WEDNESDAY, MARCH 14, 2012

International Relations The West should not consider the once and future president a threat

In its short, 20-year history, busi-ness in Russia has been largely dominated by men. The chaotic transition years that gave birth to the country’s market econo-my in the 1990s were ruled over by masculine tribal warfare, and the ensuing oligarch club that rules over the business world today is still largely “men only.”

Even linguistics don’t present many opportunities for women in business, the term “business-woman” not having followed its masculine counterpart when “businessman” made its lan-guage jump into Russian. Instead the feminine “-ka” ending is tacked onto the tail of the Eng-lish “businessman,” to create a

A Seat at the Conference TableBusiness Long relegated to roles behind the scenes, Russian businesswomen are becoming more visible

behind any successful man there is a strong woman,” said Elena Panfi lova, director-general of the Russian office of Transparency International, who herself came in 67th on the list. “The 24 busi-nesswomen in this rating repre-sent only those women who are visible. But behind the scenes, women are also playing a sig-nifi cant role because half of the chief lawyers and half of the se-nior accountants and fi nancial directors in big businesses in Russia are women.”

The group is a varied bunch and come from a wide range of sectors — from the aviation, technology and oil and gas, to sectors such as media and retail. There is a fairly clear line be-tween those mainly less-public fi gures who have attained their influential positions through years of conscientious hard work, and those who have been given a hand by an influential or wealthy husband or father.

Many analysts both in Russia and abroad believe that relations be-tween Russia and the West will deteriorate under the third pres-idential term of Vladimir Putin. The day after Putin was re-elected, one-time Moscow corre-spondent Luke Harding, writing in British daily The Guardian, predicted: “In international rela-tions, it [Russia] will continue to play a spoiling role, weighing up its own strategic interests against the frisson of annoying the Amer-icans.” Harding combines these gloomy forecasts with a compar-ison of Putin’s rule to that of Le-onid Brezhnev.

Left Front leader Sergei Udalts-ov, however, holds the opposite view. “Putin is Russia’s most pro-Western politician,” Udaltsov said in an interview with Literatur-naya Rossiya. “He shut down the Soviet military bases in Cuba and Vietnam, he allowed Nato to ex-pand to the territory of the for-mer Soviet Union by admitting the Baltic republics in the early 2000s, and he keeps Russian bud-get money in American treasury bonds.”

Much to the chagrin of Rus-sian nationalists, Udaltsov has the facts right. Putin’s other friendly moves include consent-ing to the deployment of Ameri-can bases in Central Asia in 2001 and cooperation with the West-ern countries in combating the Taliban in Afghanistan.

But still there is the abiding sense that Russia’s foreign policy under Putin will be anti-Western. “It seems as if we have a situa-tion in which the media is main-

DMITRY BABICHSPECIAL TO RBTH

NATASHA DOFFTHE MOSCOW NEWS

During Vladimir Putin’s first two

presidential terms, Russia

pursued a more aggressive

foreign policy. Will it be more

collaborative this time around?

On March 8, the world

celebrated the 101st

International Women’s Day. In

Russia, the role of women in the

business landscape continues to

evolve and expand.

CONTINUED ON PAGE 3

tion to adopt policies indicating that the U.S. has stopped perceiv-ing Russia as a threat.

Closer to home, however Putin managed to launch some impor-tant foreign policy initiatives even during his term as prime minis-ter. One was the improvement in relations with Poland after 2010, when he visited the memorial to the Polish P.O.W.s who had been executed at Katyn.

Vladimir Putin

in tears (which

he said were

caused by cold

wind) upon

winning the

presidential

race. As prime

minister, he

made several

initiatives at

improving rela-

tions with the

West.

taining a myth it has created it-self,” wrote Stanislav Belkovsky, a noted Russian journalist and political scientist, who considers himself a critic of Putin from what he calls the national-dem-ocratic position. “Putin is any-thing but a nationalist. Under him, Russia fi nally morphed from being a world power into a calm state that has only regional po-litical ambitions, and even these are not aggressive. But the West-ern media have harped on it for

so many years that people have subconsciously come to think of Putin as ‘aggressive.’”

