in.rbth.com
WEDNESDAY MAY 6, 2015
Business Report RUSSIA&INDIA THE ECONOMIC TIMES IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
ECONOMY: Focus on much-needed institutional reforms and reducing dependence on exports of oil and natural gas
Russia battles recession, firms up strategy to spur investment Russia has slipped into recession for the first time in five years, but it has decided to fight back. Moscow is using this crisis period to forge a new economic growth model based on liberalisation and initiating structural changes.
27 mn people
from the USSR are estimated to have died during the Second World War, more than from any other country
ALEXEI LOSSAN RIBR
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200 days
6000 tanks REUTERS
s 2015 began, the Russian economy found itself in a recession for the first time in five years. Headwinds had mounted throughout the previous year, blowing in from multiple sources to create a near-perfect storm. The price of oil, Russia’s most important export, fell precipitously in 2014, dragging the value of Russia’s national currency, the ruble, along with it. Meanwhile, a dispute over Russia’s role in spiralling civil unrest in Ukraine brought titfor-tat economic sanctions between Russia and the West. Rising inflation appeared set to hit double-digits in 2015, prompting policymakers to simultaneously contend with slowing growth, inflation and a falling currency. Russia, however, avoided a recession in 2014, registering 0.6 percent economic growth for the year. But in March 2015, the economy shrank by 0.4 percent, as the World Bank forecast an annual contraction this year of between 2.9 and 4.6 percent. Russian officials say they are gearing up to fight back, aiming for nothing less than a restructuring of the country’s economy to reduce its reliance on exports of oil and natural gas. Officials say they are working on a raft of measures akin to those long recommended by independent economists: liberalising the economy and making structural changes to boost private investment. Yet such talk has come from Russian officials before, and it remains to be seen whether the current crisis is the necessary catalyst to spur Russian officials to turn words into deeds. Policymakers say they don’t underestimate the task. “The difficulty of the challenges facing us demands a lot from the state apparatus, and also the coordination of work between the various branches of government,” First Deputy
Prime Minister Igor Shuvalov said during a recent conference in Moscow. Among Russia’s problems are sanctions from the US and Europe that effectively seek to isolate important parts of the Russian economy, such as its energy industry, from international debt markets. Economists, however, point out that Russia’s biggest economic problems stem from domestic, structural issues rather than from Western sanctions, meaning the country can indeed make domestic changes that will help boost economic growth on its own. Institutional reform, economists say, will
be a crucial test. “The key issue is in increasing the productivity of labour and obtaining effectiveness of production,” says Evgeny Yasin, a prominent Russian economist. One of the major obstacles to increasing investment is a lack of accessible credit. In December 2014, the key rate, a reference point for banks, was increased from 9.5 to 17 percent. Bythe end of April 2015, it was decreased to 12.5 percent, but financing costs remain high by international standards. According to the Gaidar Institute, the volume of credit given to corporate borrowers was reduced by almost a quarter to $78.2
billion in January-February 2015, compared to the same period a year ago, when it amounted to $101.6 billion. Credit activity diminished the most in the field of construction, by 63 percent, while in machine building and metallurgy, it fell 40 percent. Moreover, after the Western countries introduced sanctions, Russian players were deprived of access to inexpensive Western credit. As an alternative, some Russian firms are seeking capital through selling shares. In February 2015, Magnit, Russia’s largest retailer, sold one percent of its shares to international investors on the London Stock Exchange for $192.35 million.
Ruble Rebound: Once a turkey, now a pheonix Defying gloomy forecasts, the ruble has bounced back and become the fastest-rising currency in the world. RIBR
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n the aftermath of a historic collapse in 2014 amid heightening military tensions in Ukraine and darkening economic horizons, Russia’s national currency, the ruble, has staged a recovery that has made it temporarily the best-performing currency in the world. From the beginning of February 2015
to the end of April, the Russian ruble gained 28.7 percent, making it the fastest-rising currency in the world. The turnaround is all the more striking in that it exceeded the increase in value of Russia’s main export, crude oil. According to UFS IC chief analyst Alexei Kozlov, as the ruble rose by 28.7 percent from February to April, North Sea Brent crude oil rose from a minimum value in the same period by
only 16.7 percent, from $53.50 per barrel to $64.20. The comparison suggests that the ruble’s historical dependence on oil prices may be decreasing, said Kozlov. According to Konstantin Korischenko, former deputy chairman of the Central Bank, the main reasons for the ruble’s rise include foreign currency loans by Central Bank to banks totaling $30 billion, a decrease in the Russian Central bank’s key rate from 17 to 14 percent, and a reduction of military tension in the east of Ukraine. “All this has made investment in the ruble and ruble assets speculatively more attractive,” Korishchenko
said. The ruble’s rebound, said Kozlov, can be partly explained by rising interest among investors in emerging markets as well. The problems in the Russian economy may, however, continue to restrain the ruble’s growth. “Banks’ lack of capital, the lack of economic growth, the tendency for an increase of the public sector in the economy – all this cannot but cause concern and restrain optimism about the future value of the national currency,” said Korischenko. If oil prices don’t rise and the outflow of capital from Russia continues, the prospects of the ruble in 2016 may worsen significantly.
