T h i s e i g h t - p a g e p u l l - o u t i s p r o d u c e d a n d p u b l i s h e d b y R o s s i y s k a y a G a z e t a ( R u s s i a ) , w h i c h t a k e s s o l e r e s p o n s i b i l i t y f o r t h e c o n t e n t s

Tuesday, February 22, 2011Distributed with

A force for the future?

Gorbachev and Yeltsin

Russian police face sweeping reforms

The contrasting faces of perestroika

P.02 P.07

Just what the doctor orderedState injects £2.4bn into drugs industryP.04

NEWS IN BRIEF

IN THIS ISSUE

The Ministry of Healthcare and Social De-velopment has proposed a bill guarantee-ing equal rights and opportunities to men and women, Tatiana Golikova, the health minister, said.Analysts, however, remain sceptical about the proposed law.Although Russian legislation includes sev-eral anti-gender discrimination acts, it lacks a single federal law preventing it.Ms Golikova could not say when the new law “on state guarantees of equal rights and freedoms to men and women and equal op-portunities for exercising these rights and freedoms”, would be adopted.“We are reviewing the legislation and will draft a single act protecting women’s rights,” Ms Golikova said at a meeting with the United Nations High Commissioner for Human Rights, Navanethem Pillay. “This is a demanding task,” she added.

The decision by President Dmitry Medvedev to scrap the annual move to daylight-saving time from October is backed by 60pc of Russians, a poll showed.Russia has been switching to “winter” time on the last Sunday of October since 1981.But power savings from switching the clocks are thought to account for no more than 0.2pc of total consumption. Daylight-saving time is practised in every European country except Iceland, and across the world. The � rst recorded time change in Russia was in 1917.

Minister backs new sex equality law

Kremlin signals end to daylight saving

OPINION

News for saleKremlin plans privatisation of state media outlets

Russia may make it easier for foreign com-panies to invest in its food industry. Gov-ernment amendments submitted to the State Duma, the lower house of parliament, would change a law regulating foreign investment in strategic enterprises, the Duma said.A law limiting foreign investment in stra-tegic enterprises was passed in 2008, before the global financial and economic crisis struck. It requires government approval for major deals involving foreign investment in strategic enterprises, which include oil, gas, the nuclear industry, arms production, � sheries, aerospace, the media, and also food companies dealing with infectious agents and radioactive sources.

Food industry to be opened to investors

NIKOLAI ALENOV, ALENA TVERITINARUSSIA NOW

Authorities across the country were galvanised into action after last month’s Domededovo attack exposed flaws in security screening.

The human race has � nally set foot on the Red Planet. Kind of.In a unique 520-day experi-ment to simulate a mission to Mars, a six-man interna-tional team of researchers completed the � rst leg of the journey this month. Broad-cast live on a giant screen at the real space mission con-trol centre outside Moscow, two crewmen, Russian Alex-ander Smoleevsky and Ital-ian Diego Urbina, emerged in space suits after eight months of isolation to stage a “landing”.“Today, as I see this Red Planet surface I can already feel how inspiring it will be

Sometimes, it seems that the Kremlin chief has to crack the whip to get things moving. With Russia still reeling after the Domodedovo airport su-icide bombing on January 24, which killed 36, President Dmitry Medvedev made snap inspections of public trans-port hubs, putting his author-ity behind attempts to improve security. Most recently, the president arrived unannounced at Mos-cow’s Vnukovo airport, where he passed through a metal de-tector and had his pockets searched by a security serv-ice officer. Before that he sur-prised staff at a Metro station and the capital’s Kievsky mainline station, a key link with the restive south of Russia, the source of most home-grown terrorism in the past decade. “Just take a look, I haven’t seen a single police officer,” the dissatis� ed head of state told embarrassed officials at Kievsky station.While sceptics may see the visits as a photo-opportunity, the reality is that in Russia it

Medvedev beefs up securityTerrorism Kremlin demands better protection for public after airport bombing

DMITRY RODIONOVRUSSIA NOW

It may take two decades to mount a manned mission to Mars, but work is under way.

A giant step for Earth-bound Mars crewSpace travel Scientists test human guinea pigs in simulated mission to the Red Planet

Sturgeon numbers are recovering under farmed conditions

trip to Mars. Depending on its orbit, Mars is located 35 million to 250 million miles from Earth. While the main condition of space travel – weightlessness – is missing, the crew sleep in bunks at a 12-degree angle to create a feeling of unfamiliarity. The Russian cosmonaut Boris Morukov, director of the mis-sion, said at its launch: “Each crew member has the right to end the experiment and walk out.”A similar isolation trial at the institute 11 years ago broke down when a Cana-dian volunteer said a male colleague tried to forcibly kiss her. Two other team members came to blows.But there is plenty of time to get the crew dynamic right: experts do not expect a manned Mars mission until the mid-2030s.

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often takes intervention from the highest level to get things moving. For example, in response to the president’s suggestion that more police dogs should be

used to enhance security, the Mayor of Moscow, Sergei Sobyanin, ordered the con-struction of kennels for 500 dogs that will be trained for security duties. Under the

threat of dismissal, security heads across the country are now busily reconsidering how and where their manpower is deployed. And lawmakers were rushing to tighten con-

trols in the production of � re-works, which, with chemical alterations, can yield weap-ons-grade explosives. Coinciding with moves to re-form the police, the Domod-

edovo bombing highlighted many security failures, from lack of a de� ned chain of re-sponsibility among law-en-forcement bodies to an ab-sence of patrolling officers at key locations. “At the moment everyone is blaming everyone else, say-ing, ‘I’m only responsible up to such and such an extent’, or there is supposedly joint control which in reality results in there being no control at all,” Sergei Ivanov, the Deputy Prime Minister, told security and transport chiefs four days after the bombing.The Chechen warlord Doku Umarov claimed responsibil-ity for the attack, which was carried out by a 20-year-old man from the republic of Ingushetia.Rashid Nurgaliyev, the Inte-rior Minister, has said more security staff will be placed at airport entrances and in open terminal spaces. Tech-nical security systems are also being rapidly installed at rail-way and bus stations. Since the January attack, the au-thorities have added almost 130 metal detector frames at railway stations in Moscow and St Petersburg. All stations would be equipped with de-tectors by late March, Rus-sian Railways said. There

FSB chief Mr Bortnikov, Mr Medvedev and Mr Soby-anin inspect Metro security

to do it through the eyes of the first human to step on Mars. I salute the explorers of tomorrow,” Mr Urbina said in a radio link-up with offi-cials, cosmonauts and media at the control centre. Mr Smoleevsky also dedicat-ed the sortie to the first human space � ight made 50 years ago this April 12 by Yuri Gagarin. Remotely as-sisted by Chinese colleague Wang Yue, they performed at-mospheric, soil and other tests that Mars explorers will one day carry out. They then planted the � ags of Russia, China and the EU. The team of male volunteers, which also includes two more Russians and a Frenchman, went into isolation last June as part of the Mars-500 ex-periment to gauge the phys-ical and psychological effects of a long-term mission. Be-

fore they rejoin life on Earth, their handlers will subject them to the claustrophobia, stress and fatigue that real spacefarers experience. The experiment is being con-ducted by the Moscow-based Institute for Medical and Bi-ological Problems, in collab-oration with the European Space Agency and China’s astronaut training centre. Their simulated craft com-prises several interconnect-ing modules, including a greenhouse where fresh pro-duce is grown, and with liv-ing quarters just around 20 yards long and less than four yards wide. There is a built-in Martian surface model for three planned space walks.During the simulated � ight, the team has an internet link to Earth, but this is deliber-ately prone to the break-downs anticipated during a

of Manned Space Flight 50th Anniversary

Conservationists and lovers of black caviar in Britain may allow themselves a cautious

Blue skies lie ahead for black caviar

Conservation Fish farms help bring the critically endangered sturgeon back from the brink

hurrah. After a nine-year ban on exporting the delicacy � sh eggs to this market, Russian authorities have opened the channel to the European Union again – with provisos – now that the endangered sturgeon population is recov-ering in farmed conditions.As cultivated stocks of the giant “tsar � sh” start to reach maturity, Russian shops can

again sell black caviar pro-duced by state farms set up in the past two decades. But beware those travellers who load their suitcases with jars bought anywhere but in du-ty-free stores, even if they can produce sales receipts.“This is contraband,” said a customs officer at Moscow’s Sheremetyevo airport, add-ing that smuggling is pun-

After sturgeon stocks in the Caspian Sea were nearly wiped out by overfishing and poaching, the fish – and its coveted eggs – are back in legal circulation.

VLADIMIR RUVINSKYRUSSIA NOW

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ishable by up to six years in prison. To casually export le-gally acquired “street caviar” one must have special per-mission, which the average buyer can never hope to re-ceive. And the federal cus-toms service says the maxi-mum amount of duty-free caviar you can buy is 250g.The caviar export ban and subsequent sturgeon � shing ban were put in place to com-bat illegal hauls of the � sh from the Caspian and Azov Seas, once the source of more than 90pc of black caviar on the world market. After the

Russian Alexander Smoleevsky and Italian Diego Urbina stretch their legs on a fake Martian landscape after eight months in cramped conditions

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02 MOST READRUSSIA NOW WWW.RBTH.RUSECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA DISTRIBUTED WITH THE DAILY TELEGRAPH TUESDAY_FEBRUARY 22_2011

The old New Russianshttp://bit.ly/gidewyPolitics & Society

Police Sergeant Mikhail Menshenin dodges blows as he tries to subdue a scream-ing 86-year-old pensioner. He and his partner were called to the apartment by a social worker, who says: “She’s gone completely mad.” Calm is eventually restored, and back in the squad car the sergeant says he’s thank-ful the pensioner didn’t have her cane to hand. “They’re lethal with those things.” The 25-year-old Muscovite patrols in the south west of the capital, supporting a wife and child on a monthly in-come of about 25,000 rubles (£533), a small sum on which to live in one of the world’s most expensive cities.“It’s tough psychologically, but hard work is rewarded,” Sgt Menshenin said. “The salary may not be great, but we get bonuses.” A member of the capital’s 98,000-strong police force, which is still known by the Soviet-era name of militsia, Sgt Menshenin wonders what a new nationwide police bill due to be enacted on March 1 will mean for his employ-ment terms, powers and so-cial status.President Dmitry Medvedev ordered the overhaul last

year. He was prompted to act after a police major went on the rampage and shot dead two people in Moscow in 2009. Staff cuts of 20pc and pay rises were announced, while the draft Law on Po-lice was posted online for public discussion. To build trust, the president also pro-posed reverting to the tsar-ist-era name politsia. The � nal draft, which includ-ed suggestions made by or-dinary citizens, aims to bring the system in line with po-licing practices around the world. An officer’s authority will be limited to his precinct, citizens will have to be read their rights before being ar-rested, and they will be en-titled to make a free phone call after they are taken into custody.Mr Medvedev also champi-oned police pay rises, report-edly of up to 50pc, in an at-tempt to eliminate one of the root causes of low-level brib-ery and abuse of power. It is a key issue for both officers and a public that simply wants to feel protected. In the latest survey by the Le-vada independent polling or-ganisation, 60pc of Russians said they were dissatisfied with the performance of the police, and only 10pc fully trusted the force. Public anger at the police ap-peared to peak in December, when thousands of youths took to the streets of central Moscow in violent protests, accusing corrupt police of taking bribes to release key

suspects in the murder of a football fan. But it is largely the routine solicitation of small bribes, often when motorists are ac-cused of minor traffic offenc-es, that has soured Russians against the force. The police, meanwhile, defend them-

selves vigorously against crit-icism of their conduct. “What do you expect for the money we make?” asks Alexei, a lieu-tenant in a different precinct who did not want to give his last name. “The good offic-ers only take bribes for minor stuff, a few roubles from

A new force to be reckoned with

Mikhail Menshenin, 25, patrols Moscow’s Southwest district. ‘It’s tough psychologically but rewarding,’ he says

someone violating immigra-tion rules or something, just to make ends meet.” Some lawmakers fear that the bill will fail to end corruption or ease popular discontent with the police. “Instead of a new force, we get the same militsia with a

new name,” said Gennady Gudkov, deputy chairman of the Security Committee in the State Duma (lower house of parliament) and a mem-ber of the opposition party A Just Russia.According to the legislator, the pro-Kremlin United Rus-

sia party blocked attempts to subject the police to great-er public scrutiny. “We pro-posed increasing public over-sight through grassroots organisations,” he said. “They denied it.” Some senior police officials are also sceptical that the re-

form will usher in a new era, and believe there needs to be a broad attack on corruption, targeting both state institu-tions and public attitudes. “If we don’t reform other in-stitutions along with the po-lice and clarify who’s respon-sible for what, no staff cuts or increases will make any difference,” said Yuri Maty-ukhin, police chief of Mos-cow’s Southwest District. Nikolai Petrov, a security ex-pert with the Carnegie En-dowment for Peace, also said the public’s low regard for the police was part of a “broader dissatisfaction with state institutions”. “In my personal experience, there was nothing particu-larly bad about the police alone,” said Mr Petrov. Mr Matyukhin even claimed that few institutions had at-tempted to combat internal corruption as aggressively as his. “I challenge you to show any government body in Rus-sia that is doing more to transparently � ght corrup-tion and purge its own ranks than the militsia is already doing,” he said. But as Mr Petrov notes, the militsia cannot police itself and still expect to restore public confidence: “What’s needed is outside control over the police by public organi-sations. What we don’t have is responsibility like in the United States, where sher-iffs are elected and removed if they do not do their job.”Back on the beat, Sgt Men-shenin said that whatever the implications of the bill, lay-offs had already begun and had even had a positive effect: “They’ve already � red a lot of the bad apples in our ranks who were harming our reputation.”