Although outgoing President Dmitry Medvedev has often been considered more friendly towards the West, much of the credit for his main acheivements — the “reset” of relations with the Unit-ed States and the signing of a new Strategic Arms Reduction treaty (New START) — really be-longs to U.S. President Barack Obama, who led his administra-

Putin’s Foreign Policy: Strategy and Self-Interest

Darya Zhukova

(left) and Na-

talia Vodyano-

va are two of

Russia’s most

visible — and

influential —

business-

women.

NEWS IN BRIEF

Last month, after more than two decades of work, a drill manned by Russian scientists reached the surface of Lake Vostok, a massive freshwater lake that had been sealed more than 13,000 feet be-neath the ice shelf that covers Antarctica for more than 20 million years. The scientists involved in the project say they have found “the only giant super-clean water system on the planet.” The sci-entists believe that the conditions of the lake are similar to those of the subterranean lakes on Ju-piter’s moon, Europa.

Russians once again took to the streets in early March following Vladimir Putin’s victory in the March 4 presidential election, but turnout was light compared with the protests earlier in the winter. Most observers believe that while there may have been some incidences of fraud in the polls, Putin indeed won easily. Protest organizers say they will continue to push for snap parlia-mentary elections.

Russians Hit Antarctic Lake

Protests Continue, But to

What End?

ONLY AT RBTH.RU

The Caucasus: Old Traditionsand a Complex History

Russian Education to Align with Western Standards

Russian space agency Roskosmos has been invit-ed to take a bigger role in the European Space Agency’s ExoMars project following NASA’s with-drawal from the endeavor. Budget cuts forced NASA to back out of a 2009 commitment to the Europeans to work on the project, which aims to send a rover to Mars by 2018. Russia had already agreed to supply energy facilites to the $1.3 bil-lion ExoMars project, and will now take on more of the fi nancial burden.

Europe, Russia Leave NASA

Behind in Race to Red Planet

RBTH.RU/15002

Read more about protests in Russia at rbth.ru/protests

Read more about Lake Vostok atrbth.ru/14356

Money & Markets

Investors Snap Up Russian TreasuriesP. 5

Culture

Contemporary Russian Music Finds Listeners in Los AngelesP. 7

Feature

Growing I.T. Sector Sees Its Future in the CloudsP. 8

This special advertising feature is sponsored and was written by Rossiyskaya Gazeta (Russia) and did not involve the reporting or editing staff of The New York Times.

A Special Advertising Supplement to The New York Times www.rbth.ru

Distributed with

The New York Times

RBTH.RU/14977

word that literally translates as “female businessman.”

But a recent list of the 100 most infl uential women in Rus-sia, compiled by radio station Ekho Moskvy and several other major media organizations, sug-gests that women pull more strings in the country than they

are generally given credit for.Tucked away among the usual

pile of pop stars, socialites and public activists are roughly 24 mostly little-known business-women, whose resumes are stud-ded with top positions and major achievements.

“There is a Russian saying that

CONTINUED ON PAGE 2

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The Real Hopes Behind Russia’s Protest Movementrbth.ru/14984Politics & Society

2,500,000people registered before election day on webvybory2012.ru to exchange links to live broadcasts from polling station webcams across the country.

200,000cameras were installed, two each on more then 91,000 poling stations. At its peak, there were 400,000 viewers on the site at once. Access was pro-vided to 99.3 percent of the polling stations with webcams.

$444 millionwas spent on the webcameras proj-ect, which was announced by Prime Minister and President-elect Vladimir Putin in December as a response to the massive protests against suspect-ed vote-rigging in the Dec. 4 State Duma elections.

IN FIGURES

With its two carpets on the walls, plastic chairs, a table heaped with documents and a curtained cor-ner for voting, this private house-hold in the Chechen village of Mesedoi caught the interest of a huge number of Internet users who were monitoring the voting in the Russian presidential elec-tion. There is no school in the vil-lage that could be used as a vot-ing place, so locals have traditionally come to vote at the house of Shaya Yunusov, head of the local election commission. Vot-ers are asked to take their shoes off when they enter the polling station.

Besides performing their main function — to secure election transparency — the network of webcams put in place on the ini-tiative of Prime Minister and President-elect Vladimir Putin also brought home to many Rus-sians the vastness of their coun-try. Some of the cameras, which began transmitting videos from polling stations late on Saturday, March 3, provided glimpses into life in far corners of Russia, such as late-night school dances.

