Russia India
...Marching towards a common future
In focus:
Gas and oil: Dreams in the pipeline The new links take politics out of transportation and offer new options for buyers
BUSINESS REPORT
BANGALORE ● MUMBAI ● NEW DELHI ● Wednesday, March 10, 2010
P.04-05
SERGEY KUKSIN_RG
A Report from The Economic Times In association with Rossiyskaya Gazeta
Agenda Bilateral ties await boost during Russian PM's India visit
Glonass: the way forward
Putin’s IndoRussian decade Vladimir Putin, the Prime Minister of Russia comes to India this week almost 10 years after he first visited the country as the head of the Russian State. It has to be said that the “Putin decade” is a very noticeable page in the book of Indo-Russian friendship. DMITRI KOSYREV RIA NOVOSTI
Russia’s rival to the American GPS mapping and navigational system has moved one step closer to reality. Three satellites have been launched into orbit on a Proton-M rocket from the Baikonur space cent-
AFP
Russian Proton-M rocket carrying a telecommunications satellite being placed on a launchpad.
er in Kazakhstan last week. Glonass – the Global Navigation Satellite System – is the Russian equivalent of the US Global Positioning System (GPS). The Glonass cluster is now made up of 20 satellites.
As soon as 24 satellites are up and running by the end of 2010, Glonass will be able to offer a similar level of performance as GPS. Russia and India are keen to cooperate on the Glonass
both for military and commercial purposes. India is likely to link up some of its military systems with the Glonass system in order to reduce its reliance on the American GPS.
In fact, it was Putin together with his Indian counterparts, Prime Ministers A.B.Vajpayee and Manmohan Singh, who have subjected that friendship to a complete re-setting after 1990-s rough riding. So today the Russian Prime Minister will be reaping the harvest of what he himself had been planting 10 years ago. It is the Presidents who lay foundation of foreign policy in Russia, according to the Con-
stitution. Prime Ministers are in charge of the economy. But it took a lot of political negotiations conducted by President Putin in the previous decade to let the Prime Minister Putin come to Delhi to negotiate current agreements on nuclear power. It is known thatVladimir Putin’s visit will be mainly about Russian nuclear reactors commissioned by India.There was nothing more political than nuclear issues in the recent years. It was not just foreign policy – global positioning of India and Russia was at stake. I remember vividly the times when the US-Indian 123 deal was in the making.A lot of unhappy faces could be seen in Moscow at the time. CONTINUED ON PAGE 6
How important is next year’s oil price to Russia’s recovery? Russia assumes $58 per barrel, which leaves a hole in the budget. The World Bank thinks around $75, where Russia almost breaks even. London-based Capital Economics forecasts $50, spelling trouble. CLARE NUTTALL BUSINESS NEW EUROPE
H 10 MARC 14 APRIL
With the Russian state running its first budget deficit in a decade, there is no denying the importance of oil to the economy. But it is a myth to say that Russia is a petro-economy. Oil actually only accounts for about a fifth of Russia’s gross domestic production, whereas services are far more important and now make up more than half of GDP.
Put another way, the GDP per capita in 2008 was about $15,800, according to the CIA, whereas oil production accounted for only $3,912 of this total – and that is assuming oil was at the peak price of $150 for all of last year. Where oil and gas do dominate is in both, tax and export revenues where they make up for about two thirds of all the dollars Russia earns abroad.
But the taxes earned from oil are high because the state uses them to subsidise the rest of the economy. The state taxes away about 90 cents on every dollar an oil company earns from oil exports over a price of $27 a barrel, but at the same time Russia has some of the lowest income tax, corporate profit tax andVAT in Europe. CONTINUED ON PAGE 5
KONSTANTIN ZAVRAZHIN_RG
Looking for an escape from the petro-dollar
Russia and India are expected to sign three contracts in military technical cooperation totaling $4 bn during Vladimir Putin's visit to India
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RUSSIA INDIA BUSINESS REPORT
In brief
Dollar billionaires buck the trend The number of dollar billionaires increased by 50pc in Russia over the crisis-hit year of 2009. Novolipetsk Steel chairman Vladimir Lisin is Russia’s richest person with a fortune of $18.8bn, more than double his wealth last year, Finans magazine said in its annual billionaires list. Lisin surpassed last year’s leader, Onexim Group president Mikhail Prokhorov, and runner-up Roman Abramovich (best known as the owner of Chelsea football club), to top a Russia rich list for the first time. The list tracks the country’s 500 wealthiest individuals, offering estimates of their financial worth at the end of 2009. And while the billionaires parade found a new leader, the top spots were all held by familiar faces. RIR
Foreign investment will top $60bn Foreign direct investment in Russia will recover to $6070bn in the next two to three years, deputy prime minister and finance minister Alexei Kudrin said at the Russia 2010 Forum. “I am confident that we will begin to recover the pre-crisis level, and in the next two to three years will restore foreign direct investment to $60-70 bn.” The large flow of investment prior to the crisis was the product of stringent macroeconomic and budgetary policy and the elimination of restrictions on capital movements in 2006, he said. RIR
Flotations on the crest of a wave Russia is expecting a surge of IPOs in 2010, said Konstantin Korishchenko, president of the Moscow Interbank Currency Exchange (MICEX), speaking at the annual joint conference of the London Stock Exchange and the MICEX group in Moscow early this month. At the beginning of 2010, the Russian IPO market opened with the flotation of the aluminium giant Rusal on the Hong Kong Stock Exchange, which brought the company more than $2.2 bn. Media reports indicate the flotation of another three subsidiaries of the En+ Group – En+ Power, Strikeforce Mining and Resources and En+ DownStream – is now under consideration. According to the December forecast by the president of Morgan Stanley Bank (Moscow), in 2010 the volume of Russian IPOs may amount to $10 bn, and may include such major Russian companies as Alrosa, SUEK, Uralchem, and Ilyushin Finance. RIR
en.rian.ru RIA Novosti newswire www.itar-tass.com/eng Itar-Tass news agency rt.com Russia Today TV channel www.mnweekly.ru The Moscow News weekly
Auto industry A JV with a truck assembly plant in Hosur launched
ALROSA eyes India
KamAZ parks in India