are also proposals to link some public transport junc-tions with the Glonass satel-lite navigation system, used to monitor transport links from the North Causasus to Moscow.But not everyone is im-pressed. “The current devel-opments in state security seem like just another pub-lic relations campaign. I fear that once it’s over, things will go right back to where they were,” said Vladimir Yevseyev, Director of the Centre for Public Policy Research and an expert on international security issues. “Countries with serious security prob-lems do not solve them using metal detectors,” he added.The president was quick to blame lax security for the airport bombing. But author-ities acknowledge there is a wider failure to tackle Islam-ist militancy in the North Caucasus. Terrorist groups

have carried out several at-tacks in Moscow over the past decade, including twin suicide blasts on the Metro that killed 40 last year. “The problem is that we do not understand the phenom-enon of radicalism and reli-gious fundamentalism,” Mikhail Margelov, who rep-resents the ruling United

Russia Party on Russia’s Se-curity Council, said in a re-cent interview on Radio Svo-boda. “If we cannot combat the sources of terrorism, we will cure the cold and not the virus that started it.” Mr Ivanov said that a gen-eral rethink of security prin-ciples was required. The gov-ernment last summer began

In recent security discussions, everyone from the president down has emphasised the need for greater public vigi-lance. Mr Medvedev has also ordered security and trans-port officials to draft by April a schedule for regular exer-cises on how to protect peo-ple in public places from terrorist attacks.Judging from the public re-action to the airport attack, citizens might welcome the initiative. In a national sur-vey in early February by the VCIOM polling organisation, 80pc of 1,600 respondents feared that they or their rel-atives may fall victim to a suicide bombing. A third said it was impossible to eradi-cate terrorism in Russia.“There is a lot left to do,” said Oleg Orlov, director of the Memorial Human Rights Centre. According to him, the solution to the terrorism problem can only be found at its source – in the North Caucasus region. “Solving so-cial problems, ful� lling so-ciety’s expectations, that’s the solution,” he insisted.Mr Yevseyev agreed: “The majority of the younger pop-ulation there is uneducated and unemployed, but knows how to handle a weapon.” But he added: “The problem of the Caucasus basically can-not be resolved in the very near future… and we need security now.”

Kremlin drives broad security overhaul after Domodedovo bombing

Four-fifths of Russians are afraid they or their relatives may fall victim to a suicide bombing

Law enforcement Reform cuts numbers and boosts salaries in an attempt to clean up the organisation

implementing a new £1bn, four-year programme for “en-suring security of the popu-lation on public transport” and had already disbursed almost £165m when disaster struck, according to Mr Ivanov. “It’s no small sum, but as far as results are con-cerned, we’ve just seen,” he said of the bombing. The United States set up the Department of Homeland Security after the attacks of September 11, 2001, and Mr Ivanov called for a similar organisation to oversee the security of transport and other infrastructure.Current reform of the police, with an expected cut in the 1.4 million-strong force by 250,000 officers, may com-plicate effort. But the inte-rior ministry has said it will move to better co-ordinate law enforcement with private security companies that em-ploy 640,000 people and in many cases already work in tandem with the police.

It’s Monday and the last day of January, a typical bump-er-to-bumper rush hour in central Moscow. But it’s no average gridlock at Trium-falnaya Square, where mem-bers of Russia’s emerging opposition movement have come together just as they have on the 31st of every month with 31 days. They are here to defend Article 31 of the Russian Constitu-tion, which guarantees the right of assembly. Last November, authorities in the capital finally ap-proved this now ritualistic demonstration in the square, although they did so with-out relinquishing their right to massive shows of force.On December 31, at the end of the authorised gathering, several opposition leaders were arrested and sentenced to between � ve and 15 days in jail. They made interna-tional news and gave human rights activists pause. Key activists include Boris Nemtsov, former deputy prime minister turned op-position activist, Eduard Limonov, leader of the Na-tional Bolshevik and Other Russia parties, and Ilya Yashin of the Yabloko par-ty’s youth wing. These parties represent sev-eral small anti-Kremlin movements that lack cohe-sion and do not get on with one another, but on this point they agree: the three leaders felt the latest arrests marked a new wave of re-pressions.However, Nikolai Petrov, scholar in residence at Mos-cow Carnegie Centre, is not convinced the crackdown means that the authorities are revealing a new strate-gy of repression, taking the view that this could merely be a short-term reaction to recent events.“Street protests have be-come popular across Russia and authorities are obvious-ly overwhelmed. But it’s eas-ier to go after ‘goateed peo-ple’ [as Mr Putin calls opposition activists] than a

Society Party of People’s Freedom leads the fight to be heard

Authorities have tightened their grip on small-scale protests, breathing fresh ambition into a still heavily dispersed opposition.

worked-up crowd of foot-ball fanatics,” the analyst said, referring to the clash-es on December 11 between 5,000 youths and law en-forcers by the Kremlin walls. Mr Putin has since accused the liberal opposition of having started a destructive trend in street protests.It is true there was a rise in street protests in 2010, bu-oyed perhaps by statements from President Dmitry Medvedev that accepted criticism of power. But hopes

that apparent victories for protesters in recent months were a sign that authorities had relaxed their grip were soon dashed. For example, the Khimki Forest protest against a highway project was an environmental cause that turned political. Faced with large-scale protests in the summer, the president decided to listen and halted construction work. By the end of summer the protest-ers seemed victorious – until construction resumed at full speed in December.Remembering the adage, “united we stand, divided we fall,” leaders of the dem-ocratic and liberal move-ments merged under the banner of the Party of Peo-ple’s Freedom and the slo-gan, “For a Russia without Arbitrariness and Corrup-tion,” in order to � eld can-didates in the 2011 elections and a presidential candidate in 2012.However, during his annual televised conversation with the public (a four-hour, live question-and-answer ses-sion), Prime Minister Putin openly stated that he

wouldn’t allow the opposi-tion to “reach the feeding trough” – in particular Boris Nemtsov, Vladimir Ryjkov and Vladimir Milov, found-ing members of the Party of People’s Freedom.But what does not kill the opposition will probably make it stronger. “The au-thorities want to frighten those who come out against them, but we will continue to defend the constitution,” Mr Yashin of Yabloko said.Still, despite the seething anger of leaders and mem-bers of the political oppo-sition, they have yet to build a real base of support. Denis Volkov, a sociologist at the Levada Centre, said this was because their political mes-sage had remained too ab-stract for ordinary Russians, who don’t see the use of the right to assembly if they are missing the right to a life of dignity.Moreover, all of these groups constitue a tiny fraction of Russia’s 141 million-strong population. The ruling tan-dem’s popularity ratings have continuously hovered around 60-70pc over the last two years, according to the Levada Center.And Mr Nemtsov, for all his political persecution, has in-spired very few with his leadership potential. “Peo-ple are ready to defend their own rights, even strongly, in a sort of social opposition, but they do not see in Nemtsov a man who is in-terested in their problems,” Mr Volkov said.Yet according to Nikolai Petrov, it’s only a matter of time before the opposition movement gathers pace be-hind Mr Nemtsov and oth-ers. “The problems that are troubling society will not be solved in 2011, discontent will only increase. The op-position is uniting. When the protesting catches on and those who are dissatis� ed are looking for spokesmen, the opposition will be there.” Mr Nemtsov is here already, well dressed and full of swagger, declaring recently: “With the current state of things, people need a polit-ical party like ours. Our chances increase every time the authorities tighten their grip.”

Opposition finds unity – but still can’t agree

VERONIKA DORMANRUSSIA NOW

The front lineMikhail Menshenin, from Surgut, Western Siberia, served in the armed forces and joined the police three years ago . He patrols with a partner in 12-hour shifts four or five times a week. Sgt Menshenin welcomes the law, but wishes more emphasis had been given to a comprehensive social package for officers.

Strategy 31 on Triumfalnaya Square, August 31, 2010

CONTINUED FROM PAGE 1

ARTEM ZAGORODNOVRUSSIA NOW

Dogged by low salaries and low public regard, the country’s police face reforms that may make or break the force. Russia Now goes on the beat with Moscow’s cops.

" Not only did their criticism of Putin never really register with

the public, but their focus on Putin’s real or perceived trans-gressions has become more and more misplaced as Presi-dent Dmitry Medvedev rallies support for his modernisation agenda"

COMMENT

Eugene IvanovMASSACHUSETTS-BASED ANALYST; RUSSIA

BEYOND THE HEADLINES, FEB 15, 2011

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03most read Russia now www.rbth.rusection sponsored by rossiyskaya gazeta, russia distributed with the daily telegraph tuesday_February 22_2011 economyBP predicted Rosneft takeover of TNK-BP

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key to electric cars, solar batteries, lasers and more

In a dramatic move that rat-tled its trading partners, China announced last year that it would further reduce exports of rare earth metals (REM) by 10pc in 2011. The decision sent shock waves across the industrialised world as manufacturers are heavily dependent on China for the metals, which are used in a range of sophisticated electronic goods, such as TVs and computer monitors.What compounded the wor-ries was that China had a vir-tual monopoly, providing 97pc of the world’s supply.Beijing’s decision was stra-tegic. Last July, the People’s Daily published an article by Li Bing, an international strategy expert of the Cen-tral Party School. He said poor China should no long-er sell its valuable resources cheaply to capitalist coun-tries and declared that REM exports “must be gradually

commodities As world producers search frantically for new sources of rare earth metals, Moscow is urged to develop an industry to exploit its vast reserves

china’s decision to reduce exports of rare earth metals shocked the world, but the crisis could be an opportunity for russia.

reduced and, ultimately, stopped.” By August, the Chi-nese authorities announced cuts in export quotas in the second half-year by 72pc; later, in the first round of ex-port quota distribution for 2011, it cut them by another 11.4pc. In September, China halted exports to Japan; in October, there were supply shortages in Europe and the United States.

“The market did not hesitate to react to the reduced sup-ply with a sharp price rise: most rare earth products ap-preciated by a factor of 1.5-4; some of them, by an order of magnitude [10x] or more,” according to analysts at MetalResearch. Russian industrialists should become proactive in developing a strategic REM industry.Beijing’s unilateral quota triggered a hysterical reac-tion and also prompted a

search for alternatives. India has already declared its read-iness to export REM, but it has only some of the rare earth metals supplied to the global market by China. India needs serious invest-ments and technologies, in-cluding those aimed at en-suring environmental safety of production facilities. The REM crunch, however, may prove to be an opportu-nity for Russia. Currently, there is practically no REM production; rare earth met-als are mostly produced as a by-product. In northern Russia, for in-stance, the Lovozersk inte-grated mining-and-process-ing plant (IMPP) mines loparite ores (which contain a wide range of REM: tan-talum, niobium, zirconium, lanthanum, cerium, etc) and the Solikamsk Magnesium Plant (SMP) processes con-centrates of these. But these facilities focus on the pro-duction of magnesium; the rare earth metals business is merely auxiliary.Russia has the second larg-est explored reserves of REM in the world (about 30pc); and the world’s largest an-

ticipated reserves. A good ex-ample is the Lovozersk de-posit in the northern Murmansk Region, which “consists of three main min-erals in about equal shares,” says Alexandr Samonov, a re-searcher for the Institute of Geology of Ore Deposits, Pe-trography, Mineralogy, and Geochemistry of the Russian Academy of Sciences. “Besides loparite, the triplet includes eudyalite, an excep-tionally rare mineral, which, outside the Kola Peninsula, is found in small quantities only at two locations in the world,” he said. For the production of rare earth metals, eudyalite is much more attractive than loparite, as the REM content is 2–3pc, twice that of lopar-ite, Mr Samonov said. And ore reserves that can be sur-face-mined are estimated at 80 million tons.The second gem is the Tom-tor deposit in Yakutia, where REM content in its ores reaches a phenomenal 12pc. Moreover, its proven reserves total 150 million tons, while possible reserves may exceed all the rest of the world’s reserves combined. Finally,

there is another promising source, with apatite ores hav-ing been mined on a massive scale on the Kola Peninsula to produce phosphorus fer-tilisers. Comprehensive processing of the apatite raw material might produce ap-proximately 40,000 tons of rare earth metals a year, experts say.REM production facilities in Russia are, however, concen-trated in the hands of a few Russian entrepreneurs who have been in no hurry to in-vest in developing the sector. SMP and the Lovozersk IMPP are controlled by Sule-iman Kerimov’s Sylvinite. Apatite is controlled by the Fosagro holding company, which has shown no appar-ent interest in REM.However, conditions have changed. Unlike fertilisers, REM are exceptionally ex-pensive and are appreciating by the day, so Russia is well placed to leverage its min-ing capabilities and associ-ated infrastructure. Moreover, supplying semi-finished products to devel-oped countries might consti-tute a good starting point for establishing the advanced stages of the rare earth pro-duction chain in Russia and for spurring the production of innovative goods. China certainly sounded the alarm bells internationally with its export reductions, but ulti-mately it may be Russian cash registers that ring loud-est on the REM market.