During election day, March 4, 2.5 million voters who had pre-viously registered on webvybo-ry2012.ru exchanged links to live broadcasts from all across the country. There was the ballot box installed in a small village that had a very narrow slot and re-quired the voter to use a ruler to push the ballots inside; there were voters dancing the Lezginka at a polling station in Chechnya; and

Elections Popularity of antifraud initiative surprises authorities

Though viewers started watching

webcams installed in polling

stations to catch fraud, they soon

became captivated by the slices

of life visible on the screen.

on one camera, viewers could watch as prominent journalist and public fi gure Leonid Parfyon-ov, who was registered as a mon-itor in his native Cherepovets, talked on the phone.

Residents of some Russian re-gions used the live broadcast to pass on greetings to their rela-tives. The most advanced users accessed the webcams from their phones and took pictures of them-selves casting votes.

“Mr. Putin, will you please keep the webcams on. It is really ex-citing. I was too busy and missed the people in Chukotka and Khabarovsk. But I saw a woman waiting for voters while sitting on a sofa in Morskoe village on the Curonian Spit. I observed a political hassle in a minimart somewhere in Penza Region. I saw the polling station in my own school, which I haven’t had a chance to visit in the last 15 years. It is a big country,” wrote a blog-ger called Senism.

The webcams did not broad-cast the entire vote counting pro-cess, which left room for possible rigging during several election phases, but they did cause the voting process to become more transparent. Some bloggers, in-tent on identifying incidences of fraud, interpreted the mandato-ry test of electronic ballot boxes as ballot stuffing; the Central Election Commission had to ex-plain to the Internet community how the test worked. Other In-ternet users were indignant at the

Webcam Project Catches Fraud and Frivolity

VSEVOLOD PULYARUSSIA BEYOND THE HEADLINES

The webcams did not broadcast the entire vote counting process, which left room for possible vote rigging, but they did cause the voting process to become more transparent.

99.3 percent of the polling sta-tions where webcams were in-stalled, with only minor devia-tions,” the minister said. According to him, the Web site was accessed 500 million times on March 4.

This breakthrough did not go unnoticed by foreign politicians. Independent international mon-itor Bela Kovacs, a member of the European Parliament from Hungary’s Jobbik party, plans to propose using webcams during the next European Parliament elections. Tadeusz Iwinski, who represented the Parliamentary Assembly of the Council of Eu-rope, called the use of webcams

at Russian polling stations “a global-scale phenomenon.”

Furthermore, owing to the we-bcam network, some distant cor-ners of Russia fi nally obtained access to the Internet. These chan-nels will be used subsequently to deliver educational content to schools.

After the voting ended, the Yu-nusov family in Chechnya was having dinner. Their six-month-old son was crawling under the table, and the adults were hav-ing a quiet conversation — albe-it under the silent gaze of sever-al thousand webcam viewers. The election was over and life in the country went on.

" This [system] doesn’t exist anywhere else in the world. This unique solution [to the

problem of election fraud] shows that the lessons of history were taken into account."

" Everything was, well, trans-parent and open. Russia has opened a new page in his-

tory today – there is a broadcast of the Russian elections all over the world."

" Although the authorities made some effort to improve transparency, there remained

widespread mistrust in the election process. All allegations need to be thoroughly investigated."

IN THEIR OWN WORDS

Tadeusz Iwinski Milan Bozhevich Heidi Tagliavini

Around 8 a.m. on March 5, when it all seemed to be official, a fa-tigued yet elated Max Katz, 27, a candidate for municipal council in Moscow’s Shchukino district, staggered out of the offices of the municipal electoral commission and tweeted, “I’m 90 percent pos-itive that I did it.”

Most of his friends had long since gone to bed, wishing the events of Sunday, March 4, had been a bad dream. At around 6 p.m., an announcer on statetelevision had read the firstresults of that day’s presidential election, confi rming what many assumed, but refused to believe — 63,6 percent of Russians had voted in favor of Vladimir Putin, keeping him in office until 2018.

