WEDNESDAY, APRIL 11, 2012

Regions The Pacific port city of Vladivostok pins its hopes for revitalization on an international summit

Not Ready to Throw in the Towel Corruption Conference indicates that battle against one of Russia’s biggest challenges will continue

society and business,” Guriev said. He added that corruption is the greatest challenge for business development in Russia as it im-perils the investment climate and causes massive capital � ight.

In 1959, after a visit to Califor-nia, Soviet leader Nikita Khrush-chev called on the residents of Russia’s Pacific port of Vladi-vostok to make it “our San Fran-cisco.” Half a century later, Rus-sia’s leaders are determined to realize his dream as the city pre-pares to host the Asia-Paci� c Eco-nomic Cooperation (APEC) sum-mit in September.

Similarities between the two cities jump in the face of any � rst-time visitor to Vladivostok: the buildings and streets meander-ing up and down the hills sur-rounding Golden Horn Bay; the tramways dotting the main thor-oughfares; Chinatown; a boom-ing harbor; and the ever-present morning fog. Vladivostok even has a liberal-leaning political climate — Prime Minister Vladimir Putin garnered 47.5 percent of the vote here compared to a national av-erage of 63.75 percent in Russia’s recent presidential election.

Vasily Avchenko, the local cor-respondent for Russian daily Novaya Gazeta, recently co-au-thored a futuristic sci-� book en-titled Vladivostok-3000 with Vladivostok-born rock legend Ilya Lagutenko, who once took Rus-sia’s pop charts by storm with his hit song, “Vladivostok-2000.”

“Vladivostok-3000 is a book about two Vladivostoks,” said Avchenko. “Vladivostok-2000 is the city Ilya and I know, see and love. Vladivostok-3000 is a dream about the city I’d like to live in. I recently visited San Francisco,

ARTEM ZAGORODNOVRUSSIA BEYOND THE HEADLINES

MASHA CHARNAYSPECIAL TO RBTH

Preparations for the 2012 APEC summit transform Vladivostok’s skyline as residents ask what happens when the Kremlin turns its attention elsewhere.

As Dmitry Medevedev prepares to leave the presidency, he is working to make sure at least of one of his signature initiatives moves forward.

CONTINUED ON PAGE 2

CONTINUED ON PAGE 3

Bridging the Gap Between Russia and San Francisco

Outgoing Pres-ident Dmitry Medvedev seems intent on continuing his crusade against corrup-tion in Russia.

The Zolotoy Rog bridge across downtown Vladivostok is nearing completion.

NEWS IN BRIEF

Yakutia Airlines has announced plans to revive direct � ights between Anchorage, Alaska, and Petropavlosk-Kamchatksky, on Russia’s Far East-ern Kamchatka Peninsula. The flights will be scheduled weekly between July 12 and Sept. 13. Although the new service will save travelers time, at a cost of approximately $1,750 it will not be any cheaper than making the trip via Moscow. Nevertheless, researchers and adventurers praised the move. The last reguarly scheduled direct � ight across the Bering Strait was shut down in 2006.

The Kremlin has agreed to allow NATO to use an air� eld in Ulyanovsk, Russia, as a transit hub for supplies coming into and out of Afghanistan. When the � rst reports came out in the Russian press, detractors criticized the Russian government, stat-ing that the country’s strategic interests had been betrayed. Proponents stressed the economic ben-e� ts of hosting the center and the fact that no weapons would be deployed at the hub.

Alaska to Kamchatka Direct

Russian Airfi eld to Host NATO Transit Center

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BRICS: Moving from Economics to Politics?

Russian Explores Titanic 100 Years after Tragedy

RusAl, the world’s largest aluminum company, elected Barry Cheung its chairman of the board after oligarch Viktor Vekselberg quit in mid-March in a shareholder dispute with RusAl C.E.O. and largest shareholder Oleg Deripaska. Cheung, who is the chairman of the Hong Kong Mercantile Ex-change, joined RusAl’s board as an independent director in 2010, the same year RusAl held an I.P.O. in Hong Kong to sell 10 percent of its shares.

RusAl Elects New Chairman Following Oligarch Duel

RBTH.RU/15262

Read the full article atrbth.ru/15177

Read more about Russian airlines’ plans at rbth.ru/15249

2008 was founding the Anticor-ruption Council and instituting a law requiring government of-� cials and their family members to disclose their holdings. More recently, Medvedev’s crusade con-tinued with a law that oversees purchases made by government officials, requiring that any item that costs more than triple the family income be subject to scru-tiny. “For the � rst time in Russia’s 1,000-year history,” Medvedev said, “we have a legal framework for combatting corruption.”

Preliminary results show that so far the changes have yielded meager improvement. Having crept up from 154th place in Transparency International’s 2010 ranking, Russia still scores below Sierra Leone and Niger.

“I am convinced that the au-thorities are committed to � ght-ing corruption,” said Ivan Nineko, deputy director at Transparency International in Russia. “But at a local level more than anywhere else.”

Going forward, Medvedev said, the anticorruption strategy would rest on several cornerstones. The first one — outlined by Sergei

Guriev, rector of the New Eco-nomic School — involves dereg-ulation and privatization. “Gov-ernment interference in the economy through state ownership and excessive regulation is the main way in which a corrupt of-� cial increases his control over

BusinessAmerican Expats’ Insights on MoscowP.04

OpinionA Gain From the Brain Drain?

P.06

CultureClassical Duo Creates ‘Nightmare’ P.07

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and I felt it had many character-istics of Vladivostok-3000.”

Vladivostok-2012These days Vladivostok blazes with welders’ � ames and cranes dot its hilly downtown, demon-strating the billions of dollars the federal government is pumping into the city. The narrow, potholed road from the airport has been raised up to 10 feet in some areas and expanded into a modern, four-lane freeway; the new air-port is scheduled to open this summer. Two Hyatt hotels are under construction; monuments, roads and facades have been re-paired; and an express train link from the airport to the city cen-ter will soon open.

One of the most impressive projects nearing completion is the bridge to Russky Island — the closest island to Vladivostok — and a new campus for the Far Eastern Federal University. The two-mile-long bridge, partially held up by masts standing on two arti� cially constructed islands, was started less than three years ago. When completed this sum-mer, it will be the longest cable-stayed bridge in the world..

“When we talk about innova-tion and modernization, this is it,” said Alexander Ognevsky, press secretary for the Ministry of Regional Development, as he gestured toward the bridge. “A number of international compa-nies left the tender because they said it couldn’t be done; in the end, a � rm from Omsk took on the contract. The technology and know-how they developed with this project will be applied else-where and even exported abroad.”

Less than two months before leav-ing his presidential post, Dmitry Medvedev sat down with a team of experts behind Russia’s Open Government initiative to discuss measures intended to help stem Russia’s rampant corruption. There was no shortage of realism at the roundtable held at the State Road Safety Center on March 22. Four years after Medvedev be-came the � rst Russian president to emphatically condemn corrup-tion and vow to tackle it, Russia still ranks 143rd in Transparen-cy International’s 2011 corrup-tion index.

“It is clear that this problem cannot be solved over a set peri-od of time,” Medvedev said in his opening remarks. “No one — not I, nor the public — was under the illusion that it would take a few years.” Among the steps Medve-dev took after assuming office in

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Feminist Punk Band Prank in Cathedral Divides Russians rbth.ru/15183politics & society

parties Promised changes to have consequences for all players

On April 4, Russian President Dmitry Medvedev signed the Law on Political Parties, which is ex-pected to lead to a sharp increase in the number of registered po-litical parties in the country. The law reduces the minimum num-ber of members for a party from the current 40,000 to 500, and an impressive list of those eager to take advantage of the relaxed re-quirements has already formed. The Ministry of Justice reported at the end of March that it had received 68 applications to estab-lish new parties. Beyond the quantitative changes in the party system, however, there will inev-itably be qualitative ones as well, although these will be caused not so much by the liberalization of the law as by the outcomes of the two recent federal electoral cam-paigns. The end result is that all parties will have to change.

the party of powerEven before the Duma elections, leaders of the ruling United Rus-sia party began talking about the need for some fundamental changes. There is an ongoing dis-cussion in the Russian press about scenarios for reforming the party of power. The most radi-cal one is the total elimination of United Russia and its replace-ment by a different party of power. Another option that has been spreading through the media is the division of United Russia into two or three major parties with different ideologi-cal leanings. This would make some sense, as the party includes politicians with widely differing political views.

Therefore, the most likely way for events to unfold around the party of power may well be a combination of several scenari-os. Radical rebranding is unlike-ly to go beyond replacement of some of the leadership and soft-ening of the party’s previous un-compromising attitude toward the opposition. The change of signposts will most likely involve Medvedev’s election as the new leader, while the previous one, Putin, who noticeably distanced himself from United Russia dur-ing the presidential campaign, will rely on his All-Russia Popu-lar Front, established last year, for support. Of course the front

is not yet much of a genuine uni-fying force, since it has just as many irreconcilable enemies as United Russia.

the oppositionIt must be said that the other par-ties currently represented in the Duma have just as many prob-lems as United Russia. On the one hand, the Duma elections should have instilled a certain amount

of optimism in these groups; on the other, the presidential elec-tion campaign showed that the leaders of these parties have no particular reason to rejoice.

new playersDespite the expected pandemo-nium of neophytes eager for party registration, there are only three political forces of particular in-terest within the ranks of those who took to the streets in pro-test.

The first is the party of busi-nessman Mikhail Prokhorov, which so far lacks even a name. At the very least, it is distin-guished from the others by the fact that its leader officially re-ceived the votes of 5.7 million Russians in the presidential elec-tion. Under current conditions, Prokhorov’s party is quite capa-ble of making a marks in upcom-ing regional elections, especially in the big cities.

The People’s Freedom Party (Parnas) will attempt to become a second significant player in the party field, if it gets registered. The Yeltsin-era democrats who joined this group were no doubt inspired by sociological data in-dicating that most Russians have democratic sympathies. To be on the safe side, however, especially in view of the inevitable appear-ance of small spoiler parties on the right flank, this group will need to form a broad coalition with other prominent democrats. Liberal party Yabloko, though, has so far refused to join.