In the near future, Russian diamond producer AK ALROSA will sign long-term contracts with 30 Indian companies for the supply of uncut diamonds, said vice-president of the company,Yurii Okoemov, upon his return from a visit to Mumbai. According to Okoemov 47 Indian firms became clients of ALROSA in 2009, purchasing diamonds worth a total of $550 mn. “In the future we are planning to increase the number of our partners in India by securing long-term contracts with around 30 Indian companies”, he said. At present ALROSA has made such agreements with only 7 firms. During the visit the ALROSA delegation visited several diamond processing plants in Mumbai and Gujarat. In Okoemov’s opinion. Indian industry in this sphere is“impressive”.He noted that the positive pace of economic growth in India will ensure an increase in the supply of Russian diamonds to the republic. ALROSA is one of the biggest diamond mining companies in the world, it controls 25 pc of global extraction. The company’s industrial stock of uncut diamonds makes up $109.3 bn. ITAR TASS
KamAZ, a Russian heavy truck manufacturer, and India's Vectra Group have officially launched a joint venture called Kamaz Vectra Motors Limited. The Russian car maker invested $8 mn and plans to assemble the first 1,000-1,200 trucks in India this year. YULIA GARAYEVA KOMMERSANT
The projected capacity, though, looks modest relative to the scale of KamAZ itself and experts caution that several years should pass before the viability of the project becomes clear. On 25 February 2010, the Bangalore palace hosted a ceremony to inaugurate KamazVectra Motors Limited, the first assembly plant opened by KamAZ together withVectra Group. Production is based atVectra’s facility located 70 km from Bangalore in the town of Hosur. The joint venture will initially assemble several types of lowsided and heavy construction dump trucks mounted on the KamAZ-6540 chassis with a right-hand steering wheel, and KamAZ-5460 bolster trucks. The company plans to turn out
KamAZ trucks are internationally acknowledged as worlds toughest and most reliable trucks. from 1,000 to 1,200 trucks in 2010 and step up production to 2,500 vehicles by 2012.The full capacity of the plant is 7,500 vehicles a year, but KamAZ gave no indication as to when it expects to achieve this level. KamAZ owns 51 pc of the Russian-Indian joint venture, into which, according to the Russian automaker, the partners invested $16 m ($8 mn each).The part-
ners signed a memorandum of alliance for the joint venture in March 2009. The KamAZ PR Director Oleg Afanasyev said that the first contract had been signed for 15 vehicles with one of the Indian companies, whose name he declined to disclose. “Production and sales are quite modest at this point, but this is only the beginning", he said. The announced annual produc-
tion target of 7,500 is indeed fairly small for KamAZ, which used to roll out from 4,500 to 6,000 vehicles every month before the global recession. Even now, according to Mr Afanasyev, KamAZ sells 1,800 trucks,much more than the Kamaz Vectra Motors Limited is going to manufacture in 2010. This year KamAZ plans to sell a total of about 27,200 trucks.
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Faster rail MiGs join Indian Navy Russian stocks most attractive among BRIC travel The recent decline on the Russian stock market has attracted foreign players, who over the week ended February 24 invested $214 mn in Russian and CIS stocks exceeding the total invested in China, Brazil and India. According to Emerging Portfolio Fund Research, this is the second best result in 2010 and the third best since October 2009.The Russian market looks considerably better than the markets of the other BRIC countries. Investors channeled $113 mn into Brazil and withdrew $21.2 mn and $5.4 mn from Chinese and Indian stock
markets respectively. Funds investing in Russia have attracted over $420 mn in total since the beginning of 2010. At the same time, Russia's stock indices underperformed those in industralised and emerging countries, mostly because of speculators' aggressive sales strategies. "Speculators booked profit amidst the economic uncertainty and weak US macroeconomic statistics," said Dmitry Sadovy, the managing director of SI Capital. Gazprom and Sberbank suffered most, losing 3.5 pc and 5.1 pc respectively in a week. RIA Novosti
Global Russia business calendar 9th Annual Russian Retail Forum March 23-25, Marriott Grand Hotel, Moscow Hear from the leading domestic and international retail players as they analyse all the latest trends and developments and debate the burning issues in today’s industry – such as increasing market share
The Indian Navy formally took delivery of Russian-made MiGState-owned monopoly Rus- 29K fighters, which will evensian Railways launched its first tually be deployed on an airhigh-speed train service link- craft carrier being refitted in ing Moscow with St. Peters- Russia. Defense Minister A K burg. In a country that spans 11 Antony said the entry into servtime zones there are really only ice of the MiG-29K carrier two ways to travel any great dis- fighters marked a "milestone" tance: planes and trains. for the Indian Navy. "The inducThe new high-speed“Sapsan” tion of MiG-29K fighters into trains running daily between the naval inventory fulfills a the two cities will cut the jour- long standing requirement of ney to three hours and 45 min- our Navy," Antony said.The cerutes at a cost of $80 for a sec- emony, held at the Hansa airond-class ticket. base, was attended by top IndiRussian Railways hopes to an military officials, and a Ruslaunch a high-speed link be- sian delegation led by Industry tween Moscow and Nizhny and Trade Minister Viktor Novgorod in June. RIR Khristenko. Russia and India
and profitability in a volatile economic climate. www.adamsmithconferences.com
The 3-rd Annual Summit Digital TV Russia March 22-23, Holiday Inn Suschevsky, Moscow As a digital switchover progresses in Russia, the government plans to spend 122.5 bn roubles ($4 bn) by 2015. In one of the major projects, it leads the way to new investment areas and strategic partnerships. As key decisions on digital transition are still being made, there is a wealth of opportunities to tap into the vast Russian market www.adamsmithconferences.com
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MiG-29K fighter
signed a contract in 2004 for the delivery of 12 single-seat MiG29K and four two-seat MiG29KUB fighters to be deployed on the Admiral Gorshkov, currently being retrofitted in Russia for the Indian Navy. RIA Novosti
EurasiaBio'2010 April 13-16, The World Trade International Trade Center, Moscow This is the global event in biotechnology and bioeconomy, determining priorities of the industry development in Russia, discussing practical issues concerning active integration of biotechnology in the economy, attracting investments for perspective commercial projects. www.eurasiabio.org
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Economy
IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_MARCH 10_2010
Interview Indian businesses should be more energetic and persistent towards finding good investment opportunities in Russia, Ambassador Kadakin believes
Business news
On a growth path
Cooperation in bio technology
Indo-Russian economic relations have weathered the global crisis and are on course for further growth. His Excellency Alexander Kadakin, Ambassador of the Russian Federation to the Republic of India, chalks out the future roadmap for India and Russia to effectively realize the full potential of their ties.