Russia could cash in as China cuts REM exports

a skip loader at work at a rare earth metals mine in the murmansk region

ivan rubanovexpert MAgAzine

Rare earth metals include scandium, yttrium, lanthanum and another 12 lanthanides, cerium being the most wide-spread. They are found in nature in dispersed form and hundreds are in minerals. In metallurgy, REM are used in the production of cast iron, steel and non-ferrous alloys.

They are used in laser manu-facturing, and added to nucle-ar control rods and radiation protection coatings. REM have long been used to produce catalysts, primarily for the oil industry. Significant quanti-ties, above all of samarium and neodymium, are used in manu-facturing permanent magnets.

One of the most promising areas involving REM is in elec-tric and hybrid cars. The Toyota Prius is a classic exam-ple. The latest model includes more than 10kg of rare earths (mostly lanthanum and neodymium) in the batteries, catalysts and metal alloys. REM is also used in solar batteries.

reM are expensive and appreciating, so russia is well placed to leverage its mining capabilities

collapse of the Soviet Union the business became the province of poachers. “By 2010 the sturgeon population was a fortieth of what it had been in the late Eighties,” said Alexei Vaisman of the World Wildlife Fund.The preferred canapé top-ping of aristocrats, tycoons and 007-style agents will al-ways find its way onto the black market. “[Until 2007] Russia officially procured 15 tons of black caviar annual-ly, while selling up to 300 tons,” said Roman Andreyev, of investment company Ale-mar, adding that the largely illegal outflow was worth $1bn (£616m).Commercial sturgeon fishing was banned in 2003, but the main avenue for legalising ill-gotten caviar stayed open: all confiscated caviar could be officially sold at retail prices. That loophole was closed in 2007, when the gov-ernment ordered caviar con-fiscated from poachers to be destroyed. In 2009, fishing for sturgeon in the Caspian Sea for “scientific purposes” was also outlawed, which caused a drop in the level of illegal-ly sold roe to 150-200 tons, Mr Andreyev noted. But it is still a highly lucrative busi-ness for those who can get away with it. “Taking into ac-count the bribes paid to con-servationists, bureaucrats and distributors, the cost of [illegally] producing one kil-ogram of Caspian black cav-iar is less than $50 (£31), he said, while on markets and in restaurants it can cost up to $3,000 (£1,850).

black caviar to make a comeback in europe

retailing at $1,000 per kilogram, legally produced caviar is a valid means of preserving the sturgeon, say conservationists

cutting the poachers. Legal-ly produced Russian “aqua-cultured” caviar costs around $1,000 (£620) per kilo, a third of the price of the contra-band supplies to Europe. Even China, which began ex-porting farm-raised black caviar last year, cannot com-pete with this price. “Increas-ing the number of sturgeon farms is a positive step to-wards restoring the sturgeon population in its natural hab-itat,” Mr Vaisman said. Now comes the rub. For all the talk of resumed exports, legal Russian black caviar has yet to arrive in Europe in anything other than a lit-tle duty-free jar. The prob-

lem, said Arkady Novikov, the owner of Russian Caviar House, is that for unknown reasons Russia has still to sign EU technical protocols on fish farming and the sale of by-products, including caviar, from farm-raised stur-geon. “But without it, not one Russian company can sup-ply such caviar and Europe won’t accept it,” he added. The demand for caviar in Eu-rope is however “limitless”, said Mr Krainy, and once the problems are solved he pre-dicts that people will rush to buy it. But for now, the share of the precious roe that the state has earmarked for Europe remains in Russia.

continued From page 1

A $60bn Russian privatisa-tion programme began this month as the government sold its 10pc stake in VTB Bank, the country’s second largest, raising a record $3.3bn. “This is … proof of trust in the Russian financial system,” Prime Minister Vladimir Putin told the press after the deal was closed. The secondary public offer (SPO) of the stock was met with lukewarm, but suffi-cient, demand from investors. VTB’s stock was initially of-fered in May 2007 in what was called “the people’s IPO” and raised $8bn in the big-gest IPO of that year. Small investors flocked to that sale, spending about $1bn on shares, but the gov-ernment was left with egg on its face after the share price tanked as the subprime mort-gage crisis struck, ending in a market crash in Septem-ber 2008. The share prices never fully recovered: the state sold global depository receipt shares to internation-al investors at $10.56 during the IPO but was only able to muster $6.25 with the SPO this time round. Understandably, Russia’s re-tail investors remain livid at “the people’s IPO”, and the debacle has impaired the state’s ability to float more companies amid broad pub-lic scepticism at its invest-ment promises.

equities government begins shedding its wealth of assets

But the fact that the Krem-lin got the SPO off the ground at all should impress, given the current dire market con-ditions. After a strong run in 2010, equity investments in emerging markets have done badly this year as hot money floods out on the back of ris-ing inflation fears. But not in Russia, which was the only major country to attract net new money – $267m of for-eign direct investment – for the fourth week in a row in the run up to the VTB deal. While the new VTB offering was not a smashing success it will do, amid plans to roll out more blue chips this year. It’s all part of the effort to fund an enormous 1 trillion- rouble ($33bn) investment programme into badly need-ed infrastructure. However, the state has also said that it wants to get out of business. Taking stock in exchange for various loans and bailouts during the cri-sis, the Kremlin doubled its ownership of listed compa-nies in the past two years and now controls about 40pc of Russia’s total market capi-

VTB sale launchesprivatisation drivein mid-February the government began its privatisation programme by selling a 10pc stake in russia’s second largest bank.

ben aris Business new europe

“Volumes of this caviar are now sufficient to begin de-liveries to the European Union,” said Andrei Krainy, head of the state fishing con-cern Rosrybolovstvo. His au-thority allows the export of 150kg of roe to Europe an-nually, a paltry amount com-pared to the 1,500 tons the Soviet Union supplied every year, but it’s at least a start. Meanwhile, critics might argue that not enough is being done to preserve stur-geon in the wild rather than farming it to tantalise the taste buds of wealthy con-sumers. But commercially nurturing the fish may save it from extinction by under-

talisation. “The state is now the biggest shareholder in Russia and so for once its in-terests are aligned with those of investors, as it wants to see the market do well even more than anyone else,” said Chris Weafer, the head of strategy at UralSib.The privatisation is also in-timately linked to the con-tinuing fight against corrup-tion and attempts to boost productivity, as the Kremlin has realised that employees steal from publicly owned companies, which are gener-ally badly run.The state plans to raise a total of 1.8 trillion roubles ($60bn) in the medium term through the privatisation of about 900 state-owned com-panies. For 2011 to 2013, rev-enues are expected at 298, 276 and 309 billion roubles respectively. Next up will be an SPO of state-owned Sberbank, which is the biggest bank in the country and the bluest of Russian blue chips. The share sale is slated for the end of this year or possibly the start of 2012.

privatisation of major companies

Black-market caviar produced for less than $50 a kilo sells for up to $3,000 in restaurants

state stake stake for saleVtB 85.50pc 10pc in 2010, 10pc in 2011, 15.5pc in 2012 minus

one share. 2010-2015, reducing state stake to block package provided that there is a major investor and increase of the

company capitalisationunited grain

Company100pc 100pc by 2012

sberbank 57.58pc 7.58 pc minus one share in 2011-2013rosneft 75.10pc 25pc minus one share by 2015. 15pc on

open market, 10pc minus one share in shares exchange

russian railways

100pc 25pc minus one share by 2015, including the share-exchange option

sourCe: CeeMArketwAtCh, eConMin, DeutsChe BAnk gloBAl MArkets reseArCh

rbth.ru/letters uk@rbth.ru

In recent years, foreign de-mand has been partly met with Iranian caviar, farmed with the consent of the other Caspian neighbours, but even this has almost disappeared from European shops. Given the sturgeon’s growth period of seven years or more, Rus-sian fish farms are only now starting to come online. The first renewed shipments went to Japan earlier this year.

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04 most readRussia now www.rbth.rusection sponsored by rossiyskaya gazeta, russia distributed with the daily telegraph tuesday_February 22_2011

Russia encourages investment at Davoshttp://bit.ly/h15sFVbusiness

business in brieF

Japanese car-making giant Toyota, the Japanese trad-ing house Mitsui & Co and Russian car-maker Sollers will launch joint car pro-duction in the far eastern city of Vladivostok in 2012, the Japanese business daily Nikkei reported.Toyota will provide parts and production technology for the joint venture, which will aim to build 30,000 Toyota-brand vehicles a year. The Vladivostok plant is expected to assemble sa-loons and off-road vehicles. The participants of the joint venture will discuss produc-tion details and financing later this month. Initially, the companies plan to operate the production facilities of Sollers. Toyota will supply car parts from Japan while Mitsui will transport cars via the Trans-Siberian Railway for sale in Russia, Nikkei wrote.Toyota will become the first Japanese car-maker to as-semble cars in Russia’s Far East. The Russian govern-ment has made major in-vestments in the Far East after protests in 2009 over higher tariffs on car im-ports, on which the region is highly dependent.

toyota in deal to make cars in Vladivostok

Russia’s trade surplus grew 24.7pc to $167.5bn in 2010, $33.2bn more than in 2009, the Federal Customs Serv-ice said. Exports rose 31.4pc year-on-year to $396.4bn, including a 32.1pc rise in exports to non-CIS coun-tries to $336.7bn, and a 27.4pc growth of exports to the CIS states to $59.7bn.Imports rose 36.8pc year-on-year to $229bn. Imports from non-CIS countries grew by 35.6pc to $197.4bn, while imports from CIS states rose 44.8pc to $31.6bn.

trade surplus rises 24.7pc as exports soar

week of January, Uralsib launched research into the pharmaceutical sector with a report entitled Just what the doctor ordered.“Russian pharma producers offer an excellent domestic story and access to defensive market niches and strong cash flows,” the Uralsib analyst Tigran Hovhannisy-an wrote. “The relative un-derperformance of Russia’s pharmaceutical market by comparison to other Bric markets is compensated for by the market leaders’ high-er margins and consolidation potential.”

The Russian government has unveiled a new plan to mod-ernise Russia’s pharmaceu-tical industry and give local firms a greater presence in international markets, inject-ing £2.4bn of state funds into the sector.In late 2010, Prime Minister Vladimir Putin set the tar-get of domestically produc-ing 90pc of Russia’s vital medicines and 50pc of its medical equipment by 2020, while increasing exports eight times. Foreign pharma-ceutical companies and med-ical equipment manufactur-ers in Russia would face sales restrictions if they were not prepared to share their ex-pertise, he warned.“We will have restrictions for them on our market if there are no imports of manufac-turing facilities and technol-ogies,” Mr Putin said, adding

pharmaceuticals Government to boost home-grown companies with cash injection and curbs on global giants

Foreign manufacturers are racing to secure positions in russia’s burgeoning pharmaceuticals market while the kremlin gets tough on imported medicines.

that the trade barriers would be gradually implemented. Dmitry Genkin, CEO of Rus-sia’s Pharmsynthez, which raised £10.9m in an initial public offering (IPO) last November, said Russia had struggled with the Soviet leg-acy of building most of East-ern Europe’s pharmaceutical industry while neglecting its own needs: “It left a huge gap between fundamental scienc-es and applied science like medicine when the Soviet Union collapsed.” Russian firms have long awaited government support, but current spending levels in the country fall far short of the money spent to sup-port research and develop-ment in Europe and Ameri-ca, Mr Genkin noted. “The money being spent by the Russian government is still peanuts compared to spend-ing by the European Com-mission or the US National Institutes of Health,” he said. Nevertheless, Russia’s phar-maceutical market is grow-ing twice as fast as US and European markets and has already become a key bat-

russia’s fast-growing drugs market presents a great opportunity for foreign investors

e-books are a common sight on the moscow metro

tleground for pharmaceuti-cal companies whose sales have stalled in Western mar-kets as patents expire. The Russian brokerage Uralsib said: “The pharmaceutical market, boosted by consum-er and government spend-ing, is set to outperform Rus-s i a n G D P w h i l e t h e

rachel morarjee Business new europe

With classic writers such as Alexander Pushkin still firm favourites beside detective potboilers, electronic pub-lishing is in hot pursuit of Russia’s avid and largely untapped readership.“Russia has very little phys-ical distribution of books. There are no nationwide chains like Barnes & Noble or Waterstone’s,” said Simon Dunlop, founder of the dig-ital download company Bookmate.ru.A total of 80pc of books are sold in Moscow and St Pe-tersburg, with only 20pc in

digital market electronic publishing capitalises on thriving literary market across russia and the Cis

sales of electronic books and digital readers are soaring as manufacturers exploit the poor reach of traditional publishing across russia.

the regions, according to the booksellers Bookmate and Ozon.ru. But digital distri-bution may overcome the challenges of selling books across this vast territory.“With digital media there are no border controls, no cus-toms and no transport costs,”said Mr Dunlop. With nine time zones, no other market in the world was as well-suited to e-books.The former Soviet Union was a “nation of readers”, and Russia remains a society with literacy on a par with or higher than Western Europe. But internet piracy has held back the development of the publishing industry, with il-legal downloads robbing publishers of revenues need-ed to back new authors.E-books are thought to be the leading legally down-

loaded product on the Rus-sian internet by industry ex-perts; Mr Dunlop says the number of downloads from Bookmate grew exponential-ly in the past year.The rising popularity of e-books is easy to see; it seems that every carriage on

the Moscow Metro has at least one or two people clutching an e-book reader. And rising demand for af-fordable e-readers has al-ready been met with a pop-ular, cheap and effective Ukrainian-produced reader.