But Katz was not primarily concerned about the election tak-ing place nationwide; rather, he was focused on his own political future. In his race for local coun-cil, Katz’s campaign fl yers read: “My name is Max Katz. I am 27 years old. The election for the Shchukino municipal council is being held on March 4. This body is completely useless. It possess-es no power whatsoever.” No one could accuse him of being less than direct.

“Everyone told me I should make the same promises other politicians were making, that I would vow to punish corrupt pol-iticians, reduce the costs of gas and water, etc. But I chose to be honest,” Katz said, driving his black Opel through the jam-packed back streets of his dis-trict. The new apartment com-plexes in Shchukino are surrounded by hoards of cars. The area is known as a prosperous, middle-class neighborhood, full of upwardly mobile young peo-ple. Katz is one of them, but un-like many of the middle-manage-

ment types who are his neighbors, Katz made the money with which he funded his campaign playing online poker. He is a Russian champion, as well as a player feared on the felt around the world. He began playing poker in 2004 and soon found he had a talent for the game. Although he does not consider himself a member of poker’s elite, he posts decent earnings. However, he may actually show more promise as a businessman and dealmaker; last year, Katz made more than $1 million sponsoring another play-er in a tournament.

Katz’s poker skills and busi-ness acumen are hardly the only difference between him and stan-dard local politicians, many of who resemble the polling station officials at the Shchukino school that has been designated as poll-ing station 2997. The polling sta-tions are full of older women, all well-dressed with conservative hair styles, many of who are for-mer school principals; the men are all in stiff gray suits and have serious faces. Katz, however, looks more like the 20-year-old volunteer election monitors, who are lounging around the station in jeans and tennis shoes, sitting on couches next to fake plastic trees and dusty red curtains, posting their observations on Twitter and Facebook. For many, it’s their fi rst time monitoring an election.

Change from the bottom up By mid-afternoon on March 4, there was hardly anyone left who truly believed Putin would be forced into a second round of elec-tions — not after a campaign in which images of him flashed across TV screens all day, every day. That’s one of the reasons that Katz decided to run for a seat on the municipal council. It’s the be-

Working the System

Poker player Max Katz won election to a Moscow municipal council.

“I am deeply convinced that the signs of improvement in Rus-sian-Polish relations at the time were Putin’s personal project,” said Waclaw Radziwinowicz, Moscow correspondent for Pol-ish newspaper Gazeta Wyborc-za. “When Polish President Lech Kaczynski died in an air crash, it was Putin who began person-ally eliminating the consequenc-es of the disaster.”

The tragic plane crash, which occurred on Russian soil, could have caused further deteriora-tion in Russian-Polish relations, but instead the countries took the tragedy as an opportunity to make a fresh start. Putin began this process by visiting the crash site with Polish offi-cials and then heading up the inquiry into the crash.

In general, this is Putin’s style: coming to the aid of a country that may or may not have been on good terms with Russia and thereby improving relations. An-other example can be found in Russia’s response to the disas-ter at Japan’s Fukushima nucle-ar plant in March 2011. When it

Locals Municipal candidate celebrates a personal political victory Putin’s New Foreign Policy

became clear that the loss of the nuclear power station would cre-ate a severe shortfall in Japan’s energy supplies, Putin proposed to compensate with increased deliveries of Russian liquifi ed natural gas as well as coal.

Although his opinion piece on foreign policy published in the Russian daily Moskovskie No-vosti in the days leading up to the presidential election took a harsh tone towards Russia’s in-ternational partners, the West in particular, Putin’s actions as prime minister indicate that Russia under Putin, in its latest incarnation, will not seek con-fl ict, but will rather act strate-gically with partners ranging from the European Union and the United States to China and the Arab world.

“The current political situa-tion is very complicated,” said Tatyana Parkhalina, an expert from the Moscow-based Center for European Security, “and it is in the interest of both Russia and the West to collaborate in fi elds ranging from the strate-gic partnership in Afghanistan to the Iranian nuclear pro-gram.”

Baby, You’re No Good

POLLS CONDUCTED OVER THE LAST DECADE REVEAL THAT MOST RUSSIANS

DISAPPROVE OF THE ROLE THE UNITED STATES PLAYS IN GLOBAL AFFAIRS. POSITIVE

ATTITUDES WERE AT A HIGH FOLLOWING THE SEPTEMBER 11TH ATTACKS, WHILE

NEGATIVE ATTITUDES PEAKED DURING THE IRAQ AND GEORGIAN WARS.