ThisisyoursecondtermasAmbassador in Delhi. And you were the Ambassador here five years ago. In the space of these five years, what difference do you see in the ties between our countries? Our ties have become much more mature because we have always cooperated very closely in such crucial areas as defense, space, industries, etc. In these five years, our relations have risen to a qualitatively higher level. It is not a secret that we do not cooperate with all countries in such state-of-the-art, razoredge technologies as nuclear energy, space and in such confidential sphere as defence. This gives me reason to assert that the relations have matured a lot. The good testimony to that is a never-ending stream of visitors which we have had during the last month. In December, Dr Manmohan Singh, Prime Minister of India, visited Moscow. It was a regular summit but it was crowned by a momentous important nuclear agreement which was initialed in Moscow and will be signed during the visit of MrVladimir Putin. Recently, we had the visits of Mr V.Churov, Chief Election Commissioner, Mr Nikolai Patrushev, Secretary of the Security Council, Mr Sergey Sobyanin, Deputy Prime Minister and the Head of staff of the Government. By the end of the year, our
Alexander M. Kadakin, Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of India, was born on July 22, 1949 in the city of Kishinev, USSR. Graduated from the Moscow State Institute (University) of International Relations under the Ministry of Foreign Affairs of the USSR in 1972. Joined the diplomatic service in 1972. Began his career as attache at the Soviet Embassy in New Delhi 40 years ago, and afterwards, in 1999 – 2004, was Russia’s envoy to India. In 2000, during his ambassadorial mission, the leaders of the two countries signed an essential bilateral Declaration on Strategic Partnership. Alexander Kadakin was also Russian Ambassador to Nepal and Sweden. He speaks English, Hindi, Urdu, French, Romanian.
FROM PERSONAL ARCHIVES
How important are the ties between Russia and India today? As regards Russia, we have always attached exceptional importance to our cooperation and interaction with India, even before its independence. We were first to establish diplomatic relations four months before India became free. Over all these years, strategic partnership with India has remained a cornerstone of Russia’s foreign policy. As we understand these relations were important for India as well. I agree that this is a brilliant and graphic example of bilateral ties when we work together for the betterment of the world, for eradicating the scourges of new threats and challenges facing the world today. It is our important contribution to the world politics.
RIR Dossier
President,Mr Dmitry Medvedev will arrive in India for his regular annual summit with Dr Manmohan Singh. I think such extremely busy schedule shows the highest priority which we attach to the relations of strategic cooperation with India. What are the key challenges that both countries face? The challenges of development and progress. We are also developing our economy. In this sense, India is in a better position because you have mastered free market economy for a much longer period of time than Russia. We've only been building our market economy for 20 years. We are freshies in that rough world because during the 73 years of the communist rule we forgot how such economy worked, though Russia used to be a well-developed capitalist economy before the revolution. By reemerging we strive to build a better life for our countries and better conditions for Russia in the world diplomacy. When you look at the global challenges: the global warming, the financialslowdown,terrorism,how cancountriesworktogether,particularly India and Russia? We can learn a lot from you, which we do. It is not a secret that even against background of the world economic crisis India has succeeded in choosing better ways to escape the harsh consequences of that recession. It is a very welcome development. You were very sensitive to the
world trends. Even now you have such high growth rate of your economy – more than 7.7 pc – which we would dream of. It is due to a wise economic policy of not associating with speculative capitals in the West. We need your experience because, unfortunately, we have suffered much more than India, since our economy has been oriented towards outside markets more than inside, unlike yours. So we need your experience as regards the global challenges. As I have mentioned, our position on international terrorism and the necessity to combat it with all possible means and methods remains the same. Russia, like India being a victim of international terrorism, understands your feelings very well. The economic ties between India and Russia still have not reached their full potential. It is currently around $10 bn, but there is talk of reaching $20 bn in another five years. We have to clearly divide this into two categories, i.e. common trade, which is, unfortunately, not to the best of our expectations. Our present turnover is around $7.5 bn, which is just peanuts for such mighty powers as India and Russia, considering our potential and our abilities. If we mention the construction of Kudankulam nuclear power station, it is also economic cooperation. It is the best, shining example of good economic cooperation.We have almost completed two units with four or even six units
more in the anvil making it alltogether eight.We have also got a new site in West Bengal to build four or six NPP units.We understand that India’s requirements in energy are growing in geometrical proportion and nuclear energy is the only real way to meet them. We wish trade figures were higher.We want to reach $10 bn this year or next year. Then we want to have it 15 or even 20 bn. In this field the sky is the limit. But again, I would like to say that our Indian partners, private businesses should be more energetic, should be more forceful even aggressive, because the Soviet times are over, when we would deliver our contracts and orders on a silver plate. They have to find business opportunities themselves, but they have been slow. First they were blaming the crime situation – but now it is all in the past, the situation has drastically changed. Then there were deficiencies in the Russian law which prevented them from coming to Russia. Now this has been also changed by M r P u t i n ’s a n d M r Medvedev’s governments. So they should be more active. One of the problem areas in economic equation is that it is mostly commodities, it is not diversified in services. I agree that we have to diversify our trade relations to services, not only commodities, so that India would buy from us not only oil or other raw materials but services and technologies as well. I remember the times when Russia built India’s
first antibiotics plant in Rishikesh. But now we are inviting and welcoming our Indian friends to come to my country and open joint ventures in pharmaceuticals, especially in our provinces. But joint ventures always need start-up capital. Let it be 49/51. Unfortunately, our friends are not so eager to spend one rupee for investment in order to get two or three or five the day after tomorrow. Much hope is still laid on ‘sell and buy’. I think, part of the problem lies in the perception, common to the Indian planners as well, thatWestern Europe and North America are markets while Russia, South-East Asia, Africa and Latin America are a new and unexplored destinations. What the Russian side could offer as an incentive in this respect? I think that the major incentive is our favourable taxation climate with taxes being just flat 13 pc, excellent for bringing capitals in. Not many countries have such taxes. We have the most comfortable conditions for establishing and operating joint ventures in the already mentioned area of drugs and pharmaceuticals, the support has been guaranteed at the highest level. Prime Minister Vladimir Putin is comingtoNewDelhi.Whatcanwe expect from his visit? Like any visit of such level from Russia to India, I think it will herald a deeper understanding between our leaders. As we know, this year will be the 10th anniversary of the historic Declaration on strategic partnership between Russia and India. Ten years have passed and Mr Vladimir Putin,who signed that document, is coming here. We have every reason to say that he has become the architect of a new strategic phase in our relations after the hazy uncertainties in Russia in the preceding period. In these ten years Russian-Indian relationship has seen many shining examples of very productive and useful cooperation. Of course, a number of agreements will be signed.We do welcome such intensive twoway traffic in our relationship. I wish it were as intensive as the Delhi traffic but,please,no gridlocks or jams!
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This interview was conducted by a Russian TV channel.