Finally, there is a third force that will certainly attempt to take advantage of the liberalization of

party formation, and that is the nationalists. To date, almost all of their attempts to achieve legal status have been in vain — not counting, of course, the short-lived triumph of the Rodina party, which entered the State Duma in 2003 with Kremlin support. Today’s nationalists are kept out of the Duma and away from even the most innocuous meetings be-tween the opposition and the president, while they are regu-larly rounded up at unauthorized street demonstrations. Given how widespread everyday nationalism is in the country, however, sup-porters of the slogan “Russia for the Russians” do have certain po-litical prospects.

Nevertheless, it seems more likely that the nationalist orga-nizations are the ones the Min-istry of Justice will persist in re-fusing to register, despite the relaxation of the law on party formation. At minimum, the mo-tivation for such a position can be found in the authorities’ prom-ise to at least constructively co-operate, if not make friends, with another recently emerged foe — the disgruntled urban popula-tion.

reform to diversify political Landscape

many political movements, shown at this march 10 demontration, will now be able to register as parties.

a recently passed law on political parties will affect various social movements and their supporters from across the political spectrum.

dmitry kamyshevKommersant-Vlast

Although a few activists from po-litical parties continue to hold protest rallies, the civic activism that fueled them is taking other forms. The opposition protests on March 17 and 18 in Moscow were smaller than those before the presidential election, and it seems unlikely that a planned “march of the millions” scheduled for May 6 will attract attract anywhere near that number of marchers.

“People have realized that white balloons and ribbons are no weapons against special se-curity units,” said author Boris Akunin, an organizer of the win-ter rallies. “A period of social tor-por lies ahead.”

Meanwhile, a recent announce-ment on Russian social network-

although political protests continue to take place in moscow, many young russians are finding other outlets for their newfound activism.

ing site VKontakte read “Dry food for an animal shelter urgently needed.” It wasn’t an appeal by an animal welfare organization, but from the 170,000-strong “Against Putin and United Rus-sia Party” group. Lately, calls to take to the streets have been in-terspersed with calls to give blood or raise money for surgeries.

Many protesters have resigned themselves to Prime Minister and President-elect Vladimir Putin’s victory; even an independent vote count gave him an overall ma-jority of the votes. What happens next depends on how Putin be-haves during his third presiden-tial term. Putin indicated in a se-ries of opinion pieces published in various Russian papers before the elections that he was ready for a more meaningful dialogue with society. Among other things, he promised to revive the system of referendums, to make it easier for citizens to initiate legislation and strengthen public scrutiny of the executive branch.

Mikhail Dmitriyev, president of the Strategic Studies Center, noted that Putin’s problem is not legitimacy, which he now has, but how long that perception of legitimacy will last against the backdrop of growing discontent outside the big cities. “At the end of the day, it was the Russian

hinterland that elected the pres-ident,” Dmitriyev said. “But the problem with the Russian hin-terland is that it has frequent mood swings. It may happen that, in a year or 18 months, support for Putin among these social stra-ta will change dramatically. It happened in the 1990s. In 1996, Yeltsin was elected, and by the end of the ’90s, his approval rat-

Protestors Drift away as Putin takes stock

viktor dyatLikovich sPecial to rBtH

even before the state Duma election in December, leaders of the ruling United russia party began talking about the need for some fundamental changes within the party of power.

Fighting high-level corruption is the second pillar of the strat-egy. Sergei Aleksashenko, Direc-tor of Macroeconomic Research at the Higher School of Econom-ics, presenting the strategy, sug-gested establishing an indepen-dent body that would oversee corruption among the “highest echelons of authority.” This plan was partly rejected by Medve-dev, who instead suggested an agency that would operate under the aegis of the prosecutor gen-eral’s office. Said Nineko, “There is fear that if they establish something autonomous, sooner or later they’ll have to start keep-ings tabs on the highest-ranking officials.”

As the third cornerstone of the agenda, panelists proposed en-hancing transparency in state procurement and improving cor-porate governance in state-owned companies. “I’ve spent eight years working for either a state com-pany or a joint-stock company with a government share,” Med-vedev said. “To be honest, there is quite a lack of transparency there.” As part of the solution, Medvedev said government offi-cials should be removed from boards of directors of state com-panies. This measure would see the continuation of the overhaul of state company management

that the president launched a year ago. Increasing oversight of state procurement and creating a Web site to monitor state contracts were two other approaches Med-vedev liked. Experts say that leg-islation and tools put in place to monitor state contracts still have loopholes, which result in kick-backs worth 2 percent of Russia’s G.D.P. “To translate that into ru-bles, just imagine a one with 12 zeros behind it,” Guriev said at the conference.

The problem may not be how the project is structured, but sim-ply one of scale. In a country where the size of the government apparatus is as big as Russia’s, said Ben Aris, editor-in-chief of Business New Europe, implemen-tation is likely to be difficult. “We forget to account for geography. You can’t possibly compare the scale of what Russia has to do to what countries like Georgia or Norway have done.”

Other experts say the problem is with the lack of serious puni-tive measures. Being found guilty of corruption rarely entails any-

thing beyond fines; most jail terms are suspended. And Medvedev did not address this problem, stop-ping short of threatening a pen-alty greater than losing office.

“There is no will to enforce tougher penalties,” Nineko said. “And with the change of the ad-ministration, let’s just hope that the existing measures stay in place.”

But Anatoly Golubev, chairman

of the Anticorruption Commit-tee, insisted that all of the mea-sures, including punitive ones, only served to exacerbate the problem. “The stakes of accept-ing a bribe grow,” he said, “as do the price of the bribe and the net-work of accomplices.”

Last July, the Ministry of the Interior announced that the anti-corruption drive had pushed the average bribe paid to a govern-

ment official up to 293,000 ru-bles ($10,000). Golubev, whose organization works to engage civil society in the struggle against cor-ruption, suggested that instead of implementing “useless” ideas, authorities should facilitate pub-lic oversight through independent institutions and media. Although this was one of the approaches suggested at the conference, Gol-ubev said that, in the absence of

public officials’ accountability, it would be ill-fated. “The hiring policy is such that public officials do not answer to you or to me,” he said. “They only answer to whoever appoints them to office.”

But experts at the Open Gov-ernment initiative had faith in the idea of public-government partnerships. As part of another cornerstone of the strategy, they proposed fighting household cor-ruption by raising awareness and shifting public opinion. House-hold corruption pervades all of the public services sectors in Rus-sia, according to a survey con-ducted by the Public Opinion Foundation (FOM). The market for corruption in the education sector — selected as one of the target areas — accounts for $5.5 billion a year.

Medvedev warned of the need to take extra care not to unhinge the system. “We all understand how delicate and sensitive the [education system] is,” he said. “But let’s select several regions and try a pilot project.”

The algorithm for tackling the problem is skewed, Golubev said of the efforts to implement new policies without first ensuring that public officials are account-able to the people: “We tend to start dinner by turning on the stove instead of going grocery shopping first.”

Medvedev Continues to Fight Corruption

ing had plummeted to less than 10 percent. These are very real risks for Putin.”

Putin’s supporters in the re-gions are more concerned about corruption and housing and util-ities problems than political re-form and have made this clear in regional elections. Putin has al-ways conducted a cautious per-sonnel policy without surrender-ing members of his team, and anticorruption trials have seldom involved top officials. But if he does not want to see the anger of the electorate shift from local bu-reaucrats to himself, he will be obliged to change his policies.

“Putin will not stop at shak-ing up the ruling team. The fight against corruption will move from the lower to the middle and high-er levels,” said Alexei Mukhin, di-rector of the Center for Political Information in Moscow. Other-wise, Mukhin said, Putin will find that he is unable to keep the sup-port of his followers simply by pursuing an active social policy.

According to Dmitriyev, how-ever, the real challenge for Putin is continuing to increase public spending on an ever-shrinking budget.

russians not enthusiastic about new political parties

continued from page 1

is it possible to eradicate corruption in russia?

Household corruption pervades all public services in russia; bribes for education total $5.5 billion a year.

Putin indicated before the elections that he was ready for a more meaningful dialogue with society.

Read the full version atrbth.ru/15226

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Russia’s Big Hopes for Vladivostok Summit rbth.ru/15028 Special Report

Russky Island will be the venue for the upcoming summit, after which the campus will be trans-ferred to the Far Eastern Feder-al University. “Russia is experi-encing a demographic decline, and universities nationwide are facing a shortage of students,” said Vladimir Miklushevsky, who was until recently the university’s rec-tor. “That’s why we’re studying markets like China, Indonesia and Vietnam to attract students. We have to � nd our niche.”

Authorities hope the impres-sive new campus being construct-ed on the island and generous state grants will attract the brightest minds from around the world. A Special Economic Zone for tourism may also be set up on the island to take advantage of the lush beaches, which stu-dents at the university will have at their disposal as well.

“Our country’s higher educa-tion faces two major problems: universities don’t know how to produce what business wants, and business isn’t very interested in innovative products,” said Mik-lushevsky. “That’s why our uni-versity will focus on creating small start-ups in conjunction with major world businesses.”

Said Avchenko, “I have to hand it to the authorities: When they started building all this stuff, no-body, including myself, believed it would be completed, especial-ly not in time for the summit. Now it’s clear they succeeded in doing what they promised.”

But the success is mostly de-pendent on the hordes of con-struction workers rebuilding the city. All contact with the most-ly Central Asian workers has been strictly off limits to jour-nalists.

“They’re afraid the workers will tell you about how they’re treated,” said Bakhodir Nurakov, a young Uzbek who has been working to protect the rights of the workers in the region through a Vladivostok N.G.O. that helps immigrants and their employers. Nurakov’s complaint is not with the entire project, but with cer-tain contractors who abuse a rule allowing them to legally employ immigrants for 90 days without providing them with a long-term

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Vladivostok’s downtown is divided from other parts of the city by Golden Horn Bay; the new bridge is designed to relieve traffic congestion.

Vladivostok Revives Its Image as Russia’s San Francisco

work permit. “They promise to pay them for the first 90 days, and then simply � re them. At that point, the workers have no legal recourse because they become il-legal immigrants,” he said. “Some of them want to leave altogether, but don’t have the money for a ticket. They have to keep work-ing so they can eat.”

