Nov 2009, Russia&India Report by RBTH

Russia India

A capital of culture Come on a journey to Russia’s most beautiful city P.08-09

REPORT

...Marching towards a common future A Business Report from The Economic Times In association with Rossiyskaya Gazeta MUMBAI ● NEW DELHI

Wednesday, November 11, 2009

THE ECONOMIC TIMES

EPSILON

The richest and the poorest Crisis wealth redistribution?

Mikhail Kalashnikov The man behind the brand

Catwalk crossover Mixing East and West in fashion

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Lessons from

Big thinking for a little industry Russia has big plans for the future of nanotechnology, the mechanics of using atom-sized particles, which is already making major leaps forward in everything from new medicines to airplanes. President Medvedev recentely underlined a multi-billion-rouble commitment at an international forum. He said around $10.5 bn will be allocated by 2015. This step is much-needed, as in Russia the industry still accounts for less than one percent of the economy. “There is a gap between theoretical findings and possible industrial use,” said Mikhail Ananyan, Head of the National Nanoindustry Association. Despite promising funds for those with ideas, the State Nanotechnology Corporation has yet to allocate all its money. Moreover, while billions of dollars seems impressive, other countries are spending more.

A legacy of war: bread and kerosene

Nanotech scientists inspect the surface of a wafer used for optical photography

RIR looks back to the Soviet Union’s war in Afghanistan, with an account of a secret mercy mission by a noted Russian journalist. There are important parallels and differences with the present situation involving international forces. VLADIMIR SNEGIRYOV SPECIAL FOR RIR

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shaping a multipolar world order,” said Russian Foreign Minister Sergey Lavrov at the final press conference. The minister noted the global financial and economic crisis revealed serious defects in the post-WWII international architecture, which struggles to meet today’s demands.

In November 1991,five months before the fall of the Najibullah regime, a strange group – two Britons and a Russian – secretly crossed the USSR border into Afghanistan. During Desert Storm, I got to know British TV news cameraman Rory Peck in Baghdad. He had covered the war in Afghanistan, but, unlike myself, he lived in Peshawar, fraternising with the Mujahideen. I was in Kabul; the only Mujahideen I saw were in prison. We became friends and, hiding from American bombs in the basement of the Hotel Al Rashid, we planned a trip to Afghanistan to rescue Soviet soldiers held by Islamic guerrillas. Although our army had returned home, these captives had simply been forgotten. Putting this idea into action was not so easy. We had to get the agreement of President Gorbachev and permission from the KGB to illegally cross the Afghan border. Later, I learnt that when Najibullah found out about our plan to secretly visit the field commander Ahmad Shah Massoud, he flew into a rage and ordered our convoy to be intercepted at any cost.

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Diplomacy RIC agrees on common policies

EDUARD PESOV_RIA NOVOSTI

The triple alliance

The Foreign Ministers of India, China and Russia (RIC) in Bangalore

Afghanistan

On October 27, 2009, Bangalore hosted the 9th trilateral meeting between the foreign ministers of Russia, India and China (RIC). They agreed that the existing international order calls for improvement and to co-operate on key global problems. KONSTANTIN GEGALOV RIR

The three nations plan to start co-operative efforts by countering terrorism and addressing global energy security, an issue where the RIC ministers believe their economies could complement each other. “We think our ninth RIC meeting was highly productive. It showed that RIC is an established international group and an important factor in

Economy

News in brief

Crisis to consolidate the financial sector NIKOLAY KOROLYOFF

The Russian stock market saw a slump in prices in late October despite encouraging macroeconomic news. Securities took a plunge from the crest reached during the crisis second wave, which swept a large number of insolvent companies into the hands of big banks. Elena Titova, president and chairman of the Executive Board at OOO Morgan Stanley Bank (Russia), shares her views with RIR.

India opens arms for Russia’s largest bank

The Russian government sounds optimistic and talks of economic revival. Is the Russian economy really taking off? You can tell a growing economy from a shrinking one by looking at the structure. The downturn clearly demonstrated the Russian economy still hinges on commodity markets. As economists forecast a rosy future for a range of commodities, the prediction would apply to Russia as well. Experts at Morgan Stanley believe GDP will be up by 4.2 pc as early as 2010.

ices. Their assets were picked up by the government or big commercial banks to recover overdue debt payments. For some parts of the economy this proved a blessing in disguise. We long waited for consolidation in the financial sector. Russia has more than a thousand banks; the system is unable to sustain so many credit institutions, many of which appear dysfunctional. Now markets increasingly recognise the true value major banks hold in their assets. Recognition is coming slowly, though, as banks are clearly struggling to sell the assets they received at a fair price in the current market environment. For profitable deals, two factors need to be in place. Firstly, assets should be restructured and whipped into sellable shape. This is a critical task for banks that have accumulated a lot of property from debtors. Secondly, they need robust consumer demand coupled with reasonable prices.The combination of these factors should emerge in 2011-2012. Some assets might even find buyers next year.

Russia’s largest state-run retail bank, Sberbank, is on its way to open a branch in India. The Russian bank received the green signal from the Reserve Bank of India (RBI) and is busy clearing other mandatory requirements. Another Russian state-owned bank, VTB, has already opened a branch in India. Sberbank (established in 1841) is the largest credit institution in Russia, accounting for about a quarter of aggregate Russian banking assets. Kommersant

Russianbankshavebeen expandingtheirportfoliosofindustrialassets taken over from companies thatfailedtorepay loansthisyear. What share of the Russian economy now belongs to the banks? Very roughly, up to 25 pc of Russian businesses have gone bankrupt in the recession, mostly small and medium-sized companies. Big players could just as easily have gone under had they not been helped by government. Worst-hit sectors include real estate, retail and financial serv-

What caused such rapid growth in the Russian stock market after the squeeze? Big investment funds remained intact regardless of the crisis, but adopted a wait-and-see approach.At some point they realised they could not afford to wait any longer as the global market stabilised. Although it was not clear what other markets would generate growth apart from China, the storm seems to have abated.Funds have started to invest again. Since the Russian

Nuclear sub to enter service in December The Nerpa nuclear attack submarine will enter service with Russia’s Pacific Fleet in December and will then be leased to the Indian Navy, a high-ranking fleet official said. The Nerpa, which was damaged in a fatal accident during tests last year, has been docked at the Amur shipyard’s Vostok repair facility in the town of Bolshoy Kamen in Primorye Territory since the end of new sea trials following repairs. A crew of Indian submariners would undergo a course of training together with Russian specialists and servicemen in early 2010. RIA Novosti

www.morganstanley.com Morgan Stanley website www.minfin.ru/en Ministry of finance www.micex.com Moscow Interbank Currency Exchange (MICEX) website

Analysis Banks now own 25 pc of the Russian economy after taking possession of securities used for collateral

India may purchase oil fields in Russia ONGC is considering the purchase of Russian oil fields and companies, Indian oil minister Murli Deora said. The ONGC is currently the owner, via subsidiary ONGC Videsh Ltd. (OVL), of British oil company Imperial Energy, with production licenses for fields in west Siberia. In September, the oil minister visited Tomsk, where he held talks with Governor Viktor Kress on participating in future oil and gas projects. A high-ranking source from the Indian oil industry said India would discuss energy co-operation at a meeting of heads of major Russian and Indian enterprises in December. RIA Novosti

BOOKMARKS

RUSSIA INDIA REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

VLADISLAV KUZMICHEV RIR

Global Russia business calendar InnotechExpo November 18-21, Crocus Expo, Moscow This exhibition looks at innovative solutions in science and business. On the agenda are: introducing new products; state support for

stock market is relatively small, the ensuing growth was faster than other countries. Following this recovery, do you see any increase in IPO activity in Russia? We do see more IPO activity, driven mainly by the Russian stock market. After stocks soared by a factor of over 2.5, business owners have been eager to sell their stakes and bring in new shareholders to invest in their companies. Today, the market is abuzz with secondary public offerings (SPOs) made by companies that have

“Experts at Morgan Stanley believe Russian GDP will be up by 4.2 pc as early as 2010.” already been through IPOs.This year, Russian companies have made no initial offerings, and none are likely to happen on a large scale. But many are clearly going through a pre-IPO process. Interestingly, few of these belong to the commodity sector, perhaps because most of the industry is already listed. How much do you expect to be publicly offered next year? In 2008, the combined IPO and SPO markets totalled around $5.5 bn, collapsing to under $1 bn in 2009. Our 2010 expectation is over $10 bn. When will the Russian financial market climb back to pre-crisis level?

Based on our predictions, this will happen (if nothing goes wrong) only in 2012. Before the financial turmoil, many experts felt the Russian market was overheated with extreme stock prices lacking a fundamental basis. A similar process is unfolding now. Of course, investors always hope for good news. They also look at each other’s behaviour, and have to take orders from bosses setting tough targets. So what other outcome can these forces lead to when there is money to spend? Hence, the stock growth we observe today. The market has gone up by 250 pc relative to the“bottom”,and some readjustment is inevitable. I would not expect a crash, but the prices will have to fall, and further growth is unlikely to continue at recent pace.

ness forum with international energy giants. Does this mean Russia is going to let multinationals access its energy industry, which wasclassifiedas‘strategic’notso long ago? I think it is too early to make judgments. There is still no obvious case for letting foreign investors participate in the Russian energy industry, or, more precisely, in those parts – upstream and resources – to which access has been limited. I am sceptical about the urgency of foreign involvement in hydrocarbon development. We do need proper technology, but not of such sophistication that we are unable to provide it ourselves.We also need capital, but Rosneft and other petroleum companies have shown that sufficient funds can be raised without selling assets.

The Russian government proclaimed a policy shift toward an innovation-based economy. Has there been any progress? Diversification is a very desirable, if not a vital policy. Government agencies are taking necessary steps. Whether these steps prove effective is another matter. Moscow has been trying to diversify the Russian economy since 2000, but, as the enormous share of commodities in the country’s cash flow kept growing, there was little pressure on the government to push harder for innovation. They felt they had to take full advantage of available growth opportunities before building something new.

What stereotypes regarding the Russian business environment does Morgan Stanley have to challenge in the West? What we hear most often is that Russian companies lack structure and transparency. Foreign investors often do not understand how Russian companies operate. In such cases, we try to assist Russian companies in presenting their businesses openly and forming working relationships with international partners, rather than reassuring investors on our own. The second stereotype is based on the feeling that Western partners are more exposed in Russia.This is not precisely the case. Russia has the necessary legal framework in place – uncertainty is associated with its enforcement.

Recently, Russian Prime Minister Vladimir Putin convened a busi-

projects; financing of innovative projects; and creation of noncommercial partnerships for the innovative enterprises of Russia.

proved by the government (such as the reconstruction of the Sayano-Shushenskaya power station).

en.innotechexpo.ru

www.adamsmithconferences.com

International Conference: Russian Power Finance & Investment November 23-24, Marriott Royal Aurora Hotel, Moscow

International Russian Banking Forum November 30-December 3, Grange City Hotel, London

At this event, expert speakers share their experience and provide a comprehensive picture of the Russian power industry. The conference wil also address a wide range of highly topical issues, including the priorities of the 2010 investment programme for Russia’s state-owned utilities recently ap-

The forum is the leading annual international gathering for the movers and shakers in the Russian banking sector, offering an opportunity for key decision makers to share anti-crisis and restructuring strategies, exchange ideas for the future in the new financial landscape, and make important business contacts. www.adamsmithconferences.com

Corporate Financial Restructuring in Russia & CIS December 1-2, TBC , Moscow Addressing the ever-growing demand for effective guidance, clear solutions and real business benefits, C5 is pleased to announce Corporate Financial Restructuring Forum, the program for which is written with the institutional investor, corporate officer and the restructuring professional in mind. marketing@C5-Online.com

Find more in the Global Calendar at www.rbth.ru

BOOKMARKS

www.cbr.ru/eng The Central Bank of Russia www.arb.ru/site/eng Associaton of Russian Banks www.businessneweurope.eu Economics and business opportunities in Eastern Europe and the CIS

RUSSIA INDIA REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

Economy

News

Moment of truth

Rouble, Rupee trade use discussed

IGOR TABAKOV_FOTOIMEDIA

Crisis It’s time for smaller banks to sink or swim

Russia and India have agreed to study the possibility of using national currencies in bilateral trade, the Russian Central Bank said in a statement. The decision was taken at a meeting of the banking section of the Russia-India inter-governmental commission. Major banks such asVEB, Sberbank and VTB on the Russian side and the State Bank of India, the Union Bank of India and Canara Bank on the Indian side took part in the meeting. Russia’s trade turnover with India stood at only $3.9 bn in January to August 2009, compared with $36.5 bn in trade with China, and it even lagged bilateral trade with Brazil at

$4.4 bn. Brazil, Russia, India and China make up the BRIC informal group of major emerging economies. Deputy Prime Minister Sergei Sobyanin said last month that Russia wants to boost its trade with India to $10 bn in 2010 and $20 bn by 2015. India’s Trade Minister Anand Sharma told Reuters last month in Moscow that Russia's Prime MinisterVladimir Putin may visit India later this year, but the Russian government’s press service said it was not aware that such a visit was planned. Russia has long called for less global dependence on the dollar and has reduced the share

of the US.currency in its $400 bn reserves to less than 50 pc. With China, it has called for discussion on the possibility of creating a new supranational reserve unit, based on the International Monetary Fund’s Special Drawing Rights (SDRs), although officials admit any such process would take years. Currently, the dollar is the main currency of international trade. Big oil-producing nations denied a British newspaper report earlier this month that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the dollar with a basket of currencies in trading oil. Reuters, The Moscow Times

Large banks resisted the first wave of the crisis, but the second may be fatal for upto 200 smaller ones

Arms deal could be worth $5 bn

Despite outward calm and continuing reports of stabilisation and growth, the Russian market has been hit by the second wave of the banking crisis. This latest wave hasn’t engulfed everyone, though, having had most impact on second- and third-tier banks.