Full version at WWW.RBTH.RU
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Russia and India have agreed on cooperation in bio technology. Indian experts and representatives of the Federation of Asian Biotech Associations are to arrive in Moscow to visit the “EuroasiaBio-2010” congress (April 13-16). Under the joint projects, the two countries will found a Russian-Indian scientific center for biotechnology and pharmaceutics in Russia, produce a vaccine based on Russian technology and to use stem cells in ophthalmology applying a unique Indian development. Voice of Russia
Russia, India to sign civil nuclear accord An agreement on the peaceful use of nuclear energy is ready for signing. “I am sure the accord will be signed during the visit of Vladimir Putin,” said Sergei Sobyanin, deputy prime minister, on a recent visit to India. Russia plans to build upto 20 power reactors. Six reactors will be built at the Kudankulam site in Tamil Nadu, and from four to six reactors in Haripur in West Bengal. RIA Novosti
India set to buy 42 more Su-30 jets India and Russia are negotiating a new contract on the delivery of 42 Su-30MKI to the Indian Air Force. According to the Daily News and Analysis newspaper, the new deal, which is reportedly worth more than $3 bn, has been in the works for several months. The new air-superiority fighters will come on top of the 230 already contracted from Russia in three deals worth a total of $8.5 bn. RIA Novosti
New helicopter to go into mass production Certification of the new Russian Ka-226T helicopter will wrap up in 2012, said Sergei Mikryukov, managing director of the Kumertau Aviation Production Enterprise (KumAPP). The Ка-226Т will participate in a tender recently announced by the Indian government. The winner will receive an order for 97 aircraft to be delivered to India and be charged with organising the licensed production of 100 more helicopters within India itself. Regardless of the results of the tender, marketers at Helicopters of Russia, KumAPP’s parent company, estimate that sales of the Ka-226T at home and abroad should total at least 800 over the next 15 years. Vremya novostei
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Gas and oil New energy links could take the politics out of transportation
Dreams in the pipeline Soviet pipelines built in the 80s of the 20th century are still in place, but a raft of energy infrastructure deals and the launch of several new routes signal major shifts in the postSoviet oil and gas network. A lattice of new pipelines should make relationships more civlilised, offering Asian countries more options for energy supplies. BEN ARIS
pipeline snaking from oil-rich Kazakhstan to China, threatens to be a game-changer. The Kremlin’s response has been to build more pipelines, also heading east.One possible result of this emerging lattice of pipelines is that energy relations in and around the Continental and Asian landmass will become more civilised as competing routes force both,buyer and seller to put market interests first and politics a definite second.
BUSINESS NEW EUROPE
Russia has clashed several times with Ukraine over unpaid gas bills – resulting in most of Europe being cut off from crucial gas supplies in the depths of winter. This year, a row was avoided after Kyiv, with the help of the International Monetary Fund scraped together the cash to pay its bill on time. But, two new gas pipelines to the north and south of Ukraine should end the uncertainty completely. Russia’s imperialistic hold over the oil and gas producers in Central Asia – inherited from the Soviet Union in the form of oil and gas pipelines – has also been broken.A new gas pipeline running from the gas-rich republic of Turkmenistan, in tandem with the currently operating oil
Changing the game On December 14,Chinsese president Hu Jintao joined hisTurkmen counterpart Gurbanguly Berdimuhamedov to inaugurate the new Trans-Asian pipeline that allows energy hungry China to tap Central Asia’s copious supplies of gas.“The new pipeline marks an economic power shift to the benefit of three Central Asian countries and China and to the detriment of Russia,”says Philip H de Leon, the publisher of OilPrice.com. The Trans-Asian gas pipeline cost $6.7 bn to build and is the first out of the Caspian region that runs east,linkingTurkmenistan’s massive gas basin with China’s west-east gas pipeline. Now,Turkmen gas can be sent as far as Shanghai and Hong Kong.
The pipeline will carry upto 40 billion cubic metres (bcm) by 2013 – accounting for almost half of China’s gas needs. China’s growing importance in the region led the Kremlin to follow suit last November: Prime MinisterVladimir Putin signed a deal that promises to deliver 68 bcm a year to China through two new pipelines starting in Siberia – providing China with the other half of the gas it needs.The Russian deal represents an abrupt about-face for the Kremlin,which has traditionally been very wary of its eastern neighbour. Pipelines are intensely political beasts when they are in the planning stage, but once constructed they are the geo-political equivalent of marriage. The Turkmen gas pipeline follows on the heels of a new Kazakh oil pipeline to China that rounds out the new eastwardlooking energy transport infrastructure. The first phase of the Kazakh oil pipeline went into operation in July last year; a second phase will link Kazakhstan’s rich Caspian oil resources to China.
Tyumen region of Russia. An employee of the Russian oil company turning off a valve at an oil well
Russian response The increased competition has led the Kremlin to raise its game, too,and it is hitting back by beef-
NIKOLAY KOROLEV
Knitting pattern: a latticework of pipes will weave together countries in Europe and Asia
ing up its own energy transport infrastructure. Underpinning the annual clash between Russia and Ukraine is the fact that Russia is forced to send about 80 pc of its gas to Western European customers through Ukraine,as there is only one pipeline that connects Russia to the rest of Europe. Russia has proposed two new routes that run to the north and south of Ukraine to diversify the supply routes: Nord Stream runs from northwest Russia to Germany; and South Stream runs from southern Russia under the Black Sea to Turkey. Mr Putin ordered construction to start on Nord Stream at the end of last year,after the pipeline got the last environmental permits from Germany at the end of 2009. The other members of the EU along the way – the Baltic’s and Poland – were miffed with Chancellor Gerhard Schroeder, who negotiated the deal (and is now chairman of the company that will run the pipeline) for by passing them and so denying them any of the transit duties. The pipeline is scheduled to go
online in 2011 with a throughput of 27.5 bcm a year. South Stream, the second pipeline, will close the circle, but this pipeline has had a harder time of it. It is competing with the EU-sponsored Nabucco pipeline that runs over roughly the same route, but is supposed to source gas from Central Asia, missing Russia out.The problem is that there is only demand enough to support one pipeline. The Kremlin worked very hard in 2009 to get South Stream off the ground and managed to sign a string of deals with states like Bulgaria and Croatia, who will be among the pipeline’s main customers. By the end of the year, it looked like Russia had won the race,largely because the new Trans-Asian will soak up much of Turkmenistan’s spare gas. However, never say never when talking about pipeline politics; the issue will really be decided when someone actually starts building their pipeline. More in the pipeline With the gas transport problems well in hand, the Kremlin has
turned its attention to rounding out the oil pipeline infrastructure. Like the Russian gas pipes that will now run both, east and west, Mr Putin relaunched a new and ambitious Eastern Siberia Pacific Ocean (ESPO) oil pipeline on December 29. The 3,000-mile ESPO is the longest and most expensive of all the pipeline plans on the table at the moment. Construction began in April 2006, but the project has regained its momentum since a branch to the China’s Daqing oilfield was started in April last year . This Chinese dogleg will come online first in 2011, carrying 15 mn tons of oil a year and the second phase is due to be finished in about 2014. At full capacity, it can carry 80 mn tons of oil a year and will cost at least $30 bn to build. But the success of the pipeline will depend on the currently untouched oil resources thought to exist in eastern Siberia; optimistic forecasts say the Eastern Siberian fields will reach production levels of 70-80 mn tons a year around 2030, but serious exploration of the region will only begin this year.