Bridge to nowhere?A dark, even less visible story has to do with the region’s demo-graphic decline. Over the last 20 years, 300,000 people have left for more hospitable regions of Russia or abroad — half of Vlad-ivostok’s already sparse popula-tion.

“Of the students I know who are studying Chinese, no fewer than two-thirds want to pursue their careers abroad upon grad-uation,” said Victor Larin, direc-tor of the Institute of History, Ar-chaelogy and Ethnology of the Peoples of the Far East. “Most of the city’s infrastructure is in shambles. Roads are falling apart; there’s nowhere I can go for a

walk with my wife. The key to getting people to want to live here doesn’t lie in building bridges to nowhere.”

Said Avchenko, “Everyone’s concerned about what’s going to happen after the summit passes. We practically don’t even have a local seafood industry. This is es-pecially sad given that not long ago local seafood factories were nationally famous. We should have lively, thriving � sh markets and seafood-themed cafes. I wish

Vladivostok could be known as the ‘� shiest’ city in Russia — in a positive sense! — and people would come here to sample the local cuisine.”

A new leader for a new cityIn mid-March, a crowd of eager journalists crowded in the � rst-� oor marble hallway of the tow-ering white-colored State House in downtown Vladivostok amid typically dreary morning weath-er. They were awaiting the re-

At the peak of the economic cri-sis in 2009, Vladivostok erupted in protests after a decision in Mos-cow to raise import duties on cars. Residents took to the streets to defend a major source of revenue for the entire Far East — driving Japanese second-hand vehicles to the Western part of the coun-try for resale at a hefty pro� t. The new tariffs would cause the num-ber of cars imported annually to plummet from over 200,000 to around 60,000.

As thousands of riot police were � own in from Moscow to restore order, Prime Minister Vladimir Putin pitched a solution — the cars could be assembled in the Far East, thereby making the Jap-anese and Korean brands domes-tically manufactured and not sub-ject to the same duties. By the end of that year, Russian auto-mobile company Sollers, which manufacturs SsangYong S.U.V.s, had moved its production facil-ity from Tatarstan to Vladivostok. “It was a political decision,” said Vasily Avchenko, Vladivostok cor-

Car giant Sollers has set up a profitable automobile factory in Russia’s Far East, manufacturing S.U.V.s for South Korea’s SsangYong brand.

respondent for the daily Novaya Gazeta. “It was part of a broader carrot-and-stick strategy for lo-calizing car production.”

But after two years of work, the project is being hailed as a success by Sollers management, which is quick to deny any po-litical connection. “Sollers is a private company with an inde-pendent board of directors; the

government doesn’t decide our development strategy,” said Sollers Far East Director Alexander Kor-neychuk. At the beginning of March, Sollers Far East launched production of its � fth model, the non-diesel Actyon. The total num-ber of cars produced at the fac-tory is expected to hit 35,000 this year, compared to 25,000 in 2011.

All of the components are im-ported from South Korea. Each model is assembled piece-by-piece until, at the end of the as-sembly line, a process that work-ers call “the wedding” attaches the frame to the body of the car. The autos then undergo safety

Some Assembly Required

MIKHAIL VOLKOVSPECIAL TO RBTH

IN FIGURES

$60 million has been spent on infrastruc-

ture at the plant so far, although the gas connection is still half a mile away.

27 is the average age of workers at the Sollers plant. Nearly a third

of the factory’s workers occupy management or training positions.

side than here. A lot of locals are concerned that they’ve advanced economically at our expense.”

Some Russian officials have begun to think about how they can change this economicrelationship. Igor Gorevoy, therecently appointed economyminister for the Amur Region, said he would like to start attract-ing Chinese consumer spending as well as their cheap consumer goods.

“There’s no way we’ll be able to out-manufacture the Chinese,” he said. “Their products are cheap-er and better. We have to look at our competitive advantage, and offer them the one thing they can’t produce. If we set up a few Eiffel Tower mock-ups, a Big Ben and some basic infrastructure for a leisurely family vacation, they’ll be eager to visit.”

Another World So Close, Yet So Far

Signs in Chinese and Russian give directions in Heihe, China.

All of the components used in Russia are imported from South Korea.

Skepticism regarding China’s intentions has hampered economic integration in the country’s Far East, yet trade is booming.

VLADIMIR BARTOVSPECIAL TO RBTH

sults of the legislature’s vote on the candidacy of 44-year-old Vladimir Miklushevsky for the post of governor. The previous governor, Sergei Darkin, had been abruptly dismissed by Pres-ident Dmitry Medvedev just weeks earlier after a decade in power. The news came as a shock to many locals, who credited him with lobbying for many of the federal funds now pouring into Vladivostok.

Miklushevsky was voted in by

a wide margin, which came as a surprise to no one; he hadpromised to make transparency and fighting corruption acornerstone of his governorship. Speaking to journalists after the vote, he announced: “We have to base our long-term development on the scienti� c and educational resources we have at our dispos-al, especially the Far Eastern branch of the Academy ofSciences and the Far EasternFederal University.

“The APEC summit will have a direct impact on the long-term development of Vladivostok. The 200 billion rubles ($7 billion) of federal funding coming here will improve infrastructure, a lack of which is a barrier to investment — not only in Russia. It also put Vladivostok on the world map and make it known throughout APEC. We can’t miss thisopportunity.”

Said Avchenko of Miklush-evsky, “He’s a good manager and is not tied to the local business and criminal elites. But I ques-tion how much of a difference one individual can make in Russia’s current political system — a lot has to be changed in the econo-my, laws and especially the ap-plication of laws. On the other hand, places like Singapore show it’s possible.

“But I de� nitely have a feeling of lost potential concerning Vlad-ivostok’s development, especially over the last two decades. This concerns the economy, cultural life and basic quality of living. I hope that we’ll stop losing peo-ple and realize the enormous po-tential that our city has inherit-ed. Only time will tell how justi� ed my hopes are.”

Far Eastern Federal District

CONTINUED FROM PAGE 1

APEC Summit, Sept. 2–9, 2012

Russia became a part of APEC, the main forum for pro-moting free trade in the Pa-cific Rim, in 1998. At the 2006 forum in Hanoi, Vietnam, the Russian participants offered to host the organization’s annual summit in 2012 in Vladivostok, the largest Russian city on the Pacific coast. Initial plans for renovating a few downtown buildings were scrapped the following year in favor of the more expensive project to de-velop Russky Island, which won the support of then-Pres-ident Vladimir Putin.

Moving the assembly line to Vladivostok allowed Sollers to lower the price of the models it builds.

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See slideshow atrbth.ru/15143

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testing before being shipped by railroad to Western Russia. Fewer than � ve percent of the autos pro-duced at the Vladivostok plant are purchased in the Far East.

Critics point out that the op-eration has been pro� table thanks to federal subsidies that give Sollers a huge discount on ship-ping the cars by rail across Rus-sia. But Korneychuk believes the company can survive without the help. “Over the last two decades, Japanese cars have developed a certain reputation throughout all of Siberia” he said. “People know and like them so much that they don’t require any advertising, a huge savings in costs.”

The Far Eastern Russian city of Blagoveshchensk saw a � reworks display the night after Vladimir Putin’s latest election, but the � re-works didn’t come from Russia — they were launched on the south bank of the Amur River, which separates Blagoveshchensk from the Chinese city of Heihe. Chinese authorities celebrated Putin’s victory since his time in power, as president and prime minister, witnessed a � ve-fold in-crease in regional trade.

Few places in the world offer quite as sharp a contrast between European and Asian civilizations as the � ve-minute bus ride across the frozen Amur River. And con-tacts between Russians and Chi-nese living there are becoming more frequent because of visa-free travel for local tour groups.

“I’m going to rest and buy some stuff,” said Valery, a 40-something Blagoveshchensk native as he boarded a bus to Heihe, which boasts shopping malls, saunas, restaurants and teashops, all of-fering their wares and services in Russian to cater to visitors. Even street signs are bilingual.

Not everyone is happy with the boom on the Chinese side. “They used to have a village over there with huts and dirt roads,” said Nikolai Kukharenko, a life-long resident of Blagoveshchensk. “ N o w t h e r e are more s k y -scrapers on that LO

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tourists When Americans visit Moscow, they want both a taste of home and things that seem slightly exotic

shawn mckenna brought american-style dining to russia’s capital. he and other american expatriates share their favorite moscow places.

Moscow’s first American diner was shipped to Russia in parts, much like a recycled amusement park ride. Muscovites lining up in the snow outside the Tchaik-ovsky Concert Hall noticed one day that a diner was appearing piece by piece, like a stamped-tin and chrome Lego fortress, right in the heart of Moscow.

It is hard to describe the buzz the Starlite Diner caused when it opened its doors in the mid-1990s. Today, it still draws a cult of devotees with its bacon grilled cheese sandwiches, chicken pot pies and other American novelty foods that predate the term “bad cholesterol.” It took four weeks to teach the menu to the first wave of Russian waitresses, who wore uniforms straight out of the TV show “Happy Days.”

Suddenly, business deals were being consummated over French fries and ketchup. As expatriate families arrived in Moscow, the restaurant became their first stop after Red Square. Those were heady days for international re-lations between the West and Rus-sia, and American expats were streaming in — from brigades of consultants and businessmen, to herds of journalists and academ-ics, as well as missionaries, stu-dents, poets and dreamers.

Moscow attracted adventurous people who were taken by its en-ergy. Shawn McKenna, one of the founders of Starlite Diner and other restaurants in Moscow, was among the first of these pioneers, and also among the longest lasting.

“I like the vibe and trendiness of the city, the economic devel-opment of the entire population, and that it is a melting pot of dif-ferent nations and regional cul-tures of Russia,” McKenna said.

In his earliest visits to Russia, he identified a niche. McKenna experienced the sometimes amus-

the diner in moscow has become an iconic place for americans.

starlite founder shawn mckenna came to russia in the early 1990s.

the nikulin circus was founded by famous soviet clown yury nikulin.

the Fountain of people’s Friendship stands at the center of Vdnkh.

skolkovo Foundation president Viktor Vekselberg (left) speaks at the global technology symposium.

eVa huaspeciAl to rbth

ing, always frustrating lack of good service in restaurants in the 1990s. “One time our delegation drove to a Georgian restaurant on Tverskaya, which turned to be closed for guests due a lunch break of their employees,” he said. “That’s when I realized how much opportunity lies here.”