India and Russia have agreed on two military pacts, including a 10-year deal on weapons, aircraft and maintenance contracts potentially worth at least $5 bn. Indian and Russian Defense Ministers A.K. Antony and Anatoly Serdyukov agreed the deals in Moscow. “All defence deals and contracts will come under the 10year agreement,” Defense Ministry spokesman Sitanshu Kar said in New Delhi. Indian officials said the pact had business potential worth at least $5 bn. The deal, to be signed when Prime Minister Manmohan Singh visits Russia later this year, would include a $1 bn deal for 80 Russian Mi-17 helicopters and contracts for fitting

DENIS KUCHKIN HEAD OF TREASURY, UGLEMETBANK

“The second wave of the [banking] crisis is here, but we haven’t noticed it,” says Pavel Teplukhin, chairman of the Board of Troika Dialog Asset Management. Retail depositors haven’t lost anything – thanks to insurance – and the real sector doesn’t feel any different, either: loans remain as unaffordable as they were, with interest rates rising to above 20 pc. According to Sergei Sobyanin, deputy prime minister, some 500bn roubles ($16.7 bn) has been allocated in the federal budget and from Central Bank reserves to cope with this second wave.The first wave of the banking crisis in the autumn of 2008 cost the budget a whopping 3 trln roubles ($100 bn), he says, adding that the money helped prevent the collapse of both, the banking system and the rouble.The first wave mostly hit first-tier banks, including investment giant KIT Finance, Sviaz-bank, Globex Bank, Sobinbank, and Bank Soyuz. Some of the cashstrapped banks have been nationalised, while others changed hands. Like their US and European counterparts, the Russian government and the Central Bank rushed to the rescue of the national financial system, pumping cash into banks and the rest of the financial markets.Those

efforts helped nip a broader crisis in the bud. Nevertheless, the flood of cash did not solve the problem of expensive loans, which is the key problem facing the Russian economy. It was clear that this would also affect second- and third-tier banks, in what was expected to be the second wave. The shrinking number of banks will have a negative impact on the quality and price of services. Finance minister Alexei Kudrin said recently that upto 200 commercial banks could be forced out of business.“The restructuring of the banking sector will be a gradual proc-

The flood of cash did not solve the problem of expensive loans - the key problem of the economy ess,” he said, noting that, over the next two years, the number of banks in Russia could fall by about 50-100 a year. Financial support from the government enabled large banks to restructure their businesses by prolonging loans to key borrowers; the second- and third-tier banks were left to tackle their problems singlehandedly. According to rating agency Moody’s, overdue loan repayments by corporate borrowers will reach $110 bn towards the end of the year, or 20 pc of the total loan portfolio. For its part, in May Standard and Poor’s projected an increase in overdue loans for 35-50 pc of portfolios. The second wave differs from the first both in nature and speed. A rapid increase in overdue loans prompts a huge rise in bank capital reserves and a

decline in profits. The transfer of various businesses to banks as a result of defaulted loans will only lead to greater expenses. The two leading stateowned banks, Sberbank and VTB, already own retail chains, property and land. One possible solution could be to create a special bank for bad loans – an idea which is being actively debated. Indeed, many banks are, in fact, hollow shells, devoid of real capital. Their borrowers pay interest, but principal loans are being permanently refinanced. Anti-crisis efforts could strengthen the positions of state banks, which many experts see as the worst possible scenario. Indeed, state banks and banks with state participation, are using their administrative and financial resources to compete with their smaller rivals for reliable deposit and lending clients.This struggle, combined with the repeated lowering of the Central Bank’s discount rate, has been instrumental in reducing interest rates and cutting margins for smaller banks, many of which are now teetering on the brink of bankruptcy. The second wave is unlikely to result in queues of anxious depositors. A softer scenario, whereby small banks would be swallowed by their bigger rivals, is a more likely option. Meanwhile, now is a good time for foreign players to enter the Russian banking market without creating banks from scratch – which is a complicated and time-consuming undertaking. Potential targets include medium-sized multibranch banks and captive banks, which large corporations will be happy to shed, as non-core assets, at the earliest opportunity.

Brahmos missiles onto Sukhoi fighter planes. The deal also includes building a modern supersonic fighter aircraft invisible to radars like the US F-22 Raptor stealth fighter, according to Indian Airforce official P.K. Barbora. The second pact covers aftersales product support for defence equipment of Russian origin. “The sides agreed to develop in the nearest future a mutually acceptable solution to questions on the renovation and refitting of the Admiral Gorshkov for the Indian navy. They also agreed to decide by the end of 2009 all organisational questions related to the joint development of a multifunctional fighter and to start practical

work on its creation,”the Federal Service for Military and Technical Co-operation said in a statement. India’s growing ties with the United States, underscored by a civilian nuclear deal, have put Russia at unease, as New Delhi seeks to reach out to other countries to modernise its military inventory of mostly aging Russian-made arms and fighter jets. Delays in refitting the Admiral Gorshkov aircraft carrier have been a particular concern, with huge cost overruns affecting the country’s military planning. The 10-year deal could help iron out differences in the relations between the two former Cold War allies, analysts say. Reuters, The Moscow Times

IT products to be made in India AFK Sistema, which provides mobile communication services under the MTS brand in India, is proposing to locate its own production of telecommunications and IT equipment in India. This initiative was put forward by Gujarat Chief Minister Narendra Modi. Experts calculate this project could cost Sistema 25-30 mn euro. Narendra Modi recently visited the Sistema company’s production complex. During his meeting with the company’s management, he suggested it should locate its own production of SIM cards and IT equipment on Indian territory. Modi also showed an interest in the possibility of organising – in Gujarat – Russian production of monitoring equipment for coastal protection and for measures to combat natural disasters.

According to Sergey Filippov, press officer for Sitronics, India is a priority market for the company.“We’re currently supplying radio equipment, billing and SIM cards to our own operator,” said Filippov.However,he notes, Sitronics also intends to develop this market and has already had talks on supplying transport cards for Indian Railways, and also on supplying SIM cards and other equipment not only for Shyam but also other operators. “As far as locating our own Sitronics production on Indian territory is concerned,that needs to be looked at separately,”Filippov noted. During the recent Russian–Indian forum in Moscow,Vladimir Yevtushenkov, Chairman of the Sistema board of directors, remarked in his speech that Sistema has something to offer India within the framework of

bilateral co-operation. This could be high-technology products – for example, crisis situation management systems – developed by the company to the requirements of Russia’s Ministry for Civil Defence, Emergencies and Elimination of Consequences of Natural Disasters. According to Finam analyst Anna Zaytseva, in the event of Sistema deciding to locate production in India, construction of such a facility could cost 25-30 mn euro.This sum would be enough to organise production of approximately 30 mn cards per year, Ms Zaytseva believes. Sistema could somewhat reduce SSTL’s (Sistema Shyam TeleServices) costs by supplying it with SIM cards that it has produced itself locally, the analyst reasons. Kommersant

Technology

BOOKMARKS

RUSSIA INDIA REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

www.rusnano.com The Russian Corporation of Nanotechnologies (RUSNANO) www.rbcnews.com English-language business news en.rian.ru/business RIA Novosti newswire

A scientist puts a sample onto a scanning microscope at a nanolaboratory in Zelenograd

Interview The state technology corporation is seeking co-operation with foreign partners

ALEXANDER ZELENKOV RIR

HowmuchisRUSNANOinterested in expanding its ties with foreign partners, including India? We are actively looking for foreign partners. Co-operation with foreign companies is one of our top priorities, not least because many countries are far more advanced in the field of nanotechnology than Russia. Not so much in terms of science, where we have significant achievements, but rather in the commercial use of scientific achievements and research. We see India as a potential partner and plan to establish closer contacts next year.A delegation led by General Director Anatoly Chubais will make a factfinding trip to India to look at what’s going on there and understand what kind of projects we could collaborate on. We certainly need closer contacts with India’s authorities and its research and technology community. Perhaps we will also visit Bangalore, India’s Silicon Valley. Which areas do you see as the most promising for Russian-Indian co-operation? Our prime focus is on joint production of nanotechnology products, especially in Russia. This is why RUSNANO was

Alexander Losyukov, Deputy General Director for International Co-operation, Russian Corporation of Nanotechnologies. created. But there can also be parallel projects in Russia and in India. Our second priority is investment in such nanotechnology projects. In India, who is showing interest in joint projects? Is it private business or the government? We have already had some contacts with Indian officials who

The Director’s words RUSNANO General Director ANATOLY CHUBAIS: “Russia’s entire system of nanotechnology management rests on two pillars: science and business. The Kurchatov Institute takes care of science, while we focus on business. Our job is to create it. We don’t want to control Russia’s emerging nanotechnology industry or replace private owners, but we will help them and leave our partners in control. ROSNANO plans to withdraw from projects when we see they can go on without assistance. We approved 20 projects in the third quarter of 2009.”

visited Russia. In particular, I refer to Indian ministries and departments responsible for industry and industrial research and development. However, India’s business community is also showing interest.Talks are currently underway – I will not mention any specific names for now – to create parallel entities in India and Russia, which would co-operate in this area. At this point, we cannot boast any specific projects with Indian partners.We are still testing the waters and getting to know each other. But this stage is necessary before establishing serious relations. What do you want from your foreign partners in the first place – experience, cash, markets or somethingelse?Andwhatcanyou offer in return? We are interested in everything. If our foreign partners have some interesting technology projects, we are interested in participating, including participation in related production projects. I would like to stress that we too have research achievements of interest to our foreign partners, and there is opportunity for mutual enrichment and benefit. On our part, we provide our counterparties with a lucrative investment opportunity: RUSNANO is a large investment venture fund concentrating on nanotechnologybased production. In the future we plan to invest between $11.2 bn a year, which the Russian government guarantees despite current economic conditions. What are the terms for RUSNANO and private businesses in joint projects? According to our charter, we have to find private co-investors for our projects.We are prepared to invest in joint projects

VALERY SHARIFULIN_ITAR-TASS

The Russian Corporation of Nanotechnologies (RUSNANO) was created to promote the development of Russia’s nanotechnology industry, though its activities are not limited to Russia alone. Alexander Losyukov, Deputy General Director for international co-operation, told RIR about the corporation’s plans to work with foreign partners.

PHOTOXPRESS

RUSNANO: helping tech business grow

RIR Dossier: RUSNANO investment projects One of RUSNANO’s priorities is co-investment in production, infrastructure and educational projects in the field of nanotechnology. The corporation began taking requests for financing on 1 April 2008. As of 23 October 2009, it had received 1,272 requests for project financing valued at a total of more than 1,569 bn roubles, including RUSNANO’s share of 974.9 bn roubles. 239 projects valued at 501.1 bn roubles have been considered, with 293.6 bn roubles to be provided by RUSNANO.

RUSNANO’s Supervisory Board has so far approved 38 projects with a total budget in excess of 96 bn roubles, including RUSNANO’s share of 55 bn roubles. All investment projects approved by the Supervisory Board are divided among the following areas: solar energy and energy conservation; nanostructured materials; medicine and biotechnology; mechanical engineering and metal processing; optoelectronics and nanoelectronics; infrastructure.

at a relatively low return over the long term, which is unusual in an international investment environment. We do not invest more than 50pc of a project’s value.This means that we need private partners with a strong incentives to generate a profit, thus ensuring revenues from the project. I must say private businesses are rather cautious

about investing in innovation, and it is for this reason that our corporation was set up. For the government, this was a measure to encourage private investment in this vital area. It is not our goal to earn extraordinary profits, but rather to promote production together with private capital, helping projects get off the ground and begin

ing, which imitates the damaged wall of a vessel. The device can detect both insufficient and excessive blood coagulation. This is a unique option which other test systems lack. The accuracy of diagnosis, simplicity of use and low price are the strong points of the new products, with production to be launched in the first quarter of 2012.

LARGE-SCALE PRODUCTION OF POLYCRYSTALLINE SILICON AND MONOSILANE

generating results. Once that objective has been achieved, we withdraw from the projects, seeking a return of the initial investment without profit maximisation in mind.This is an important condition, as this is our mission. What are the additional advantages for foreign investors working with RUSNANO? Co-operation with RUSNANO allows foreign investors to start production in Russia, offering opportunities for profitable investment and potential entry into the Russian market, which is becoming increasingly attractive for such products. We also assist our partners in the administrative sphere, shielding them from many problems typically faced by foreign companies in Russia. Our production plans embrace both Russian and international markets, otherwise it would be difficult to be successful. If such successful businesses are ultimately wholly foreign owned, they will continue to operate in Russia.

Projects recently approved by RUSNANO NANO-VACCINES AND NANOMEDICINES

The project envisages the launch of pharmaceutical production based on technology to produce vaccines and pharmaceuticals from nanoparticles and nanostructures. Certain levels of target proteins are ensured in an organism, and they either strengthen immunity or treat illness.

Nanoparticles provide cells with a gene producing the required substance within a month, in the form of protein molecules. Two new vaccines will be produced – one against human flu, the other against bird flu – and three preparations to treat toxic conditions in oncology patients, ischemia of lower extremities and amyotrophic lateral sclerosis, and

also to activate immunity. The launch of the project is scheduled for the third quarter of 2012. DEVICE FOR BLOOD COAGULATION DIAGNOSIS

The device is based on a unique technology, which has no known parallel. Natural blood coagulation processes are simulated on a special nano coat-

Almost 90 pc of the world’s solar cells are produced based on polycrystalline silicon, while monosiline provides material for covering solar cell substrates with super thin layers of silicon, and also for manufacture of thin-film solar cells. The new production facility will provide

raw materials for the development of microelectronics and formation of the solar energy sector, which is new to Russia. The production of polycrystalline silicon, with a capacity of 3,500 tonnes per year, will kick-start at the end of 2009, while the monosilane project will be launched in stages, to eventually reach 200 tonnes per year.