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NEW WAVE OF PRIVATIZATIONS: WHO WILL GET THE PICK OF THE BUNCH?
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Gazprom to join Peace Pipeline project Russian gas giant Gazprom will join the Peace Pipeline project, aimed to deliver natural gas from Iran to Pakistan and India. Thus, the company plans to participate in sharing profits from exports to the booming Indian market as well as redirect Iran’s gas from West to East while Russia remains the key player in the European market. YURI SOLOZOBOV
ALEXANDER KOROLKOV_AFP
RIR
The reason why Gazprom is ready to turn away from Europe to the booming markets of South Asia is obvious.“After a while, Gazprom will face a big challenge in Europe,” says Lukoil Vice President,Leonid Fedun.In the coming years, the EU countries will try to limit consumption of hydrocarbons and look for alternative fuels and supply routes. Gazprom needs to enter new markets to become less dependent on Europe, currently the main consumer of its gas. Russia’s new energy strategy has already chosen an alternative: it has declared the booming AsiaPacific Region (APR) as its priority.By 2030,the share of oil and gas supplies to the APR, as planned, will account for 20-25
Energy
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pc of its total exports versus 6 pc today. All the forecasts say Europe is taking a backseat as the main buyer of Russian hydrocarbons.There is still some room in the booming APR markets and Gazprom has a chance to be there on time. Analysts say Gazprom is playing a multidimensional chess game on the global chess board. In the geopolitical field, by joining the Peace Pipeline project it will boost Russia’s reputation as an energy superpower in the APR region. It can be noted that an alternative TurkmenistanAfghanistan-Pakistan-India (TAPI) project is being promoted by the US. It is longer than the Peace Pipeline, but its capacity is less, just 33 bn cubic metres. And the complicated situation in Afghanistan (and its geography) is working in favour of the Peace Pipeline. Last year, Gazprom and the National Iranian Oil Company agreed to create a joint venture to develop Iran’s massive oil and gas fields of Southern Pars and Kish, which will provide gas to fill the Peace Pipeline. Gazprom would hate alternative sellers to appear in Europe as it wants to remain a strategic player in the solvent gas market there. In par-
Looking for an escape from the petro-dollar
ticular, it would like to keep Iran out of Europe. Meanwhile, the EU has been showing signs of growing interest in Iranian gas as an alternative source of fuel in the wake of“Russian-Ukrainian gas wars”. The Russian gas monopoly today sees as the main challenge the Nabucco pipeline, which pursues the strategic aim of linking Iran to Europe via Turkey. Gazprom would certainly prefer to divert Iranian gas to India rather than compete with Iran in Europe. By assisting the construction of a trans-Asian pipeline, Gazprom is reorienting Iran’s energy resources to the east and making the Nabucco project still less viable. So, the stakes around the Indian projects are going up and up. Gazprom’s share in the Peace Pipeline project is still unknown. But most probably it will be a quarter of all the project’s shares. “In current prices, the pipeline will probably cost $8-10 bn. If Russia or Gazprom get 25 pc and the ratio between equity and borrowed capital is 30 to 70,Russia’s contribution will be a mere $600-750 mn,”saysAlexei Kokin, s e n i o r a n a ly s t w i t h I F K Metropol. The gas pipeline will be 2700 km long with a capacity of approximately 55 bn cm a year. The smaller part will be delivered to Pakistan while India will get the lion’s share (62.5 pc).
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Russia is one of the few oilproducing countries in the world where the majority of oil production is in the hands of private companies. Taxing oil so heavily means that the ultimate beneficiary of Russia’s oil wealth is (in theory) the Russian people, not the oligarchs who own the companies. More demonstrably, the high tax on oil allows low taxes on everything else which should bolster diversification. Of course, it doesn’t work quite so well in practice, which is highlighted by the other half of the equation: the dominance of oil and gas in the export revenue. Taxes on real sector companies may be low but the value of the rouble is high, making exports uncompetitive in the international markets.The tide of petrodollars causes the so-called Dutch disease that inevitably drives up the value of the currency. The upshot is Russia’s other exports – such as planes, power stations and caviar – cost more than they should. To its credit, the Central Bank of Russia has worked hard to try to keep the value of the rouble down just as the price of oil soared 15-fold since 1998. The state was enjoying a huge tax windfall from oil, but the frustrated Duma deputies were unable to touch any of the $600 bn that was locked up by finance minister Alexei Kudrin in the stabilisation fund, up from a mere $9.1 bn in 1998.
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Can shale gas fix the energy dilemma?
NICK WATSON BUSINESS NEW EUROPE
The gas industry’s“quiet revolution”,asTony Hayward, chief executive of BP,described it,began in North America, where new techniques, such as horizontal drilling and hydraulic fracturing,have allowed energy firms to access hard-to-get-at deposits of unconventional tight and shale gas,as well as coal-bed methane (CBM),at much lower costs than thought possible five years ago. By some estimates, the US now has more than 57 trln cubic metres of gas available, giving it over 100 years of supply and transforming it in one fell stroke
into a gas self-sufficient country. By comparison,Russia’s reserves of conventional gas, the largest in the world, are just over 43 trln cm,according to BP. Experts believe unconventional gas resources could add as much as another 250 pc to world reserves. Those techniques pioneered in North America are spreading to Europe and other parts of the world. ExxonMobil, which in December shocked the markets by announcing a $41 bn takeover of US independent gas producer XTO Energy,has already drilled for shale gas in Germany and is looking at drilling more wells in Hungary and Poland. ConocoPhillips is also looking at Poland in a joint venture with Lane Energy. And Austria’s OMV is looking for shale-gas deposits in theVienna basin. On the other hand,experts argue there are many myths surrounding shale production and that the environmental consequences – such as intensive water use – are often overlooked. Hydraulic
fracturing does involve injecting a mix of water and chemicals at high pressure in order to create fractures in the rocks to get the gas out. Industry and environmental groups argue this process has a significant environmental impact – the fracturing fluid could contaminate water supplies – and could even induce seismic events. Such concerns
prevented the US gas firm Chesapeake from drilling for shale gas in NewYork state.Luckily for European policymakers, who are worried more about energy’s security than its purity, many of the most promising reserves are to be found in European countries that are most worried about Russia’s influence on their energy supplies.