By the mid-1990s, he had start-ed his own restaurant business, bringing the classic diner expe-rience to Moscow. Initially, 95 percent of his clientele was made up of expatriates. Today, Starlite Diner serves authentic burgers and milkshakes to mostly Rus-sian customers.

The diner concept also attract-ed young Russians on a budget. While Moscow gradually grew

into one of the expensive cities in the world, McKenna’s restau-rant cultivated the Russian mid-dle class with the idea that some-thing could be trendy and cheap at the same time. Said McKenna, “Focusing on Russians brings the success in the long term.”

recommended by expatsShawn McKenna spends a lot of time in his own restaurant when he’s in Moscow, but still has a soft spot for the famous Izmailovo Vernisage souvenir market on the outskirts of Russia’s capital, which sells everything from old Samovars to DVDs and is home to the city’s Vodka Museum. “When family and friends come, you have to descend to the class of tourists,” he said. “I love the Izmailovo market, the whole ex-perience of bargaining like in the old days in the epicenter of the flea-market society of Moscow, surrounded by this entrepreneur-ial spirit.”

Chris Lee, President of C.B.S.D. Thunderbird Russia, agreed:“In addition to the kebab you can find at Izmailovo, Moscow has a wealth of foreign cuisine you

the american View of moscow

skolkovo russia’s silicon Valley goes on the road, taking its message of investment opportunities to california

the leadership of the skolkovo Foundation visited california to show off and attract investors at the annual global technology symposium.

Russia Looks for Help in Monetizing Its Investment Potential

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During the last week of March, a team from the Skolkovo Founda-tion, the group behind the Skolk-ovo Innovation Center, sometimes referred to as Russia’s Silicon Val-ley, came to the actual Silicon Val-ley for the eighth annual Global Technology Symposium. The sym-posium has always had a bit of a Russia focus, and this year was no different, featuring a half-day of sessions exclusively on Russia. Another highlight of this year’s event was the inaugural meet-ing of the U.S.-Russia Bilateral Presidential Commission Inno-vation Working Group, estab-lished at last year’s G8 summit by U.S. President Barack Obama and Russian President Dmitry Medvedev. In its first session, the working group identified partic-ular problems that the countries can work on jointly, exchanged opinions on the legal framework for innovation and discussed fu-ture commercialization of new technology.

“Russia has a deep R&D [Research and Development] base,” said Lorraine Hariton, special representative for com-mercial and business affairs at the U.S. Department of State, “but the actual understanding on how to commercialize R&D is something that needs to be de-veloped.” She also said that Skolkovo was a great opportu-nity for Russia to built its own innovative ecosystem.

The Skolkovo group took ad-vantage of the presence of major U.S. tech companies to sign agreements and road maps with

American partners. During the symposium, Cisco signed a strat-egy document to create an R&D presence in Skolkovo, as a part of the company’s multiyear com-mitment to invest $1 billion with-in the Russian Federation.

“We are very proud and ex-cited to initiate our R&D efforts in Russia with this agreement, particularly in Skolkovo,” said Marthin De Beer, senior vice president of Cisco’s video and collaboration group, “Now we’ll start the work specifically in

R&D in the video area. We have two very large businesses asso-ciated with video, and video also drives a lot of networking space, so it is very important and stra-tegic for Cisco.”

The state-owned Skolkovo Foundation is only adding to its list of major international part-ners. I.B.M., Intel, Microsoft and General Electric are already working with the foundation. The center is interesting for big mul-tinational corporations because a partnership with Skolkovo comes with tax breaks and other

incentives to make it easier to work in Russia.

For small start-ups, however, the main value comes in access to government grants, venture capital, and a mentoring pro-gram. Russian start-up Kuznech, which was present at the Glob-al Technology Symposium, works on technology to make it easier to search within videos and im-ages online. When the company ran out of the initial investment it received from its founders, it applied for a Skolkovo grant and received $1 million. Through Skolkovo, Kuznech also had an opportunity to receive feedback from venture capital funds to gauge its competitiveness on the global market.

“We have largely improved our business model and focused more on monetization of the technol-ogy,” said Michael Pogrebnyak, Kuznech’s C.E.O. “So the feed-back has helped us a lot.”

Kuznech is an example of Skolkovo’s model, which con-nects good ideas with the money to make them possible. The foun-dation searches for start-ups with innovative, marketable ideas — in Russia and abroad — and presents them to a pool of more than 30 venture capital funds. The funds decide which start-ups deserve investment, and offer grants ranging from $150,000 up to $1 million.

Skolkovo was launched with a grant of $5 billion as a gov-ernmental effort to transform Russia into an innovation-based economy through partnerships with leading scientists and cor-porations. The goal is to create an environment for innovation. Currently, Skolkovo boasts more than 350 companies.

During the Global Technology Symposium, the Skolkovo Foun-dation expanded its available

funds significantly when it signed a memorandum of understand-ing with Bessemer Venture Part-ners for a $20 million investment in Skolkovo participants over two years. Bessemer Venture Partners has been investing in Russia-related businesses since 2005, and its list of successful investments includes KupiVIP and Parallels.

“At Bessemer, we always try to follow the heat and the action, and there is certainly a lot of it in Silicon Valley,” said David Cowan, a partner at Besse-mer. “But we also see it emerg-ing in a very interesting way in Russia.”

Cowan said that his company invests a lot in other emerging economies, naming India as a country with rapid and sustained

timeline

a short history of skolkovo

Nov. 12, 2009 • President Dmitry Medvedev announces his intention to create “something like Silicon Valley” in Russia to facilitate “an at-tractive environment for the work of leading scientists, engineers and managers.”

March 19, 2010 • Out of several proposed locations across Russia, Skolkovo is chosen as the site for “an ultramodern scientific and tech-nological complex for the elabora-tion and commercialization of new technologies.”

april 27, 2010 • Roger David Kornberg, a prominent American biochemist, Nobel laureate and professor of structural biology at Stanford University, becomes the co-chair of the Science and Tech-nology Council of the Skolkovo In-novation Center.

Sept. 28, 2010 • Dmitry Medvedev signs a federal law establishing the Skolkovo Innovation Center, follow-ing the approval of the law by the State Duma. The law provides spe-cial tax, immigration and customs benefits for Skolkovo residents.

Dec. 14, 2010 • Construction on Skolkovo is started outside of Moscow.

april 21, 2011 • Skolkovo Open University begins its work.

oct. 22, 2011 • The Skolkovo Foun-dation and M.I.T. sign a partnership agreement for the Skolkovo Insti-tute of Science and Technology. Professors at the institute will hail from M.I.T., Harvard University, Stan-ford University and other world-fa-mous educational institutions.

During the Global technology symposium, the skolkovo Foundation signed a memorandum of understanding with bessemer Venture partners for a $20 million investment over two years.

russia is attractive for investors because it has both innovative technology and a large domestic market.

companies, including many start-ups, are currently operating in Skolkovo. So far, 119 companies have joined the I.T. cluster; 104 have committed to the biomedical clus-ter; 90 to the energy cluster; anoth-er 27 to the nuclear cluster; and 15 to the space technologies cluster.

355in Figures

won’t find in the States. Geor-gian food is something most Americans have never encoun-tered, but that everybody loves. I personally recommend Tiflisky Dvor on Ostorzhenka Street.”

To get away from the city’s no-torious traffic, Lee recommended night driving. “The lighting and architecture of Moscow are an amazing combination. We go up to the Sparrow Hills and Mos-cow State University to get a view of the city. Christ the Savior Ca-thedral is one of my favorite plac-es to take guests at night. We’re a middle-aged couple with kids, so no night clubbing!”

Karl Swanson of Natura Foods was on the train to Moscow’s Do-modedovo airport to pick up rel-atives visiting for the first time when he said,“I want to give the kids a sample of typical Russian culture. The Pushkin Museum is nice, but maybe a little early for them. That’s why we’re visiting the Moscow State Puppet The-ater and the Moscow Nikulin Cir-cus — they’ll be absorbed in a Russian story and surrounded by a Russian audience.”

American journalist Alec Luhn

in fascinated by Moscow’s histo-ry. “The best place to get in contact with Soviet architecture and ideology is VDNKh [the All-Union Exhibition Center, a park with pavilions showing the agri-cultural achievements of the Soviet republics] and the Sovets-kiye Vremena [Soviet Times] restaurant. I like going to VDNKh because it’s a place steeped in history,” he said. “Today, the Soviet Union seems strange and archaic, but at one point its ideology completely defined the lives of millions of people, even dictating the way the buildings around them looked. VDNKh creates a physical connection with that world and helps you feel it

in a more visceral way, and it’s authentic — not some theme-park recreation.”

Eric Leroy, a longtime English teacher in Moscow, appreciates the city’s inhabitants. In an in-terview with Afisha magazine, he said, “Moscow’s charm is in its people. I love Russians. I had so many questions before com-ing here, and everyone told me life in Russia would not be easy. But the opposite turned out to be true: I came here and imme-diately felt at home. There’s some mixture of coldness and rude-ness with warmth and sponta-neity here that I really love, and with my Russian wife, I’m at home here.”

G.D.P. growth, but that Russia is attractive for investors because it has both the innovative tech-nology and large domestic mar-ket to support the start-ups.

“When it comes to innovation

in Internet and computer net-working companies and energy related companies, we expect to find a lot more interesting activ-ity in Russia than in any other non-U.S. regions,” Cowan said.

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C O N TA C T U S : F o r e d i t o r i a l i n q u i r i e s , p l e a s e , c o n t a c t u s @ r b t h . r u F o r p a r t n e r s h i p o r a d v e r t i s i n g c o n t a c t s a l e s @ r b t h . r u p h . + 7 ( 4 9 5 ) 7 7 5 3 1 1 4

With the presidential elections over and Vladimir Putin due to return to his old

job in May, the Kremlin has turned back to the task at hand: fixing Russia, Inc. At the top of the agen-da is taking on corruption, and the Kremlin has just taken the first steps toward institutionaliz-ing the fight.