VICTORY DAY: India’s President Pranab Mukherjee, China’s President Xi Jinping will attend May 9 celebrations
Why 70th anniversary of WWII matters to Russia DAVID MILLER RIBR
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hen invading Nazi forces reached the outskirts of Moscow in late 1941, the stakes couldn’t have been higher for the Soviet Union. Hitler considered Slavs an inferior ethnic race. Nazi records suggest that if Germany had been successful, tens of millions of Russians would have faced a genocidal regime of enslavement and forced exile. The statistics around the Battle of Moscow defy belief. Estimates of Soviet casualties alone range as high as 1.2 million people for that single battle — almost double the number that the US lost in all of World War I, World War II, the Vietnam War and the Korean War combined. Nearly every family in Russia has a direct connection to the war. Comparisons like these help demonstrate why the Second World War still looms so large in the minds of Russians — in a way that Western visitors to Russia often find surprising. “World War II is an event very different
and self-propelled guns took part in the Battle of Kursk in June 1943, still the world’s biggest battle of its kind
The Russian government hopes a weaker currency boosts sales of Russian products in foreign markets, and that structural reforms help promote investment. In the picture: Russian Prime Minister Dmitry Medvedev (centre) chairs a meeting with his deputies.
CURRENCY: Drop in Central Bank’s key rate from 17% to 14% and tensions in Ukraine are reasons
ALEXEI SERGEEV
was how long the Battle of Stalingrad lasted. It was a major turning point in the war that cost the lives of more than a million Red Army soldiers and civilians
in the minds of Russians than in the minds of Americans and Europeans,” Paul Goble, a political analyst who advised former US Secretary of State James Baker, wrote in a recent analysis for the Russia Direct website. “For Russians, World War II is and remains the central act of their history during the last century. For Americans and Europeans, that conflict is increasingly a matter of history.” Every May 9, Russia commemorates victory over the Nazi Germany with a zeal that is almost not matched anywhere else in the world. Government offices and financial markets close; Moscow’s main thoroughfare becomes a pedestrian promenade bedecked with flags and black-and-orange St. George’s ribbons, the Russian symbol of military valour. The holiday is celebrated not just in Moscow. Practically every city in Russia has a monument to the war and an eternal flame where ceremonies are held. During the Soviet era, 13 cities that suffered particularly intense fighting were given the title of “hero city”, although only half of these are in modern Russia.
Indeed, the Soviet Union endured the highest casualties of any country in the war, with estimates ranging from around 20 million to 28 million. The colossal human sacrifice made by the Soviet Union has led many average Russians today to feel as if their country paid the lion’s share of the cost for defeating Nazi Germany. At odds with West The original victory parade was held in June 1945, after many Soviet troops had returned from the front. After that, parades were held on May 9, 1965, for the 20th anniversary, and then in 1975 and 1985. Since the May 9, 1995 parade celebrating the 50th anniversary of the victory, parades have been held every year. The Soviet Union, and now the Russian Federation, marks Victory Day on May 9 because although Germany surrendered on May 8, due to the time change, the surrender was signed after midnight in Moscow. Today, it is both a chance to honour Russia’s past sacrifices and achievements and to show off the country’s latest military hardware. This year, however, the celebration comes at a time when Russia is locked into a standoff with the West over the armed conflict in Ukraine, and economic sanctions threaten to force average Russians into making sacrifices. During a recent meeting of the committee organising the 70th anniversary celebration,
Russian President Vladimir Putin lashed out at unnamed critics he accused them of attempting to downplay Russia’s role in the war — which is known as the Great Patriotic War in Russia. “Unfortunately, today we see not only attempts at distorting the events of that war, but also unmasked cynical lies and impudent defamation of an entire generation of people who gave up everything for this victory, who defended peace on earth,” Putin said. “We should constantly, firmly, persistently and with reason assert the truth about the war, about the colossal contribution of the Soviet people to the victory.” Leaders of 26 countries plan to attend the Victory Day celebrations in Moscow in 2015, including India’s President Pranab Mukherjee and Chinese President Xi Jinping. None of the leaders of major Western countries, including the leaders of the former allied powers US President Barack Obama, British Prime Minister David Cameron and French President Francois Hollande plan to attend. German Chancellor Angela Merkel will also not attend the parade, although she will join Putin in laying a wreath at the Tomb of the Unknown Soldier beneath the Kremlin Wall on May 10. The Second World War has a central place in Russia’s national consciousness. Now, the country is gearing up for the blockbuster celebration of the 70th anniversary amid new tensions with its former allies.
The Order of the Patriotic War, established in 1942, was the Soviet Union’s first military award of the conflict. Given for heroic deeds by troops, security forces and partisans, it had two versions, first and second class. Until 1977, it was the only Soviet order that could be retained by relatives after the death of a recipient. All others had to be returned to the state.
The most common Russian wartime award is the medal For the Victory Over Germany in the Great Patriotic War 1941–1945. Established on Victory Day, May 9, 1945, more than 15 million people qualified as recipients.