Oleg Naumenko, 29, the Ukrainian entrepreneur who launched the best-selling Pocketbook e-reader, realised that a product designed for the Russian-language mar-ket could profit from the huge number of free (pirated) files on the internet without infringing copyright laws. Before the Pocketbook, the drawback of such files was the inconvenience of reading from printouts or LED dis-plays. Mr Naumenko’s Pock-etbook e-reader range does not come cheap at around £190, but users recoup their investment quickly if they use it as a substitute for buying hard copies of books.The crisis year of 2009 was a breakthrough for Pocket-book; it sold 142,000 devic-es, earning £23m. Around 60pc of the devices were sold

E-book boom is a page-turner

rachel morarjee, graham stackBusiness new europe

research and development partnerships with local firms. Switzerland’s Nycomed and Denmark’s Novo Nordisk have also announced plans to start producing in Russia, while Britain’s GlaxoSmith-Kline struck a vaccine deal in November with Moscow-based Binnopharm. And the French giant Sanofi-Aventis in January appoint-ed a new emerging markets management team to boost its market share in Russia, which is considered one of its key markets. Meanwhile, Russian compa-nies are also looking at mar-

more than offset by the sheer numbers of movie-goers.Hollywood has woken up to the profits that can be made in Russia, but so have Rus-sian producers: imported films are already facing stiff competition from home-

grown offerings. In the 2010 box-office year (which runs to November), 338 films were released in the Common-wealth of Independent States,with distributors of Hollywood films grossing a quarter of the total take, or $250m (£155m). The rest of the box-office receipts went to Russian distributors.

Thanks to oil and gas reve-nues, Russia has become a middle-income country, and its people increasingly enjoy the little luxuries of life, such as going to the movies. So much so, that by Novem-ber 2010, the value of Rus-sia’s movie distribution mar-ket had reached $1bn (£620m), up 40pc from the

leisure industry Film distribution reaps the benefit as more people go to the cinema

russia’s movie distribution market is a ripe prospect for foreign investment after the 2010 box-office take soared to $1bn.

2009 box-office season, Rus-sian Film Business Today re-ported. Companies are build-ing cinemas across the country (usually in the shop-ping centres that are going up in every city) and last year’s box office take makes Russia the fifth biggest movie market in the world.The importance of the Rus-sian movie market was high-lighted by the success of two American films at the begin-ning of this year. The Tourist and Gulliver’s Travels attract-ed bigger audiences in Rus-sia than in any other market in the world bar the US: the

Movie business finally makes the grade as a billion-dollar baby

tim gosling speCial to russia now

former film took $10.3m (£6.4m) on its first weekend in January while the latter took $9.5m (£5.9m).But foreign investors have generally yet to arrive in this promising market, which is dominated by Russian dis-tributors – who account for around 97pc of the total rev-enue the sector generates, ac-cording to the trade publi-cation Kinobusiness.According to consulting firm PricewaterhouseCoopers, one of the strengths of the Rus-sian cinema market is that the consumer seems prepared to pay more for quality. Box

office revenues were up by 40pc in 2010, but the audi-ence only increased by 14.9pc over the same period, it noted.This strong performance is doubly surprising, as al-though Russia has become a hot market for Hollywood blockbusters, the infrastruc-ture remains underdevel-oped. There are fewer than 11,000 screens in Russia, of which about two-thirds are modern. There should be four times that number, given the population of 142 million, says Viktor Frumkin, CFO of Kinoplex, which operates dozens of movie theatres in Russia’s regions.“One mid-sized cinema op-erator in America has more screens than all the screens currently operating in Rus-sia,” says Mr Frumkin, add-ing that the relatively low penetration of screens is

top-earning films in the cis, 2011Foreign investors have yet to arrive in the market, which is dominated by russian distributors

Given russia’s nine time zones, no other market in the world is quite as well suited to electronic books

in Russia and most of the rest in Ukraine. According to SmartMarket-ing, Pocketbook captured 43pc of the Russian market, with Sony a distant second with 24pc. Pocketbook’s suc-cess was expected to contin-ue in 2010, with earnings es-timated at around £94m. Mr Naumenko has also estab-lished an e-book where licensed files cost a fraction of hard copy.With a Russian population of 142 million, a total of 110 million people in the CIS on-line and double-digit growth in the spread of internet ca-pability, the market has huge growth potential. “As long as people have an internet con-nection you can start to use the power of technology to crack open new markets,” Mr Dunlop said.

new shot in the arm for ailing drug industry

the numbers

£2.4bn

State funds to be pumped into drug sector

90pc

Vital medicines to be produced domestically by 2020

11pc

Estimated growth of Russian pharmaceutical market in 2011

kets overseas. Pharmsynthez said it will use part of its IPO funds to purchase pharma-ceutical producers in Europe, as well as in the US and Is-rael. The drug manufacturer is looking for small, growing and profitable companies which own production facil-ities, Mr Genkin says.With the push to promote do-mestic pharmaceuticals, the Kremlin has opened up a new front in the war to diversify the Russian economy.Analysts are excited by the government’s initiative as it gives them a new sector in which to invest. In the last

fragmented regional phar-macy segment offers big con-solidation potential to lead-ing chains.”To cash in on the market’s growth potential, Western drug giants are determined that they will not be caught out by import barriers and are already setting up domes-tic manufacturing bases in Russia.Just before Christmas, the Swiss giant Novartis said it would invest £310m in Rus-sia over the next five years, building a production plant in St Petersburg to focus on local manufacturing and

title origin Distributor screens total gross $usD

1. Yolki russia Baselevs 975 22.8m

2.tron: legacy united states wDsspr 867 21 .2m

3. the Chronicles of narnia: the Voyage of the Dawn treader

united states 20th Century Fox 1 ,284 19. 1m

4. the tourist united states wDsspr 654 18 9m

5. tri bogatyrya i shamakhanskaya

tsaritsarussia nashe kino 757 18. 7m

sourCe: KinoBusiness

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global russia business calendar 5th annual open russia conFerence: partnership For modernisationmarCh 24-25, worlD traDe Centre, mosCowOver the last several years, the number of Russian com-panies interested in increas-ing their level of internation-al involvement has greatly increased. The conference seeks to capitalise on this important trend and serve as a venue for exchange be-tween Russian and foreign executives.The conference is an annual meeting of Russian and for-eign entrepreneurs, finan-ciers, lead experts, journal-ists and representatives of federal and regional govern-ments. The organisers are the Chamber of Commerce and Industry of the Russian Federation and AER group.Previous speakers of note include Sberbank president and former economics min-ister German Gref and steel magnate Alexei Mordashov.

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05most read Russia now www.rbth.rusection sponsored by rossiyskaya gazeta, russia distributed with the daily telegraph tuesday_February 22_2011

Leading Russian exchanges MICEX and RTS to mergehttp://bit.ly/gjeesz banking & Finance

stephendalziel

Russo-bRitish cham-beR of commeRce

is Russia, the “unloved Bric”, the new safe haven of 2011? Russia is al-ready off to an excellent

start, and analysts only ex-pect momentum to build from here. The Russian stock market was up 23pc in 2010, soar-ing 18pc in December alone. Having shunned Russian equity for most of 2009, when the leading RTS index lost about three-quarters of its value, investors are now piling back in. Net inflows into emerging-market equity funds were recorded in 33 of the past 34 weeks, and Russia had its biggest inflow in three years in mid-January. Port-folio investors are increas-ingly drawn here seeking to continue the big returns enjoyed in emerging mar-kets since the crisis struck, while Renaissance Capital predicts that Russian IPOs will triple this year, as Rus-sian companies return to equity markets to raise fresh investment capital.The economy is also doing well. The government upped its end-of-year estimate for GDP growth to 4pc in Jan-uary, but most analysts pre-dict that growth will top 5pc this year – not bad for a middle-income country.Unexpectedly strong oil prices (topping $90 per bar-rel in January) have meant that state finances in 2010 did a lot better than expect-ed, with the deficit coming in at 3.8pc – far better than the 6-7pc expected at the beginning of the year. The key number, however, is the state’s external debt, which, at 17pc of GDP, is ridiculously low against the triple digits that most de-veloped economies are sporting. And, with private investors having caught the Russia bug, institutional in-vestors in the UK and US have also said they will con-

to put more energy into ex-ploring alternative and cheaper sources of energy?If the BP-Rosneft deal was potentially good news with a few question marks, Janu-ary’s other big news out of Moscow was dreadful: the bomb at Domodedovo air-port. I went through Domod-edovo 50 times in the past two years; a year ago I stood on that spot, at that time, waiting to meet a flight; I had friends five minutes either side of the explosion. So this had personal resonance.However, I was in London on July 7, 2005, when four bombs went off on the trans-port system. I was late for work, otherwise I could have been on one of the trains that was hit. I then detoured past the point where, 30 minutes later, the bus blew up. Clear-ly, on that day, as in Moscow last month, my name wasn’t on any of those devices.But one thing that angered me after the Moscow bomb-ing was the frequently asked question: “Will this put peo-ple off doing business in Rus-sia?” In 2005, when the Lon-don bombings occurred (the day after London was award-ed the 2012 Olympic Games) the question was: “Will this affect the number of tourists coming to London?” Despite there being four explosions, no one asked whether any-one would be deterred from doing business in the UK.This shows that far too often the West judges Russia by other criteria than those by which it looks at itself. For-tunately, those westerners al-ready doing business in Rus-sia will see the tragedy of January 24 for what it was, and realise that if you pull out of the country you are simply allowing the men of violence to win. Ultimately, international trade is an essential part of the dialogue whereby, in the ever-hopeful words of the BBC’s motto, “Nation shall speak peace unto nation.”

When I left the BBC in 2004 it was because I was told Rus-

sia “wasn’t news any more”. Yet for a non-newsworthy country, 2011 has already seen a couple of massive headlines.Early in January, the first big business story was that BP and the Russian oil giant Rosneft had signed a deal to drill for oil under the Arctic ice cap, in the process exchanging a sig-nificant number of shares. This was a real sign that Russian and British busi-ness relations were improv-ing again after the reces-sion, which saw a sizeable drop in bilateral trade.But even before BP’s asso-ciated company in Russia, TNK-BP, started to ques-tion the legality of the deal, I had doubts that it made great sense. I can’t pretend to understand all the eco-logical ins and outs, but there’s something about drilling for oil in the Arc-tic which makes me uncom-fortable. The World Wildlife Fund says it could affect the habitat of polar bears, but to me this is only one precarious aspect.I’m sure BP has learnt the lessons of the Gulf of Mex-ico oil spill, but there is al-ways risk. What would be the price to pay for such an accident in the Arctic?And what about the “price” factor in the direct sense? Is it really going to be fi-nancially viable to extract oil from such a difficult re-gion, with the costs of drill-ing, transportation and so on? There is, of course, the argument that we are so committed to our cars that we shall continue to buy petrol whatever the price. But might it not be wiser

trade ties show solidarity against the terrorists

london blog

moscow blog

ben arisspecial to Rn

finding new strength in latest numbers

tinue to invest in emerging markets, as they offer higher yields, appreciating curren-cies and lower risk. Safe havens are likely to be in high demand this year: with the fiscal stimulus com-ing to an end, new storm clouds are gathering as the next stage of the Great Sov-ereign Debt Crisis unfolds. In Europe, Spain and Portu-gal have to raise tens of bil-lions of euros this year sim-ply to roll over existing debt. In America, things are look-ing even worse. Investors fled the US municipal bonds in December, driving up the cost of borrowing and driving state after state into deficit. Currently, well over half of America’s states are unable to meet their obligations and

the government is due to pass a bill enabling states to go bankrupt. Russia was briefly hailed as a safe haven as the world reeled from the subprime mortgage debacle in 2008, but following the Lehman Brothers collapse that Sep-tember, the huge corporate indebtedness of Russia’s big-gest firms was exposed, bringing the economy to a standstill. The crisis has squeezed Rus-sian debt dry, and, this time round, if there is a fresh cred-it crunch, Russia is much bet-ter equipped to deal with it. Indeed, a safe-haven image becomes a self-fulfilling prophesy, as the more money you attract, the better you are able to weather the storm. It is already clear that the biggest danger Russia faces this year is inflation – driven by the arrival of “hot money” from the developed world and by asset-price bubbles with investors having no-where else to go.