This was always going to be an uphill battle. Eradicating en-demic corruption is by definition an incremental process — espe-cially in a country as large as Rus-sia. Georgian Presdient Mikheil Saakashvili famously sacked the entire police force for taking

bribes and solved the problem overnight. However, Georgia only has a few thousand traffic cops. Russia, on the other hand, has about a million “GAIshniki,” as the traffic cops are known. Fir-ing them all at once is simply not an option.

Until now, the campaign (such as it is) has been a series of ad hoc arrests and investigations into state officials from nearly every branch of government. The strat-egy seems to have been to fire a series of warning shots to every-one in government that they can no longer steal with impunity.

The results have not been dra-matic. Russia moved up slightly on Transparency International’s 2011 Corruption Perceptions Index to tie for 143 place out of 182 countries, up from 154 a year earlier. However, Russia remains the world’s most corrupt major economy, on par with Uganda and Nigeria.

But in the middle of March, outgoing President Dmitry Med-vedev ordered the government to prepare a draft bill that will force bureaucrats to declare excessive personal purchases of real estate, securities and vehicles — any-thing that costs more than three years worth of combined house-hold income.

Perhaps more important, Putin attacked the utilities sec-tor in December, calling it “high-ly corrupt,” and ordered the state-owned power companies to break any contract where the beneficial owner of the coun-terparty was unknown. In March, federal electric grid com-pany FSK said it may break 20 billion rubles ($660 million) worth of contracts because the counterparties wouldn’t disclose their ultimate beneficiaries. Half a dozen other state-owned gen-erating companies have followed suit. The surprise was that it was Putin who ordered this change, as anticorruption is supposed to be Medvedev’s baby. But that is the point: The fight has moved from being fought by individu-als against individuals to an in-stitutional improvement in cor-porate governance and transparency. In this sense, Rus-sia has only just started on what will be a long and bitter fight to make a difference.

moscow bLog

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beginning a top-Down attack on corruption

Up until now, the anti-corruption campaign has been a series of ad-hoc arrests and investigations.

the fight has moved from individuals to an institutional improvement in governance.

On March 29, Russia returned to the international capital markets with a $7 billion Eurobond issue that was more than three times oversubscribed. This sale was only the second since the Kremlin sus-pended debt issuances following the 1998 crisis. It followed a sale of domestic Russian bonds at the beginning of February, which was more than five times oversub-scribed, with up to 80 percent of the demand coming from over-seas, according to bond traders. In that sale, demand was so high that the Russian Ministry of Fi-nance more than doubled the of-fering to 35 billion rubles ($1.1 billion).

The success of this latest sale only reinforces Russia’s claim to be the most attractive debt mar-ket in the world. With more than $500 billion of reserves in the bank, Russia can cover its exter-nal debt dollar-for-dollar with cash. However, the solidity of Rus-sia’s financial position is not re-flected in the yields. While most developed markets have slashed interest rates to a few percent at best, the Russian sovereign yield of 5.67 percent on the longest ver-sion of the latest bond, which ma-tures in 2042, is very attractive. The relatively low yield was key, as the government’s bond will be used as a benchmark against which to measure prices for a flood of corporate bonds that are expected to follow.

“[The yield was] very impor-

Among U.S. investment angels, Esther Dyson is probably the one who has invested the most to date in Russia. Her portfolio includes no fewer than 15 Russian start-ups as well as Yandex, the Rus-sian search giant, which she ad-vises as a member of its board of directors.

In this exchange with East-West Digital News, Dyson speaks open-ly about her business successes and failures. She also reveals why considers Russia her “second coun-try,” and thinks that information technologies could bring a better future to Russia by “reducing the cost of being honest.”

you speak commendable russian; you have invested in a range of russian companies; you often visit russia; and you even went through cosmonaut training here. how does your personal russia story start? In some strange way, Russia is my second country, even though I have no Russian roots. I learned Russian in high school, because my father learned it in England as a student at Cambridge, where most of his math and science pro-fessors were Russian. And then he was involved in the U.S. space program, which cooperated well with the Russian space program. So in our family we liked the Russian people, even though we

securities Government offers continue to attract foreign investors

russia continues to look to international financial markets to raise capital, and so far foreign investors find the offerings very attractive.

tant for us because these inves-tors guide others interested in in-vesting,” Finance Minister Anton Siluanov said on the day of the issue. “Russia had very good suc-cess, and that will manifest itself in the borrowings of other state-run companies, including infra-structure ones.”

The yields on the domestically traded Ministry of Finance bonds, known as O.F.Z.s, are even more

appealing, as they carry the high-est yields of all major emerging markets. Demand for the O.F.Z. has soared since the start of the year, when foreign investors were given direct access to the domes-tic Russian bond market follow-ing reforms that went into effect in February. The yields of 8 per-cent in ruble terms and 15 per-cent in dollar terms led to these bonds being snapped up by for-eign investors.

“Even though true liberaliza-tion hasn’t happened yet, you can see the effects on the market. Some foreign investors are already accessing O.F.Z.s, and local traders and investors are speculating ahead of the expect-ed full liberalization,” said Dmit-

ry Yakushin, a fixed-income trad-er at Renaissance Capital in Moscow.

The further reforms that will give foreign traders full access to Russia’s buoyant domestic debt market still have a few more hur-dles to cross, but the goal is for Russia’s Micex exchange to be hooked up to Euroclear, the main European trading platform, this summer. This will make it possi-ble for foreign traders to buy and sell Russian issues without ever leaving their desks.

“Previously, foreign investors seeking Russian sovereign expo-sure required local broking ac-counts at Micex, and they need-ed local custody accounts. This could take months and even years to complete,” said Martin Greg-son, a spokesman for Euroclear. “That has now changed — the bonds can be bought [over the counter], and a Micex account is no longer required. This will allow many offshore investors access, and we think even more will gain access once O.F.Z.s are able to be settled through international de-positaries, like Euroclear.”

Reforms and Russia’s solid fun-damentals are only two factors driving the booming bond mar-ket. The reluctance of domestic banks to lend to Russian compa-nies along with the state’s policy to push borrowers to borrow at home rather than abroad are both adding to the impetus.

The state is looking for more ways to raise money in anticipa-tion of the increased government spending in the near future nec-essary to carry out many of Pres-ident-elect Vladimir Putin’s cam-paign promises. Moscow hopes to borrow a page from Washington’s strategy book and finance gov-

russian bonds model the concept of supply and demand

Finance minister anton siluanov is trying to create a market for debt.

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While most developed markets have slashed interest rates, the latest russian bond has a 5.67 percent yield.

the state is looking for ways to raise money to finance an anticipated increase in government spending.

yields on domestic bonds by country

ernment spending through in-creased borrowing in its own cur-rency.

Heavy spending by the state means that the surpluses the gov-ernment enjoyed in the last de-cade could soon become a thing of the past. The efforts by the Min-istry of Finance to create an ef-ficient debt market are part of a

drive to finance the expected bud-get deficits.

Russia plans a net issuance of 1.2 trillion rubles ($41 million) in 2012, larger than the programmed 1.5 percent of G.D.P. deficit, mak-ing Russia the fastest-growing local debt market among emerg-ing economies, according to Mor-gan Stanley.

interview esther Dyson

Reducing the Costs of Being Honest Through Technology

do you see differences between western and russian start-ups?The big difference is that in Rus-sia there is much more regula-tion and corruption, and it is hard to find experienced business managers — even though it is easy to find highly intelligent and qualified engineers.

is corruption an obstacle to inno-vation?Obviously, there’s a lot of corrup-tion in Russia, but fortunately, around the world, the Internet is

changing things for the better. To the extent that an economy moves online, corruption usually dimin-ishes. First of all, there is simply more recordkeeping, and trans-actions are automated, so brib-ery is harder to implement and harder to cover up.

Separately, so much of the In-ternet economy empowers indi-viduals. It may be cost-effective to bribe a manager in a large company to give you a contract you don’t deserve, but you can’t bribe millions of consumers to buy your products or use your online service. Overall, the on-line economy is more efficient and allows the best players to win by pleasing customers rather than bribing middlemen.

And finally, in some ways on-line services can reduce the costs of being honest. One of the most wonderful innovations in Rus-sia is the online kiosks that let you accomplish a variety of transactions online — including the payment of traffic fines. Now, instead of paying a cop a bribe in cash to avoid getting a fine, you can simply pay the fine on-line. In the old days, paying a fine instead of a bribe involved going to the traffic police office or more recently the bank, which added a lot of inconvenience to the cost of honesty. Most people would prefer to be honest; now it’s easier.

what is true and what is false con-cerning russia’s image in u.s. in-vestment and financial circles? Mostly, they know very little about Russia at all. They just think of it as a place where good engineers come from.

her story

A former Wall Street technology analyst, Esther Dyson today invests in and nurtures start-ups, particular-ly in the healthcare and aerospace sectors. She recently spent six months training as a backup cos-monaut in Star City.Dyson is an active board member for a variety of start-ups, including 23andMe, Airship Ventures, Event-ful, Evernote, I.B.S. Group (advisory board) and Meetup.

position: chAIRwomAn,

EDVEnTuRE hoLDInGS

studied: EconomIcS

did not like the Soviet govern-ment.

why do so many u.s. tech compa-nies come late to russia, or do not come at all?Because many other markets are more attractive and easier to op-erate in. For foreigners, the lan-guage itself is a problem. Because there are so many Russians, fewer Russians have learned English. In this way, Russia is similar to Germany or Spain, where there is a large enough local market

that fewer people learn a second language.

But second, there’s a lack of busi-ness experience. Most people don’t have parents or other relatives who ran a bookstore, worked as man-ager or started a restaurant. Very few have been well managed, so they themselves don’t know how to manage either. They don’t know how to write an e-mail that makes it clear what kind of response they want. It’s the simple things that Westerners take for granted that are most lacking.

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a Gain From the Brain drain ?

stepanpachikov

special To rbTh

olegalekseev

special To rbTh

i’m often asked by my Western colleagues, “Is Russia the moth-erland of talent?” This comes as no surprise given the number of

talented Russian developers work-ing for Western I.T. companies.