BOOKMARKS

www.kiae.ru Russian research center - Kurchatov institute eng.kremlin.ru The President of Russia's website. See his speech at the Second Nanotechnology Forum

RUSSIA INDIA REPORT

Technology

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

The triple alliance countries have close or identical positions on many internaThe three countries decided to tional issues. take mutually agreed steps in The Indian minister of external order to create "a more fair and affairs, Somanahalli Mallaiah inclusive world order". Krishna, praised the quality of “We agreed to co-ordinate ef- RIC discussions, which conforts to establish a more demo- cerned export cooperation, cratic system both in finance joint economic projects, and and security. We also agreed to transnational crime. develop a common approach to He said the next trilateral meetinternational discussions on ing would take place in 2010 in sustainable energy security and China. climate change”,said Lavrov. Konstantin Simonov, director of In the joint communiqué, min- the National Energy Security isters emphasised that Russia, Foundation, says: India and China “naturally “In terms of its energy industry, complement each other in the India is very similar to China. energy sector”. While Russia is The share of coal used by the Inthe dominant supplier of oil dian economy versus other enand gas, India and China are ergy sources is almost as high as major manufacturing centres. China.While both countries are The document says: "Energy is- ratcheting up hydrocarbon prosues should be discussed to rec- duction, neither India nor oncile the long-term interests China can satisfy steeply rising of both the energy consuming domestic demand. and energy supplying nations". Though China did not earlier Russian President Dmitry Medvedev visits According to the document, need gas or perceive it as an imKurchatov Institute in Moscow Moscow, Delhi and Beijing will portant source of energy, the work to intensify co-operation country is gradually turning in the energy sector based on into a big consumer and the role openness, transparency, a com- of gas will keep expanding as it petitive energy market and a is in India. balance between the interests India faces the same challenge of all nations involved. of finding additional sources of The RIC ministers also ad- energy to sustain economic dressed the nuclear dispute in- growth.Apart from fuelling the volving North Korea and Iran, economy, energy is essential for supporting a diplomatic ap- eliminating poverty.The Indian proach.“We agree it is neces- population is swelling fast sary to employ political and enough to catch up with and diplomatic tools to resolve ten- even exceed China, but the sions in the Korean Peninsula, country is still stuck with yawnNorth Korea’s nuclear pro- ing gaps between rich and poor Medvedev said a nanotechnol- order to create competitive na- gramme in particular, and the and the general scale of poverty ogy funding programme ap- noproducts.” He added that tensions associated with Iran”, is as bad as in China. proved by the government was most small businesses in Russia said Lavrov. If India wants to eradicate povthe largest in the world, with up nowadays are in the service sec- The foreign ministers also dis- erty, it will have to radically cussed measures to support Af- step up consumption of primato 318 bn roubles ($3.95 bn) ear- tor, not high technology. marked until 2015. He said the Medvedev criticised private ghanistan’s reconstruction and ry energy to provide its people sector’s sales in Russia would companies for being “inert” fight drug trafficking and ter- with light and electricity; withreach 900 bn roubles by that when it comes to investing in rorism. out these, it will be impossible time, but he scolded the state’s nanotechnology, saying the "We will continue our work on to pull the nation from the mire. management of the sector as state’s main task was to stimu- the issue with due considera- India needs hydrocarbons and, “disorderly.” late the interest of private in- tion of the decisions made at the unlike China, is already enSCO Conference on Afghani- gaged in a number of joint “The role of the sector is clear vestors in this sector. and the state’s efforts are quite Medvedev said that, to develop stan”,said Sergey Lavrov. projects with Russia. One Indiactive, but we have failed to un- the sector, the government The RIC countries considered an company owns a stake in the derstand the essence of what needed to reform the tax sys- industry-specific co-operation Sakhalin-1 project, and other exactly needs to be done,” he tem, introduce“green customs in agriculture and other sectors. deals are being negotiated. said. corridors” for high-tech ex- “Our cooperation relies on sim- The key challenge for Russia The new innovations should be ports, and place orders for in- ilarity between the fundamen- and India becomes obvious as tal interests of India, Russia and soon as you look at a map. Shipcreated by small and mid-sized novative products. businesses, Sergei Mazurenko, He stressed that qualified spe- China”,emphasized Lavrov. ping oil and gas to China is conhead of the Federal Science and cialists needed to be trained to Chinese Foreign MinisterYang ceptually straightforward, but Innovations Agency, said. work in nanotechnology.“The Jiechi remarked that the three getting these commodities to “We should be more systematic demand for these specialists is nations could build an impres- India is much trickier as poor in developing new high-tech roughly 100,000 to 150,000 sive record of co-operation.“We geographic accessibility stalls production by creating medi- people today,”he said.“We have have made progress in joint cri- co-operation. Given current um-sized and small science-in- a list of related professional sis management. Let us contin- transportation challenges, I do tensive businesses,”Mazurenko training courses approved by ue contributing to regional sta- not think Russia can view India stated.“In addition, we need ex- the Education and Science bility”,he said. as a potential market in the Yang Jiechi added that the three short term.” tensive applied research in Ministry.” MAXIM SHIPENKOV _REUTERS

CONTINUED FROM PAGE 1

Diversification President says Russia must get off the oil road

Medvedev: nanotech is the economic way forward Nanotechnology will rival oil as a global powerhouse industry, so Russia’s economy needs to embrace it now to avoid a repeat of the “well-known scenario” in which growing oil prices keep it from modernising, President Dmitry Medvedev said at the opening of the International Nanotechnology Forum, which took place in October. ALEX ANISHYUK THE MOSCOW TIMES

“The economic crisis is a great impetus for an economic renewal,” Medvedev said in his speech at the Forum. “But the main challenge,” he said,“is to avoid the well-known scenario where oil prices are on the rise and the economy is improving and, again, just like in previous years, no one needs nanotechnology because we can relax and make ends meet without innovation. We therefore must make nanotechnolo-

gy one of the main sectors of the economy.” Medvedev also said the main lesson Russia should learn during the crisis was the need to diversify its natural-resourcesoriented economy. “We should not focus our economy on natural resources, no matter how tremendous they are,” he said.“However, there haven’t been any changes so far. The crisis hit the economy, but no one wants to change anything, which of course is a sad conclusion.” The global nanotechnology market is worth about $250 bn today and may reach $2 trln to $3 trln by 2015, making it comparable to the market of natural resources, Medvedev said, citing independent estimates. Russia has a number of advantages that could make it a leader in this field, he said.“We have a competitive scientific base, a spacious domestic market and active state support.”

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

www.rbcnews.com English-language business news en.rian.ru/business RIA Novosti newswire www.forbes.com See Forbes Billionaires List - an annual ranking of the world's wealthiest people

Money bags What these billionaires have lost in toys and capital, they have gained in righteousness

The oligarchs redeemed? The idea that the super wealthy should not be ostentatious with their fortunes, and at least appear to live like ordinary people, has been popular in the West for some time. Some of Russia’s new rich want to be seen differently following the economic crisis.

Russia’s 100 richest people lost 73 pc of their wealth last year due to the financial crisis, Forbes Russia said. Only 32 billionaires remain, compared with 110 in the previous year.

SVETLANA GRAUDT RIR

Mikhail Fridman, the founder of Alfa Group, is worth $6.3 bn, and is number 71 in the 2009

Mikhail Prokhorov, owner of Onexim Group, tops the list with a fortune of $9.5 bn. Oleg Deripaska, formerly Russia's richest man, has fallen to 10th place after losing $25 bn during the credit crunch.

Russia’s Millionaire Fair - popular prior to the economic crisis - recently took place in Moscow. In contrast to the luxury of previous years, the latest event had a dressed-down format. The public fair previously maintained a strict dress code and was dominated by Russia’s new rich.

Forbes billionaires’ list (a fall from number 20 in 2008). Fridman also appears to have gone anti-yacht, saying that a passion for private planes or yachts wasn’t quite “healthy”. He added,“It’s not a benchmark of success for me. I am in no way condemning anyone and have a philosophic point of view regarding the toys of our oligarchs. I just think it’s not very

“For intelligent people, money is a means and for stupid ones, it is a purpose...” clever to be seriously interested in buying expensive things, cumbersome and useless… It’s not that their interests are narrow… It’s that they hadn’t found other touch points.They don’t get other values. My personal sign of success is for me to be able attend a play or a concert anywhere in the world, just take off and go there.” In Russia, righteousness and temperance is becoming trendy again. Perhaps there is, after all, a ceiling to the oligarchs' conspicuous consumption. Another wealthy Russian, Oleg

Tinkov,who has made his money in the restaurant business, food production and financial services and who admitted to selling his personal jet due to the crisis, concurred.“In theWest,showing off your wealth is considered a poor show. I’ve always personally agreed with that. Now this tradition has become a trend here. Modesty and limited consumption is becoming popular, and this is line with my philosophy.” In Britain, where many Russian oligarchs have moved their businesses and families and purchased massive mansions, the crash has not fundamentally changed public attitudes toward wealth, said Ben Page, the chief executive of Ipsos MORI, a market research agency. “The country is as divided as ever on whether it is acceptable to be filthy rich or aim for a society with less wealth inequality, but it has made some wealthy people more self-conscious about flaunting conspicuous consumption when their companies are making people redundant and profits and personal wealth are down.” But in Russia, consumption among the rich is still at a high level, according to Tom Mundy,

equity strategist of the Russian investment house Renaissance Capital.“Oligarchs have had help from the government,”he said.“In the beginning of the crisis, experts were predicting the death of the oligarch...but it hasn't happened,”he said. An employee of a Russian transportation millionaire, who asked not to be identified, said about his bosses’ circle, “They’re still living ostentatiously.This is their way of life. They’re not calming down. They just can’t be satiated, although it’s about time they did.” As a nod to Russia’s 19th century merchants who set up hospitals for the poor and contributed to the arts, Russia’s rich have tried to improve their reputation by spending money on charitable causes. When oil and gas industrialist Viktor Vekselberg brought the Faberge eggs back to Russia at a price of over $100 mn, it made headlines around the world and won him grace with the Kremlin. More recently,Vladimir Putin was dismayed by the show of extravagance by Azeri-born tycoon Telman Ismailov; he opened a luxury hotel in Turkey at a reported cost of $61 mn during the recession.

A poll conducted by Russia’s Center of Public Opinion showed that 67 pc of Russians thought that“to throw money around”when there are many poor people in the country is amoral and shouldn’t be permitted. Moreover, 56 pc of those polled said that the conduct of the rich is not their personal business but a concern for the wider public and the government. Oligarchs still appear to be out of favour with common Russians who have had to

PHOTOXPRESS

Fall in wealth, but more well rounded

The value of assets held by the so-called Golden Hundred tumbled to $142 bn from $522 bn a year earlier. KONSTANTIN ZAVRAZHIN_RG

Sergey Polonsky, the head of Russian real estate giant Mirax Group, was a billionaire before the Russian stock market collapsed. After the crisis hit Russia, he sold his assets, including his prized yachts, to keep his ailing business afloat. That act of prudence is a far,far cry from his 2008 persona, including a comment, repeated in the press, that anyone with assets less than one billion dollars is a loser. The proud,down-scaling mogul hasn't stopped boasting, however, and torturously described his responsible act on his blog. “After giving it a good thought during the NewYear holidays, I decided it’s not the time to feed others’economy. In view of this, I decided to sell my hotel, Sungate Port Royal, yachts, and house on the Côte d’Azur and put all the proceeds into further construction of our projects." He even moved from boasting to preaching: “For intelligent people, money is a means and for stupid ones, it is a purpose,” he wrote. Could this be a sign that the days of conspicuous consumption by Russia’s super-rich are over? Are we seeing the shoots of socially responsible business? Not so fast, experts agree. The oligarchs are still in the game of wild profits and consumption. More recently, they have received a lot of help from the government. Prime MinisterVladimir Putin provided billions in loans through natural resource grants, particularly in minerals and mining. This has received a mixed review, as the emerging but vulnerable Russian middle class began to shrink again.

Facts about billionaires

bear the brunt of high unemployment and increased prices. “I’m negative about the oligarchs. They are not thinking about the people,” said Nadezhda Sorokina, 55, a single mother of two sons and a pensioner from Moscow. “Although I’m retired, I will be working for a long, long time. The oligarchs haven’t changed from the way they were. Now let them move their money from their foreign accounts to Russia or sell one of their five villas abroad.”

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http://wciom.com Russian Public Opinion Research Centre www.economy.gov.ru Ministry for Economic Development of the Russian Federation

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

Stimulus The government is boosting benefits for elderly Russians in an indirect bid to ease the crisis

Pensioners hold a key to revival As the world looks for ways to stimulate the economy, there’s a growing interest in those that have finished work. It seems that the retired could be a significant component in the fiscal reconstruction. They’re certainly not being overlooked, as a new pension plan reveals.

In 2010, the average monthly pension will be more than 8,000 roubles ($275). Currently, the average pension is 5,500 roubles ($189), while the official living minimum is 4,780 roubles ($164).

BEN ARIS SPECIAL FOR RIR

According to the Public Opinion Foundation, 29pc of pensioners said their pension was enough to cover their food and clothing expenses; 44 pc said it was enough only for food; and 20 pc believed it wasn’t enough for food.

SERGEI KARPUKHIN_REUTERS

Tanya Kokovina sits in her kitchen drinking tea. A former factory worker, she has been retired for six years and is struggling to get by. But life should start to look up next year: In October, Russia’s prime minister,Vladimir Putin, promised to increase average pensions by at least 40 pc. Part populist headline grabber, part economic stimulus package, the move should put more cash into the hands of some of the neediest Russians. “The state gives me 5,600 roubles ($180) a month, but half of that goes on utilities and rent for the apartment,”says Kokovina, who lives in the leafy Sokol district of Moscow. “I need $450-500 a month on top of that to have a comfortable life.” Russia’s OAPs have had a miserable time since the fall of the Soviet Union.Their life savings were hyper-inflated away in the early Nineties, and the all but bankrupt state could only afford to pay a pitiful $10 a month for most of that decade. Following the economic boom

Russia has around 38 mn pensioners; two thirds are women, and 22 pc are employed.

New pension plans will give the elderly more money to cover basic living costs, in the hope they will spend the extra cash on domestic products

of recent years, pensions have risen nearly twentyfold to the point where pensioners can cover the basics, but the increases have trailed the rising cost in living. Like many women in her position, Kokovina works on the side, making soft toys and scarves to sell in the market.“I have no idea how I could live if I had to depend only on my pension: my diet would be limited to cabbage soup and porridge. Really, I wouldn’t be able to do anything other than survive.”