Foreign direct investment latest figures suggest that multinationals are once again sensing opportunities in Russia

buoyed by major new deals with foreign companies, the russian leadership is now seeing returns on efforts to modernise the country and enhance investor appeal.

Overshadowed as his trip to Davos was by the January 24 terrorist attack on Rus-sia’s Domodedovo airport, which left 35 people dead, President Dmitry Medvedev had a string of billion dol-lar-plus deals to show off as he took the podium at the World Economic Forum. Oil major BP’s share swap deal with state-controlled oil company Rosneft kicked off 2011 with the same message that PepsiCo’s record-break-ing $3.8bn investment into juice-maker Wimm-Bill-Dann offered at the end of last year: Russia is a “must-do” investment for leading strategic investors. The two deals have been wel-comed by the Kremlin, which last year launched a major initiative to modernise the country by luring large in-vestors that bring not just cash but badly needed tech-nology and management skills. Modernisation has been pro-moted to the top of Russia’s political agenda after the 2008 economic crisis exposed the flaws of the economic model built since 2000. “The slump proved that the model was not capable of deliver-ing stable long-term growth,” said Roland Nash of Verno Capital.Foreign investors can import more efficient management, expertise and technology. At the same time, they bring capital and competition to spur growth. The twin BP and PepsiCo deals are key as they will bolster the confi-dence of other strategic in-

large-scale foreign direct in-vestment (FDI) into the Rus-sian economy,” says Plamen Monovski, chief investment officer at Renaissance Asset Managers. Russia has a relatively poor track record in attracting FDI, weighed down by a rep-utation for bureaucracy, cor-ruption and poor corporate governance. While the levels of FDI started to recover to a total of $40bn in 2010, the second highest among all emerging markets, it is still half that of 2008, according to UNCTAD. However, the pace picked up fast at the close of last year. A third of global M&A deals were struck in emerging mar-kets in 2010, but Russia closed $34bn of transactions in the last quarter of the year alone, on a par with the

$38bn of China (which has a much bigger economy) and well ahead of Brazil and India. Speaking in Davos, BP chair-man Carl-Henric Svanberg said: “We are being asked what has changed in Russia, why now all these deals are being signed. The regulations have changed considerably… normal conditions have been created.”Indeed, while the total vol-ume of deals remains de-pressed, the size of the deals is increasing as strategic in-vestors commit themselves, eyeing Russia’s abundant natural resources and popu-lation of 142m. Analysts expect the pace to pick up this year, and Mr Medvedev attended the sign-ing of another $1bn joint venture between Exxon

Mobil and Rosneft at the forum itself. “The deals don’t necessarily mark a turnaround in senti-ment,” suggested Pavel So-rokin, an analyst at invest-ment bank Alfa, “but they may be a first step. “These deals are being made in strategic enterprises which are pillars of the Russian economy.”Last year’s focused drive for hi-tech arrivals has drawn pledges from a slew of big names, including IBM, Sie-mens, Philips, and Microsoft, to open R&D facilities. This year, the hot sectors are like-ly to be transport and infra-structure: late January saw a plan to build a £42bn high-speed rail network in time for the 2018 World Cup, with private companies contrib-uting a third of the finance. Russia is best known for its treasure trove of natural re-sources, but the PepsiCo deal highlights the fact that Rus-sia’s emerging middle class is now capturing the atten-tion of major multinationals. Indeed, PepsiCo has become Russia’s biggest food produc-er as a result of the deal. Italian bank UniCredit, which moved into Russia sev-eral years ago, is also rapid-ly expanding to tap into the pool of household money. It has announced that, in Jan-uary, it will add hundreds of retail branches. Thomas Cook Group travel company has also taken the plunge into a country widely predicted to become the biggest consum-er market in Europe within a decade.The low level of investment into Russia is closely con-nected to its poor interna-tional image. However, ex-perts say investors need to be more discerning; while the risks to doing business in Russia are real, they are not universal.

big names eye up huge deals

robert dudley, ceo of bp, and eduard khudainatov, president of rosneft, marked their share swap last month

tim gosling business neW euRope

Foreign direct investment ($bn)

The worst of the crunch may be over, but as the consumer’s basket will tell you, Russia’s economic health faces a fur-ther relapse. In 2010, inflation was 8.8pc, after being in double digits for more than two decades. But the price of the monthly basket of goods used to de-fine the poverty level rose 22pc, to 2,626 rubles (£55). “The reappearance of infla-tion could derail Russia’s economic recovery as it hits the Russian consumer’s pock-et directly. With oil prices ex-pected to be more or less flat in 2011, it will be the strength of internal consumption that will set the pace for econom-ic growth this year,” said Alexey Moiseev, chief econ-omist at VTB Capital. “The rise in food prices is the major concern and part of the current global upward trend, but there is relatively little the authorities can do about it.” In a demonstration of the im-pact of inflation on ordinary Russians, a Yekaterinburg stu-dent tried to live for a month on the official basket of goods. He immediately began to lose weight, which shamed a local official into admitting that pensioners are expected to live on “the same as you need to feed a dog”.The wildfires that swept Rus-sia last summer kicked off the dramatic rise in food prices. Russia’s harvest of 60 million tons of grain was around half of the bumper crop in 2008, and the world’s third-biggest grain exporter was barely able to cover its domestic needs. The situation looks a little bet-ter this year, although the ex-port ban remains in place, with First Deputy Prime Min-ister Viktor Zubkov predict-ing a harvest of 80 million-85 million tons. But foodstuff prices are already rising so

inflation Recovery talk abounds but ordinary Russians suffer as the cost of basic foodstuffs rises by 22pc

as russia emerges from the economic crisis it now faces more traditional foes, with higher food prices, and capital inflows creating speculative bubbles.

rapidly the government is con-sidering price caps on pota-toes and flour. However, the Central Bank of Russia (CBR) is not free to concentrate solely on damp-ening inflation. It also has to deal with issues provoked by the $600bn (£370bn) released by the US Federal Reserve to revive faltering growth in No-vember, which has spread a wave of liquidity around the world. “Nominally, the latest dollop of money is to perk up the flagging US economy, but in reality there will be contin-uous leakage of capital flow-ing away from the place it is meant to stimulate (devel-oped geographies) to the places that do not need any stimulus (emerging markets). If anything the emerging markets are already over- stimulated,” said Plamen Monovski, chief investment officer at Renaissance Asset Managers. “It is easy to pre-

dict what will happen next as we have seen this movie before; most of the conditions that drove the last bubble are back, with bells on.”The effect of QE2, as it has been called, can already be felt. Turkey is in the strange position of having to cut in-terest rates to reduce rising inflation (the orthodox wis-dom is you increase rates

when inflation is high), as higher rates suck in more US “hot money” and send infla-tion even higher. Brazil has had to impose cap-ital controls to stem the flows. China also had the fastest rise in inflation for three years, but is reluctant to raise interest

rates, which would take the edge off its extraordinary eco-nomic expansion. In Russia the situation is less extreme, but money has been gushing into the market since the end of last year, sending the stock market soaring and bond yields tumbling. Rus-sia suffered from a whopping $38bn (£23.5bn) of capital outflow last year, but the CBR expects the flow to reverse in 2011, and Russia to take in $10bn (£6.2bn). The CBR ended a two-year string of cuts which took in-terest rates to record lows with its first rate rise in De-cember. Economists believe the CBR will have to start increasing rates again this year, which could kill the re-covery before it can gather momentum. Only a year ago, the talk was all of recovery and how the emerging markets would “rescue the global economy”; this year’s discussions sur-

rounding emerging markets seems increasingly to be fo-cused on overheating, with pundits divided over how bad the problem will get. Emerging markets are “where the risks lie at this point, be-

cause those economies are further along in the overheat-ing stage, and you are start-ing to see tightening,” said Michael Aronstein, president of Marketfield Asset Man-agement in New York.

Consumers feel the economic heat

dmitry dovlatovspecial to Russia noW

food prices are rising so rapidly that the government may impose price caps on staple products

having shunned Russian equity for most of 2009, investors are now piling back in

If you want to know where the especially harsh winter weather came from, look no further than Russia - and pre-pare to pay more for your flour and coal this year.Volcanoes on the country’s eastern seaboard of Kamchat-ka have been unusually ac-tive for the last six months. The dust they threw up di-verted winds in the Arctic, pushing cold air over Europe and North America and caus-ing the unusually cold winter, say scientists. This string of volcanoes, 29 of which are active, could cause more problems this year, de-pressing harvests around the globe just as food prices soar,

violent eruptions along russia’s volcano belt are affecting global weather patterns and prices to boot.

and culminating in a second freezing winter. The eruptions have come at the worst possible time. The Pacific Ocean has already been cooled by the “La Niña” ocean/atmosphere phenom-enon, which is particularly se-vere this year. At the same time the Atlantic Ocean is warmer than usual.

up go the volcanoes, up go the prices

ben arisbusiness neW euRope

Erste Bank said the combi-nation of these factors means the weather forecast for the first quarter of 2011 is ex-treme, and will hit both the agricultural and mining sec-tors, sending spiking prices up even faster. “These climat-ic conditions reduce the out-looks of harvests for agricul-tural commodities and prevent

COUNTRY 2007 2008 2009 2010*

brazil 34.5 45.0 25.9 30.2

Russia 55.0 75.4 38.7 39.7

india 25.1 40.4 34.6 23.7

china 83.5 108.3 95.0 101.0

Global 1,978.8 1,770.8 1,114.1 1,122.0

Developing 529.3 630.0 478.3 525.0

brics 198.1 269.1 194.2 194.6

*preliminary estimates(souRce: unctaD)

vestors to buy into Russia.However, many commenta-tors were more concerned with the government’s entry into the capital of BP through

the stock swap. “Very few see this deal for what it was - the next logical step in the modernisation of Russia, and a milestone in attracting

the mining of commodities like coal. The extreme weath-er will probably culminate in 2Q11… the prices of commod-ities will be influenced… then [we will see] an acceleration of consumer inflation.” The combination shifts wind patterns around the world, but the spanner in the works has been the Kamchatka vol-canoes, according to US cli-matologist Evelyn Browning- G a r r i s s ’s a c c l a i m e d Browning Newsletter: “Kam-chatka tends to be active but recently it has been ridicu-lous! Since late November, Kizimen, Sheveluch, Karym-sky, and Kliuchevskoi have been erupting almost con-stantly.”Volcanic ash screens out the sun, cooling the air below. This lowers air pressures, which changes wind patterns, espe-cially in the Arctic. And, “the cold air normally trapped

the kamchatka peninsula’s karymsky volcano rumbles away

around the North Pole surges south”. The upshot has been some bizarre weather. The UK was colder than Russia on Christmas Day and New York was under heavy snow, while Moscow had icy rain as tem-peratures hovered around zero. The snap has already impact-ed agriculture. Australia’s wheat crop was down by 10pc in December – the worst fall in 100 years – and Russia’s agriculture ministry is fore-casting a mediocre harvest. Add in last season’s severe drought in Argentina, floods in Brazil and Venezuela, odd weather in agricultural parts of China, and food prices have soared. What happens throughout the rest of this year will depend entirely on the volcanic activity, says Ms Browning-Garriss, which is impossible to predict.

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06 most readRussia now www.rbth.rusection sponsored by rossiyskaya gazeta, russia distributed with the daily telegraph tuesday_February 22_2011

All the president’s messageshttp://bit.ly/f6lJQgopinion

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THE PEOPLE can makE THE mEDIa HOnEST

TaLkS brIng THaw TO ‘cOLD PEacE’

erik berglof

Special to RN

Modernisation is the new keyword in the Russian policy de-bate, closely asso-

ciated with President Dmit-ry Medvedev. Russ ia undoubtedly faces enormous challenges in modernising its industry, agriculture and services sectors, and the media spotlight has focused on a few high-profile under-takings such as the Skolko-vo innovation hub, the ini-tiative to make Moscow an international financial cen-tre, and the Rusnano corpo-ration for co-investing in hi-tech projects.The government has poured significant resources into these flagship projects; Ru-snano alone was capitalised with $5bn (£3.1bn) in 2007.These initiatives represent important visions, but they may be a distraction in the debate about what needs to be done to modernise the Russian economy. The chal-lenge of modernising Russia runs much deeper and re-quires much broader chang-es in the business environ-ment. There is also a risk of creating unrealistic expecta-tions for what individual projects can achieve.The government initiatives focus on radical modernisa-tion, with the development of new products and tech-nologies. The objective is to put Russia back strongly on the world’s R&D map. Rus-sia remains home to some of the world’s brightest minds, and recent reforms of migra-tion legislation make it eas-ier to attract expatriates. The country’s commodity wealth also enables the government to fund radical innovation projects generously, even without co-investment from the private sector.But true modernisation also encompasses importing internationally applied tech-nologies and skills, and the gradual enhancement of existing domestic products and technologies. Russia lags behind many other emerg-ing markets in attracting for-eign investment and in bring-ing about incremental productivity improvements in existing enterprises.According to various esti-mates, productivity in Rus-sian manufacturing could be improved by a factor of three

it may not be a break-through, but the existing problems between Russia and the United Kingdom

brought upon by cold wars and mutual distrust are no longer taboo topics. On his first official visit to London last week, the Russian foreign minister, Sergei Lavrov, closed the books on an era of frosty political relations with Mos-cow that had characterised Tony Blair’s time as prime minister.The thoughtful and intelli-gent views of the British For-eign Secretary William Hague, whose wisdom has been polished over the years by multiple political battles, have replaced the hot-head-ed and often impulsive na-ture of his predecessor David Miliband, who came across as wanting to teach Russia British common sense.This by no means implies that London has surrendered its positions in favour of re-storing a dialogue with Rus-sia. But Mr Hague vividly demonstrated his country’s ability to transform quickly during Mr Lavrov’s visit. Such transformations are being seen not only in the economy, where Prime Min-ister David Cameron is car-rying out large-scale reforms, but also in foreign policy, where it turns out that Lon-

yevgeny shestakov

Special to RN

ish Foreign Secretary con-firmed this was one of the main subjects discussed at the talks. The two men agreed in principle to exchange ex-perience in such delicate matters as security for Ol-ympic facilities. Mr Hague was slightly evasive in his reply about when such co-operation would begin, say-ing only that the appropri-ate services would think about how to establish such interaction. But it was still clear the foreign ministers had reached a mutual under-standing on this issue.