Even if you discount Google co-founder Sergei Brin and Pay-Pal founder Max Levchin, who left the Soviet Union as children when their parents decided to em-igrate and did not make this move on their own volition, there are thousands of Russian computer specialists who have chosen to go and live in the United States. These include Arkady Borkovsky, who heads the Yandex R&D Cen-ter in California, and Eugene Ve-selov, a leading programmer for Microsoft. Parascript, a leading developer of handwriting recog-nition solutions for mail and checks, still employs mostly Rus-sian engineers at its headquar-ters in Boulder, Colorado.

I have never come across com-parative talent statistics by coun-try, and I don’t believe that Rus-sia supplies more immigrant talent than other countries; how-ever, many have felt this way. In answer to my colleagues’ ques-tions, I normally provide the fol-lowing explanation.

First of all, Russia was under the sway of an ideology-driven dictatorship throughout most of the 20th century. All intelligent people realized that, in order to minimize the ideological imprint on their lives, they should avoid studying history, philosophy, law, literary studies and politics and, instead, engage in pure science — mathematics, astronomy, phys-ics or chemistry.

Yet ideology played havoc even with exact sciences, including bi-ology, genetics and cybernetics. One of the most prominent bot-anists and geneticists of the 20th century, Nikolai Vavilov, was ex-ecuted during Stalin’s Great Purge. Soviet genetics was ruined and most Soviet geneticists died in the gulag. The notion of bour-geois pseudoscience, which was applied at the time to cybernet-ics and genetics, became a com-

The brain drain is only part of the process known as mi-gration. According to sur-veys by the All-Russian

Center for Public Opinion Re-search (VTsIOM), more than 20 percent of Russians want to go abroad. This is most clearly ex-pressed in the younger generation, but the desire to leave exists even among people of retirement age. By no means do all of them go, but the very fact that 20 percent of the population is prepared to leave the country at the earliest opportunity says that Russia does have a drain of people in general and brains in particular. There are many reasons for this, the most common being the difficulty of self-fulfillment; corruption; the difficult social environment; and the more difficult climate.

Some of these problems could be solved by internal migration, but this is poorly developed in Russia. There is a major lack of infrastructure in the regions, and there is a higher-than-usual de-gree of centralization of the econ-omy. In many smaller cities, it is

russia needs a post-industrial revolution

alexeimoiseev

special To rbTh

in order to follow through on its promises to the people, the Russian government needs to take a serious look at the coun-

try’s economy and make the chang-es necessary for sustainable long-term growth.

Over the last six months, the Russian government has been concentrating on winning elec-tions — from United Russia main-taining its majority in the State Duma to Prime Minister Vladi-mir Putin returning to the pres-idency. Now, in order to justify its resounding mandate, the po-litical establishment has to turn its attention to delivering sustain-able and long-term economic growth for the Russian people.

Recent levels of capital flight suggest that investors are not en-tirely convinced of the govern-ment’s current economic strategy, which centers around expanding and diversifying the manufactur-ing base. It is time to accelerate Russia’s transition to a post-in-dustrial economy in which high-value knowledge and service in-dustries play a larger role.

As a middle-income country with a large public sector to sup-port, Russia has neither low labor costs nor low taxes. Although Chinese labor costs are rising, they are still a third of those in Russia, which gives the Chinese a massive advantage in the glob-al marketplace for manufactured goods.

mon term. In the 1930s, there was an attempt to brand probability theory as a pseudoscience, but it was saved by the ingenuity of the preeminent mathematician An-drei Kolmogorov, founder of com-plexity theory.

Most intelligent people under-stood, therefore, the danger in-herent in the humanities and fo-cused on the small range of exact sciences, creating the illusion of “extraordinarily talented Russian scientists and engineers.”

After Scientific Communism was abolished in 1990 and the indoctrination of society col-lapsed, talented young Russians hurried into fields such as busi-ness, banking, law and finance. And, on the flip side, Russian sci-ence lost much of its lifeblood. The policies of post-Soviet Rus-sian authorities have marginal-ized education and science in

difficult to find a suitable apart-ment; there is a lack of restau-rants, theaters and clubs; and — most important — salaries are often several times lower than in Moscow or St. Petersburg. As a result, it can be easier to move abroad than to a Russian region-al center.

But this does not mean young émigré scientists need live abroad forever.

Science, like most other areas of life, works according to the clan

principle. A young scientist who goes abroad relies primarily on the support of the diaspora. In the 20th century, Japan success-fully implemented a model of de-velopment of science through a global diaspora. After World War II, Japanese scientists left for many countries. After becoming established there and doing var-ious research projects, they began

state financing and, more impor-tant, in the public eye. Contem-porary Russia has made it pres-tigious to be a banker, stock broker, restauranteur or TV presenter, but not a scientist.

There are no indications that Russian science will recover any time soon. And when it finally does so, will there be any demand for it in the world?

Talented young Russians inter-ested in science are asking them-selves the same question. They understand that their chances of success in their own country are limited in virtually all areas, since the Russian economy today is driven by oil and gas, not inno-vation.

Young Russians are also imped-ed by the mediocrity of the po-litical system and the Russian au-thorities in general — the existing vertical of power is es-sentially feudal: the closer you find yourself to the authorities, the more opportunities, power and money you have. As the great actress and philanthropist Chul-pan Khamatova put it, “In this country, you can’t live the way you ought to.”

The future of the I.T. industry in Russia is vague because the authorities today only need peo-ple capable of pumping oil and servicing those who pump oil. They plan to buy the rest, includ-ing new talent.

Stepan Pachikov founded the first Moscow computer club with Garry Kasparov. He is also the founder of the ParaGraph and Evernote companies. He lives in New York.

to invite their young compatriots to join them. In scientific circles, work is done on a project basis: an employee is invited to work on a specific project; after it is finished, the person is without a job, unless invited for follow-up research. As a result, young Jap-anese people, having worked for several years on projects in the United States or Europe and hav-ing gained foreign experience, re-turned to their country and con-tinued their careers, once suitable conditions had been created for them there.

A similar model can be imple-mented in Russia. There is no point in forever trying to get sci-entists who left to return. We can offer them participation in spe-cific projects, on which they would work here for three to five years. A first-rate researcher or athlete is a person of the world who lives and works where he is offered the best conditions. From a financial point of view, the Rus-sian market is quite competitive. In recent years there has been clear demand for research from major corporations, primarily in the raw materials industry, ma-chine building and metallurgy.

Representatives of the Russian diaspora in Europe and the Unit-ed States say that there is inter-est in working in Russia. There are many reasons for this. The most common is the possibility of self-fulfillment. Early in their careers, many of them indeed found it more comfortable and easier to work abroad, but there are hidden barriers that are al-most impossible to overcome. It is not yet possible even to imag-ine a Russian in Europe or the United States being the head of a national laboratory or univer-sity. These are strategic posts, which are not entrusted to a for-eigner, however talented he may be. And many Russians are ham-pered by this “ceiling,” finding they cannot continue to develop. No such limitation would exist for them in Russia.

There is another reason: many remain nostalgic, with memories of their homeland, and want to work in the country where they grew up. This is especially true of successful first-generation im-migrants.

It is impossible to stop the brain drain; migration is an organic process in the scientific world. But Russia needs to change the dynamic — not only selling minds, but also buying them.

Oleg Alekseev is vice president and chief operating officer for education and research at the Skolkovo Foundation.

Talented young russians understand that their chances of success in their own country are limited in all areas.

a researcher or athlete is a person of the world who lives and works where he is offered the best conditions.

The government has attempt-ed to erode the Chinese advan-tage by subsidizing industries and erecting high tariff barriers. While this may be politically popular, it simply delays the nec-essary productivity and manage-ment reforms that would help Russian industry become more competitive. It also keeps capi-

tal and labor tied up in unprof-itable ventures, when it could be put to better use creating the profitable industries of tomor-row.

If the government wishes to base the country’s future econo-my on manufacturing, it is going to have to oversee a massive in-crease in productivity in a very short time. The current policy of subsidy and trade protectionism actively works against that.

In recent years, the Russian government has attempted to overcome its structural problems by using fiscal and monetary tools to stimulate domestic demand, a tactic it has in common with many developed countries. But this has only worked to boost in-flation and increase reliance on imported goods. It has not ad-dressed the fundamental prob-lem, which is that labor in Rus-

sia is too expensive to produce low-quality, cheap goods.

Some have called for a whole-sale reindustrialization of the country so it can compete with China. This would be theoretical-ly possible with major macroeco-nomic and institutional reforms, including significant government intervention in the economy. How-

ever, current rates of capital flight demonstrate that Russian inves-tors are nervous about such pros-pects. Therefore, they cannot be relied on to underwrite a major reindustrialization.

But this is not inherently dis-couraging. The real prize lies not in low-value, high-volume man-ufacturing, but in a post-indus-trial economy based on higher-value knowledge industries.

To achieve this, the Russian government needs to ensure that all sectors have an equal chance to thrive. This means developing policies such as creating a natu-ral resources tax, cutting subsi-dies and trade protection for weaker sectors, and reducing reg-ulatory and tax barriers for new businesses.

The government also needs to ensure that investors can deploy their capital without fear of fu-

ture arbitrary government con-fiscations. This means that pri-vate property rights need to be taken seriously and upheld by the courts. The legal system needs to be fair and transparent, and prop-erly separated from the govern-ment. Other areas of priority re-form should be ensuring competitiveness and transparen-cy for government investment and spending, and ensuring that mon-etary and fiscal policy is more consistent. These moves would go a long way toward reversing the corruption that has been holding back the economy.

On top of this, the labor force needs to upgrade its skills to com-pete in the knowledge economy of the 21st century. Labor also needs to become more mobile, so people can move from areas of unemployment to take advantage of new opportunities.

If the policy mix is correct, there is no reason that Russian businesses and investors cannot modernize the economy them-selves from the bottom up, with strategic help and investment from the government where ap-propriate.

The government has made a good start by investing in modern transport and communications in-frastructure and funding the Skolkovo Innovation Center. In 2012, it should build on these ini-tiatives in order to continue the path towards modernization.