Traders who are happy to stay in the grey ARAM TER-GAZARYAN RIR

Most Russians do not live on their state pensions alone. And while some continue to work in their former professions, others are learning how to make money on the stock exchange. These traders approach their “second profession” with a sense of responsibility, arriving at 10.30am when trading starts at the Moscow Stock Centre, and staying patiently till the

Facts about pensions

end of the working day. The group includes a wide range of professions – from mathematicians to cleaners – and each makes a profit in proportion to their financial resources. The elderly usually start trading when they have $2,50 0 to $3,500 at their disposal – a year’s worth of pension. Such expenditure is only possible for recent retirees or those receiving help from their children. Some people have turned to the stock exchange to earn enough

Mr Putin hopes to kill two birds with one stone. As well as dramatically improving the lot of ordinary people, underlying the increase is his calculation that giving state money to pensioners is one of the more effective ways of stimulating an economy that is spluttering back to life.“This money will go where it’s needed,” he told international investors at the recentVTB Capital investment forum in Moscow.“Ask yourself what pensioners are spending their money on. It is not luxury

goods but basic things; things that are made in Russia.” “In the past, the Kremlin was fixing leaks in the pipes by putting a bit of duct tape over the worst holes; now they are looking at installing a new set of pipes,” says Ariel Cohen, a senior associate at the Hermitage Foundation in Washington. The first stage of the reform is to dramatically boost spending on pensions to a whopping 10 pc of GDP in 2010. The target is for pensions to reach 7,750 roubles

money to enjoy a comfortable retirement; for others, playing the market is simply a way to get out of the house, or stave off boredom. Whatever the motivation, all have taken a free training course (St Petersburg, Yekaterinburg and other cities are also providing free training for pensioners). The way the pensioners actually do their deals is a striking departure from the accepted image of the modern trading floor. Elderly people quite often sleep right in front of the screens showing all the latest market reports. However, if any changes happen on the market, they start to wake one another

up. They may be relative newcomers, but their grasp is every bit as good as that of experienced investors. The players say that, on average, each one earns up to 5,000 roubles per day. Staff in the transaction centre say that that blue-chip securities attract the most conservative pensioners and the inexperienced, while second- or third-rank shares are of interest to the most active and emotional players. Analysis is usually done collectively: they all get together once a week to study the forecasts, then each makes a plan of action for the next five working days.

($271) a month on average, then 8,408 roubles ($315) a month at the end of the year,“which means an impressive 50 pc increase… or increasing the ratio between average wages and pensions to the level it was at in 1990”,according to analysts at Merrill Lynch. Some economists worry that Russia can ill afford such a huge increase in social spending when the state is facing its first budget deficit in nearly 10 years. Merrill Lynch says the move means the state will have to top up the pension fund with transfers worth 3-4 pc of GDP to meet their commitments in the next few years. Others worry that a big increase in pensions will be inflationary. Russia has been battling inflation for more more than a decade and a half. By the start of 2008, the Kremlin had brought the rate down to single digits for the first time in modern history: one of the few beneficial effects of the current crisis is that prices have actually fallen in the last two months, according to the Central Bank. The priority now must be to get the economy moving using some of the hundreds of billions of dollars the state has kept in reserve. “Any stimulus spending will cause inflation, but once you have decided to go down this

road, then the only question is: where do you spend the money? The advantage of giving it to pensioners is that it will go directly in the hands of millions of people.This is likely to cut graft [syphoning off cash] as, if you spent it on three of four targeted projects, then you have the chance that part of the money will end up offshore,”says Ronald Smith, head of strategy at Alfa Bank. Handing trillions of roubles to pensioners will almost certainly bolster the fragile return to growth that was visible over the summer, but it can only be the first step in a wider reform of the pension system – which will take time. There are two major problems to overcome: the first is that the average pensioner is not financially sophisticated; second, many small Russian investors got badly burnt by the pyramid schemes of the Nineties and remain very wary of the investment industry. Kokovina says she has seen the pension fund adverts, but remains very sceptical.“Yes, of course, I heard about private pensions… but I didn’t really understand what it was all about, so I didn’t look into it. After the Nineties, I’d be very mistrustful of any scheme run by a commercial company.”

editor.india@rg.ru

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

eng.gov.spb.ru Official portal for the St Petersburg city government www.saint-petersburg.com On-line resource for business and leisure travellers to St Petersburg

A Bird’s eye view of old St Petersburg with the Hermitage (left), the dome of St Isaac’s Cathedral (centre) and the Spit of Vasilievsky Island. The Little and Big Neva rivers meet at this point, with the city’s famous Admiralty – and its golden spire – on the other side of the Palace Bridge.

City of waters St Petersburg is a time machine transporting you through history, romance and adventure

A journey through St Petersburg…

St Petersburg – what’s in a name? It’s the rhetorical question that has always mocked identity and, in this city’s case, it would go one step further and mock history itself! Aanchal Anand takes us on a journey through this enchanting city. One of the walls of Sadovaya Metro station is etched with the city’s different names “1703-1914 St Petersburg; 1914-1924 Petrograd; 19241991 Leningrad”and, just like that, it manages to capture over 300 years of Petersburg’s history and that of Russia! Back in 1703, after winning this piece of land from the Swedes, Tsar Peter the Great laid the city’s foundation and named it St Petersburg after his patron saint, Peter, who holds the keys to the gates of Heaven. But there’s more behind the name – instead of picking a Russian name, Tsar Peter chose something more European. He was loathe to Russia’s social and industrial backwardness and even levied

a tax on beards! Therefore, St Petersburg was designed to be the ‘modern’ Russian city, the window to the West, the Gates to Heaven.The cream of European architects were invited to create a city so unsurpassed in style and beauty that it remains Russia’s most picturesque and one of the best in the world. Like Paris and the Louvre go in one breath, so do Petersburg and the Hermitage. One of the largest and oldest museums in the world, the Hermitage is a part of the emerald and ivory Winter Palace, the former residence of the Tsars. Overlooking the river Neva on one side and the Palace Square on the other, it is undoubtedly the most impressive building in Petersburg. Palace Square – the scene of the “Bloody Sunday” crime. This is where, in January 1905, Tsar Nicholas II’s troops opened fire on peaceful demonstrators who had brought a petition to appealing for improvement in living conditions. When the news of this Jalian-

wala-Bagh-like massacre spread, Russia erupted into the 1905 Revolution and seized the Duma – the first Parliament – from the Tsar. Twelve years later – by which time Petersburg had become Petrograd

In the small hours, see the Petersburg bridges lift up their steel-entwined hands to the black heavens under nationalistic pressure – a shot was fired from the Aurora (a ship stationed on the Neva) into the Winter Palace and the Bolsheviks seized power in the October Revolution. Lenin came to power and in 1918 moved the capital to Moscow; but, soon after his death in 1924, Petersburg was renamed Leningrad after him. This name remained until the collapse of the Soviet Union in 1991. Even though I had been flirting with Russia since I was 5, it

wasn’t until my first trip in June 2006, when my love affair with Petersburg – or Piter as the locals prefer to call it – began. On my first day exploring the city, I did what most tourists do – walk down Nevsky Prospekt, Piter’s spine. I started atVosstaniya Square where a large column topped by the Soviet star signifies Petersburg as a Hero-City for bravely not surrendering to the Nazis in the Second World War. Along the Griboedova canal is the Kazan Cathedral to the left and the Church on Spilled Blood to the right. The Kazan Cathedral was modeled on Saint Peter’s Basilica in Rome and l o o k s a s t h o u g h i t’s stretching its arms out to to welcome you. The Church on Spilled Blood is the colourful onion-domed Orthod o x c h u rc h t h a t doesn’t only have a gory name but a gory history as well. It’s built at the spot where the reformer Tsar, Alexander

II, was assassinated by a dissident group. A few blocks and canals later, you hit the magnificent Palace Square with theWinter Palace, the Army and Navy headquarters and St Isaac’s Cathedral, which is St Petersburg’s largest. In fact, during the Siege of Leningrad from 1941-1944, when the Nazis had been bombing the city, they decided to spare this Cathedral. That’s because the sun’s reflection off its golden dome always gave away the city centre and the Nazis knew exactly where to bomb to cause maximum damage. The Palace Square might be Piter’s touristic pinnacle but it doesn’t c ove r e ve ry t h i n g . Menshikov Palace – the smaller wing of t h e H e rmitage; the

Bronze Horseman – one of the city’s best known symbols; the blue and white Smolny Cathedral; the world-renowned Marinsky Theatre; the Peter and Paul Fortress, which houses the Romanov burial grounds and the two rostral columns at the spit of Petersburg’s largest island,Vasilievsky Island – all are pieces of the same magnificent city that has been home to and inspired some of Russia’s greatest talents like Pushkin, Tolstoy and Repin. When I returned in September 2008, I must admit I wasn’t as excited as I was the first time. Piter and I had moved on from the initial rush to something more meaningful. But I still felt like a child in a candy store – hungry and curious! And these two years that separated my visits had obviously changed Piter too. CONTINUED ON PAGE 9

PETERHOF

View of St Petersburg from the Hermitage roof at night in early summer. The “White Nights,” when sunsets are late, sunrises early and darkness is never complete, normally occur in late June.

SERGEY MAXIMISHIN_

_EPSILON

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www.st-petersburg.ru/en Official presentation of St Petersburg www.enlight.ru/camera “Wandering Camera” project – photos of St Petersburg

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

Interview India’s Consul General in St Petersburg talks business

A rich history of bilateral city ties

YEVGENIYA TSYNKLER RIR

ALEXANDR PETROSYAN

CONTINUED FROM PAGE 8

One phenomenon I couldn’t ignore was the number of Japanese restaurants that had mushroomed all over the city. It was almost as if people were saying, “Move over kolbasa (sausage), and bring on the sushi!” But one thing that hadn’t changed at all (and I hope it never does) is that time is perfectly preserved in Petersburg. All museums and buildings are highly maintained and go through regular services. Even when things were completely destroyed during the war – like the mysterious Amber Room of the Catherine Palace – funds have been pumped in to restoration or reconstruction. Another great feature of Piter is its metro. Not only is it the deepest metro in the world (because it’s built underneath a swamp!), but it’s also one of the most beautiful with mosaic artwork. And it’s absolutely spotless.You’ll find a lot of graffiti in London, New York, Paris and Milan – but not in Petersburg! My last day in Petersburg was 21 June 2009. Anya and I went

to the Neva embankment in the small hours of the morning to catch the last glimpse of the bridges going up to let ships through. Summer is the time of White Nights, when the sun doesn’t set until about 1am and rises again around 5. Against the golden spire of the Peter and Paul Fortress, the sky was splashed with a light salmonpinkish and lilac hue. Hundreds of people – both tourists and locals – sang and danced along the embankment, cheering and taking photographs of the ships passing by. And that’s probably because Petersburg isn’t just a city – it’s the torch on the columns onVasilievsky Island on a holiday. It’s the taste of the mushroom and sour-cream pancakes at Teremok. It’s the sound of Shostakovich’s Leningradskaya symphony that was composed during the Siege. It’s the smell of fireworks and beer after the Victory Day celebrations. And it’s the longing in Lenin’s heart, lying incarcerated under layers of chemicals in the mausoleum in Moscow, which had wanted to be buried next to its mother in Petersburg.

VYBORG

KRONSHTADT

1. Troitsky Bridge 2. The Peter and Paul Fortress 3. The Spit of Vasilievsky Island 4. St Isaac’s Cathedral

You have served in Indian missions in many countries. Is your work in St Petersburg different? St Petersburg is the cultural capital of Russia, so the Consulate is involved in cultural activities: close relations with museums, cultural organisations, universities, academicians and indologists. Recently, with the focus on the economic and commercial content of the bilateral relationship, and because of the commercial importance of St Petersburg (also the largest port in Russia), commercial work is growing in value. Do you have favourite places in the city? Petersburg is a unique city – historically, culturally and romantically; it’s picturesque and beautiful all year round. However, I am often disappointed with the weather.The boat ride during the white nights along the Neva and the canals with endless processions of museums, mansions, parks, bridges, domes and spires is really fas-

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FONTA NKA

5. Admiralty 6. The Hermitage 7. Kazan Cathedral 8. Cathedral of Our Saviour on the Spilled Blood 9. The Field of Mars

Mrs Radhika Lal Lokesh, the Consul General in St Petersburg. cinating. So are the reflections of beautiful architecture in the quiet waters of Griboedova Canal. Do you feel the interest in India is growing? Yes, definitely – both as a business destination and for culture or tourism. India has witnessed steady growth in the last two decades. The socio-economic transformation can best be experienced by visiting the country; I am glad Russians are doing so. Of course, the interest in India’s spiritualism, culture, rich history and civilisation continues to fascinate. I would like to mention that, despite the global downturn, last year’s tourist traffic to India from Russia recorded positive growth and people took advantage of excellent opportunities for affordable holidays in India.

Which areas of co-operation betweenIndiaandStPetersburgare developing most vigorously? The relationship between India and St Petersburg is traditionally close. In fact, the Sanskrit department was opened at St Petersburg State University as early as 1858 and the language was taught even before that. Minaev, a famous indologist, founded the St Petersburg School of Indology in the 19th century. Recognising this strong interest, School No. 653 was established in 1957 and continues close links with Indian culture. Overall bilateral trade turnover in 2008 was $6.95 bn, out of which $702mn involved St Petersburg – almost double that of 2007. Amongst the companies working with India are the Kirov and Baltic factories, Laztec (Laser Systems), scientific manufacturingcompanies Granit, Rubin, Aurora, Malakhit and the Nevsky Design Bureau.Turbines supplied by the Izhora factory for NPP Kudankulam are a key element of co-operation. Mining and metallurgy isanother important area. An important part of our economic co-operation is in the defence sector.The Baltic Shipyard built three frigates from 20022004 and ships and submarines are being repaired in Severodvinsk in the Archangelsk region. Indian business in Petersburg is represented by companies engaged in export-import of tex-

tile machinery, steel and related products, building materials, tea,coffee,pharmaceuticals,etc. Examples of Indian companies in St Petersburg include Jindal Steels, S&D Private Limited and Tandoori restaurants. The Indian bank ICICI also has a branch office. St Petersburg and Mumbai are sister-cities. How do they benefit from this? Mumbai has a special place in the bilateral relationship. Mumbai has been a sister-city of St Petersburg (then Leningrad) since the 1960s. A co-operation agreement was signed in December 2004 during the visit of the Governor of St Petersburg,Valentina Matvienko, who accompanied then-PresidentVladimir Putin.This gives the relationship a contemporary context and aims at advancing scientific potential to facilitate broader trade and economic co-operation. Sistercity relations also aim at promoting cultural contacts. Recent high-level visits have provided impetus. During the last two years, specific areas of co-operation have been identified: contact between chambers of commerce and co-operation in tackling common problems such as water supply, waste treatment,transportation, flood protection, etc.