Discover the Unknown War in the pages of this issue and find out much more at
unknownwar.rbth.com
IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
B |U |S |I |N |E |S |S WEDNESDAY MAY 06, 2015
BUSINESS: Indian exporters continue to bet on Russia despite the crisis, and feel it’s best time to figure out who your friends are
NEWS
Slowdown, falling ruble pose a test for India-Russia business ties PHOTOSHOT/VOSTOCK-PHOTO
The ceremonial squadron of the armed forces of India will take part in the celebrations of the 70th Anniversary of Victory in Moscow. “The ceremonial squadron of the armed forces of India will come to Moscow – to take part in the parade dedicated to the 70th Anniversary of Victory in the Great Patriotic War – on April 25 and then on May 9, will make the solemn march through Red Square,” says India’s Ministry of Defence. “The Indian armed forces will be represented by 70 military ground troops in modern dress uniform and carrying small arms.” The honor to represent India at the Victory Parade will go to the best drill squadron, which will also participate in the annual parade during that country’s Republic Day in New Delhi. President Pranab Mukherjee will represent India at the Moscow celebrations. RIBR
Russia to propose BRICS orbital station: Roscosmos Russia is set to propose to the BRICS grouping (comprising Brazil, Russia, India, China and South Africa) the creation of a joint orbital station, head of the Scientific-Technical Council of the Federal Space Agency (Roscosmos) Yuri Koptev told journalists. The joint orbital station development may be started if the International Space Station operation is stopped due to political disagreements between the ISS partners, he said. RIBR
Russia ready to lease second nuclear submarine to India Russia is ready to lease a second Project 971 Shchuka-B submarine to India for a period of ten years, a source in the shipbuilding industry told InterfaxAVN. The decision has been made on leasing a second nuclear submarine, remarked the source. That may be K-322 Kashalot or another submarine of the Chakra class, he said. The submarine will require thorough modernisation, consistent with wishes of the foreign customer. It will be customised by the Amur shipyards. Modernisation and testing of the submarine and training of the Indian crew will take three years. The Kashalot will be transferred to the Indian Navy in 2018, the source noted. RIBR
Russia’s economic crisis offers new challenges for Indian firms doing business with that country. ALEXANDRA KATZ RIBR
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ith the Russian economy experiencing recession and the ruble plunging against the dollar, Indian companies working in Russia are facing difficulties. However, this moment of crisis is a perfect time to figure out “who are your best friends”, feel Indian industrialists and exporters. Many analysts point out that the devaluation of ruble makes investments in Russia cheaper. The Russian Direct Investment Fund (RDIF) spokesperson told RIBR that the current economic downturn and attractive company valuations, given current asset prices and exchange rates, create a unique investment opportunity for the companies with long-term plans in Russia. “During two years after the economic crisis of 1998 and 2008, the Russian stock market in dollar terms grew 7 times and 5 times respectively,” he noted. India, an emerging economy, however, continues to bet on Russia. “The major volume of Indian investments in Russia is in mining sector and manufacturing industry. There are no doubts that the negative economic situation will lead to a revision of investment plans. However, I don’t expect a mass exit of investors as even with the growth slowdown. The Russian economy remains attractive due to large
size of its domestic market, ranked 7th according to Doing Business,” Timur Nigmatullin, financial analyst with Finam Investment, says. According to him, India contributes not more than 2 percent of the overall FDI in Russia. As for the India-Russia bilateral trade, the analyst says, it is dominated mainly by defence and machinery contracts, which are normally long-term ones. “I don’t think they will be revised considerably,” Nigmatullin said, adding, “Moreover, I expect ruble to gain about 10-20 percent in long term perspective as some of the depreciation factors such as the panic-buying of foreign currency by people and business to pay for external debts will be leveed.” However, in the case of non-defence trade where the governments of both countries are less involved, the situation looks different. Sudhir Pal Sabharwal, vice-president, Pacific Global Exports, that manufactures and exports lather and cotton garments to Russia, says his company had to adopt some “anticrisis” measures, including extending the credit period to Russian byers.” “It is like in the marriage, in the time of crisis, you have to take care of each other, so that’s the way we are dealing with our byers.” He believes that the current economic slowdown is a temporary phase. “I think the crisis should not continue for more than a year. Being in the Russian market for
AP
India’s Ceremonial Squadron to take part in V-Day Parade
Dairy products: possible niche for Indian suppliers.