THE POLLS

“impassive and cynical” face of the man who fed ballots into the machine at one polling place. “Webcams have really complicat-ed many people’s lives: Some found it hard to stuff the boxes and some to shoot ‘shock!stuffing!’ videos. Praise the robots!” writer Sergei Minaev tweeted.

The webcam project, which cost the country 13 billion rubles ($444 million), was completed on a very tight schedule and successfully managed the high traffic load. The system was commended by Min-ister of Communications and Mass Media of Russia Igor Shchegolev. “In normal operat-ing mode, we managed to access

Some of the cameras provided glimpses into life in far corners of Russia, including late-night school dances.

Katz claims he is not one of the “frustrated city dwellers” and does not want to be labeled as one of the protestors.

MORITZ GATHMANNSPECIAL TO RBTH

On March 5, rather than mourning

President Vladimir Putin’s

reelection with his friends, Max

Katz celebrated his own win in a

race for municipal council in a

region of northwestern Moscow.

CONTINUED FROM PAGE 1

ginning of something new, start-ing from the ground up.

It was sometime after the fi rst demonstrations for fair elections in December that Katz read an appeal by the opposition party Yabloko for candidates interest-ed in running for seats on mu-nicipal councils.

“To be honest, I want to be mayor in a small Russian town when I am 35, and test my urban development plans,” Katz said, explaining his interest. He claims he is not one of the “frustrated city dwellers” and does not want to be labeled by the media as one of the protesters. “I’m actually quite satisfi ed,” he said.

After the polls closed at 6 p.m., Max Katz turned his Opel back in the direction of polling station 2997. In addition to the six inde-pendent election monitoring vol-unteers, there were now six im-posing figures dressed in matching black suits who said they were election monitoring of-fi cials. It’s unclear what they were doing at the polling place, but at one point, they began fi lming Katz and trying to provoke him by such action as screaming and making

obscene gestures. The one official-ly independent member of the election commission got up and left, but the election monitors kept their calm, responding to the scene by writing one complaint after another. Finally, the men in black left the polling station and drove off in their sedan.

“It could very well be that we just kept them from committing electoral fraud,” Katz said.

Around 2 a.m., the votes for president were all counted. Prime Minister Vladimir Putin took 52 percent at this polling station alone. “That’s impossible,” whis-pered a young female monitor-ing official, almost in tears.

Vladimir Putin was also close to tears that night in front on the Kremlin. “We are victorious,” he stated from atop a stage in central Moscow, thanking the thousands of people chanting his name.

There was no one chanting Max Katz’s name, but nevertheless, out of a total of 16 candidates, he re-ceived the third-highest number of votes and was elected to the municipal council along with four others. Max Katz’s career as a local politician had begun.

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THE HEAD OF THE ELECTION OBSERVATION

MISSION OF THE OSCE

BULGARIAN MONITOR PACE MEMBER, DEPUTY OF THE EUROPEAN

PARLIAMENT

Live streams from webcams across Russia were broadcast at the Central Elections Commission on March 4.

SOURCE: PUBLIC OPINION FOUNDATION (FOM)

03MOST READ

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Alisa Ganieva and The Chronicles of Dagestan rbth.ru/14982 Special Report

Two of the list’s most public busi-nesswomen, Daria Zhukova and Polina Deripaska, were in rela-tionships with some of the coun-try’s richest men when they began their business ventures. But while the funding for their companies may have come from the men in their lives — Zhukova is the girl-friend of billionaire Roman Abra-movich’s girlfriend and Polina Deripaska is married to Basic El-ement’s Oleg Deripaska — they both worked to make their busi-nesses a success. Zhukova’s art gallery, Garazh, is one of Mos-cow’s most popular cultural spots, and Deripaska is credited with having pumped new life into For-ward Media Group.

Elena Baturina is the wife of former Moscow mayor Yury Lu-zhkov, but her work with the real estate fi rm she founded, Inteko, made her the world’s third rich-est woman, according to Forbes.

Olga Sloutsker, founder of World Class, Russia’s fi rst fi tness club, talked with RBTH about the role women played in developing the spa, fi tness and health club in-dustry in Russia.