For full version, go to www.rbth.rg.ru

St Petersburg is riding the storm According to St Petersburg real estate analysts and 2009 sixmonth economic results, the city’s economy has already reached bottom. The market has stabilised. The city administration hopes this stability will attract investors, thus promoting St Petersburg as a fully-fledged European business centre. ALYONA RYABOVA RIR

PERSONAL ARCHIVE

St Petersburg is the Western jewel in Russia’s cultural crown. The city may be less businessoriented than Moscow, but it nevertheless plays an important role in the development of IndoRussian bilateral relations across a broad range of sectors.

In 2006, the St Petersburg municipal government adopted amendments to the Tax Relief Law granting property tax exemptions and a 4 pc income tax reduction (down from 24 pc to 20 pc) to those who invested more than 3 bn rubles ($100 mn) in St Petersburg businesses.The task of attracting investment now tops the city’s agenda. A Council and a Commission for Investment have been established to assist MayorValentina Matvienko, who personally attends all investment fo-

rums and holds talks with investment fund managers. The city encourages investors to put their money into the commercial real estate market. In July 2008, Raven Russia, a UK investment fund, acquired 50 pc of AKM Logistics warehouse facilities, planning to buy out the remaining 50 pc after the project completion in 2010. Fashion House Development, in cooperation with GVA Sawyer, plans to purchase land for construction of an outlet mall.“The appraisal looks good and we will be securing a plot by early 2010 with an opening date of 2012, - comments Neil Thompson, CEO, FASHION HOUSE Development. –With St. Petersburg classical and traditional architecture,the 37,000-squaremeter site will have 172 stores, 1200 parking spaces and café and play areas.This will generate jobs within the local area and draw a high number of visitors.” Fleming Family&Partners has now started its first develop-

ment project in Russia, a 200,000-square-meter multipurpose complex including offices, apartments and shopping centers. In an interview with Vedomosti, Mark Garber, Fleming Family&Partners senior partner, said that the company had been ready to come to Russia as early as last spring but held back because the market was overheated and needed correction. Now the time has come. “We believe the timing is good: the valuation rationale has changed yet the assets are still available,”he said. According to Colliers International, over the first six months of 2009, the market for office space grew at a rate comparable to that of last year. “St. Petersburg's commercial market is one of Russia's most dynamic and still has a huge potential for growth,” says Neil Thompson, FHD. According to 2009 six month results, St. Petersburg sellers of Class A office and retail space expect the cap rate to reach

12-14 pc, while in the Class A warehouse market it should hover around 14-16 pc. Developers are now restructuring their debts and most of them refuse to sell good assets at a cap rate below 14 pc. For example, Colliers reports that Storm Real Estate Fund AS, a Norwegian investment fund, bought Griffon House, a 6,970-square-meter B+ business center, for $17 million at 14 percent capitalization rate. A full-fledged furniture industrial park is one of the most impressive investment projects presented by St Petersburg MayorValentina Matvienko at the Russian-Finnish Forest Summit. Ms. Matvienko says that for this purpose, the city will allot as much as 160,000 square meters, of which 100110,000 square meters will be used for production facilities. The project investment value is estimated at 3.8-4 bn rubles. The city’s economy is recovering after the shock and investors are coming back.

BOOKMARKS

RUSSIA INDIA REPORT

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

DMITRIY KOROTAEV_EPSILON

Bearing arms: Kalashnikov and the weapon he developed

Inventor Russia celebrates the 90th birthday of the man who armed the world

Designing history His chest clinking with medals from different regimes, Mikhail Kalashnikov has been revered by Soviet and Russian leaders, from Stalin on. Small wonder, given that his weapons have earned his country a fortune, while he has never asked anything in return. NADIA KIDD RUSSIA NOW

Far from being rich, he does not own yachts or airplanes. He belongs to the generation that appreciates the value of human recognition.“Are there many famous designers who have a monument built in their honour while they are still around? Or a museum? Do many have presidents of their countries coming to wish them happy birthday? I do!”says Kalashnikov.“I have

no celebrity attitude. I am the same man I have always been. I just keep working.” “A Russian sergeant armed the entire Warsaw Bloc,” wrote journalists during the ColdWar. In fact, Kalashnikov armed the whole world: the AK assault rifle is manufactured globally with or without licence. Many countries have equipped their armies with his creation: for

Interview Kalashnikov: the truth behind the myth

‘I invented the AK-47 to protect my country’ For years, a hidden, almost mythological figure, the designer of the world’s most famous gun has rarely been seen in public. But as he reveals here, when he does leave his homeland, he is revered wherever he sets foot… from America to the Middle East. IVAN EGOROV RIR

Why did the world learn about the Kalashnikov rifle many years ago in the era of the USSR, while it remained ignorant of the inventor until the 1990s? For years, I had a top secret clearance and never left Russia. Just once did I go to Bulgaria with my wife for a holi-

day at the Golden Sands resort, but I could not mention my real name. I was allowed to travel abroad only in the early 1990s. As an adviser to the managing director of Rosoboronexport, a government-controlled weapons export company, I visited many high-profile weapons exhibitions and at last could hold in my hands the most recent products. I do not consider the AK to be the best ever assault rifle. I am saying it over and over again: only the sky is the limit. Have you followed the progress of your international colleagues before? In the world of weapons, everybody is watching each other

and knows each other’s systems.When I met Eugene Stoner, the famous designer of the М16 rifle, and teased him about my rifle being slightly better, he replied that he doubted that I would have been able to design a decent 2800g piece as required by the Pentagon based on the original 5kg prototype. When Stoner and I arrived at a Marine Corps base, its commander, General Coffield, confessed: “For combat, I would personally choose your rifle, Mr Kalashnikov. I fought in Vietnam as a unit commander, and I wanted to have your rifle all the way. What stopped me was a different rate of fire and report compared to the M16. If I had started using it, my soldiers would

some it has even become a symbol of power and resistance featured in their state emblems. The story of how he designed the AK-47 has been shrouded in legend and rumour. A semiliterate boy from a large farming family beat some of the top small-arms designers in a competition for the best assault rifle. How did it happen? Mikhail Kalashnikov was born on November 10, 1919, in aWest Siberian village. His mother bore 19 children, but only eight survived. In 1931, the Kalashnikovs were stripped of their property as the country was swept by the repressive campaign against well-off peasants. His father died in exile, while Mikhail’s elder brother,Victor, spent nine years in labour camps. Signs of his future calling became apparent early in his career when, while serving as an army tank driver, Kalashnikov invented a device to count shots fired by the cannon. For his ingenuity, the famed Marshal of the Soviet Union, Georgy Zhukov (who at that time commanded the Kiev Special Army District), presented the young inventor with a watch with “Mikhail Kalashnikov” engraved on it. Shortly afterwards, the war became the instrument in his choice of vocation.As Kalashnikov puts it: “Germans were responsible for my becoming a gun designer.” When the Great Patriotic War broke out, the young tank driver was sent to the front, where he was badly wounded. Bedridden, he started thinking about creating a submachine gun, which Russian soldiers desperately needed. Without any previous engineering training, Kalashnikov set to

have shot at me thinking that I had been attacked by the Vietcong guerrillas, so I could only feast my eyes on your masterpiece.” The word “Kalashnikov” is recognised in every part of the world. Clearly, it does not always have a positive ring to it as in “reliable like a Kalashnikov”. When I met the defence minister of Mozambique, he said: “Please come to visit us! We won our freedom with your rifle, and when soldiers got back home, many gave the name of Kalash to their new-born boys.” Of course, there is a downside too. People often ask me how I feel about my invention being used to kill people every day and the AK being a common weapon of ethnic conflicts. I want to make it clear that I created my assault rifle to protect my country.You can blame politicians for its spreading out of control on a global scale. Once when I was thinking it

kalashnikov.guns.ru Site dedicated to the legendary Kalashnikov submachine gun en.wikipedia.org/wiki/Mikhail_Kalashnikov Find more information about Mikhail Kalashnikov

work thinking, designing, testing and discussing weaponry with experts. He finally got a job in an arms design bureau and began learning from professionals. From the start, Kalashnikov clearly identified his own principles of design: his rifle should be simple and reliable. However, success proved to be elusive. It was only in 1947, after the failure of numerous prototypes, that Kalashnikov’s design was accepted in a competition organised by the defence procurement agency. Despite competition from the top small-arms makers in the Soviet Union, Kalashnikov’s prototype made it to the second round, and ultimately to the final test.

‘I still closely follow what goes on in the world, but I try to avoid making political statements’ At last, the jury board announced: “Our recommendation is to adopt the assault rifle designed by Senior Sergeant Kalashnikov for operational service.” In 1949, Kalashnikov saw his rifle adopted as the army standard, and he received the prestigious Stalin Award. He spent the next 60 years refining his award-winning design. And in doing so, he felt as if he were honing his own personality. This autumn is a special time for Kalashnikov. Before his 90th birthday, he celebrated the 60th anniversary of his joining the weapons factory in Izhevsk, a historical city of gunsmiths

over, I recalled our specialist term – ricochet. At least the three of us – Eugene Stoner, Uziel Gal, and me – developed guns to do away with fascists as soon as possible… But the bullets fired from the М16 hit Vietnamese people who fought to unite their homeland. Uzi bursts shatter the slim hope for peace in Palestine and the countries next door… Let alone my АК. Rumour has it that somebody even suggested you should convert to Islam and become a living icon of the Arab world? As we were exchanging farewells before leaving Riyadh in Saudi Arabia, one of the Arabian majors suddenly began speaking passionately: “Mr Kalashnikov, has it ever occurred to you that you simply ought to convert? In Christian eyes, you are a sinner… you are responsible for tens of thousands of lives lost around the world. But in Islam, things would be completely different

about 600 miles north-east of Moscow. The Izhmash machine-building plant was the first to launch mass production of the AK-47 rifle that spawned a whole new generation of small arms. His son Victor is also a smallarms designer, striving, according to Kalashnikov senior,“to surpass his father”. One of his best known weapons, the Bison submachine gun, is carried by various Russian police units. In his free time, Mikhail Kalashnikov enjoys classical music and faithfully attends the Tchaikovsky Music Festival. He also loves poetry and has quite a few friends among the poetry fraternity.The inventor has also published several books and is a member of the Russian Union of Writers. Five years ago, a unique museum of small arms opened in Izhevsk. Its core exhibition is based on the success story of Mikhail Kalashnikov and his brilliant invention. Some visiting delegations will be welcomed by the designer. “I still closely follow what goes on in the world, but I try to avoid making any political statements,”he says.“Perestroika destroyed the USSR and sapped my own optimism – as well as that of others of my generation. Although we faced many problems under Communism, we still enjoyed a much stronger social safety net.” As for his vision of small arms evolution, Kalashnikov is confident that the upgraded AK rifles will reign supreme for at least 25 years, until the advent of new, high-power cartridges. In general, gun makers will continue to design weapons for better precision and penetration through modern body armour and light obstacles.

for you.”I said, not without embarrassment, that I would consider the idea. And at the same moment, I recalled an old Russian proverb wisely admonishing that changing your faith is not as easy as changing your shirt… In recent years, the media has come up with many myth-busting “revelations”, claiming that the АК-47 was designed by someone else and that the figure of designer Kalashnikov emerged as part of a well-staged Soviet publicity stunt. Any designer believes his gun is the best, and when its test performance is a bit less impressive compared to others, he feels bitterness and envy. It is all about competition, and in any competition the loser starts plotting against the winner and spreading nonsensical rumours. But you can see for yourself that I am still a weapons designer! Well, some think I was gone long ago… but I am used to it.”

RUSSIA INDIA REPORT

Designer Intelligent design drives evolution of a remarkable jet fighter

The sky’s no limit for supersonic Simonov Mikhail Simonov, designer of the iconic fighter jets Su-27 and Su30, has been at the forefront of aircraft design for more than 50 years. To celebrate his 80th birthday this month, we hear from the man who gave Russia the edge in aerial combat. DMITRY LITOVKIN IZVESTIA

Many would need two lifetimes to accomplish the things that Mikhail Simonov has packed into his 80 years. His Su-27 jet fighter – which has become as well known as Kalashnikov's AK-47 assault rifle – is recognised as the best jet fighter of the 20th century and brings billions of dollars into the Russian economy.

A virtuoso in the skies

was greeted with a universal sigh of admiration, but the truly awe-inspiring spectacle was yet to come. The 30-ton machine, with the ease of a ballet dancer, began performing aerobatics: two and a half loops within 800 metres of the ground with a “flip”at the end; vertical rolls; 90- and 270-degree loops. Finally, the jet suddenly gained speed and lifted its nose – but did not fly up as everyone expected. Instead, at full speed and leading with its fuselage, it carried on forward. A moment later, the angle increased from 90 to 120 degrees; the jet looked as though it was falling on its “back” while rushing with its tail forward. Professionals call this military manoeuvre “dynamic braking”; the pilot needs it to sharply drop speed, while still have an advantage over the enemy. Moreover, the pilot is able to simultaneously launch a missile from behind his back. No other aircraft in the world is capable of this.

‘Why don’t you go to your wife…’ “Our jet fighter came out late,” admits Simonov. “The American F-15 was already operating when our machine was only in its design stages.” T-10 was the prototype of a future Su-27; it first flew on May 20, 1977. But despite all the efforts of the designers and engineers of the Sukhoi Company, it was worse

SUKHOI COMPANY (JSC)

When the International Aviation and Space Salon – MAKS – announced it would be showing the Su-27 in flight… people crowded at the edge of the airfield. The blue-grey “Su”,with red stars on the wings and tail, leant toward its landing wheels as if welcoming the audience, turned on the afterburner a n d qu i c k l y took off. The sharp ascent

Mikhail Simonov has been developing the Sukhoi family of jets since 1969

Sukhoi continues to ﬂy high in both military and civil aviation projects The Sukhoi Company is one of the world's leading aircraft firms. Its fighter jets are used by dozens of countries. In August, at the International Aviation and Space Salon MAKS 2009, the Russian air force bought 48 Su35s. The Indian air force wants to acquire, in addition to its existing 105 Su-30MKIs, 50 more units. The current CEO of Sukhoi,

Mikhail Pogosyan, is successfully implementing the ambitious project of the regional passenger aircraft, Sukhoi Superjet: before the end of the year, the first mass-produced machine will begin flying on regular airlines. Overall, the company plans to build more than 1,000 units. The sky is immense – there will be enough space…

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

than the American jet. “This was bad news for us,” he recalls.“The jet was already being produced. Some were making space for military awards on their jackets, while thinking about how they would spend their state prizes.” But he recalls mustering the courage to go to the minister of aircraft industry, Ivan Silayev, to tell him that the aircraft did not come out as planned, and it would need more work. “It’s a good thing, Petrovich, that today is not 1937,”said the minister.“OK, I’ll redesign it…” I replied. “It was a true scandal. I came to the ministerial meeting. I began presenting my report and explaining that in order to improve the flight characteristics of the jet, we would need to move the stowage compartment from the bottom on to the ‘back’of the aircraft.Then, suddenly, the aircraft designer Arkhil Lyulka – a cheerful and a kind man – stood up and began yelling at me, nearly cursing me in Ukrainian. The conflict with the engine designer was only the beginning: the transfer of the stowage compartment meant redesigning the body. And that implied a scandal with another serious institution – Central State Aerohydrodynamic Institute (TsAGI). As a result, Simonov travelled to TsAGI overnight in secret, so as to not to let the management know he was designing new fighter jet models. According to him, they were in such a rush, they decided to start working on the first model that looked acceptable. And, it was that model that proved to be superior.