Alexei Moiseev is head of macro-economic analysis at V.T.B. Capi-tal.

as a middle-income country with a large public sector, russia has neither low labor costs nor low taxes.

if the policy mix is correct, there is no reason that russian businesses cannot modernize the economy.

The desire to emigrate from Russia is at a record low despite a turbulent election season marked by a rise in protests, ac-cording to state-run pollster VT-sIOM. However, the drive to

leave is the highest among the young and the supporters of po-litical hopeful Mikhail Prokho-rov, a presidential candidate who led demonstrations.

ria novosti

unpack your bags ... when asked if they wouLd Like to LiVe abroad permanentLy, russians said...

the poLLs

the motherland oF vanishinGtalents

leave home, But don’t stay away Forever

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Street Art With an Intelligent Face rbth.ru/15137 Culture

John Freedman

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� rst writer in 30 years to have that honor at the university.

Important as his service to Brodsky was, bringing the poet to Ann Arbor was only one of Proffer’s many signi� cant contri-butions in bringing Russian lit-erature to America. When Vasily Aksyonov was deported from the Soviet Union in 1980, he also went straight to Ann Arbor. By that time, it was the natural, the only, destination Aksyonov could have had in America. Not New York, not Los Angeles, but Ann Arbor — where Carl and Ellendea Prof-fer were located.

There isn’t that much of sub-stance about the Proffers on the Internet, and that is an injustice. You can read that Ellendea was awarded a MacArthur Fellowship in 1989, a well-deserved award for her work at Ardis. There is a paragraph about Carl on the Web page of the Slavic Department at University of Michigan.

But there is definitely some-thing missing. For those of us coming to Russian literature in the 1970s and 1980s, Carl and El-lendea Proffer were Russian lit-erature. As long as people con-tinue to read Joseph Brodsky, Vasily Aksyonov, Andrei Bitov and many others, their contribution will continue to affect us.

ment with dog hair and ashtrays. The smell of the sewage works, the sound of the drill or the pangs of jealousy are the pieces of grit around which Zaionchkovsky makes his pearls of stories.

The author himself was born in the city of Samara and worked until recently as a rocket engi-neer in a small town, but as a re-cent transplant to Moscow, he conveys the city’s gravitational pull; submitting to it is like join-ing a secret club. The deafening noise provides a “solace and re-assurance that only we can un-derstand,” but it also demands sacrifices. If everyone settled down happily, the narrator ar-gues, the city would lose its en-ergy. Instead of starting families, the citizens “are woven, minute by minute, into a web of count-less lines of communication.”

This is an unusual novel among the corpus of contemporary Rus-sian works in translation, deal-ing, as it does, with neither the triumphs and terrors of history nor the prophetic horror of a dys-topian future. Zaionchkovsky’s book is set in contemporary Mos-cow with its quotidian pressures and pleasures. It combines situ-ational humor and philosophical re� ection with a distinctively Rus-sian edge.

One of the most inspira-tional people in my life was a scholar and pub-lisher whom I never

met. His name was Carl R. Prof-fer. Along with his wife Ellen-dea C. Proffer, he founded Ardis Publishers in the early 1970s. The Proffers began printing Soviet and Russian literature at home and selling it by mail. Here you could read the latest stories, nov-els and poems by contemporary writers such as Joseph Brodsky, Vasily Aksyonov and Andrei Bitov, to say nothing of banned works by Osip Mandelstam, Mikhail Bulgakov, Nikolai Erd-man and others from the early Soviet period.

Recently I happened to be at the University of Michigan at Ann Arbor, the very place where Carl Proffer taught and pub-lished books until his death at the age of 46 in 1984. I even had the opportunity to step inside the office once occupied by Jo-seph Brodsky.

Brodsky came to Ann Arbor because of Proffer. It was his very � rst stop in the United States after he was deported from the Soviet Union in 1972.

Proffer happened to be in Leningrad with Brodsky at the moment when Brodsky received news he would be allowed to emigrate. Proffer wasted no time setting the poet up with a job. He convinced the University of Michigan to grant Brodsky the status of poet in residence, the

It has become a cliché to de-scribe some city or other as the main character in a novel, but in Oleg Zaionchkovsky’s

“Happiness is Possible,” Moscow is alive and all-encompassing. The human characters interact with an anthropomorphized city. Zaionchkovsky writes: “The city is the arbiter of our destiny and the master of our wills,” and, “We are Muscovites, children of the metro; we seek refuge in its ma-ternal womb.”

Zaionchkovsky’s novel, which was shortlisted in 2010 for two major Russian prizes, is a series of darkly comic vignettes. The narrator is a struggling novel-ist whose ambitious wife has left him for another man. What the story lacks in plot, it amply re-pays in disheveled charm and style. He shuffles through the dacha village of Vaskovo or � lls an abandoned Moscow apart-

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Soviet Literature’s Passport from Ann Arbor to the World

Not Just Another Story of Unrequited Love

In the early 1970s, Carl and Ellendea Proffer began printing Soviet literature at home and selling it by mail.

TITLE: “HAPPINESS IS POSSIBLE”

AUTHOR: OLEG ZAIONCHKOVSKY

PUBLISHER: OTHER STORIES

RBTH CONTINUES ITS COLUMN ON AUTHORS WHO WILL BE FEATURED AT BOOKEXPO AMERICA. THE EVENT, SCHEDULED FOR JUNE 1–8 IN NEW YORK CITY, WILL HIGHLIGHT RUSSIAN LITERATURE.

Music A British pianist and a Russian violinist shake up the staid classical music scene

Several years ago, a video began making the rounds on YouTube. In the video, a pianist and vio-linist play classical music and ma-nipulate it in ways even the most astute listeners never thought possible.

Russian violinist Aleksey Ig-udesman and British pianist Hyung-Ki Joo have been perform-ing their show, titled “A Little Nightmare Music,” for eight years. They have performed in most major European cities, and now they are bringing their tour across the pond, appearing at Carnegie Hall on April 17.

Their concerts begin with the proper decorum — the two come on stage wearing full concert dress — but it doesn’t take long for the nightmare to begin. The pair mixes Gloria Gaynor’s “I Will Survive” with phrases from Bach and Chopin, Igudesman playing like a Jewish � ddler and singing the lyrics with a heavy Russian accent. Unable to agree whether to play Mozart or the theme music to the 007 series, they end up playing both at the same time.

Their skits, � lled with a mix of simple humor a child can under-stand and witty references no-ticeable only by professional mu-sicians, are crafted to make their concerts accessible to a wide au-dience. They call their show “A Little Nightmare Music” because it embraces the nightmares of a musician at a concert. “Very often, when we go to concerts and things go wrong, that inspires us,” said Joo. “When something goes wrong, you realize that that’s what makes people wake up and be curious; there’s the sense of ‘what’s going to happen next?’” The two get in-spiration from their own trouble on stage. “In the end, our show is full of mistakes,” Joo said. “Our show is just one giant mistake.”

Igudesman and Joo became friends as students at the presti-gious Yehudi Menuhin School in the U.K. After graduating, Igudes-man went to the Vienna State Conservatoire while Joo went to New York to attend the Manhat-tan School of Music. But eventu-

Aleksey Igudesman and Hyung-Ki Joo could have been traditional chamber musicians, but instead combined their musical talents with their love for comedy.

ally Joo followed his friend to Vi-enna, and they have been collaborators ever since.

In late 2010, Igudesman and Joo brought their show to the Great Philharmonic Hall in St. Petersburg. It was the � rst time Igudesman had returned to his native city since leaving more than three decades ago; his fam-ily emigrated to Germany when he was six. At the performance, Igudesman took every opportu-nity to shock the audience — which included older ladies ex-pecting an evening of chamber music but � nding themselves in

what many likely considered a nightmare of their own. At the end of the concert, Igudesman spoke about how thrilled he was to come back to play in his home-town, then he said, in a serious voice, “I went back to my child-hood home — or at least I think that’s where it was — and it had become a sex shop.”

Despite their antics, Igudesman and Joo are excellent musicians and likely could have made a ca-reer in mainstream classical music with a bit of luck. But for them, such a staid existence didn’t feel right; they loved theater and comedy — especially in the of-ten-humorless classical music scene. When videos of their per-formances went viral, what they were doing resonated with many people, including several high-pro� le musicians such as Eman-uel Ax and Gidon Kremer, who wanted to be a part of the fun, too. Fans were astonished and de-lighted to see a serious musician of such stature as Ax on stage being shoved off the piano stool by Joo. The pair has not limited their collaborators to musicians either; they have done videos and concerts with Sir Roger Moore and created a show called “The Music Critic” with actor John Malkovich.

In addition to their musical comedy collaborations, both have individual projects; Igudesman has worked with Hans Zimmer on several Hollywood � lm scores and Joo has given his own con-certs as a pianist. But the two al-ways come back to the Igudes-man and Joo show. “When I’m working with Hans Zimmer for

example, I always think, ‘Oh, this is great, I can bring this back to our show,’” said Igudesman. “A Little Nightmare Music” has evolved over the eight years that it has been on the road, but this fall, the pair will come out with something new, “And Now, Mo-zart,” which will, � ttingly, be pre-miered in Vienna.

Trapped in a Nightmare of Their Own Making

AYANO HODOUCHI SPECIAL TO RBTH

HOMETOWN: NORWICH, U.K.

AGE: 38

STUDIED: PIANO

HOMETOWN: ST. PETERSBURG

AGE: 38

STUDIED: VIOLIN

Apart from his collaboration with Igudesman, Joo is in demand as a soloist. He has performed under the baton of many famous conduc-tors, including Sergiu Commissiona, Daniel Raiskin and Yehudi Menuhin. Billy Joel chose Joo to arrange and record his classical piano pieces for the album Fantasies & Delusions. He also performs in the piano trio Dimensions.

In addition to his career as a musi-cal comedian, Igudesman is a rec-ognized composer and performer. He has published three violin so-natas that have been performed worldwide by soloists, ensembles and orchestras, as well as several books of violin duets, which Igudes-man has performed with other well-known violinists in the Violins of the World project.