The missing link appears to have been found in the Rus-sian-British agenda, despite its relative brevity at first glance. The lack of such a link, which could be de-scribed as tolerance for dif-ferent viewpoints, had ham-pered the dialogue between Moscow and London for several years.In addition, the two men did not shy away from contro-versial issues that could have put a damper on the atmos-phere during the talks. On the contrary, Rossiyskaya Gazeta has learnt that Mr

is the government trying to cash in on the sale of worthless media proper-ties? President Dmitry

Medvedev has announced plans to divest the state of its media holdings. But what is a Russian media outlet worth? Newsweek magazine sold for just $1 last year. I wonder how much the Rus-sian outlets will bring in.Some insiders may already be anticipating a bonanza from the mass sell-off, but it is worth asking whether these media companies have any real commercial value.From my experience, it is rare to find a profitable indige-nous media company. More commonly, a business with an inadequate audience and advertising revenues will sell propaganda that masquer-ades as news to compensate for the revenue shortfall. Who is going to buy into such a corrupt business?Arkady Dvorkovich, the pres-idential aide, said he would like to keep the sold-off media companies out of the hands of “dishonest investors”. Interesting concept. The pur-pose of a commercial enter-prise is to produce profits. Given that, what’s the value of one that produces loss-es?Newsweek was put up for sale by The Washington Post Company because the pub-lication was incurring losses. But before last year’s sale, Newsweek made a valiant ef-fort to rehabilitate itself. Managers targeted a differ-ent readership, redesigned the magazine and attempted to increase revenues. But they made serious mistakes in judgement. Maybe the mag-azine’s new owner will have a better go at it.Can the state-controlled un-profitable media companies in Russia be rehabilitated? Can they become legitimate businesses that will attract “honest investors”?Some circumstances will make this difficult. First, there are too many media companies in Russia — more than the economy could sup-port as legitimate business-es. Second, the media field generally has a deficit of

business acumen. And final-ly, the ingrained corrupt culture of paid-for news would be a difficult institu-tion to eradicate.In addition, there is the ques-tion of whether the govern-ment really wants to get out of the media business. Some predict that the media out-lets will end up being ac-quired by friends or support-ers of the current political owners. Others suggest that the sell-offs are just a ruse to wrest

control of the outlets from regional leaders and put them under the power verti-cal. Legislating “subsidies” to aid the “transition away from government ownership” seems consistent with that supposed scheme.Mr Medvedev’s initiative to get the government out of the media business is commend-able. In his televised Decem-ber interview, he asserted that news decisions should be made independently of governmental influence.But this will be very difficult to accomplish. It doesn’t seem practical to assure absolute

transparency of ownership or to know the allegiances of the new owners. What is more, it is hard to define ex-actly what is a government-owned outlet. The owner of record may appear to be an independent company, but the beneficial owner may be a politician or state entity.Closing down hack media outlets is something consum-ers can do. All they need are some good media outlets to choose from. That is where the administration’s focus should be. It must create con-ditions for truly consumer-centred media outlets to emerge and thrive. Those will be the outlets of consumer choice. The existing crop of self-censoring purveyors of dishonest news will be put in their place and marginalised, if not closed completely.There is a salty Russian prov-erb which characterises the original plan to sell the governmental media outlets: beer without vodka is money thrown to the wind. Perhaps the same could be said about media enterprises without profits. They will be very tough sells.

Yevgeny Shestakov is editor of the international politics desk at Rossiyskaya Gazeta.

new patriarch wins over the publica poll by Vciom Found that patriarch kirill, who replaced alexy ii as head oF the russian orthodox church in 2009, is increasingly known and supported by russians.

the polls

LESSOnS FOr mODErnISErS

He was named as head of the Church by 70pc of respond-ents, compared to 68pc in 2009. Most of those familiar with Patriarch Kirill hold him in high esteem, with that number increasing each year (53pc compared with 44pc in 2009). Two-thirds (68pc) of those surveyed said that Church policy as maintained by the Patriarch reflects the interests of the public.

Erik Berglof is a chief econo-mist at the European Bank for Reconstruction and Development.

Hague reminded Mr Lavrov about the situation involv-ing a Guardian newspaper correspondent who had been unable to enter Russia be-cause of technical problems. The Foreign Secretary thanked his Russian coun-terpart for his efforts in re-solving the problem. Mr Hague also expressed grati-tude for the Russian securi-ty services’ actions to provide consular and medical assist-ance to British citizens in-jured during the January ter-rorist attack at Domodedovo airport in Moscow.

Taking questions from stu-dents at the London School of Economics, Mr Lavrov mentioned on several occa-sions that Russia was pre-pared to involve all of Eu-rope in its modernisation programmes, with particu-lar emphasis on innovative sectors of the economy. These programmes, to be called “A Partnership for Mod-ernisation”, would be extreme-ly important for the Europe-an Union and its key members amid the global economic cri-sis, he said. In this regard, the minister noted that Peter the Great had also attached great importance to co-operation with Europe in the develop-ment of the Russian state 300 years earlier. Overall, the sides can pride themselves that thorny issues were discussed, including the Mikhail Khodorkovsky case and UK moves to deport the Russian citizen Yekaterina Zatuliveter for alleged spy-ing, without harming or al-tering the two sides’ concep-tual approach, whether for these negotiations or future ones. This approach can basically be summed up as Moscow and London finally being united in the under-standing that existing disa-greements should not ham-per areas where they capable of co-operating.

to four with existing tech-nology. Even then, recent analysis shows that Russian industry is not only poorly diversified and lacking effi-ciency, but its capabilities are in places where the scope for productivity improvements is limited and from where di-versifying to products with more growth potential is difficult.In these circumstances it is understandable that policy-makers are toying with ideas for top-down industrial pol-icy. International experience with such policies is mixed at best, and on balance not very encouraging. In part, this is because government officials are not necessarily better than markets at pick-ing “winners”. But more im-portantly, without the key in-puts of adequate human capital, physical capital, and the application of manage-ment skills, there will be no long-term competitive com-panies from which to pick these winners. Russia needs to modernise all three.Start with human capital. Successful recent modernis-

ers tend to be among the top performers in the Programme for International Student As-sessment (Pisa), the OECD test of performance of 15-year olds. In 2006, Finland was ranked first, Hong Kong-China second, Korea third, Chinese Taipei fifth, and Japan 10th (Singapore and Malaysia did not participate in the survey).Russia was ranked 33rd in maths, 35th in science, and 39th in text-analysis. Russia undoubtedly has islands of excellence in terms of human capital, but for modernising the technological base of the entire economy, overall sec-ondary education will be of particular importance, as it is largely about learning to learn and to acquire new skills.Another key aspect is the modernisation of capital stock and technologies. A major impediment to “im-ported modernisation” is the lack of convergence towards international standards of certification and application of equipment. Enterprise sur-veys including the EBRD/

World Bank Business Envi-ronment and Enterprise Per-formance Survey (Beeps) in-dicate that domest ic certification of equipment re-mains a very long and cost-ly affair, even in the case of internationally certified and widely used technologies, with approvals required from a large number of different government agencies. This raises the relative cost of investment and delays modernisation. Reform of the certification regime, the low-ering of non-tariff import barriers for capital goods, and improvement in the broader business environ-ment leading to higher rates of foreign direct investment could go a long way.Finally, a recent EBRD sur-vey showed that Russian firms scored well below av-erage in terms of quality of their management tech-niques. Strikingly, manage-ment skills proved to be worse on average in higher-value-added industries. Set-ting up management schools – as is being done in the con-text of the Skolkovo project – is important, but second-ary school attainment is a more important predictor of economic growth. Ultimate-ly, it is competition that drives badly managed firms out of business and puts pres-sure on to modernise.Given the daunting challeng-es of modernisation, visions are helpful in providing a sense of direction. Skolkovo, the international financial centre project and nano-technologies are probably good places to start, as they draw on some of Russia’s existing strengths and they are each associated with a broader reform agenda.These flagship initiatives will hopefully eventually succeed; some are more likely to than others. But there should be realistic expectations in terms of their wider impact. Silicon Valley and Route 128, the implicit models for Skolkovo, are not the prima-ry reasons why the United States remains the world’s top destination for capital.The success of broader mod-ernisation will ultimately depend on economy-wide efforts to modernise capital stock, upgrade management practices and improve human capital through deregulation, competition, education and other policies to build an attractive environment for business.As President Medvedev told participants at the St Peters-burg Economic Forum a few years ago, the ultimate test of modernisation is whether it creates a country in which people want themselves and their children to live.

the challenge of modernising Russia runs much deeper than flagship projects like the Skolkovo hub

Russia has islands of excellence in terms of human capital, but overall, secondary education is vital

William Dunkerley is a media business analyst and consultant specialising in Russia and the former Soviet Union.

originally published in the moscow times

conditions must be created for truly consumer-centred media outlets to emerge and thrive

william dunkerley

the MoScow tiMeS

don can nevertheless hold a constructive dialogue with its more complex partners without ditching its princi-ples. Commenting on their meeting, Mr Hague said gradual progress was being made step by step. This measured Russian-Brit-ish forced march, void of any bravura, has shown the first signs of paying off. The pre-vious approach of simply marking time and only giv-ing the illusion that progress was being made has come to an end. The work the two ministers put into a joint statement on Afghanistan, which was passed on Mr La-vrov’s visit to London, dem-onstrated that Downing Street and the Kremlin can achieve results when there is strong political will.What made the situation unique was that there were roughly six points of conten-tion on the joint declaration when the two foreign min-isters sat down for talks, but Mr Lavrov and Mr Hague in-sisted experts involved in the negotiations find a compro-mise in an hour. Amazingly, 60 minutes was long enough to fully resolve all the disputed issues. It appears there has also been a shift in London on anoth-er issue that long remained contentious under the previ-ous British government: co-operation between intelli-gence agencies in the fight against terrorism. The Brit-

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07most read Russia now www.rbth.rusection sponsored by rossiyskaya gazeta, russia distributed with the daily telegraph tuesday_February 22_2011 comment & analysisDemocracy promotion for dummies

http://bit.ly/erb3w4

Our world is fortu-nate indeed that the collapse of the So-viet Union and its

empire was presided over by two men of intelligence and moderation. It might not have been so. For all the oppro-brium they have received at home, the late Boris Yeltsin and Mikhail Gorbachev will be remembered in the long view of history as positive, albeit limited leaders.Gorbachev and Yeltsin are linked in a Janus-like em-brace, resent it as they might. Allies in the early years of perestroika as each recog-nised and even admired the strengths of the other, they became bitter rivals who in-creasingly detested what each perceived as the faults of the other. Each blamed the other for, in essence, going with the flow of history.Gorbachev recognised the fu-tility of the Cold War and brought it to an end, with the goal of reinvigorating the Soviet system. In the latter objective, he failed. Yeltsin recognised the futility of the Soviet system itself and helped bring it to an end, with the goal of a Russia ac-cepted by Western nations as fully one of their own. In the latter goal, he failed.Forces beyond them deter-mined the outcome of the Cold War and the Soviet Union, but peaceful manage-ment of the respective end

President Boris Yeltsin is of our time. We don’t have the dis-tance to evaluate him

fully, or unequivocally. There are many people alive who remember him very well. Many of my friends worked close to him, as journalists in his travelling pool, and as his speechwriters, photogra-phers, interpreters and ad-visers. They remember how he spoke and how he moved, when he was rude, or crack-ing jokes, drinking cham-pagne and vodka. To some of us it seems only yesterday when he made his famous pronouncements, including: “Default is not going to hap-

THE DUO WHO SHOOK OUR WORLD

On THE RigHT SiDE Of HiSTORy

Wayne Merry was chief of the domestic political reporting section of the US Embassy in Moscow, 1991-94.