the last 20 years, I have seen the market during the default of 1998, so I kept everything in the back of my mind,” Sabharwal says. Anish Unnithan, director, Suryamangalam Group that imports compressors, motors, turbines and various other steel and power industry products from Europe, US, Russia and Ukraine to India, says the company bore about Rs 35-45 crore ($ 5.57 million to $ 7.16 million) losses since last year. The depreciated ruble in Russia
EXPORT: 4 Indian firms allowed to supply buffalo meat to Customs Union
Indian dairy exports to Russia cleared A Russian expert team recently inspected Indian producers of buffalo meat and dairy products. ALESSANDRO BELLI RIBR
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ssistant Head of Federal Service for Veterinary and Phytosanitary Surveillance of Russia (Rosselkhoznadzor) Aleksey Alekseenko told RIBR about the results of the second inspection of Indian producers of buffalo meat and the new opportunities for manufacturers of hard cheese in the Russian market. How did the inspection go? On December 4, Rosselkhoznadzor opened buffalo meat imports to Russia from India and included four Indian companies into the register of exporters into the customs territory of the Customs Union. All of them have already started supplying. During the recent inspection, we visited six companies. The last one (Mirha Exports)
is the most advanced one I have ever seen. We’ll see how many of them will be included into the suppliers’ list. How do you choose the companies for further inspection? Our Indian colleagues provide us the list. India said that it wants to increase the number of companies. The Indian side send their inspectors to each company in order to determine whether it meets our requirements. After that, we visit the selected companies. Can you estimate the potential demand for Indian buffalo meat in Russia? It’s not easy to estimate the demand in the Russian market. Firstly, it depends on the price level that will be formed for this meat. Secondly, it depends on the willingness of our Indian colleagues to increase the production
Is there any progress in granting permission for the supply of Indian dairy products to Russia? Yes there is. Rosselkhoznadzor allowed the import of Indian dairy products to Russia. We have included two Indian companies in the register with the right to supply dairy products -- Parag Milk Foods and Shreiber Dynamix Dairies, the manufacturers of hard cheese. The Russian market is interested in quality dairy products, specially hard cheese. It is possible that during the next inspection we’ll visit a number of Indian producers of dairy products. You say Russia is ready to supply meat items to India. What were you referring to? Russia has the potential to supply products in India. The Indian market may be interested in poultry imports from Russia. This will be a major breakthrough for our producers. We asked about the requirements of the Indian authorities for import of our products, especially poultry.
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first game. In 2005, the brothers borrowed $100 from their father to put a deposit down on a computer. In two months, they created their new game, Boxy Goxy, which involved puzzles. In 2006, the brothers began to write to publishers – Big Fish Games, GameHouse and others. The US company Freeze Tag invited them to remake their game Boxy Goxy in 2008. In 2009, they released the game Strange Cases, a detective story about an FBI agent. In 2010, the brothers earned their first million dollars. Their biggest hit has been the hidden object game, The Secret Society, one of the top
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FROM PERSONAL ARCHIVES
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he Ushnitsky twins, Alexey and Afanasy, were born in Yakutia region (some 8.300 km from Moscow) in a village, where winter temperatures can plunge to minus 60 degrees Celsius. By now their game – The Secret Society – has been installed 15 million times from the App Store, Google Play and social networks. iPhone users alone bring the brothers and the publisher $11,000 per day. One day on their way home from school, the brothers came across a
copy of the Gameland magazine, with an article by a developer in it. “It dawned upon us: games had to be made by someone,” Alexei recollects. “The man wrote that he had a swimming pool in his office!” The brothers went to the local library to learn how to write code. They mastered the simplest language Basic, followed by Pascal and Fortran. In 2003, Alexei got a job with the diamond production company repairing computers. The company’s head, impressed by internal corporate chat service that Alexei had written, sponsored the development of the twins’
10 games both at the App Store and Google Play. The game has brought the Ushnitsky brothers more than $10 million in sales, according to consulting firm Think Gaming.
interviewed by RIBR agree that Russia with its weak ruble becomes very attractive for foreign investors since the investment became cheaper, as for the export industry, it is probably not the right time for newcomers. “There won’t be any comfort level with Russian byers and partners. Indian companies will not be able to extend credits to them, and they need it now,” Sabharwal says. “Probably newcomers need to wait for another one-two year to enter the market.”
PERSPECTIVE
for the needs of our market. The Indian side said that it was ready to reduce the price of products supplied to Russia in the case of sales growth. In this case, the system seems to draw up.