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Kudrin’s motive was to build up reserves in case there was another crisis, which turned out to be a good idea. But, even more importantly, the stabilisation fund“sterilised”the oil windfall money: as the windfall money can’t be spent; it doesn’t push up either inflation or the value of the rouble. Still, all this money sloshing about (Russian oil companies still make a packet from the part of the oil price not taxed below $27) kept inflation and appreciation high in recent years. And that is what all this talk of “modernisation” is about in Moscow. On November 12, Russian President Dmitry Medvedev gave his first state-of-the-nation speech, most of which was dedicated to how the state needs to modernise the Russian economy. It is an old theme and the Kremlin’s record has not been good so far, distracted by crises, terrorists and battles with oligarchs. Finally, a serious start was made in 2007 after inflation fell to single figures for the first time in modern history and the state showcased a $1 trln investment programme to rebuild Russia’s dilapidated infrastructure. But that plan, like most of the others, has been derailed by this crisis. While the Kremlin may hope for a return of $100 oil soon, what would be best for the country is cheap oil that will force the government to concentrate on the prog r a m m e e s p o u s e d by M r Medvedev.
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Tapping coal-bed methane In mid-February, the first coalbed methane (CBM) production began in the huge Kuzbass coal basin in West Siberia. Kuzbass alone reportedly contains 13 trln cubic meters (cm) of CBM, a jaw-dropping amount comparable with the giant Urengoy gas field, one of the world’s largest repositories of natural gas. According to Gazprom CEO Alexei Miller, Russia has enormous un-
discovered CBM resources of about 84 trln cm, or a third of the projected conventional gas resources. Kuzbass is expected to produce as much as 4.2 mn cm of gas in 2010, followed by steep production growth as new areas come on line with annual output of 18-21 bn cm per year in the long term. Russia has quite a few large coal basins.
ANVAR GALEEV_RG
The gas industry’s quiet revolution in shale gas could redetermine the key players in the global market. The US and Western Europe stand to benefit from huge untapped reserves, while Russia is quick to point out the potential negative environmental effects.
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A new gas reserve discovery in Russian North Siberia
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Cooperation
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www.goldman-sachs.com/ideas/brics Goldman Sachs about BRICs www.businessneweurope.eu Business magazine focusing on emerging European markets
Putin’s Indo-Russian decade "Our President Putin has agreed to start completely new, powerful and wide-ranging relations with India," they were saying. He wanted to get Russia back to the position of India’s best and trusted friend. And now, with this 123 deal, America will squeeze us out of India in more sense than one”.That was George Bush era, you have to remember, when Russia and the US – at best – stopped talking to each other. There were people in Moscow, admittedly, who were publicly saying that Russia may actually profit from the 123 agreement. India is big, it cannot be monopolised even by a country like the US, they claimed. The 123 agreement opens the way to the Russian nuclear energy, too, setting up precedents.You just have to wait. Today, India has a set of two almost similar nuclear energy agreements – with USA and Russia. That surprising news came in only recently. And the moment one partner tries to exert pressure, India may immediately turn to the other for the same technologies and services. There will be no monopolists on the Indian market, ever.
SERGEY RYATAKOV_RIA NOVOSTI
CONTINUED FROM PAGE 1
Reactor hall in Leningrad Nuclear Power Plant. Russia is ready to build in India up to 12 civil nuclear reactors
You have to be Vladimir Putin with his patience and restraint to wait for such a result for so many years. So in the end, today, having disposed of global politics in that issue, he comes to India to negotiate details. Like, how many reactors Russia can provide. And when. The first Russian reactor, in
Kudankulam, starts generating power right this summer, another one is under construction. Next might be upto 12 others, in the same ground and in others.West Bengal has been mentioned, as well as “a third area”. It is a huge contract, and it will take more than one visit to ne-
gotiate millions of things, like timing, the type of reactors, not to mention the money. 12 reactors is the top figure among several others mentioned. But even if it comes only to half of this amount in the end, it will stay a huge contract. It will change the economic landscape of India, for sure, but it
will also change drastically the Russian nuclear power industry for years to come. It may even mean that Russia will be unlikely to have capacities to build reactors anywhere else in the coming 5-10 years. So you can imagine that every step on this way will be very carefully considered. For those privy to pains of forging the new Indo-Russian relations, nuclear success comes as a big surprise. Equally surprising was the unexpected feat of bilateral trade – it has reached $7 bn in the pre-crisis 2008.And that was after years and years of top-level lamenting about trade’s inability to move higher that lethargic $2-3-4 bn. Now we talk about $10 bn annually, and more. Even the global crisis could not prevent Russia and India from success. Who would know, 10 years ago, that the profits of Indian medical drugs sales in Russia would skyrocket by 23,5 pc in 2009, the year when all chart arrows point down, globally? We talk about joint production of pharmaceuticals now, while joint research in military armaments has been conducted for some years already. So, all in all, the plans to forge
completely new set of bilateral relations, laid down in 2000, met with a surprising success. Which, incidentally, means that the current Russian President, Mr. Dmitri Medvedev, will have to come up with new strategies for the years ahead. In the meantime – a Russian Prime Minister, in charge of economy, is not exactly supposed to discuss with India issues like Afghanistan. Dr. Manmohan Singh has been conversing with President Medvedev on that subject in December, in Moscow. But – do you seriously believe that Vladimir Putin, with his 10-year experience at the top, will not mention such subjects? American war in Afghanistan may end with Taliban eventually grabbing back power, and Russian Prime Minister keeps silent about it? No, Central Asia will just have to be a focus point for Russia and India for a long time. As well as Indian Ocean, navy, airspace industry, gas and oil.Vladimir Putin was the one who began these talks on the serious basis. He will participate in it as long as he is around.
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Dmitri Kosyrev is a RIA Novosti Political Columnist
Opinion Does Russia still belong to the BRICs, despite poor performance during the financial crisis?