A successful athlete in the past, you

decided to go into business. Why?

And why did you choose fitness?

In the early 1990s, when the coun-try started living a new life, I want-ed to come up with something new. I had never thought of becoming a businesswoman. It happened ac-cidentally, as is usually the case. As a professional athlete, I trained all my life in unheated, stuffy and scuffed gyms. We never then thought that it could be any dif-ferent. I went to Spain on vaca-tion with my then-husband and went into the hotel fi tness club for a step aerobics session. I was shocked at the sports culture there: instead of the military-style phys-ical training we were used to dur-ing the Soviet era, I saw people engaged in fun and happy sports in a clean gym while listening to music — this motivated you to take care of yourself.

I came to Moscow and found out that there were no profession-al fi tness clubs there. So I thought, why not try it for ourselves? We found a place and did it up — a lot with our own hands.

Where did you get the money? And

how much did you invest?

My husband gave me the money. Initially, we invested almost noth-ing, just $400,000.

You started from scratch. How did

people like your idea?

The media gave us a hostile re-ception. I was expecting people to laud me when I came to the fi rst press conference. But the re-sponse was just the opposite. The reporters started picking on me

A slow climb up the ladder But perhaps surprisingly, given the nature of Russia’s business climate, a large number of the business types on the list are women who have worked their way up the through talent and hard work.

One of these is Natalia Kasper-skaya, Russia’s second richest woman according to Forbes, who, together with her ex-husband Eu-gene Kaspersky, founded and ran Kaspersky Labs, a world-class I.T. security company. Kaspers-kaya, who stepped down as C.E.O. of the lab in 2007 to run her own company, InfoWatch, is often put forward as a notable example of Russia’s potential in the global technology industry.

Other businesswomen on the list have worked their way to high positions in major Russian com-panies, but have had little public presence and are rarely regarded as the face of the corporations that employ them.

Women Taking Bigger Role in Business

Real estate magnate Elena Baturina is the world’s third-richest woman, according to Forbes.

For instance, Bella Zlatkis, the deputy director of Sberbank, is one of the founding fi gures of the Micex stock exchange and was a chief negotiator for the restruc-turing of Russia’s debt during the country’s 1998 default.

And Olga Dergunova, ranked 37 on the list, has twice made it to the Wall Street Journal’s list of most successful female European business leaders for her running of Microsoft Russia and current role on the management board of VTB bank.

High achievers, low ambition TV hosts Tina Kandelaki and Kse-nia Sobchak are not regarded as businesswomen in the tradition-al sense — and yet their infl u-ence in Russian society is unde-niable.

A study on career opportunities for women in business conducted last year by the international audit firm PriceWaterhouseCoopers found that while Russian women are high achievers in the business world, they rarely reach top posi-tions within their companies. The study found that some 91 percent of chief accountant positions were held by women, but only 6 per-cent of company president posi-tions, showing that women per-haps have the right skills, but don’t generally aim for the top.

Panfi lova, of Transparency In-ternational, says gender roles play a big part in perceptions of the types of roles women should play in the business world.

“Sometimes women just prefer to keep a lower profi le,” Panfi lova said. “We shouldn’t forget that most women are also mothers and simply don’t have the time to pro-mote themselves. The time that men have to spend on self promo-tion and P.R., women spend cook-ing dinner.”

But Natalia Orlova, a macro-economist at Alfa Bank and a prominent female fi gure in Rus-sia’s financial sector, says the issue may also be a product of Russia’s immature business en-vironment.

“Russia has had a market econ-omy for just 20 years — not long enough to establish well-protect-ed legal wealth,” Orlova said. “Women in Russia generally try to do business following business rules rather than their personal connections. You could also draw the conclusion that they are less corrupt, but I probably wouldn’t say so directly.”

" When it comes to manage-ment, men and women have different approaches. In

business, women are more inclined to compromise, are willing to hear other parties’ opinions, and they are more concerned for loyalty rather than personal success.”

" Lately, I’ve noticed that a majority of large-scale, rather ‘brilliant’ projects,

have been engineered by women. In our country, women are very ef-fective in business — they are more organized, goal-oriented, and have the option of using native ‘feminine’ qualities to help them past several obstacles, such as women’s intuition and natural charisma. Success in a woman’s personal life is also very important.”