Peter Cheremushkin is an Interfax News Agency correspondent based in Washington DC.

Lilia Shevtsova is a senior associate at the Carnegie Moscow Centre.

Russian crowd in those days. The man could dominate a room just by walking in. In one briefing with a promi-nent American television journalist, I compared Yeltsin’s force-of-nature magnetism and masculinity with that of Lyndon John-son. She replied, “More.”Yeltsin had great faith in youth and in talented peo-ple with “Western” concepts. He was not a hands-on man-ager of the application of Western prescriptions to the Russian patient, being more of a Franklin Roosevelt, try-ing one thing after another until something might work. Sadly, none did.Yeltsin was always inspired by a crisis, but lacked follow-through and the stamina to bring reforms to fruition. He tired with the details of plu-ralist political life. Even after he obtained a renewed pop-ular mandate in the April 1993 referendum, Yeltsin could not use it effectively to produce constitutional re-form. He then resorted to il-legal means in September to prorogue the legislature, leading to his pyrrhic victo-ry on October 4. The episode was a terrible setback for the rule of law in a country which needed it badly. That Yeltsin had lost touch with the economic needs and fears of ordinary Russians was demonstrated clearly in the December 1993 elections, when his team was decisively beaten. To his cred-it, Yeltsin accepted the elec-toral outcome, but he never

learnt how to deal with a non-compliant parliament.Every important leader makes mistakes, but Yeltsin made two of surpassing stat-ure which permanently blot his historical record.Russia faced a genuine prob-lem of public order in the North Caucasus in 1994, but the unleashing of war against the Chechen people was a failure of judgement and hu-manity redolent of Soviet leadership. The carnage not only turned the region into

gORbacHEv: THE aRcHiTEcT Of pERESTROiKa

For taking tough deci-sions and staying the course even when it wa s u n p o p u l a r,

Mikhail Gorbachev has earned his place in history.There are leaders who have presided over the renewal of their countries: Adolfo Suá-rez, Margaret Thatcher, Hel-mut Kohl, Ronald Reagan and Václav Havel. Then there are leaders who changed the world. The first among them was Vladimir Lenin, who cre-ated the Communist system that stood up to the West. The second was Mikhail Gor-bachev, who brought that system down.Between 1985 and 1990, Gor-bachev showed that he was

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able to compete with the United States in the nuclear arms race; a different Soviet leader could have continued playing dangerous games with the Americans for much longer. Gorbachev decided voluntarily to renounce the maintenance of the nuclear threat as a way of propping up the Soviet system.Gorbachev’s second great de-parture from his predeces-sors was his conviction that every nation was entitled to choose its government, a be-lief that was crucial in his decision to release Eastern Europe from the Soviet grip. When revolutions swept across East Germany, Czech-oslovakia, Hungary and Po-land, their leaders made fran-tic calls to the Kremlin pleading for help, but Gor-bachev responded with a firm

“Nyet.” Soviet troops were still stationed in these East-ern bloc countries, but Gor-bachev did not want a repeat of the Prague Spring. His ac-tions were crucial in reuni-fying the German people and returning the former Soviet satellites into the European fold. Gorbachev buried the world Communist system, marking the end of the Cold War and confrontation be-tween two systems vying for world leadership.Having renounced the Com-munist Party’s monopoly and opened the floodgates for the freedom of expression, Gor-bachev accelerated the dis-integration of the Soviet Union. True, he had hoped to preserve the country as a community of allied states, but national republics were distancing themselves from

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pen!” and “I will lay down on the railroad tracks if the prices will go up!”I talked to him only once, in 1990. I was a young TASS reporter in Moscow attend-ing his meeting with a del-egation of the Polish parlia-ment. He had just been elected chairman of the Su-preme Soviet of the Russian Federation, and after the meeting I was supposed to get his clearance for the text. Yeltsin said: “As far as I can see, you are an experienced man (it was not true by any means). It will be up to you to decide.” And then my hand disappeared in his giant grip as he shook it. I saw him speak at Moscow State University in 1988 and he impressed me, seeming larger than life, just as eve-

ryone had said. Then I saw him again at Dom Kino (the cinema house) where he gave a bear hug to the Polish dis-sident Adam Michnik. And when Yeltsin was expelled from the Politburo of the Communist Party, I picked up his portrait and placed it on the bookshelf in our house. My wise grandfather threw it away with the reproach, “Don’t be an idiot, while they are fighting for power, you are taking sides.” My friends evaluate him in various ways. Those who worked with him – with a few exceptions – say he was a great statesman with enor-mous charisma. The best characterisation came from Strobe Talbott, the American foreign policy analyst, who said that Yeltsin had a vol-

canic character. He could be unpredictable, but his polit-ical instincts were without comparison on the Russian

political scene. I have also heard the opinion that Yeltsin brought the country to its knees, and that he made sev-eral crucial mistakes – in-cluding the process of priva-

We are all the beneficiaries of Yeltsin’s performance in the critical months of 1991-92. We must remember him for the vision he could not bring to fruition

Moscow much too quickly and strongly for disintegra-tion to be averted. Gorbachev let the Soviet Union evapo-rate and, probably without intending to, turned out to be a great reformer. The former Soviet president comes across as a dramatic personality first and foremost because after starting the country’s great transforma-tion, he did not carry it through all the way to the end. He was the first man in Russian history to have left the Kremlin without cling-ing to power.But this is not unusual. His-tory does not know of any reformer who managed to destroy an established sys-tem and build a new one in its place. Reformers sacrifice their popularity when they start to dismantle the old way

of life, and this is true for Gorbachev. Even today, his name evokes mixed feelings in Russia. No society has ever perceived reformers as he-roes during their lifetime. Great politicians are recog-nised for their achievements only when they pass into eternity. Mikhail Gorbachev, howev-er, has become a monument in his lifetime. Gorbachev is history. As Thomas Carlyle said: “The history of the world is but a biography of great men.” Having assured himself a place in eternity too, he remains a remarka-ble man of a calibre and personality that are indeed larger than life.

a different kind of leader. First, he recognised that the US-Soviet arms race was futile. In 1986, Gorbachev put forward the idea of a nuclear-free world, which re-sulted in the Soviet-Ameri-can dialogue on nuclear dis-armament and the signing of a treaty on the liquidation of medium and shorter range missiles. The two sides de-cided to destroy a class of weapons that could have triggered a nuclear war. This decision was followed by negotiations on strategic offensive arms reductions, cuts in conventional weap-ons and a ban on chemical, bacteriological and biologi-cal weapons. Gorbachev’s di-alogue with Ronald Reagan on security matters was not merely an admission that the Soviet Union was no longer

a bloodbath, it eviscerated political reforms in Moscow and decisively turned much Western thinking against Russia. Yeltsin always want-ed his country to be accept-ed by the West as having tri-umphed over Communism. He told one associate that his two finest moments were Au-gust 1991 and his appearance before a joint session of the United States Congress. But the war against the Chechens became the perfect instru-ment of Russophobia in Eu-rope and America, perfect because it was of Russian manufacture.Yeltsin’s second blunder was in standing for a second pres-idential term, when he (and everyone) must have under-stood that he was in no con-dition to serve. Sadly, Yeltsin was too easily convinced that only he could prevent the Communists returning to power, a message urgently

communicated from Wash-ington. This was nonsense. There were ample alterna-tives to Yeltsin. None of these men were ideal and most were little known in the West, but any of them could have won and would have done a better job than did Yeltsin, whose declining years in of-fice alternated between fail-ure and farce. To those who recalled the leader in his great years, the contrast was often painful.How would Yeltsin at the end evaluate his own choice of successor? Vladimir Putin represents the end of the post-Soviet transition and is emblematic of Russian lead-ership for years, if not dec-ades, to come. Yeltsin must have recognised that. Did he feel he had no better choice, that he had misjudged, or simply that events had taken Russia back into familiar channels?

Given his mixed legacy, why should one look back with respect on the leadership of Boris Yeltsin? Above all, be-cause he was the antithesis of a Russian Slobodan Mi-losevic, thank God. We are all the beneficiaries of Yeltsin’s performance during the critical months of 1991-92. In addition, we should re-member Yeltsin for the vision he could not bring to frui-tion. To an extraordinary ex-tent, he was a Russian lead-er unafraid of the Russian masses. He believed that if the people could be empow-ered, both politically and eco-nomically, then all would be well. But he had not a clue how to achieve that.Aleksandr Yakovlev said of his mentor that Gorbachev was by nature a democrat but always afraid of democracy. In contrast, Yeltsin was by nature not a democrat, but not afraid of democracy in

his country. He did not want to mobilise or harness or dis-cipline or control his people, but to empower them. He failed. Yeltsin could not achieve his vision in part be-cause the task was so im-mense and in part because so few even of the so-called democratic forces in Russia shared his trust in the peo-ple. Indeed, one of Yeltsin’s closest Kremlin aides was widely reported to describe the Russian people as “the manure of history”.It is an axiom that all polit-ical careers ultimately end in failure. Yeltsin’s did, but how long may it be before Russia again produces a national leader who believes her peo-ple should be empowered rather than mobilised?

tisation, during which mobs and thugs seized Soviet prop-erty. He also started a war in Chechnya and brought into power as his successor “some-one we won’t be able to get rid of for a long time”. But for me this is a simplifica-tion of Yeltsin. His supporters say he brought Russia freedom. Others say it was Gorbachev who initi-ated freedom of the press (glasnost); opened the Sovi-et Union for foreign travel; arranged the first democrat-ic and alternative elections; published Solzhenitsyn; and refrained from using force against the opposition. The mid-Eighties was a pe-riod of expectation for the Russian people. Gorbachev looked like an unusual and promising individual com-

pared to his grey-faced col-leagues. However, his goals were not clear, and it became obvious that he cared much more about his Communist Party friends and his politi-cal ambitions. Yeltsin looked like a doer, a fixer, like some-one who was capable of bringing real change. And in-deed he brought it. Yeltsin re-vised and changed the tra-ditional Communist ban on private property, his most sig-nificant achievement. Yeltsin did not make every-one in Russia happy; nation-al minorities are a significant part of political life. Compli-cated ethnic conflicts in the North Caucasus – the after-math of the Soviet national policy and the result of a vac-uum of power in societies where feudal instincts were

still quite strong – did not give him much choice. I strongly supported his ac-tions in 1993 against the Su-preme Soviet, whose mem-bers arranged, as the veteran politician Anatoly Chubais correctly said, “a military-fascist coup” against Yeltsin. I understood the fragility of the economic model he built in the early Nineties and pre-dicted the default of 1998 which was a turning point for Russia and Yeltsin. From 1998, he was a differ-ent Yeltsin, exhausted by po-litical struggle. He was not free of bad habits, and had a serious heart problem. He criticised America and ar-gued with his friend Bill Clinton, who cared for and devoted more attention to Russia than any other pres-

ident in US history. He was not the same person on whom we pinned our aspirations and expectations in 1987.At his resignation, Yeltsin again showed himself to be the same man we liked so much a decade earlier: a human being who was ca-pable of a gesture, of a step, of a deed. He asked for for-giveness. That is something that not many politicians can do. I would remember Yeltsin as someone who cared about his nation and as someone who always felt himself to be on the side of the virtue of good, on the right side of history.

On February 1, Boris Yeltsin would have turned 80. Burly and boisterous, charismatic and controversial, he leaves a huge legacy in the modern Russian state and 14 more independent republics of the former USSR. Russia Now pays tribute to the man and his close contemporary, former Soviet President Mikhail Gorbachev

Yeltsin looked like a doer, a fixer, like someone capable of bringing real change. and indeed he brought it. He could be unpredictable, but his political instincts were unrivalled

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HOW bORiS DivORcED THE SOviET SySTEm

games required political talents of the highest order.From his years as Commu-nist Party boss in Sverdlovsk, Yeltsin understood the So-viet system from the inside as few others could. Like many of his peers, however, it was not until he encoun-tered the real world – the out-side world – in person that he understood how much a failure his country had be-come. On his first trip to the United States, Yeltsin was as-tonished at the contents of an average supermarket and that “workers” were allowed to shop there. On his return, after describing these won-ders to one of his closest ad-visors, he blurted out, “Our system is s**t!” It was that recognition which led him to break with it.At this remove, it is difficult to recognise the political and personal courage required of a member of the Politburo to break openly with the Party and set out on an in-dependent political course. By rights, Yeltsin should have disappeared. Through cha-risma, brashness and good luck, he prevailed, first in Moscow and then as leader of the Russian Federation. Yeltsin was extremely fortu-nate in his timing and in the character of those who fum-bled the August 1991 putsch. In such a moment, Yeltsin knew what to do. In the af-termath, his experience and instincts were inadequate.One almost had to be present to recall how immense was Yeltsin’s charisma with a

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Wanted: a good Gulag filmhttp://bit.ly/ijVyoCCulture

Do you like to make pan-cakes? Personally, I don’t. My � rst pancake is always a � op and so, as a rule, is my last – possibly because I don’t know how to juggle the fry-ing pan properly. To treat yourself to really good pancakes is another matter entirely. Russians make pancakes fairly often, though not necessarily on the Russian folk festival imme-diately preceding Lent known as Maslenitsa. But don’t be-lieve the popular myth that the Russian tradition is to eat pancakes or blini with spoon-fuls of caviar. The USSR would probably be alive and kicking today if the Soviets had enjoyed such luxury – they did not.Anyway, should you happen by Trafalgar Square on Sun-day, March 6, the delicious sweet-smelling pancakes will not be served with black cav-iar. But don’t worry: they there will be in abundance, together with pirozhky (small pies). There will also be many bizarrely dressed Russians resembling living Matryosh-ka dolls, and a strolling bear who will give you his paw – if you have the courage to take it. Meanwhile tuneful balalaikas, folk orchestras and the best voices on the Russian stage promise to give such a powerful performance that the Trafalgar Square pigeons risk going deaf.