The most unloved BRIC For almost 10 years , the BRIC nations (Brazil, Russia, India and China) have been considered growth champions, promising big profits for investors. But the global economic crisis has shown that Russia is still dependent on commodities. So it's time to take the 'R' out of BRIC? BEN ARIS SPECIAL TO RUSSIA NOW
The BRIC nations have been impacted by the global meltdown, but countries such as China and India are already back in fast growth mode and are starting to implement their exit strategies from the crisisbusting stimulus programmes that are holding the rest of the world up. Indeed, a Chinese suggestion that it would tighten
rates sent stock markets around the planet plunging at the end of January. Why would they do that? Because they are growing too fast. “Crisis”was the most used expression at the recent Davos Forum, but“emerging markets” came in a close second. The world's leading businessmen have their eyes now on these new“wunderkinder”of the global economy, but the very slogan of the event belies the fact that, actually, most of their attention still remains at home. “The emerging markets are looking much better now,”said Mark Green, senior economist at HSBC,“but theWest is on life support and surviving on the drugs of stimulus.” But where was Russia in all this? Last year, there was a Rus-
sia session at Davos as business leaders focused on the booming economy.This year, while China and India’s names were bandied about by nearly everyone, Russia is increasingly missed out altogether. Even the op-eds
Russia is expected to return to strong growth soon – and so justify its membership of the BRIC club about the BRIC quadriga skip over Russia’s name. A few have even called for the“R”to be removed permanently from the acronym. The reason? Russia had a bad crisis and the other BRIC mem-
bers didn’t; it was the only one of the four to suffer from substantial and dramatic economic contraction. China and India are rapidly returning to their habitual fast growth, while Russia is recovering from 8.8 pc contraction in 2009 and is expected to put in somewhere between 1.5 pc and 5 pc of growth this year (depending on what happens to oil prices). Should Russia be booted out of BRIC? It is certainly the least loved of the four. Jim O’Neill, the chief economist at Goldman Sachs, who coined the term in 2001, says no, but admits Russia disappointed last year. However, in a recent note he argued that the economy was dragged down by its exposure to the oil price and heavy borrowing in the international credit mar-
kets, but expects the country to return to strong growth this year and next – thus justifying its membership of the club. The 1998 financial crisis levelled Russia’s nascent banking sector and forced the government to default on its international debt, wrecking the state’s reputation.This time round, the government has emerged relatively unscathed: none of the big banks or companies have gone bust; the government still has the third largest foreign currency reserves – about five times more cash than either the UK or the USA – and the lowest external debt of any major country. Even the budget deficit (the first in a decade) is expected to fall to between 5pc and 1pc of GDP, depending on oil prices, this year.
What most commentators miss is that the boom years have transformed Russia from a petro-economy to a normal one where consumers, not hydrocarbons, are the long-term drivers of change. Roustam Tariko, founder of Russian Standard Bank (and owner of a vodka by the same name), said that both his businesses took a hit, but both are back to 60-70 pc of 2008 levels.“Everything relating to the Russian consumer is going better and faster than with business,”saysTariko.“The situation is stabilising and we will go back to growth, but clearly it will be slower than before.” A little growth would go a long way to earning Russia a little more love; the strong recovery some are predicting should make it hot again.
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BOOKMARKS
www.indianembassy.ru Embassy of India in Moscow www.rus-ind.com Find more information about trade and economic co-operation en.fondsk.ru Strategic culture foundation magazine
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Economy The mutual trade is far behind the potential of our countries
Indo-Russian bilateral trade has shown consistent growth in recent years and the trend is expected to continue in the foreseeable future. Other areas of cooperation between the two countries are as strong as ever before. Prime Minister Vladimir Putin’s impending visit to India is expected to provide the impetus to raise Indo-Russian relations to new level. ARUN MOHANTY JAWAHARLAL NEHRU UNIVERSITY
Trade and economic relations, an important component of the growing Indo-Russian strategic partnership, have been demonstrating strong positive trends in recent years after more than a decade of stagnation.The bilateral trade turnover that was around $2.5 bn for most part of the post-Soviet period has grown by 30 pc annually during the past couple of years to over $8.5 bn. The structure of the trade also has undergone a positive change. India probably is the only country to which Russian exports is dominated not by energy and raw-materials but by machinery and equipments. Another notable trend in our bilateral trade is that India and Russia are perhaps the only major countries that have seen robust growth in their mutual trade volume despite the global economic crisis.
The growth in mutual investment in recent years is also a matter of great satisfaction. India has made significant investments in the Russian energy sector. India’s ONGC Videsh is investing $2.5 bn in Russia’s Sakhalin-1 oil and gas project, which is India’s largest investment abroad and one of the largest foreign investments in Russian economy. India has recently purchased the Imperial Energy Company operating in Russia for $2.58 bn. India is also keen to acquire stakes in the huge Sakhalin-3 energy project. Private sectors of both countries are also investing in each other’s economy. Russia’s AFK System is planning to invest more than $5 bn in India’s telecom sector, which would be Russia’s largest private sector investment in India. India’s Sun Group has acquired a 25 pc stake in Russia’s leading energy company-Itera. A noteworthy feature of our bilateral economic cooperation is joint ventures in high-tech sector.This productive cooperation takes place in several vital and sensitive sectors like defence, space, nuclear science and technology. Indo-Russian defence cooperation has grown from a buyer-seller relationship to joint production and marketing.The world’s most effective supersonic missile BrahMos is a glaring example of such productive cooperation in the high-tech sec-
tor.The proposals for joint production of multi-role transport aircraft and fifth generation aircraft that had its maiden flight recently by India and Russia reflect the strategic nature of our military-economic cooperation. A unique feature of our strategic partnership is that the high-tech sector is gradually dominating our military-economic coopera-
'We should provide new content to our economic cooperation and qualitatively raise it to new levels' tion.The long-term defence cooperation agreement signed during the last Indo-Russian summit held in December 2009 at Moscow has many projects for such cooperation. Russia can play a significant role in strengthening India’s energy security by building nuclear plants on Indian soil.Nuclear cooperation with Russia has a number of advantages. First of all, Russian technology is costeffective and cheaper while being at par or even superior to technology from other countries. Secondly,Russia does not attach conditions in the deal like others, and would ensure life-long fuel supply to its reactors,apart from providing reprocessing technol-
ogy to India.Given the trustworthy relations that we have in this sector for decades, India and Russia would make ideal partners in this area for more meaningful cooperation. India and Russia have the largest programme between any two countries for cooperation in science and technology. Industrial application of the results of the cooperation between the scientific institutions of our countries would provide strong impetus to our economic cooperation. Russia still remains a powerhouse of high technology and India is Russia’s preferred partner in this sector. Though France and China had evinced keen interest to be Moscow’s partner in the project for development of fifth generation aircraft,Russia chose India as its trusted partner in this sensitive venture. India and Russia are genuine and natural strategic partners enjoying robust political relations. However, the current level of bilateral trade and economic cooperation does not match their high level of political relations nor does it reflect the economic potential of both countries. Both sides should contemplate serious measures to provide new content to our economic cooperation and qualitatively raise it to new levels. Russian Prime Minister Vladimir Putin’s forthcoming visit to Delhi provides such an
RIA NOVOSTI
India, Russia keen to bolster economic ties
Works on Chaivo field, Sakhalin-1 project. Commercial oil/gas production from this field started on October 1, 2005.
opportunity. Putin in many ways is the architect of our multi-faceted strategic partnership. His deep sense of love and sympathy towards India is reflected in the ‘best friend of India in Russia’ statement that he made after being elected as the President and his mentioning of ‘India as the country of his childhood dream’in his autobiography. President Putin’s first visit to India in October 2000 became a historic one in many ways by formalising the strategic partnership between our two countries and opening a new chapter in our time-tested friendship. It is this visit that heralded the holding of regular
annual Indo-Russian summits, making it a permanent feature of our relations in subsequent years. Putin’s forthcoming visit to India would be his first visit to our country in the capacity of Russian Prime Minister. However, given his understanding and sympathy towards India, the visit promises to be a milestone as several important agreements are planned to be signed during the tour are destined to provide new quality and content to our relations in many directions.