" When you work in a team with men, it’s important to mask your emotions, listen

to their opinions, and compromise. Men see problems in a different way — they think globally, and therefore make any problem out to be much bigger than it really is. Meanwhile, women have a tendency to stick with details, so I appreciate the op-portunity to hear the male perspec-tive in every situation.”

" What is success? Some ac-complishments, which may be considered successes to

individual women, may be different from society’s expectations. One of these is earning your first million before you turn 25. But according to society, a woman should strive to be beautiful and smart. If she is wealthy, she is successful.”

IN THEIR OWN WORDS

Ekaterina Petelina

Olga Miagkikh

Yulia Charysheva

Tatyana Shirkina

CORPORATE MANAGEMENT TEAM,

VTB BANK

HEAD OF CORPORATE ALLIANCES,

CIRQUE DU SOLEIL

MARKETING DIRECTOR,

CENTRAL PARTNERSHIP FILM COMPANY

CURATOR,

HENNESSY CULTURAL FOUNDATION

CONTINUED FROM PAGE 1

Russian Women Create a World-Class Fitness Experience

INTERVIEW OLGA SLOUTSKER

[asking] “How can you sell phys-ical training?”

I was lucky to make new ac-quaintances. I moved to Moscow from St. Petersburg and met up with artists, pop stars and fi lm di-rectors, who supported me with my idea. Also, it was a new trend; people didn’t know what fi tness meant and we had to translate this word.

Who were your first customers?

They were some of the most suc-cessful people. The Abramovichs, for instance. I did not know Roman then. They were fi lm stars, show-biz celebrities, fi rst capitalists, fi rst successful journalists, there were many politicians. They sensed the trend very well and they wanted change.

How much did you charge for an an-

nual pass?

The fee was $2,500.

That is a lot of money even now, but at

that time it was an exorbitant price.

It was, but there was nothing else; we had no competition. Anyway,

people were ready to pay for such a club in the center of Moscow, near the Kremlin, with many gyms and the best aerobics classes, fi t-ness machines that they couldn’t fi nd anywhere else.

When did you break even?

Very quickly. Things were very dif-ferent in 1993. We broke even in less than a year.

At some time you had to make a

choice: to stay in the elite club seg-

ment, or expand your audience.

I had a wonderful team, but I could not make all of them directors. I did not want to lose them, though. That’s when we decided to open a second World Class club. Then I got excited: new offers came in, and I felt that the team, too, had ambition to open new clubs. Our third, fourth and 20th clubs emerged. We established a region-al department, to sell franchising contracts. Now we have clubs in 15 cities, including Khabarovsk, Vladivostok, Astana and Almaty.

You could say that the Russian fitness

industry was established by women.

You were the first, then big new fit-

ness networks appeared — also con-

trolled by women. How would you ac-

count for this trend?

Maybe our men are unwilling to spend time creating something from scratch. It is very hard work. At that time, many industrial com-panies were privatized, and you could acquire an oil fi eld or buy into a big foundry without too much effort. Men must have cho-sen that way.

Or there could be a different reason. You know, World Class was the fi rst company. Then we decid-ed to set up a new one to manage cheaper clubs, called Planet Fit-ness. My director and fi tness di-rector were transferred there. A third company was created by my sales director’s wife. The Russian fi tness industry could be not so much a women’s initiative, as women’s networks shooting out from World Class. We were work-ing hard, living within our means, which is typical of women. We never split and grabbed state as-sets. We created this industry; we brought it here.

Prepared by Vladimir Ruvinsky

HER STORY

Olga Sloutsker was born in 1965 in Leningrad and began studying fenc-ing at the age of 11. She fenced 12 years for the Leningrad City team and became a master of sports in fencing before retiring in the early 1990s. In 1993, she opened World Class, the first fitness club in Rus-sia. Today, there are 37 World Class clubs in Russia and the C.I.S., and the company has developed other brands to appeal to different seg-ments of society. Sloutsker later studied management at the Man-agement School of the State Acad-emy and has observed American and European fitness clubs to bring her clubs in line with international expectations. World Class has been named one of the world’s top 25 fitness clubs eight times.