How the Arabs helped ‘Su’ Simonov insists that perestroika allowed the Su-27 to become the best of the best. A lack of money in the Nineties forced the Sukhoi Company to make a desperate move – to try to sell the jet abroad. The first place they looked was the United Arab Emirates. “At that time, their air force was headed by Colonel Khalid,” recalls Simonov. “He wasn’t a flexible man. As he looked at and flew our fighter jet, he said:‘It’s not bad, but can it sink a destroyer?’ But these

were two d i ff e r e n t things… It’s one thing to conduct air combat and completely another to destroy underwater and ground targets.” This could have been the end of the conversation. Intead, Simonov proposed the Arabs formulate their demands for the machine: “If you want the fighter jet to be able to hit targets at a distance of 100km – that can be done.You want it to sink destroyers – it will do.” So, the Su-27 became a multifunction fighter – though the Arabs did not buy it. Khalid admitted that the Americans would not have allowed them to do so. It is often said that the Su-27 and Su-30 are the best, but they have not been used in a single war. So how could their superiority be proved? “That is, of course, a secret,” smiles Simonov. This display of equipment was not simply advertising, but a comparison with competitors – at least with the French Mirages that were part of the UAE inventory. How could they be compared? Two of their best pilots took turns flying the aircraft, the Mirage and Su. All flight information was documented and the information analysed.

one who took part in those exercises, chief of the Lipetsk Air Force Training centre Major GeneralAleksandr Harchevsky, due to its high manoeuvrability and thrust-to-weight ratio, the Su-27 gained speed on the upward trajectory faster than F-15. The F-15 constantly needed to make a kind of a “step”– fly along a straight line for a certain period of time.The Russian pilots took advantage of that – they persuaded the Americans to go upward, at which point they lost speed, and the Sus, having made a sharp turn, found themselves on the tail of the enemy. A mo-

m e n t later and the target was “destroyed”. Thus, when the Americans learnt that India had acquired the more advanced Su-30s, they decided to pay them a visit. In their exercises, they decided to use the improved F-15.The result of the meeting was 6:4 in favour of the Su-30. However, instead of the Su30MKI, the Indians used the ordinary training Su-30, a machine without the new radar or thrust vector control.The next time Americans arrived in India, they brought the improved F-16. “This fighter jet is smaller and lighter than our Su-30,”says Simonov.“Thus, logically, it ought to be more manoeuvrable and win in close combat. But everything was exactly the opposite. Su-30MKIs were used.The defeat was unquestionable.”

Supersonic for presidents At one aerospace show, while watching flight demonstrations of civilian aircraft,

ANTON DENISOV_RIA NOVOSTI

ma.hit.bg/su27history/history1.html History of the SU-27 family www.aviation.ru/Su/story1/ Q & A with Mikhail Simonov, general designer of the Sukhoi Bureau

The best jet fighter of the 20th century The Su-30MKI is considered an unbeatable fighting machine. This has been borne out in air battles with potential adversaries. The first time it was done was in the early Nineties, when Su-27 pilots were invited to take part in military training with the F-15. The rules of the “battle” required the Russian planes to get on the tail of the American jets, then the opponents changed places. In a real battle, this would allow directing a missile and hitting the target. In both scenarios, Sus were victorious. According to some-

Mikhail Simonov turned to journalists and made a surprising statement:“Fighter jets are nothing; here is our future!” In his office, I understand what he means. Next to his desk stands a two-storey model aeroplane, designed for 1,000 passengers, the KR-860 “Krilya Rossii”(Wings of Russia). “They’re afraid of constructing such machines,” says the designer with a sigh of disappointment.“Even though we do have factories capable of implementing this project, and we could make necessary agreements on engines.” It wouldn’t be the first time that big-plane projects have run into difficulty. Although all necessary components are present – governmental approval, money, factories – series production of the globally demanded An-124 heavy transport plane “Ruslan” stalled after the break-up of the Soviet Union. Simonov is not one to give up, however, quoting the great Soviet aircraft designer, Roberto Bartini, who believed that the aviation design bureau should be like a conveyor belt, with new, trial aircraft at the beginning, and mass-produced aeroplanes falling off the end.Today, there are three model supersonic passenger aeroplanes standing on Simonov’s desk. “I see on television how our leaders move from one region of the country to another,”he says. “But they do this with subsonic machines – slowly. A great amount of time is lost this way.” Simonov’s supersonic aircraft will be given a name only after it starts being produced. Such is the tradition, so as not to “jinx” it. One of the three models is a 40-seat airliner, capable of flying at twice the speed of sound. The second model is smaller – 12-passengers – but flies faster. The third aircraft is an even faster design – but it’s still a secret.

SUKHOI COMPANY (JSC)

BOOKMARKS

In the cockpit: Sukhoi is the backbone of Russia’s airforce

BOOKMARKS

RUSSIA INDIA REPORT

Opinion

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

www.en.rian.ru RIA Novosti: Russian News and Information Agency www.russiaprofile.org Russia Profile online magazine

FALL OF BERLIN WALL LED TO ASIA’S RISE BRAHMA CHELLANEY ACADEMICIAN

By marking the Cold War’s end and the looming collapse of the Soviet Union, the fall of the Berlin Wall 20 years ago transformed global geopolitics. But no continent benefited more than Asia, whose dramatic economic rise since 1989 has occurred at a speed and scale without parallel in world history. For Asia, the most important consequence of the fall of the Berlin Wall was that the collapse of communism produced a shift from the primacy of military power to economic power in shaping the international order. To be sure, rapid economic growth also occurred during the Industrial Revolution and in the post-World War II period. But in the post-Cold War period, economic growth by itself has contributed to altering global power relations. Another defining event in 1989 was the Tiananmen Square massacre of pro-democracy protestors in Beijing. If not for the Cold War’s end, the West would not have let China off the hook over those killings. Instead, the West adopted a pragmatic approach, shunning trade sanctions and helping to integrate China into the global economy and international institutions through the liberalizing influence of foreign investment and trade. Had the United States and its allies pursued an approach centered on punitive sanctions, as with Cuba and Burma, the result would have been a less prosperous, less open and potentially destabilizing China. Indeed, China’s phenomenal economic success — illustrated by its world-beating trade surplus, world’s largest foreign-currency reserves and highest steel production — owes a lot to the West’s decision not to sustain trade sanctions after the Tiananmen Square massacre. Having vaulted past Germany to become the world’s biggest exporter, China now is set to displace Japan as the world’s second largest economy. India’s rise as an economic giant is also linked to the post-1989 events. India was heavily involved in barter trade with the Soviet Union and its communist allies in Eastern Europe. When the East Bloc unraveled, India had to start paying for imports in hard cash.That rapidly depleted its modest foreign-exchange reserves, triggering a severe financial crisis in 1991, which in turn compelled India to embark on radical economic reforms that laid the foundations for its economic rise. More broadly, the emblematic defeat of Marxism in 1989 allowed Asian countries, including

DRAWING BY DMITRY DIVIN

China and India, to pursue capitalist policies overtly. Although China’s economic renaissance had already begun under Deng Xiaoping, the Chinese Communist Party, after 1989, was able publicly to subordinate ideology to wealth creation.That example, in turn, had a constructive influence on surviving Communist Parties in Asia and beyond. Geopolitically, the post-1989 gains extended far beyond the West.The Soviet Union’s sudden collapse was a strategic boon to Asia, eliminating a menacing empire and opening the way for China rapidly to pursue its interests globally.

Russia’s decline in the 1990s became China’s gain. For India, the end of the Cold War triggered a foreign-policy crisis by eliminating the country’s most reliable partner, the Soviet Union. But, as with its 1991 financial crisis, India was able to emerge with a revamped foreign policy — one that abandoned the country’s quixotic traditions and embraced greater realism and pragmatism. Post-Cold War India began pursuing mutually beneficial strategic partnerships with other key players in Asia and the wider world.The new“global strategic partner-

Letters to the Editor Gorbachev and Medvedev

Russian Liberalism

This is an excellent article that shows the continuity between the ideals of the venerable Gorbachev and his successor Medvedev.Well done.

There are cycles to Russian history where repeated efforts to create more or less liberal systems under Alexander I or during the New Economic Policy or Gorbachev and earlyYeltsinfailed. They failed in that such efforts never established new political institutions; they did not become systemic. However, the authoritarians who came in their wake did establish much more durable systems: Nicholas I, Stalin, Putin. It’s interesting that the historical analogies are so much a part of the current debate. It’s hard to imagine Medvedev as a reformer of any stripe, he’s Putin’s right hand. It makes no difference which of them is president in 2012.

JOE

Ex-leader Mikhail Gorbachev provides a reminder that the United States betrays those it pretends to accept as allies. The“collapse”of the soviet economy was achieved by Gorbachev trusting President Reagan to allow world oil prices to rise: instead, Machiavellian Reagan encouraged the Saudis to increase production and bring down oil prices. Gorbachev was lost...and soon another Russian leader – the abominableYeltsin – trusted American know-how to reform the economy; and the Americans sent mediocrities like Jeffrey Sachs and Strobe Talbott to debase the currency – and the Russian people. AMBRICOURT

MIRIAM LANSKOY

Secret cities An excellent article that opened my eyes to the entire“secret”world of Russia’s hidden cities. It’s

interesting to see how so many elements of the old system had to undergo painful adjustments to face the realities of capitalism. The residents of secret cities are just one of many such elements: monotown residents, underpaid pensioners, former Komsomol workers, etc. Are the residents of secret cities really happy to be open,“free” and competing with the outside world? SHIV CHOPRA

Exellent language columns The regular“Found in Translation”rubric is very interesting and helpful. Thanks a lot. The Russian language has many subtle nuances which represent endless headaches to any foreign learner, so we always greatly appreciate such expert guidance. I’ll certainly keep reading and would advise all other students to do the same. LU

ship”with the United States — a defining feature of this decade — was made possible by the post-1989 shifts in Indian policy thinking. Of course, not all post-1989 developments were positive. For example, the phenomenon of failing states, which has affected Asian security the most, is a direct consequence of the Cold War’s end. When the Cold War raged, one bloc or the other propped up weak states. But with the Soviet Union’s disappearance, the United States abandoned that game. As a result, dysfunctional or failing states suddenly emerged in the 1990s, constituting a threat to regional and international security by becoming home to transnational pirates (Somalia) or transnational terrorists (Pakistan and Afghanistan), or by their defiance of global norms (North Korea and Iran). Asia has suffered more casualties from the rise of international terrorism than any other region. Moreover, two decades after the Berlin Wall fell, the spread of democracy has stalled. Between 1988 and 1990, as the Cold War was winding down, pro-democracy protests erupted far from Eastern Europe, overturning dictatorships in countries as different as Indonesia, South Korea, Taiwan, and Chile. After the Soviet disintegration, even Russia emerged as a credible candidate for democratic reform. But while the overthrow of totalitarian or autocratic regimes shifted the global balance of power in favor of the forces of democracy, not all the pro-democracy movements succeeded. And the subsequent“color revolutions”in places like Ukraine only instilled greater caution among the surviving authoritarian regimes, prompting them to implement measures to counter foreign-inspired democratization initiatives. Aside with he problems with democracy in Russia, China — now the world’s oldest autocracy — is demonstrating that when authoritarianism is entrenched, a marketplace of goods and services can stymie the marketplace of political ideas.Twenty years after communism’s fall, authoritarian state capitalism has emerged as the leading challenger to the spread of democratic values.

Brahma Chellaney is professor of strategic studies at the Center for Policy Research in New Delhi and the author of “Asian Juggernaut: The Rise of China, India and Japan.” First published in The Moscow Times

Questions? Opinions? Please send your comments by email (editor.india@rg.ru) or fax (0870 928 9823), with your name, address and other contact details for verification. If you do not wish your name or email to be published, please indicate so, clearly. Once published, letters and guest columns become the property of Rossiyskaya Gazeta, and it reserves the right to reject, condense or edit for clarity, or when information cannot be substantiated. We do not publish anonymous letters, letters advocating extremism or containing personal attacks, mass mailings or commercial appeals. All articles and letters appearing on the pages 12-14 do not necessarily reflect the opinions and views of the editors of Rossiyskaya Gazeta and Russia India Report.