Siberian twins’ Secret: $10 million online ANASTASIA CHERNIKOVA SEKRET FIRMY MAGAZINE
and political and economic turbulence in Ukraine lead to delays in shipments from both countries and upto 300-400 percent increase in prices. Abhilash Pillai, director of Regency Group that operates several Indian, Japanese and Italian restaurants in Moscow and deals in healthcare and garments business, says the restaurant business is the one that got affected the most because of its total dependence on imported ingredients. Although Indian businesspersons
ALEXEI LOSSAN Economic expert
Keeping economy afloat, Russia style
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or a long time, entire sectors of the Russian economy were made up entirely of imports from abroad. But sanctions from the US and EU, along with the sharp 50 percent drop in the value of the ruble at the end of 2014, have forced Russia to rethink its developmental model. Previously, the Russian market sought to protect itself from an influx of higher-quality foreign goods with import duties. That strategy, at last, went out the window. The reduction of the population’s purchasing power and the weakened ruble now protect Russian producers better than any duty could. This spurs hope for the growth of exports of products beyond raw materials. Russian imports in January 2015, immediately after the fall of the ruble against the American dollar, plummeted by 41 percent to $11.19 billion compared to January 2014. In the automobile and equipment sectors, the decline was 45 percent. Imports of food products fell 42 percent. Russian individuals and legal entities started buying products from abroad in much smaller amounts than before. To be sure, the volume of Russia’s total exports also fell, since the lion’s share of that trade consists of oil and gas. In the last year, the price of oil fell by more than twice. However, Russian exports in January 2015 fell by only 30 percent year-on-year to $27.5 billion, as the export of energy resources shrank by 33 percent. Meanwhile, the export of certain
OPPORTUNITIES FOR BRINGING RUSSIAN AND INDIAN BUSINESSES CLOSER TOGETHER IN.RBTH.COM/BUSINESS_BEAT
goods increased. Russian firms began selling more grain, fertiliser and food abroad as the falling cost of these goods based in foreign currencies made them more competitive on the world market. Exporters are trying to increase the share of products shipped to foreign markets, especially metals companies and food producers. However, redirecting domestic supplies to foreign markets may also create shortages and price increases within Russia. In particular, it is for this reason that the Russian authorities imposed export duties on grain at the beginning of 2015, and did not rule out similar moves in the metals industry in the future. Russia is developing plans for substituting imports with domestic production in 18 industries by the end of June 2015, including localising foreign companies in Russia. This tendency leads to the fact that Russia’s trade balance remains positive, despite the financial crisis and the economic recession. Some pundits have sought to draw a comparison between Russia’s current economic malaise and the Soviet dysfunction of the late 1980s, when a sharp drop in oil prices slammed the Soviet economy. At that time, the Soviet Union responded by increasing imports, creating an unsustainable imbalance that hastened the collapse of the Soviet economy. But now, having drastically devaluated the national currency, the Russian government has been able to avoid repeating the mistake.
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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
E |N |E |R |G |Y WEDNESDAY MAY 06, 2015
NEW FRONTIERS: Partnership with ONGC can be useful in the wake of sanctions, says expert
Novatek to sell 9% stake in LNG Yamal project
Vankor oil thirsty for Asia-Pacific investors
Novatek’s decision to sell 9% stake attracts interest from many Southeast Asian countries. ALEXEI LOSSAN RIBR
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Rosneft is eyeing companies from Asia-Pacific region for the development of Vankor oil field. Specially for RIBR
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ussia’s energy giant Rosneft is scouting around for strategic partners for exploration and development of the Vankor oil field. Primarily, Rosneft is interested in companies from the Asia-Pacific Region where there has been rapid growth in energy consumption, the company’s press service informed RIBR. Rosneft head Igor Sechin has previously spoken about the possibility of collaborative work. Furthermore, foreigners are in line for the whole technological cycle of work – extraction, infrastructure, processing and transportation of hydrocarbons. The Vankor field began in late 2013 when Rosneft’s board of directors approved Vankorneft as the operator for the field and for another three fields: Lodochnoe, Suzunskoe and Tagulskoe. A unified management system has been established. According to company experts, the integration will significantly increase the resource base - more than 400 million tonnes of oil and condensate -- and will increase the pace of the development. With the commissioning of the Vankor field, the annual production will increase from 22 million to 25 million tonnes of oil.
It was previously announced that a proposal to purchase 10% of the Vankor field was received from OVL, the overseas arm of India’s ONGC. Rosneft has chosen to be quiet about the very fact of such a proposal. Last year, an agreement was signed between Rosneft and Essar for the supply of 100 million tonnes of oil and petroleum products to the Indian refinery for a 10 year period. “The agreements open new opportunities for cooperation between the two countries due to the synergistic potential of cooperation in areas such as surveying, extraction, commerce and logistics between two leaders of the oil and gas industry in Russia and India. Due to the agreement Rosneft receives a guaranteed passage for crude oil and petroleum products, and Essar will have a stable partner-supplier of quality products for its processing capacity,” said a company spokesman. ONGC also has experience working in Russia. In 2014, it produced there 30% of its foreign oil, VTB24 analyst Oleg Dushin told RIBR. However, he pointed out that the focus of the Indian company had turned to Colombia, Bangladesh, Vietnam and Iraq. “Of course, the Vankor field is already developed. But maybe the Indians want greater diversification around the world. They have already been
REUTERS
VIKTOR KUZMIN
burned with production in the Tomsk region, so they prefer locations that are closer, Sakhalin instead of Taimyr,” said Dushin. However, the partnership with ONGC would be helpful to Rosneft given the limiting sanctions imposed on Russia. Dushin recalled that in Russia, there is another organisation that is close to ONGC – Imperial Energy, which carries out fracking and can provide these services to third parties. “In the context of western sanctions, it might be useful,” said the analyst. The Asia-Pacific Region is a very promising potential buyer of the Vankor oil. Oil from Vankor is transported by the Vankor-Purpe pipeline, which travels 556 km to connect with the general pipeline system, and part of the oil goes into Eastern Siberian – Pacific pipeline which is already well-known in Asia.
ATOMIC ENERGY: KNPP equipment can be produced domestically
Localisation stimulus, job boost for India’s industry Russian nuclear companies have scored in India with their blend of localisation and expertise.