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JNU professor Arun Mohanty is the Director of the Eurasian Foundation.
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Aviation
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www.sukhoi.org/eng Sukhoi Company website warfare.ru Find more information on Russian modern and perspective weapons systems www.rbcnews.com English-language business news
Joint project The development of the Russian-Indian fifth generation jet fighter will mark a breakthrough in military aviation
WWW.SUKHOI.ORG
A jet fighter with a“human intellect”
A fifth generation combat aircraft has taken to the air in Russia. This plane is as yet unnamed – it is just known as the T-50. Following its maiden flight earlier this year, the aircraft has now reached the flight testing stage. SERGEI PTICHKIN ROSSIYSKAYA GAZETA
Traditionally fighters are divided into generations, but often one aircraft combines characteristics of both current and future machines. Generally speaking, the first generation includes the subsonic jet aircraft which appeared after the Second World War and which has cannon armaments (MiG -15 and the MiG-17 are best known examples of this type). The second generation are supersonic fighters carrying missile weaponry; for example, the MiG-19 and the MiG-21. The third generation are aircraft with more powerful engines, improved radar and sometimes altered wing geometry. In the USSR, examples of this are the MiG-23 and the MiG-27 and in the USA, the F-4 Phantom. The fourth generation are aircraft which have new on-board equipment, powerful radar and a wide-ranging armament system, including everything from 30mm cannons to guided mis-
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The T-50 will incorporate the latest developments in a military fighter, including low visibility, supersonic cruising speed and highly integrated control systems. It will be able to fulfil military tasks in any weather conditions and at any time of the day and use runways only 300 – 400 metres in length.
siles and smart bombs. In the USSR, these aircrafts are the MiG-29 and the Su-27, and in Western equivalents are the F-15, the F-16, the Mirage 2000 and the Grippen. The development of the fourth generation proceeded rapidly. Based on the“old”MiG and Sukhoi models, fighters such as the MiG-29SMT, the MiG-35 and the Su-35 came into service, and these were almost as advanced as fifth generation aircraft.What defined them was their exceptional manoeuvrability.This was on account of their vectored thrust engines and phased array radar systems, their multirole capability and the replacement of the basic gunsight with computer displays and other innovations.
A “predator” at a price The idea of building a combat aircraft for the 21st century was conceived in the USSR and the USA simultaneously. Work began at the end of the 80s. For obvious reasons, the USA had a headstart and were able to be the first to put a fighter into service, an aircraft called the F-22 Raptor. The demands placed on the fifth generation are significant. The aircraft should have a supersonic cruise capability, low
radar signature, a powerful radar system providing a foreshortened view, a computerised “brain”capable of controlling the flight and correcting any input errors of the pilot. Many specialists consider that the main defining feature of a fifth generation aircraft should not be its unique technical characteristics, but its ability to orientate itself in modern warfare’s constantly evolving system of conduct.There is even an expression ‘to enter the system of systems’.In the F-22,the Americans succeeded in realising nearly all of the demands of fifth generation fighters.But at what a price! The cost of the project exceeded the USA’s military budget by $65 bn. The initial cost of one plane amounted to $140 mn and the hourly operating cost came to $44.000. During the process of perfecting the F-22 and improving its features, the cost of one plane was approaching $350 mn. Such extravagance was displeasing even to the Pentagon, and it declined further purchases of the most expensive fighter in the world. Today, production of the F-22 has been halted.
Can Russia take the lead? In terms of appearance,theT-50, or as its still known the PAK FA (Perspective complex of front
aircraft), is similar to the Raptor. But it may turn out to be much better and more economical.It is impossible to compare the features of the two aircraft, since everything to do with the T-50 is still classified information. But there are a few things that can be discussed. With its supersonic cruise speed, the Raptor can enter a combat zone quickly.But what next? Then it has to transfer to subsonic speed so as to be able to open the doors of the armament store and utilise the missiles which are hidden in the belly of its fuselage. Russian aircraft designers were the first in the world to manage to solve the problem of opening the armament store doors and releasing a missile when in supersonic flight. If this is the case, then the PAK FA already has the edge over the F-22. In a close combat manoeuvre, the American fighter would be at a disadvantage just on account of the exceptional manoeuvrability of theT-50. Moreover, the Russian fighter’s engines with their vectored thrust allow the pilot to apply a range of anti-missile manoeuvres, which no other aircraft can do at this point in time. In the case of dog fights at middle and far ranges, the new missiles are certainly no worse than foreign
“It takes precisely 23 minutes to become a New Yorker, and five generations to become a Muscovite...” “Should Russia be booted out of the Bric club?...” “I am trying to plan a military campaign similar to Napoleon Bonaparte’s...”
The T-50’s specifications compared to Lockheed Martin/Boeing F-22 Raptor T-50 March 1.7 March 2.75 2.000 km 20.000 m 37.000 kg
F-22 Cruising speed Maximum speed Range Service ceiling Maximum take-off weight 38
March 1.7 March 2.5 2.000 km 20.000 m 38.000 kg
The T-50 will cost less than $100 mn which is much less than Lockheed Martin/Boeing F-22 Raptor
equivalents. Russia also has active phased array radar systems. As far as the electronic“brain” is concerned the avionics of the fifth generation are also of a high quality, and at the moment they are being tested on the Su-35 and the MiG-35. The cost of production of the T-50 is estimated to be $15 bn, which is four times less than the F-22.The cost of the production model is not expected to exceed $100 mn and according to statements of the “Sukhoi”, operation costs will be cheaper than those of the Su-27.
A winning co-operation When the Russian Indian collaboration on the creation of a fifth-generation prototype air-
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craft based on the experimental T-50 starts to become a reality, then we can expect a real breakthrough. Thanks to this, the Su-30MKU came into existence – the best heavyweight aircraft to date. It is hoped that through the combined efforts of Russian and Indian specialists, the PAK FA will be filled with the latest equipment and fitted out with the best armaments. The main task is to finance and activate flight testing of the T-50. And then in three years theVVS will receive the first consignment of these fighters for experimental use in the forces. From 2015, the world market for heavyweight combat aircraft will be filled with only Russian-Indian aircraft.
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This issue has been conceptualised by INTERNATIONAL MEDIA MARKETING, RESPONSE adqueries@ timesgroup.com Co-ordinator: • Feature Mehernosh Gotla (mehernosh.gotla@ timesgroup.com)