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eng.kremlin.ru President of Russia website www.ln.mid.ru/brp_4.nsf/english Ministry of Foreign Affairs documents www.cdi.org/russia/johnson Johnson’s Russia List

RUSSIA INDIA REPORT

Opinion

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_NOVEMBER 11_2009

WE ARE STRONGER THAN YOU ALL THINK GLEB PAVLOVSKY POLITICAL EXPERT

Western leaders and observers persistently repeat, like a mantra,that Russia is“weak.”This judgment is based on a flawed comparison between Russia and the Soviet Union.Measured by Soviet standards,Russia has weakened,but as former United States National Security Adviser Brent Scowcroft noted, Russia still“has enormous capacities to influence the US security strategy in any country.”A country with such influence over a military superpower cannot be considered weak. In fact, the issue is not Russia’s strength per se, but whether Russia intelligently concentrates and applies it. The new Russia has transcended its Soviet identity and put down uprisings in the post-Soviet space as far away as Tajikistan. It has dealt with a new generation of security threats on its own territory – most prominently Chechen warlord Shamil Basayev – and prevented them from turning into a global force like al-Qaida. Moreover, Russia has helped other new nations in Eastern Europe create their own identities. Does this not demonstrate Russia’s global know-

how? Is it not a contribution to international security? The United States has recognised the Russian factor in post-Soviet state-building processes. Russia has not been the only beneficiary of its activities in the Caucasus, especially since 2000. By bringing recalcitrant minorities into a new security consensus, Russia helped transform local ethnic conflict into a constructive process of nation-building. So Russia’s claim to being a central element in Eurasian security, on par with the United States and the European Union, is not the blustering of a spent Leviathan. Rather, it is a demand for a fair international legal order. The debate about whether the United States should allow Russia to have“special interests”in Eastern Europe is pointless. Russia’s interests are by necessity becoming global.The agenda of USRussian relations includes issues such as treaties on the reduction of strategic weapons and on nuclear nonproliferation, NATO,Afghanistan, Iran, Central Asia, North Korea and the post-Soviet space.These are all global issues, not local ones. Russia can be effective in dealing with these issues only if it becomes a competent global actor.

Yet many assume that world politics should be designed to bypass Russia. Everywhere Russians are expected to support something without participating in its creation.We are supposed to help stabilise the region around Afghanistan, for example, but only in order to create a“greater Central Asia”that will not include Russia. It is clear that modern Russia lacks a“global status”in the Soviet sense. But the United States has also been unable to achieve the global status of a“Yalta superstate.”American global military power is undisputed, although it is used with decreasing frequency. Sprawled over 11 time zones – five of which border China – it is impossible to expect Russia to remain a mere regional power. A state that is involved in four global regions – Europe, Central Asia, the Far East and the Arctic – and borders several others cannot be considered“regional.” Moreover, because the regions in which Russia has interests face a number of problems, it must seek influence over the strategies for those regions pursued by other powers of various sizes, from China and the United States, to the EU and Iran. Russia is expected to act in ways that are

NO NEED TO GET GRUMPY CHRIS PATTEN UNIVERSITY OF OXFORD

Having reached pension age, I qualify to be a grumpy old man. I should be boring my children and the students at Oxford University with grumbles about how everything is going to the dogs. But that is not quite how I see things. I went to university myself in 1962. My first term coincided with the Cuban missile crisis. The world seemed to be teetering on the brink of nuclear catastrophe. Those were the days when global peace was sustained by a concept known suitably enough by the acronym MAD — Mutually Assured Destruction. Was that world a worse and more dangerous one than today, where our main nuclear concerns are how to prevent proliferation and strengthen the treaty that has deterred it for the last generation? Within my adult lifetime, we have moved from the murder of civil rights campaigners in the United States to the election of a black president. There is nothing to be grumpy about there.

The polls Russians still don’t connect democracy with the pursuit of people’s interests THE NUMBER OF THOSE BELIEVING THAT RUSSIA NEEDS DEMOCRACY DROPPED FROM 66PC IN JUNE 2005 TO 57PC IN JUNE 2009, ACCORDING TO A RECENT OPINION POLL CONDUCTED BY THE LEVADA CENTRE. DO YOU THINK RUSSIA NEEDS DEMOCRACY?

SOURCE: WWW.LEVADA.RU

Elsewhere, some of our biggest problems have a sort of Hegelian quality.They are the result of solving past problems or of past success. Consider, for example, the biggest challenge facing us, which deserves to be called existential: global warming and climate change. In the last century, the world got richer, its population quadrupled, the number of people living in cities grew thirteenfold and we consumed more of everything. Moreover, water consumption rose ninefold and energy use thirteenfold. Industrial output soared to 40 times its level at the beginning of the 20th century. But — and here comes the real hit — carbon-dioxide emissions grew seventeenfold.That is the biggest problem we face: the unforeseen result of increased economic activity and prosperity. Looking at preparations for the Copenhagen summit in December, when we will try to broker a new global agreement to combat climate change, does not make me grumpy. At last, the big players are taking the issues seriously. The United States is no longer in denial on the question. President Barack Obama and his advisers

do not deny the scientific evidence of what is happening to us all. In China, political leaders seem genuine in their commitment to reduce the carbon content of their runaway economy. The big problems, of course, are how we take account of past responsibility for the carbon in the atmosphere, how we balance aggregate national emissions and per capita figures — China leads in the first category, and the United States, Australia, and Canada are the biggest culprits in the second — and how we manage technology transfer from developed to emerging and poor economies. There will be plenty to moan about if we don’t solve these problems sooner rather than later. This is where old men seem past their political expiration dates. Let me explain. For all of our lives, my generation has defined success in terms of rising growth in gross domestic product — that is, more money in more pockets, more resources for public programs and more jobs. None of these will necessarily be a measure of future success. We need to talk more about the quality of growth. French President Nicolas

At the same time, the number of respondents convinced Russia is not created for democracy increased from 21pc in 2005 to 26pc in 2009. The very word“democracy”evokes negative associations for 19pc of respondents, who described it as“hogwash and demagogy”.This is a high figure, especially as only 27pc perceive democracy as“a fair system of governance involving all citizens equally”.In 1989, most Russians believed power should not be trusted to a single person, but this halved by 2008. Sixty-two pc said the authorities’interests did not coincide with the overall population, while 30pc believe those in power are preoccupied with their incomes, saying“the authorities act as parasites feeding on the people”. “These are collective ideas about democracy in a society which had no experience of democracy or self-government in the past. This is a motley picture, lacking consistency and logic,”Levada Centre director Lev Gudkov remarked. On one hand, the percentage of democracy supporters has been hovering at

around 60 pc over the past few years. On the other hand, the number of pro-Westerners has been declining steadily sinceVladimir Putin took office. Gudkov thinks the main problem is that the ideas of democracy in Russia are not associated with the pursuit of people’s interests.

IS THERE DEMOCRACY IN TODAY’S RUSSIA?

SOURCE: WWW.LEVADA.RU

beneficial to US and Western interests. But it is inWashington’s interest to enhance Moscow’s capacity to act and to strengthen a globally competent Russia. This would be a Russia that acts in pursuit of its own interests – the same way the United States and the EU act. Americans sometimes suggest Russia has a hidden strategic agenda. But the consensus Vladimir Putin has created in Russia since he became president in 2000 is more than a question of interests. It is a value-based reality. It is based on the possibility of a free life in a secure environment – something Americans take for granted. For many years, we had to deal with the problem of Russia’s very existence rather than the quality of its governance. Putin’s consensus made it possible to resolve both problems without foreign assistance and interference. Now, in order to solve other problems, we need to go beyond Russia.

Gleb Pavlovsky is head of the Russia Institute. First published in The Moscow Times

Sarkozy has raised this issue, and he is right to do so. I am not arguing that growth is bad. Try telling that to the poor. But what we should want to promote is the right sort of growth — growth that won’t ravage our future prospects. We have to define the sustainability of growth in ways that create an attractive narrative for our citizens. At the moment, people applaud sustainable growth, but they don’t vote for what it means in practice. German voters balk at any suggestion that we should limit the environmental damage caused by big and expensive cars. British voters line up behind the truck drivers when protests are launched against hikes in the price of gasoline, not least through the introduction of higher energy taxes. Ideas for carbon taxes run into resistance everywhere. I have five grandchildren below the age of four. By the time they qualify for pensions and the license to grumble, the century will be into its seventh or eighth decade.We hope! How much will they have to get angry about then because of the way that we are behaving today?

Chris Patten, the last British governor of Hong Kong and a former EU commissioner for external affairs, is chancellor of the University of Oxford

Simultaneously, an increasing number of respondents recognise Putin’s stability as the optimal“political system”and the need for a firm hand.Yet, the idea that those in power are preoccupied exclusively with careers and finances survived the whole of Putin’s term, until the state media joined the election campaign of 2007-2008 and succeeded in convincing at least part of the audience of top officials’ purity and self-denial. As for opposition parties, there is no hope for them – not just because they are denied access to elections and media, but also as most people think their only distinction from ruling parties is that they lack power while offering no alternative. No alternative, no election: 67pc of those polled by the Levada Centre on the eve of the October municipal election called it a“sheer spectacle”.Such a cynical majority opinion was never registered before, despite the fact a rising number of people consider themselves free (almost 70pc). In general, it is very difficult to understand what society wants from democracy, and which kind of democracy is needed.

Reflections

Language It’s that draft time of the year again THE AUTUMN COLD AND FLU SEASON HAVE COME TO RUSSIA AGAIN, WITH THE MICROBES OF THOUSANDS OF STRANGERS CIRCULATING HUNGRILY AROUND US EVERY DAY IN THE METRO. NOT THAT YOU REALLY WANT TO DISCUSS THESE THINGS AT GREAT LENGTH, BUT HOW DO YOU TALK ABOUT YOUR ILLNESS? SARA BUZADZHI THE MOSCOW NEWS

The most common ones, of course, are grip, nasmork and prostuda.The first is the flu, and the latter two both refer to colds,while prostuda refers to a regular cold or chill.You can prostudits'a, which means to catch a cold.If the flu is going around,you can zabolet' gripom (to get the flu), or svalits'a s gripom, which could be literally translated as "to falldownwiththeflu",andisamoreconversational phrase meaning "to come down with the flu". So you're sick - your Russian friends will now have some entertaining explanations as to why this is. If you have a sore throat, it could be because you drank very cold water. Even in summer, this is considered a bad idea. If you're feeling unwell, someone might comment, "the air pressure is high today". I think that non-Russian scientists and arthritis sufferersoftenacknowledgesomelinkbetweenair pressureandhealth,butit'sdefinitelynotawidelyaccepted cause of health issues, as it is here.These temporary disturbances in the Earth's magnetic field are held to affect blood pressure and people withheartproblems.Again,thismayhavescientific support, but I had never heard about the health effects of magnetic storms until I came to Russia. All of these dangers to your health, however, pale in comparison to The Draft. Not the kind where the army comes to take your sons away, but a currentofairinaroomcomingfromawindoworcolder hallway. "Don't sit where there's a draft, you'll catch a cold". As for home remedies that people use to cure nose, throat and respiratory ailments, many are familiar to foreigners: tea with honey, mint, etc.There's also a strong belief in the healing powers of raspberry jam, and raw garlic. (Once,sufferingfromaminorcold,Iwastalkedinto eatingapieceofbreadsmotheredinrawgarlicand drinking hot milk with melted butter.) Some helpful person might also want to apply a mustard plaster. They burn. Another practice seemstobeobsoletenow,butearlieritwascommon to stavit' banki,a process known in English as cupping, where an open flame is used to create a vacuum in glass cups, which are then placed against the back of the cold sufferer. Whatever you do, occasionally you will have to stay home sick from work.To describe this situation, people might say, he (or she ) is na bill'utene which indicats that the person is on sick leave. A bill'uten' in this context is a medical certificate indicating your illness, which can be given to your employer to validate your absence from work - a doctor's note.

This issue has been conceptualised by INTERNATIONAL MEDIA MARKETING, RESPONSE adqueries@timesgroup.com Co-ordinator: • Feature Mehernosh Gotla (mehernosh.gotla@timesgroup.com)

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www.sovlit.com Encyclopedia of Soviet writers www.pushkinskijdom.ru The Pushkin House website jrusk.tripod.com/russian/russian.html Russian literature in English translation

SARCASM AND FAIRY TALES In our series dedicated to famous Russian authors from the 20th century who remain largely unknown in the West, we present Andrei Platonov. It is difficult to imagine a better novelist who embodied the ambitions and ambiguities, energies and tensions of the young Soviet state and life in the 1920s and 1930s. ALEXANDER MELIKHOV RIR

When Perestroika made Andrei Platonov’s celebrated novels, Chevengur (a village name) and Kotlovan (The Foundation Pit) accessible to Soviet readers, they were perceived as a revelation and he himself was seen as a visionary, prophet and debunker who at the turn of the 1930s was preparing to embrace democracy and the free market. Indeed, the Chevengur village, where a handful of Bolsheviks denounced labour and intelligence as elements of a harmful bourgeois ideology laying the groundwork for oppression, appeared to be a sharp parody of the communist ideal. Chevengur is set in the early 1920s, the time of transition from the period of “Military Communism” to the New Economic Policy (NEP), which implied elements of free trade. And Kotlovan mirrored Soviet realities, showing the communist ideal allegorically as a joint effort to dig the foundation pit for a huge building where workers would find their happiness, moving into the Palace of the Future from their ramshackle huts. Not hoping to survive such a great happiness, the sagacious peasants also prepared plenty of coffins… Indeed, the diggers did not get to the palace construction, instead devoting their energies to eradicating“prosperity”in the village (in reality, 25,000 ideological missionaries workers were sent to villages all over the country to

oversee the so-called collectivisation – the forced consolidation of individual farms into collective farms). However, the fate of kulaks (wealthy peasants), unworthy of making it into the Promise Land of collective farms, is decided by "Bear the Hammerer". Only the hyper realistic accuracy in the depiction of his fantasy keeps Platonov from being seen as a direct heir to Jonathan Swift. In the end, all the “impure” ones are dumped into the river, but one of them diresees that, even if all private property is destroyed throughout the entire country, the country itself will remain a private property: you kill us, but then others will come to kill you, and so on, until a single head person remains to meet communism. This is Platonov’s trademark: putting on the mask of a simple villager, full of citations from Soviet leaflets, he drops incoherent remarks of profound depth. It is due to this high concentration of“wisdom playing the fool”,this mix of formal and low-class language, which makes Platonov’s works almost impossible to translate into other languages. In his 1922 autobiography, the 23-year genius wrote:“I was born in theYamskaya village outside Voronezh… I worked in many places, for many masters. At some point we were ten in the family, with me as the elder son, the only worker except my father. He, a locksmith, was unable to feed us all. Along with fields, the village and my mother, I also loved railway engines, cars, the singing horn and sweaty work. Already at that point I realised that everything was done, and not born by itself.” Even after Chevengur and Kotlovan were rejected for publication, Platonov still believed that a writer must be a practical worker for Socialist construction. However, the publication of his relatively innocent novel Vprok, or Bednyatskaya Khronika (For Future's Sake, or A Poor Man's Chronicle)

in the Krasnaya Nov magazine put an end to his literary career in the Soviet Union. There is much less cruelty in Platonov’s novels compared to Mikhail Sholokhov’s Podnyataya Tselina (Virgin Soil Upturned) for which the author was awarded the Stalin Prize, but Platonov’s collective farm undertakings look like the weird ideas of eccentric dreamers. Soviet leader Josef Stalin was smart enough to crack it: better blood than imbecility.The margins of his copy of Vprok are dotted with his comments: vulgar man, blockhead, villain, scoundrel. In May 1931, Stalin wrote a more coherent summary:“This is a story by an agent of our enemies, written with the purpose of debunking the collective farm campaign.” Admitting his mistakes in front of his fellow writers, Platonov confided that since 1927 his work had been driven by the ideology of a nonparty, backward worker soaked in bourgeois anarchism and nihilism, but in fact it was people’s humour and common sense, which could not be subdued by any ideology. Yet, doomed to silence as a prose writer, Platonov in his serious critical reviews of contemporary Western writers invariably accused them of not leading mankind to communism. And those were not empty words. However, following a report by his fellow criticVladimir Ermilov to party boss Andrei Zhdanov, Platonov was also excommunicated from professional criticism.Though, to everyone’s surprise, he was not arrested. But his beloved son Platon was. As a result of Mikhail Sholokhov’s solicitation, Platon was released, though he was fatally ill. Andrei Platonov contracted tuberculosis from his son and died in 1951. For some time, Platonov has been portrayed as a blessed man and as a malcontent, but the true scale of his talent remains unclear even today.