REUTERS
ANDREI RETINGER RIBR
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ussian nuclear specialists are the first to have entered India’s nuclear energy market, jumping ahead of competitors from the US and France. And they stand to be in a strong position in days to come as India is set to get multiple benefits, thanks to a high degree of localisation. The international nuclear market is going through a rough patch. Never have the leading nuclear corporations experienced tougher times than today. For example, French company Areva in 2014 suffered a huge loss of 4.8 billion euros, and Westinghouse constantly has numerous problems with all its projects. “Competitors are trying to catch up with Rosatom which has had a full portfolio of contracts for 10 years – worth $110 billion, of which more than $60 billion is for the construction of nuclear power plants,” says Alexey Gavrilov, independent nuclear expert. This portfolio includes sections of the Kudankulam nuclear power plant in
India’s southern state of Tamil Nadu The first unit of the plant is already reliably producing electricity and the second unit is planned to be connected to the electricity grid in 2015. Multiple benefits for economy “The Kudankulam project enables India to get ahead in terms of technology, not only in the region but also
The roadmap devised by Russia and India stipulates graduated localisation, which brings many benefits for the Indian economy. internationally. The localisation at the facility is 70 percent, that is a colossal volume of work for Indian companies to carry out, which causes an explosion in growth for local industry and brings new technologies to the country,” says Alexander Uvarov, editor-in-chief of the Russian independent analytical website Atominfo.
GAS: Potential buyers include Indian companies
The large-scale recruitment of local service providers is an integral part of Rosatom’s offer around the world. However, if you look at other countries, for example, in Belorussia, the localisation for the construction of a nuclear power plant was 30 percent, and in Hungary it might reach 40 percent. “If we are to compare it with the level of Indian localisation, it becomes clear that Rosatom is playing an active role in the development of Indian industry,” notes Alexander Korovin. Localisation has myriad benefits and guarantees employment for many people and a constant supply of orders for hundreds of local enterprises. Furthermore, Indian nuclear specialists have valuable personal experience in the nuclear industry and Rosatom relies on this. The civil nuclear roadmap devised by Russia and India, stipulates graduated localisation. While working on the first unit of the Kudankulam plant, Indian specialists carried out assembly and commissioning work. Today, as part of extending the Kudankulam project Rosatom is discussing partnerships with India’s largest corporations, which are prepared to participate in manufacturing equipment for the new energy blocks. “Russian nuclear specialists are the first in the world to suggest a whole product line for the entire technological chain in nuclear energy: from extracting natural uranium to decommissioning nuclear power plants,” says Uvarov. “ The Russians are demonstrating a flexible approach to Indian requirements, offering solutions that meet any request from their Indian partners, including financing,” said the expert. It was thanks to this approach that a system for insuring responsibility for nuclear damages was agreed upon, which has opened the way for the construction of the second stage of the Kudankulam nuclear power plant.
Largest oil field... Vankor is the largest oil field discovered and put into operation in Russia after the collapse of the Soviet Union. Now, it is one of the largest employers in the Krasnoyarsk Territory, employing more than 4,000 people. The initial recoverable reserves (as of 1 January 2015) were estimated at 476 million tonnes of oil and condensate and 173 billion cubic meters of gas. About 90 percent of the equipment delivered and services provided at Vankor are of Russian origin. Vankor has its gas programme, which can potentially use upto 95% of associated gas entering all the facilities. About a year ago, the company began processing surplus gas and selling it through Russia’s unified gas transportation system.
ussia’s largest privately owned gas producer, the Novatek Company, expects to sell 9% in the most promising project for liquefied natural gas – the Yamal LNG. According to Leonid Michelson, head and co-owner of Novatek, the company is in talks with potential investors, but “to announce who the potential customers are, without their consent, would not be proper”. The company plans to wind up negotiations by mid2015, according to Russian business newspaper Kommersant. Currently, shareholders of the Yamal LNG project, in addition to the Novatek Company (60%), are the French Total (20%) and Chinese CNPC (20%). The project calls for the building of a mammoth LNG plant by 2017, with capacity of 16.5 million tonnes. Given that France’s Total and China’s CNPC paid $425 million and $468 million for their stakes respectively – the 9% stake in the project is likely to fetch between $190 and $210 million. At the beginning of 2014, Michelson had said that negotiations were underway with potential buyers from India, South Korea, Japan, and “countries that already are partners”, like France and China. Why offload stakes The Yamal LNG needs $27 billion investments, of which $10 billion has already been arranged. In 2015, the investment has to be around $5 billion. Analysts say the sale of shares is one way to solve the liquidity problem. In
January 2015, the company received 150 billion rubles ($3 billion) from the National Welfare Fund – the Russian repository of oil and gas disbursements, and thus did not need to search for an investor. Now, however, this idea has to be revisited. According to Kommersant, additional funding for the project was to be provided by French and Chinese banks, but because of the sanctions imposed against Russia, they decided against providing the credit. “If it were not for the sanctions, there would be no problem with the issue of funding,” said Patrick Puyang, head of Total, at a press conference. He added that the the shareholders are expecting to receive $10-15 billion in loans from Chinese banks, and another $3.3 billion should be invested into the project in 2015 by shareholders. “This project still looks promising, and we believe that the potential problems of Gazprom in Europe may well enhance its attractiveness,” said Ilya Balakirev, an analyst at UFS IC. According to him, LNG is much more flexible, in terms of delivery, than gas pipelines. According to Dmitry Baranov, leading expert at Finam Management, the LNG sector in Russia is still in its infancy, so the companies involved in the first such projects will make significant profits. “A large number of Asian investors – from Japan, South Korea, China, and even India – have expressed interest in purchasing this package, since the Southeast Asian countries offer the most promising markets for LNG,” said Balakirev.
IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
V |I |C |T |O |R |Y D |A |Y WEDNESDAY MAY 06,, 2015
WWII: Facts, figures, timeline ● Battle of Stalingrad ends on Feb. 22, 1943. The tide of the war begins to turn. During the Tehran conference from Nov. 28 - Dec. 1, 1943 Joseph Stalin, Franklin D. Roosevelt and Winston Churchill agree to open a second front.
SEPT. 1, 1939 - JUNE 21, 1941 ● Hitler’s armies roll through Europe in the “blitzkrieg” phase of the war.
The second World War not only left more than 50 million dead, but also intimately affected the lives of hundreds of millions of men, women and children across the globe. Nearly every Russian has a direct connection to the war; every family has its story to tell. This edition of RIBR, and our online project, the 70th Anniversary of Victory, conjures up why the victory means so much for the Russians. in.rbth.com/70th_anniversary_of_victory
JUNE 22, 1941-NOV., 1942 ● Nazi Germany launches Operation Barbarossa, the invasion of the Soviet Union. Siege of Leningrad begins on Sept. 8.
DEC. 1943 - MAY 9, 1945 ● Second front is opened with the invasion of Normandy on D-Day. On April 25, 1945, the meeting on the Elbe takes
MID-NOV. 1942 - DEC. 1, 1943
place; Soviet troops arrive in Berlin on May 2, 1945. MAY 10 - SEPT. 2, 1945 ● The war in the Pacific continues until Japan surrenders on Sept 2, after atomic bombs are dropped on Hiroshima and Nagasaki. JUNE 24, 1945 ● The first Victory parade was held on the Red Square in Moscow.
HISTORY: US scholar offers an alternative view of the Soviet leader’s war leadership and the nation’s role in defeating Hitler and crushing Nazi juggernaut
Secret Stalin saga: How the big war was won The much-reviled Soviet leader has been criticised for his 1939 ‘friendship pact’ with Hitler’s Germany. But there is another side to the story... Historian
J
oseph Stalin remains a divisive figure, in Russia and beyond. Widely decried as the architect of brutal political purges and forced labour camps, his domestic policies nonetheless ushered in a period of unprecedented modernisation, featuring great improvements in industrial output, social welfare and education. US historian Albert Axell draws upon his vast research to offer an alternative view of the Soviet leader’s war leadership and the nation’s role in the defeat of Hitler. What the US ambassador said The wartime US ambassador to Russia, W. Averell Harriman, who knew Stalin closely, said the following when I met him in Moscow in May 1979: “During the war, we became convinced that Stalin was a great leader.” Harriman then added two extraordinary sentences: “Stalin was one of the most effective war leaders in history.” Harriman may be called an eyewitness to history because he not only participated in many important wartime conferences with Stalin but he also had an insider’s knowledge of Russia. In the 1920-ties, he had received a concession to a manganese mine in the Caucasus.
During the war, Stalin sometimes jokingly referred to Harriman as “our man from the Caucasus”. British scholar Joseph McCabe echoes this view, saying that when Hitler’s armies fell upon Russia in 1941, “Stalin became the West’s leader in the gravest crisis through which the world has passed since the fall of Rome.”
Leading from front Marshal Georgy Zhukov – the man with more major victories to his name than any other Second World War general and the most decorated officer in Russian and Soviet history – is considered in the West to be one of the best generals of the 20th century. Of Joseph Stalin and the victorious Battle of Moscow in 1941-42, Gen Zhukov said: “Stalin must be given credit for the enormous work in organising the necessary strategic, material and technical resources. By his strict exactingness, Stalin achieved, one can say, the near-impossible.”