Hyung-Ki Joo Aleksey Igudesman THEIR STORIES

“When something goes wrong, you realize that that’s what makes people curious; there’s the sense of ‘what’s going to happen next?’” Joo said. The two get inspiration from their own mistakes on stage.

Audio slide show atrbth.ru/15154

Hyung-Ki Joo (left) and Aleksey Igudesman perform their version of a musician’s worst nightmare.

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Twelve Russian Inventions That Changed the World rbth.ru/15089Feature

Improving Russia’s Business ClimateMay 9

Some technical inventions that make life simpler start out by making the life of their inventor easier. Nikolai Abkairov’s expe-rience is a case in point. The com-puter programmer from the Mos-cow exurb of Zelenograd was annoyed by the traffic he encoun-tered en route to work in the Rus-sian capital. While others opted to take the train, Abkairov de-cided to start working from home, collaborating with Ramu Sunk-ara and Bhaskar Roy, two Amer-icans of Indian descent, who were planning to leave U.S. software giant Oracle. In early 2007, after nine months of development, the three finished the prototype for a company that became known as Qik, which aimed at increas-ing the functionality of mobile telephones. Qik’s program enables mobile phone owners to upload videos and make them accessible

programming Russia hopes to compensate for a lack of interest in outsourcing with domestic software start-ups aimed at foreign markets

russians programmers can’t compete with india on price for outsourcing, so they are developing start-ups that appeal to foreign investors.

i.t. Firms Lay out welcome mat

tino kyuntseLRussia beyond the headlines

to friends. The program, now also available as an app for mobile video chats, is currently used by more than 10 million users around the world. The start-up had a me-teoric rise, and in January 2011 the company was purchased by Skype for $121 million.

Today, Qik employs 50 pro-grammers in Zelenograd. Grad-uates of the National Research University of Electronic Technol-ogy, which is also located there, are in the envious position of hav-ing an excellent prospective em-ployer just around the corner.

Qik demonstrates that Russian companies can compete in the global market without having to relocate to the West. Still, Qik’s success is dependent on an Amer-ican company in Silicon Valley, where two dozen employees take care of marketing and sales. With-out the business acumen of its partners overseas, the project would have been doomed from the start, Abkairov told Zele-nograd.ru. “I would have never taken such a huge risk alone,” he said. “I’m not that courageous.”

Until now, Russia has been known more for programming

talent than business savvy, but more and more Russia-based I.T. companies are finding commer-cial success. Moscow-based soft-ware manufacturer Abbyy has become known for its text rec-ognition program FineReader and

its electronic dictionary Lingvo. Now Abbyy is focusing on busi-ness solutions, as well as docu-ment and data capturing.

The most successful interna-tional Russian I.T. company is without question Kaspersky Labs, which produces antivirus soft-ware. Its earnings totaled $612 million dollars last year alone, and 80 percent of this revenue came from abroad. Partially as a result of this success, an increas-ing number of start-ups are being tailored for international markets right from the beginning. Alexander Galitsky, co-founder

success stories

andrei andreyev david yang

alexander galitsky max Levchin

Andreyev founded his first Internet project, the Web analytics service SpyLog, in 1999. Three years later, he launched Begun, an online con-textual advertising firm. In 2003, Fi-nam Holding bought an 80 percent stake in Begun.

A native of Yerevan, Armenia, Yang founded Bit Software in 1989, while he was still a student. He later re-named it Abbyy His company’s most popular products are optical recognition system Abbyy FineRe-ader and Abbyy Lingvo dictionaries.

In 1993, Galitsky sold 10 percent of his I.T. company ELVIS+ to American computer giant Sun Microsystems. After the sale, he became a venture capitalist, founding several funds that invest money in programming start-ups.

In 1998, Levchin and his partners founded the company that became PayPal. In 2002, eBay bought the company, and Levchin started Slide. Google later bought it for $182 mil-lion, and Levchin became Google’s vice president of engineering.

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and manager of the Russian venture fund Almaz Capital, believes that Russia’s greatest advantage lies in its “excellent programming institutions,” which provide their students with a first-class education, training software developers to be able to tackle complex problems. “Solving difficult problems, analytics, large quantities of data and algorithms are all areas where Russia can compete on a global scale,” Galitsky said. “Those are traits one can expect when working with Russians.”

Galitsky proves his point by comparing two popular smart-phone games. According to him, the more popular “Angry Birds,” from the Finnish Rovio Entertain-ment Studios, is not nearly as challenging as the similarly pop-ular “Cut The Rope” from the Moscow-based ZeptoLab. “‘Cut The Rope’ has a completely dif-ferent intellectual level,” but, he said, this intellectual ambition sometimes distracts Russian pro-grammers.

In the words of Kaspersky Labs founder Yevgeny Kaspersky, Rus-sia produces “a great deal of qual-

yevgeny kaspersky’s kaspersky Labs is russia’s most successful i.t. company; 80 percent of its sales come from abroad.

science experts question the benefit of handing out massive grants to foreign talent

Megagrant, the brainchild of the Russian Ministry of Education intended to revitalize Russian sci-ence, is well into its second set of awards. The program — organized in conjunction with Russian uni-versities, laboratories and re-search centers — gives partici-pating scientists grants of up to 150 million rubles ($5 million) to personally lead a research labo-ratory in Russia for a period of not less than four months per year over two years.

The competition has attracted 517 applications from all over the globe, and many of the winners are Russian émigrés who have an interest in rejuvenating scientif-ic research in their native land.

Megagrant winner Alexei Kavokin, 41, a professor at Britain’s University of Southamp-ton, earned his Ph.D. at the A.F. Ioffe Physico-Technical Institute in Leningrad, but after graduat-ing, he received an offer to work

state-sponsored grants of up to $5 million may not convince expert russian émigrés to come home, but they could encourage young russian scientists to stay.

in France; he later moved to the U.K.

“I’m working on the question of interactions between light and matter in crystals. We are trying to find out how to make light carry 10,000 times more infor-mation than it can at present when it goes through a fiber-op-tic cable,” said Kavokin, describ-ing his work. One of the most groundbreaking institutions in this field was Kavokin’s alma mater, which influenced the sci-entist to submit an application for Megagrant.

In contrast to Kavokin, who is coming home to Russia, ground-breaking American astrophysi-cist and Megagrantee George Smoot, 67, has never been to the country, although he has worked alongside many émigré Russian scientists. Smoot is positive about the high standard of science and educational traditions in Russia, but said that Russian science is being held back. “Throughout the whole world there is a large num-ber of outstanding Russian sci-entists,” he said. “But despite the high level of individual research projects in Russia, the equipment used by astrophysicists and cos-mologists is out of date.”

For Megagrant, Scientists Must Go Big and Go Home

megagrant hopes to encourage groundbreaking science in russia.

aLexandra guzevaRussia beyond the headlines

Russia has been known more for programming talent than business savvy, but this may change soon.

interview geLya morozova

ified specialists, but precious few successful businesses.”

Ten years ago, many felt that Russia could be the first choice for I.T. outsourcing from the West, said Georgy Pachikov, head of Moscow-based Parallel Graph-ics. But, said Pachikov, “Our pro-grammers see a piece of software and think to themselves, ‘I can do better than that.’ In outsourcing, you have to stick to the regula-tions, which require a certain amount of discipline.”

Parallel Graphics conducts most of its business abroad with Boeing and Airbus. According to

Pachikov, the interest in domes-tic business is minimal. “The pos-sible savings potential generated by our software is not worth the extremely large state operating costs,” Pachikov said. “That is the difference between an extensive and intensive economy.”

A better situation for Russian firms is collaboration with West-ern companies on developing new ideas and programs, according to Alexander Vovkula, Parallel Graphic’s technical director. “If the customer is not sure what they want,” Vovkula said, “then wel-come to Russia.”

Putting science Front and Center

askar ramazanov and daniel pe-rushev founded the web site the-ory and practice (t&p) as a way to share knowledge, to conduct lec-tures, seminars and master class-es. today the site is one of russia’s most popular forms of “edutain-ment.” sofia raevskaya of russia beyond the headlines talked to ge-lya morozova, who is in charge of organizing events for t&p, about the project’s popular young scien-tists seminar series.

how did you come up with the idea for the young scientists feature? Two-and-a-half years ago, we began to notice that the science section of our project is often empty, so we de-cided to close that gap. We conduct-ed an offline lecture series on scien-tific research called “The Brain and Behavior.”after the series was over, we noticed that science as a topic was popular, and we just kept going.what is the audience for these lec-tures?different kinds of people. often the viewers are colleagues in related fields, or students and curious peo-ple, 25–35 years old.what was the goal of the project?The main goal was to stir up interest in science. It turned out that people in Russia are extremely interested in science; the topic is both untapped and in demand.how did the scientists benefit?It’s a good experience in public speaking. They then get calls from Tv and radio stations.

This is not the case in the field of bioluminescence. According to Nobel laureate Osamu Shimomu-ra, who was born in Japan but emigrated to the U.S., Russian sci-

entists are among the best in the world in his field of interest. “Peo-ple are making huge progress de-veloping practical applications for bioluminescence in many countries of the world, but all the other countries have stopped doing fundamental research into the phenomenon itself,” Shimo-mura said. “All, except Russia.”

According to psychologist and Megagrantee Yulia Kovas, “the main point of this grant is to integrate Russian science into the global scientific community.” The

Russian-born scientist plans to develop a research project on twins at Tomsk State University in Siberia that will dovetail with research she has done in the U.K. — but she has no plans to give up her job at the University of London. “I am planning to work with the laboratory in Tomsk for a long time, not just over the next two years,” Kovas said. “Working on scientific research in Russia does not mean you have to live there.”

Alexei Kavokin understands her position. “I would be able to return [to Russia] to work, if I was given a position with condi-tions that matched those offered in other countries,” Kavokin said. “But it is hardly likely, as scien-tists just aren’t paid well in Rus-sia.” He thinks the process of at-tracting Russian scientists back to Russia is happening too slow-ly, but Megagrant is a big step towards reinstating Russia as a global player in science and re-versing the brain drain.

“Working on scientific research in Russia does not mean you have to live there,” said psychologist yulia Kovas.

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