Alexander Melikhov, writer and columnist

From the newspapers Two great powers now pursue wiser policy

Dmitry Medvedev is creating a stronger team

Boris Makarenko

Elina Bilevskaya

The visit of the US secretary of state to Russia (in mid-October - RIR) has made clear what“reset” means. American policy does not cease to be American, nor Russian policy Russian, but both sides are now following a more intelligent path. The first example is the growing hope that a treaty on strategic nuclear weapons will be signed. Progress in this direction helped the United States modify its position on missile defence by reversing the lack of wisdom of the former administration, which tried to pursue the initiative unilaterally, without the support of allies, exasperating Russia. The dialogue on Iran is also important. The Americans wanted to use these defences against Iran. Russia did not want its southern neighbour to acquire nuclear weapons, and even in the worst of times brought pressure on Iran together with the Americans and Europeans. But today the degree of understanding on Iran is greater, meaning there is more hope for the tactics of the good and bad cops to prove effective. Jonathan Swift once said that a person need not be shy of acknowledging his mistakes. It only means that today he is wiser than he was yesterday. Russia is all for a wise policy. If the Americans are for it, too, then the “reset” will continue.

In the next two to three months, Dmitry Medvedev will continue building his team. Nezavisimaya Gazeta (NG) has been told that the minister of justice, Alexandr Konovalov, will be the new head of presidential administration. However, his department will remain in the hands of the president. Konovalov will be replaced by the recently appointed deputy minister of justice, and Medvedev’s former student, Yuri Lyubimov. A Kremlin source noted that it was important for the president to first strengthen the PR focus of his administration, then to build up cadres. Medvedev is not satisfied with how the current head of the administration, Sergei Naryshkin, has been promoting his initiated projects, mainly the anti-corruption campaign. The problem is that the government’s corruption-fighting efforts have not produced any tangible results.

Russia’s nuclear doctrine will not get tougher Alexei Nikolsky

The new concept for Russia’s use of nuclear weapons, now under consideration by the Security Council, will not radically differ from the

DRAWING BY DMITRY DIVIN

old one and is unlikely to provide for preventive strikes. According to Nikolai Patrushev, the organisation’s secretary, the president will adopt the new doctrine late this or early next year. One need not expect any radical or tough changes in Russia’s nuclear doctrine amid ongoing talks with the US on a new treaty to limit strategic offensive arms, warns a source in the Defence Ministry. New ceilings on delivery vehicles and warheads to be fixed in the new treaty will certainly call for changes in nuclear planning, but are unlikely to produce substantial shifts in the political doctrine of nuclear deterrence, the source believes. General Makhmut Gareyev, president of the Academy of Military Science and a member of the Security Council’s Scientific Council, does not expect a radicalisation of the doctrine, either. According to him, the discussion of the new doctrine resulted in leaving the issues of using nuclear weapons unchanged.

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library.iit.edu/govdocs/afghanistan Sources on Afghanistan artofwar.ru/e/english Soviet soldiers’ recollections www.ruswar.com Soviet war in Afghanistan (photos)

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Recollections

Lessons from Afghanistan Journalist Vladimir Snegiryov describes a mission to free captured Russian soldiers in Afghanistan, a land where they are no longer viewed as enemies

A legacy of war: bread and kerosene

OLEG NIKISHIN_EPSILON

Rory Peck covered the first Gulf War and several armed conflicts that followed the dissolution of the Soviet Union.

Just like during the Soviet-Afghan War 30 years ago, danger awaits around every corner for soldiers of the international forces

RIR dossier

From 1981-1992, Vladimir Snegiryov worked in Afghanistan as a correspondent for the leading Soviet newspapers Pravda, Komsomolskaya Pravda and Trud. He has produced a post-graduate thesis on the subject of the Afghan war and written a number of books and film scripts. He is now working on an extensive study of the role of special forces in Afghanistan’s recent history.

difficult journey, so full of danger, I was not a Russian. Before we arrived at Ahmad Massoud’s base in Takhar Province, I was a Finnish correspondent to everyone we met. That was the cover. Rory assured me a Russian would be strung up from a tree on the first day.

“Don’t utter a word in Russian, don’t read a Russian book when people are around, and don’t listen to Russian radio broadcasts,”Rory kept telling me.“Otherwise, you can take it from me that some fanatic will turn up and cut you into little pieces.”

FROM PERSONAL ARCHIVES

He had decided that the Russians had entered into separate negotiations with Kabul’s bitterest enemy behind his back. But this wasn’t true: we – Rory Peck, his colleague Peter Jouvenal and I – were looking for the captives. The whole venture was crazy. It was already winter, snow had fallen, and we had to get through a dozen passes upto 5,000 metres high. Part of the route went through areas controlled by people who didn’t care whether you were Russian or British – if you were an infidel, they shot you. We could freeze to death in the mountains or fall victim to Islamist f a n a t i c s o r N a j i b u l l a h’s agents. This long introduction is only so I can recall the passionate arguments Peck and I had during our 30-day journey. My British friend would not let even the slightest opportunity pass to reproach me for the invasion of Afghanistan. It was as if I had been the one who decided to bring in the 40th Army and bomb the local villages. “The Afghans are destined to always have a bad relationship with the Russians,” my friend would say with great feeling. “They already know what Communism is. They’ve already been dying under your bombs.” His words did not seem entirely fair. “But perhaps, the Afghans will see that the Communist regime and ordinary citizens like me are not the same thing.You cannot always live with hatred in your heart,”I argued. “No,” Rory would say, “you don’t know the Afghans, but I do.These people will never forgive you for losses and destruction. They may have bad clothes, but they have a good memory. Open your eyes and look around.” I should note that during that

FROM PERSONAL ARCHIVES

CONTINUED FROM PAGE 1

Everything turned out very well. Despite some adventures, we got to the headquarters of the Mujahideen leader and I was able to negotiate the release of our soldiers. Soon after, they returned home. And, in early 1992, the three of us set off on a flimsy raft across the Panj River, the border between Afghanistan and its northern neighbours. I still think about the situation. It’s a pity Rory Peck did not live to see today. When I visit Afghanistan now, I do so freely, without concealing the fact I’m Russian, and I associate with our former enemies. And do you know what they tell me? “The best president for us would be Dr Najibullah. And your best president was Brezhnev.”That’s what former guerrillas say. I can’t believe my ears. “Stop that, my friends! It was

Brezhnev who brought the troops here. Before Najibullah became president, he was head of the secret service and the bitterest enemy of Islamic guerrillas. Have you forgotten?” No, they haven’t forgotten anything. They give you a lecture on the fact that they were the unwitting tools of the Americans, who had treacherously lured the Soviets into the country.They tell you the USSR left them with roads, tunnels, factories, colleges, farms, hydroelectric power stations and housing estates, and that the Soviets left almost the whole Afghan economy intact. And what help did the Americans give? Nothing. Yes, Rory, you were wrong back then, 18 years ago. They don’t hold a grudge. It’s as if they have completely forgotten our carpet bombing, minefields,

“mopping-up operations”and looting – in a word, everything that sadly accompanied the implementation of our socalled“international mission”. But memories of tunnels we built, flour and kerosene, free study in the USSR, our generous hospitality all remain, warming hearts and nourishing dreams. Of course, it’s not Brezhnev they idolise, but that former life, which now seems completely happy. They’re not dreaming of Communism, but they want to play a real part in their own destiny – the way the Soviet Union once allowed them to. This is a very important point when it comes to understanding the Afghan situation. As for my British friend, he met his death not in the Pamir Mountains but central Moscow, catching a bullet in October 1993 in the middle of an armed uprising. Rory dashed out bravely with his camera to film fighting by the Ostankino TV centre. He was undoubtedly the most courageous frontline cameraman in the business. A special award for freelancers was created in his memory. I have written a book about him, and to this day I very much cherish our friendship.

Travel diary

Want to look back through old issues?

Your Trans-Siberian journey across Russia with Aanchal Anand continues with the fourth article in her special series

now online at www.rbth.ru

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Feature

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www.expat.ru The virtual community for Englishspeaking expats en.wikipedia.org/wiki/Slava_Zaitsev Find more information about Slava Zaitsev

Fashion Russia’s design darling, Slava Zaytsev, is not letting age get in his way

Zaytsev's ﬁve most famous costumes

“Red Dior” dreams of India

In 1978, he designed a stage costume for Russian pop diva Alla Pugacheva. The red shapeless garment produced a sensation at the Sopot International Song Festival in Bulgaria. In 1980, the designer created the team uniform for Russian athletes at the Olympic Games. In 1988, he designed the costumes for the Broadway production of Duke Ellington’s musical, Sophisticated Lady. Zaytsev is also the first leading designer to embrace figure skating, literally defining the style of Russia’s awardwinning ice dancers, Bestemianova and Bukin. Finally, in 1991 he created a new uniform for Russian policemen.

ZAITSEV.INFO

VASILY SHAPOSHNIKOV_KOMMERSANT

The first Soviet couturier to be known throughout the world was Vyacheslav (Slava) Zaytsev. The “Red Dior”, as he was known to salon colleagues and foreign journalists, dressed many celebrities and continues to do so. A few years ago an “Indian period” began in his life: he is creating collections from Indian fabrics and planning to begin co-operating with local couturiers.

NATALYA GRIDNEVA RIR

He is 71 years old, but just as full of energy as ever.Vyacheslav Zaytsev travels regularly around the world, and presents one of the most popular programmes about fashion on the central channel of Russian television. During Russian Fashion Week in October, the public – as always – gave a warm and enthusiastic reception to Zaytsev’s vision of fashion for spring/summer 2010. This story began in 1963, when his first collection was shown, evoking a storm of emotions among Soviet officials and western journalists who saw it.

His models stepped out onto the podium in padded jackets and light skirts made from traditional Pavlovo-Posadsky shawls.Their feet were adorned with colourful valenki felt boots. The committee that was supposed to approve this collection was in a state of shock. As a result, Zaytsev received a severe reprimand and was banned from creating further collections. Also, a little while later, a six-column article appeared in Paris Match magazine, entitled “From now on Moscow has its own artist”, which described the brave experiment by the young Russian couturier Zaytsev. Vyacheslav Zaytsev acquired his title of“the red Dior”,as well

as winning the grand prix, for a scarlet gown he named“Russia” and showed at the couturiers’ competition held as part of the 1967 World Festival of Youth and Students in Moscow. He was the first Soviet couturier to be accorded the honour of showing his collection at Fashion Week in Paris (indeed, he is an honorary citizen of that city). Right after this, he was awarded the title of“Man of the year”in the world of fashion. In general, as he admits himself, he has always feared monotony: “I was a man of extreme situations; I loved to be in conflict with the times.” One of a sequence of sharp turns happened in 1979, when Zaytsev set up his own small salon, from which

In accordance with his artistic credo, Zaytsev propogates elements of traditional Russian style. His new 'Indian' collection effectively combines East and West: Russian and Indian flavours.

subsequently grew his Fashion House. Today he prepares two collections per year; his“Marusya”perfume range, named after his granddaughter, is jointly produced with L’Oreal in France, and furniture designed by him is manufactured in Belgium. The Indian period in his life began several years ago – the eminent, brilliant and flamboyant master was bound to see and be enchanted by the diversity of Indian silk, cashmere and cotton. At that time, some textile manufacturers from India travelled to his Fashion House, bringing samples with them. “They were luxurious natural silks, multi-coloured and in various styles, wonderful designs, with a magnificent

colour palette,”the couturier recalls in an exlusive interview with RIR.“All this inspired me to buy these fabrics and create spring and summer prêt-a-porter and haute couture collections from them.” Last year,Vyacheslav Zaytsev brought his spring and summer collection made from Indian silk to New Delhi for the first time. Expressive and lush in colours and style, it aroused huge interest among the capital’s public. There was also a suggestion that garment production be transferred to India.“I was prepared to take that step,”the designer admits.“The outstanding Indian couturier Mrs Geeta even wanted to invite me to India to acquaint me with her production

facility.We were planning to create a joint collection and show it at the beginning of the year, but the economic crisis meant our plans could not be implemented this year.” Vyacheslav Zaytsev is still making collections from Indian fabrics today, but the couturier admits he is also starting to think about closer co-operation with his Indian colleagues. “That would undoubtedly be very interesting, but it all depends on the market, on market conditions; it (co-operation) should nevertheless bring not just pleasure but also profit to both sides. If necessary, we shall discuss future plans with our Indian colleagues, but possibly not until the economic situation in the world stabilises.” During his visit to India last year, the Russian couturier managed not only to make contacts with Indian businessmen but also to get to know the country. It made a strong impression:“India is a rapidly developing country. I noticed the huge influence of European style on Indian fashion. Some outstanding and very high-level Indian couturiers have emerged.Their collections captivate and strike the imagination.And I would especially like to mention the very high standard of workmanship in creating some amazing fabrics: wool, silk and cotton. I have used these fabrics in my latest collection.”

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