The Hitler-Stalin pact of 1939 The so-called “friendship pact” between Stalin and Hitler (the MolotovRibbentrop Pact) signed on August 23, 1939, only eight days before the outbreak of the WWII, continues to stir controversy. Many books accuse Russia of “betraying our Western democracies” by signing the pact with Hitler. On balance, the Hitler-Stalin pact was more beneficial to Russia than to Germany. Although the pact at first angered the democracies, the fact remains that Russia gained nearly two years to build up its inferior military and economic might. Russia had feared a possible surprise attack by Germany and Japan. On June 22, 1941, Hitler’s armies suddenly attacked the Soviet Union, turning that country overnight into a partner of the democracies. During the next three years, Stalin’s Russia became the key player confronting the Nazi juggernaut. Some complain that Stalin failed to use those 22 months, when the Russo-
German pact was in force, to strengthen the Red Army. What are the facts? In the late Eighties, I put a question to several senior generals who fought under Stalin: did the Soviet leader do everything to prepare for the Nazi invasion? General Ivan Shavrov said: “Stalin made everything possible and even the impossible to prepare the country for defence. If the industrialisation had not been achieved, if there had been no base created for the defence industry, we could not have managed during the war.” “Of course, Hitler’s armies would have succeeded at the very begin-
TASS
ALBERT AXELL
Joseph Stalin (left) and Georgy Zhukov on the tribune of the Lenin Mausoleum in Moscow. ning in any case, because our army divisions were weak and not at full strength compared to the German forces. But our casualties could have been considerably less if we had built up our strength at the border.” Getting strategy right I pressed him on this point: is it entirely certain that casualties would have been fewer if Stalin had placed the bulk of his armies on the border? Gen Shavrov thought for a while before replying: “If we had concentrated many more troops in the border areas – as Hitler wanted us to do – they could all
have been destroyed then and there.” It is little known that far from trusting Hitler, in the critical days leading up to the invasion, Stalin strengthened the Soviet armed forces and the border area. Gen Ivan Bagramyan says these steps prove that “a titanic effort was made to prepare Russia for war”. D.F. Fleming, author of Cold War and Its Origins (1961), concludes that “by making the 1939 pact with Hitler, the Russians instead of facing the full power of the Nazi war machine, turned Hitler back upon the West and acquired almost two years to prepare for German onslaught.
WINSTON CHURCHILL Britain’s wartime PM
It is very fortunate for Russia to have this rugged war chief at her head. He is a man of massive out- standing personality, suited to the sombre and stormy times in which his life has been cast...”
TOURISM: From Volgograd and Kursk to Moscow and St. Petersburg, take a walk in the footsteps of soldiers who fought and won
Russia’s must-visit war memorials, battle sites Well-preserved sites of famous battles continue to beckon tourists. YULIA SHANDURENKO
Kurgan. The best way to get from one place to the other is by the Metrotram: a tram that goes both overground and underground.
RIBR
KURSK: Arch memorial complex
sonal perspective of the events at the Museum of the Defense and Siege of Leningrad, which features a replica of a typical apartment at the time of the siege.
tains, the number of weeks the Soviet Union was at war. SEVASTOPOL, CRIMEA: Memorial complex at Mount Sapun
MOSCOW: Statue of Marshal Zhukov and Victory Park
ST. PETERSBURG: Victory Square and Museum of the Defense
LORI/LEGION MEDIA (5)
VOLGOGRAD: Memorial complex in Mamayev Kurgan. Volgograd (560 miles south of Moscow), called Stalingrad in Soviet times, is the location of the bloodiest battle in world history in which almost 1.5 million people perished. In July 1942, the Red Army defeated Hitler’s troops at Mamayev Kurgan, in a battle that changed the course of the war. Most of the monuments devoted to World War II are concentrated in three areas relatively close together: Heroes’ Alley, which leads from the Embankment to the Square of the Fallen Fighters, around the Battle of Stalingrad MuseumPanorama and in Mamayev
park is located in the northern outskirts of the city, and is set up in the form of an alley about half a mile long and features a Triumphal Arch, a monument to Red Army Marshal Georgy Zhukov, the Church of St. George and the Tomb of the Unknown Soldier from Kursk, lit with an eternal flame. The complex also includes an exhibition of military equipment such as a T-34 tank and the famous “Katyushas.”
The Battle of Stalingrad marked a turning point in the course of World War II, but allied victory success may not have been assured if not for the July 1943 Battle of Kursk. The Battle of Kursk was the biggest tank battle ever: approximately two million people, 6,000 tanks and 4,000 airplanes took part in it. The monumental Battle of Kursk memorial
While the inhabitants and defenders of Stalingrad were dying in battle, Leningraders were suffering the 872day siege of their city. The monument to the heroic defenders of Leningrad is located in St. Petersburg’s Victory Square. You can get a more per-
Marshal Georgy Zhukov’s first major task was to save Moscow, so it’s only appropriate that his statue appears there, just outside Red Square. It is only one of many war memorials in the Russian capital. Most of Moscow’s monuments to the war are located at Park Pobedy. The memorial complex, which opened in 1995, includes a massive monument and a museum. The approach to the museum features an alley of 225 foun-
Visitors can see the world’s biggest diorama that shows the attack of the German troops on Mount Sapun on May 7, 1944 in Sevastopol. Impressions are reinforced by a thematic map. Here, the authentic profile of the scene is reproduced, scarred by bullets and holes produced by bombs. There are life-sized replicas of armoured vehicles, trenches, weapons and shells. It is worth visiting Mount Sapun not only for the diorama, but also for the panoramic view of its surroundings. Nearby is the towering chapel of St. George built in the shape of a bullet, and an exhibition of military equipment from the war.