Culture A Russian folk festival brings warmth and colour to central London

What did you expect? Gulyat means to entertain (sometimes to excess) – and the Russians are famous for it. To outdrink a Russian, out-scream a Russian, outdance a Russian is a difficult busi-

ness, indeed. You may suspect Russians of any sin but drear-iness: with them there’s never a dull moment. And during holidays, such as Maslenitsa, this irrepressible energy is used purely for fun and amusement. On the same day, Maslenitsa will be celebrated all over Russia, and at 3pm GMT, Londoners will be able to wave to fellow party-goers near Red Square via satel-lite link. So don’t hesitate to come. This will be the � rst-

Blini and a bear on Trafalgar Square

At the culmination of the celebrations, Lady Maslenitsa will wave winter goodbye

Spring fever is in the air, as the fun-filled Maslenitsa party hits the capital – and there’s a lot more on offer than just pancakes.

OLGA DMITRIEVARUSSIA NOW

ever celebration of Maslen-itsa on Trafalgar Square. Pancakes have never been made at this famous London landmark – and certainly never by Russian bakers. The idea of firing up skillets under the protection of Ho-ratio Nelson is the brainchild of Olga Balakleets, a charm-ing Russian businesswoman who has been importing Rus-sian culture to Britain for close to 15 years. In the early nineties, Ms Balakleets grad-uated from London’s Royal

Here is the simplest and most popular version of oladi, a tradi-tional form of Russian pancake.

Ingredients8 fl oz sour cream2 tbsp sugar3 eggs2 tbsp butter7 oz plain flour1/3 tsp baking soda2/3 tbsp milk1 pinch salt

Preparation1. Separate egg yolks and whites. Mix yolks with sugar.2. In a small pan, melt butter.3. In a bowl, combine flour, sour cream, salt, butter and egg yolks, stirring vigorously to form a batter.4. Add baking soda to milk, then pour into bowl.5. Whip egg whites, add to bowl, and mix again.6. Once the batter is ready, place a few dollops (not more than 3-4 inches in diameter) on a preheated pan and fry briefly on a low/medium heat until un-derside is golden brown. Flip and repeat, being careful not to burn. Oladi should not more than 3/4 of an inch thick.7. Serve with sour cream, jam or honey. And enjoy!

RECIPE

Pancake pleasure

College of Music and mar-ried “local lad” Julian Gal-lant – musician and now di-rector of the Russian cultural centre Pushkin House. She then made a typ-ically feminine decision: she brought what she loved best from her native Russia to her new home in Britain. She started her own compa-ny for this purpose, Ensem-ble Productions, and became an avid promoter and organ-iser of Russian events, from tours by leading ballet com-

Books The forthcoming London Book Fair will provide a special focus on the most talked-about talent in contemporary Russian literature

Read all about it – a new wave of authors

1. HE-LOVER OF DEATHBoris Akunin (W&N)Moscow, the early 20th cen-tury. Senka the thief falls for a mysterious beauty nicknamed Death, whose previous lov-ers all died in suspicious cir-cumstances. Senka witness-es horrific events but is saved by Erast Fandorin, a detective who is Russia’s answer to Sherlock Holmes.Boris Akunin is the pen name of the philologist and Japa-nese-Russian translator Grigo-ry Chkhartishvili, whose post-modernist detective novels have become bestsellers and movies. His works are set in the late 19th and early 20th centuries, a period well known to aficio-nados of Russian literature as the heyday of Fyodor Dosto-evsky and Leo Tolstoy. Akun-

Russian literature has started to regain the spring in its step in the 21st century. The most interesting works on offer today will be presented at the London Book Fair – Russia Market Focus 2011, which will take place from April 11-13 at Earls Court. Representing the trends and genres that have evolved and flourished over the past decade, the following 10 books are among the most notable now available in English translation.

ging into an unknown dimen-sion. The effect produced is that of sheer fear, largely due to the simplistic style of the language and the realistic re-portage-style descriptions. An Akward Age is the debut work of this young Moscow journal-ist (born 1978). It was followed by her equally chilling but less successful novel Asylum 3/9, and a critically acclaimed nov-el based on the feature-length animation film First Squad.

5. THE NIGHT WATCH Sergei Lukyanenko (Arrow Books)Besides ordinary citizens, there are “others” living in this world. They have the outward appearance of ordinary people but they are gifted with super-natural powers. The “others” are divided into “dark” (bad) and “white” (good). The main character in the series, Anton Gorodetsky, is a white magi-cian working in the the “night watch”, a white special service charged with ensuring the dark forces do not work their mischief at night.A former psychiatrist, Sergei Lukyanenko is the most pop-ular and best-selling author among contemporary Rus-

sian science-fiction writers; he is also one of the most popu-lar bloggers in the Russian-language internet. In the Night Watch series, he has created a parallel universe exactly like ours – even the major histori-cal events are the same – only everything in it is explained by the confrontation between the dark and the white.

6. DANIEL STEIN, INTERPRETER Ludmila Ulitskaya (Overlook Press – being printed)Ludmila Ulitskaya works in an area that could be defined as intellectual female prose. Ulit-skaya has received an impres-sive array of awards, the most recent of which is the French Simone de Beauvoir Prize (2011). A true story, it follows the es-capades of a Polish Jew, who managed to not only survive the Second World War but al-so to save hundreds of peo-ple from Nazi concentration camps. Based on the life of translator, hero, and monk Oswald Rufeis-en (1922–1998), the novel was both praised and disparaged in Russia, yet won Ulitskaya the Big Book award.

7. I AM A CHECHENGerman Sadulaev (Tin House Books)A collection of novellas about what it is like to be a Chechen. German Sadulaev was born in the town of Shali to a Chechen father and a Russian mother and now lives in St Petersburg. There are two distinct direc-tions in his work that could be termed the “mountain theme” and the “city theme”. The first is far more interesting, in particular, his books I am a Chechen and The Raid on Shali. Sadulaev is second to none on this topic; there are very few who would dare to write about the Chechens on behalf of the Chechens themselves.

8. 2017Olga Slavnikova (Duckworth Publishers)A novel about love and revo-lution set in the near, rather gloomy, future. The events take place in a town resembling both the author’s hometown of Yekaterinburg and a classic, anti-utopian metropolis with mysticism, gangs, a polluted environment, social inequality and an atmosphere of impend-ing revolution. 2017 is Slavnik-

ova’s most successful novel, receiving the Russian Booker prize. This serious author’s dis-tinctive feature lies in the cour-age she displays when experi-menting with such traditionally light-branded genres as ro-mance novels and contempo-rary city prose.

9. METRO 2033 Dmitry Glukhovsky (Gollancz)It’s 2033. Twenty years have passed since nuclear war de-stroyed the world, and the piti-ful remnants of Moscow's pop-ulation is struggling to survive in Metro stations and tunnels where they have established a primitive economy, raising pigs and growing tea. Mean-while, they have also created over a dozen mini-states, some on the outskirts that suffer from mutant invasions, and from where one inhabitant goes on a journey in search of help. Muscovite Dmitry Glukhovsky has lived in Israel, Germany and France. It took him eight years to write Metro 2033, which may partly explain his book’s popularity: it is not merely post-apocalyptic sci-ence fiction, but a true com-ing-of-age novel.

in marshals his material with great elegance, and his novels are studded with hidden pearls from classical literature.

2. LIVING SOULS Dmitry Bykov (Alma Books)A highly ironic description of civil war in Russia in the 21st century, where the Varang-ians are pitched against the Khazars. Both warring sides are in essence alien to Russian soil and show scant concern for the fate of its people. The characters clearly evoke biting literary caricatures of contem-porary Russian publicists and political analysts.Dmitry Bykov is not only a novelist but also a poet, televi-sion and radio host, column-ist, critic and the author of an impressive biography of Boris Pasternak, which hit the lit-erary jackpot in 2006, when Bykov received two of Russia’s most prestigious book awards:

the National Bestseller and the Big Book.

3. PARIS WEEKEND Sergei Kostin (Enigma Books)The tale of Paco Araya, a dash-ing Russian superspy work-ing undercover in the US who comes to Paris for the week-end. While attending to some personal business, he must al-so locate a lost container hold-ing a hazardous substance.Kostin’s publishing house in-sists he himself is not a spy, but he has extensively studied the ins and outs of the world’s intelligence services. There is a distinct deficit of good-quality spy novels in Russia, but Ko-stin’s work is a cut above the coffee-table action novels that permeate the mass market.

4. AN AWKWARD AGE Anna Starobinets (Hesperus Press)This book combines a format and genre that remain largely unknown in Russia – the short story and horror – and features eight terrifying yarns, includ-ing an ant colony living inside a teenager; a description of Moscow destroyed after a war between humans and androids; and a southbound train chug-

1 2 3 4 5 6 7 8 9 10

Many Russians dress as living Matryoshka dolls, and a strolling bear will give you his paw

panies to rock concerts. A self-styled Russian cultural attaché, Olga is organising Maslenitsa in London for the third time. The first two were held at Potters Field Park, right next to City Hall. This year, the London Mayor’s office made an even more generous ges-ture, offering her Trafalgar Square. Mayor Boris John-son took into account the substantial size of the Rus-sian community in London, which he has praised as “enormously in� uential – in business, in sport and in cul-ture”. He also rightly re-marked that “familiar as we are with Matryoshka dolls and onion domes, there is much more to this vast na-tion, which has a rich and varied cultural heritage.” But why was Maslenitsa cho-sen to represent Russia in London? “It is a very happy festival,” said Olga. “Farewell to winter, the welcoming of spring and the sun. It is a time when people go to each other’s houses and forgive each other all past offences. It is, I think, the most beau-tiful and most ‘folkloric’ of all the Russian festivals.” How did she manage to � nd the funds to underwrite this festival given that nobody has any money to spare nowa-days? Well, everyone chipped in a little: the London May-or’s office, the Russian Min-istry of Culture, the Moscow City Government and the Onexim Group, one of the largest private investment funds in Russia. However, according to a Rus-sian saying, “You don’t bring your own samovar with you

while visiting a friend.” Then why are Russians coming to visit Londoners with their own samovar, and even their own pancakes? In order to feel at home in their friend’s house, of course. Nobody knows exactly how many Russians live in Brit-ain today. But this much is clear: there are an awful lot of them. Professor Donald Ray� eld, the Chekhov trans-lator, once joked to me that it had become impossible to have a private conversation in Russian on the London Tube: invariably there will be a native Russian speaker in the same carriage.

Britain has become a home from home for (if not the per-manent residence of) hun-dreds of thousands of Rus-sians. In gratitude for this hospitality, they have taken to sharing with the British what they have: rich culture and traditions. People who lived for many decades be-hind the Iron Curtain are now discovering a world that had been closed to them. That is why it is so important to Russians to show themselves and to see others. And to make a foreign country feel like home – with one’s own samovar, one’s own pancakes, and even one’s own bear.

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“This is the best holiday of them all!” I gushed, “I’ve had three marriage propos-als, ten invitations to go for a beer, and two guys asked me to swim with them.”

“I have seen so many surreal things in my time in Russia: a single-stemmed rose auctioned off for thousands of dollars, eight-hour traffic gridlock, and a nine dollar can of Dr. Pepper.”

10.THE HELMET OF HORROR Viktor Pelevin (Canongate Books)Eight people meet on a certain website in a certain chat room. They begin communicating and through a series of innuendos and tiny details they, as well as the reader, quickly gather that they are locked in a virtual labyrinth – the very same lab-yrinth as featured in the The-seus and Minotaur myth. As they try to escape, fearing an encounter with the beast, they endeavour to maintain commu-nicating with each other. A near consensus has been reached in Russia regarding Pelevin, with literary circles tending to agree that he is one of the most important contem-porary Russian authors.Once a year, as autumn ap-proaches, Pelevin publishes a new novel, novella or a collec-tion of short stories in which he renders an accurate, if rath-er cynical, description of life in Russia. Pelevin’s work is increasingly seen as a treasure trove for fu-ture historians.

More about the London Book Fair–Russia Market Focus at www.academia-rossica.org

KONSTANTIN MILCHINSPECIAL TO RN