NATIONALITY: RUSSIAN

HOMETOWN: LENINGRAD

STUDIED: PHYSICAL CULTUREIrina Khakamada is easily one of Russia’s most prominent women, having been a successful entrepreneur, deputy speaker of the State Duma and a govern-ment minister. Now Khakamada has largely retired from the pub-lic eye, but remains an infl uen-tial fi gure; she has reinvented her-self as a teacher, giving master classes in the art of business psy-chology and communication. The thread that runs through all her courses is the art of negotiating. “Eighty percent of business suc-cess depends on successful com-munication, and most Russian businessmen fail during most ne-gotiations,” Khakamada said. “The reason is not their ineffi-ciency but an inability to com-municate.”

Khakamada holds degrees in economics and embraced entre-

Life Stories From entrepreneur to politician

At various times a business leader

and a politician, today Irina

Khakamada teaches seminars on

business psychology, teaching

the art of communication.

preneurship when Russia became a market economy. She took a po-sition with the government in 1997 to promote entreprenuer-ship. In her opinion, the main problem at the federal level is not that some laws are good and some are bad, but that they are changed too often. “Rules, including tax rules, are altered every year,” she said. “Rules must be adopted once a decade.”

Khakamada says that gender discrimination exists in both business and politics, and that while there is no gender differ-ence in the ability of a person to succeed in business, she main-tains: “Women are better negoti-ators; they are less ambitious and are more eager to accept a com-promise; they are also better at scanning the psychological type of their opponent in order to adapt and get what they want.”

Khakamada believes that her business experience made it more difficult for her to succeed in pol-itics. “They told me that politi-cians did not understand me,” she said, “since I behaved like a busi-nessperson.”

She explained that, in business, when you strike a deal and shake hands, you start working even be-fore the contract is signed. “The main thing is to calculate if there is profi t for you and say openly whether you can benefi t or are uninterested,” she said.

“In politics, it is the other way round,” Khakamada explained. “Everything is vague; it is not clear where people’s interests lie. A person nods, agrees and then breaks the deal within three hours. They say one thing, mean something else and imply a to-tally different thing.” Profession-ally speaking, politics consists of endless intrigues, she explains. “As a businessperson, I found it hard in politics. It is hard for all businesspeople in politics.”

Finding Success in Business and Politics

Irina Khakamada isn’t content

just to rest on her laurels.

VLADIMIR RUVINSKYRUSSIA BEYOND THE HEADLINES

Russia’s Top 100

Women, By Age

Women in Business by Industry

This content first appeared in the World Economic Journal

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A ranking of influential women shows that younger women get more press, but success comes with age.

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Taking a New Look at Nuclear

QUESTIONS & ANSWERS

One year after Japan’s Fukushi-ma disaster heightened the con-troversy over nuclear power, Russia’s leadership remains com-mitted to the peaceful use of the atom. RBTH caught up with Denis Kovalevich, head of the nu-clear technologies cluster at the Skolkovo Innovation Center, to talk about the many uses of nu-clear energy.

Before you came to Skolkovo, you

worked on strategic development

at the state corporation Rosatom.

Was it then that you developed an

understanding that there were al-

ternative areas and markets for nu-

clear energy?

I suppose the idea was shaped even earlier, and I was not the only one. If we take a look at the strategic documents of the nu-clear industry of the late 1980s, we’ll see many of the new direc-tions outlined there. There are at least two reasons for pursuing di-versifi cation in the nuclear sec-tor. The fi rst is that the market is too sophisticated, so there is a lot that does not depend on us. Take Fukushima — it happened out-side Russia, but it had a direct impact on us. The second reason is that the markets for allied tech-nologies are growing much fast-er than the energy market, but their volumes are already com-parable.

The range of the nuclear in-dustry know-how that can be ap-plied outside the energy market is estimated to include at least 500 products and solutions. Many of them constitute part of the new technology platform “Radiation Technologies” adopted by a spe-cial commission with the Russian government and given priority status.

Currently you supervise this plat-

form as director of the nuclear tech-

nologies cluster at the Skolkovo In-

novation Center?

Yes. This platform is officially co-ordinated by the Skolkovo Cen-ter and our cluster. Overall, four strategic directions have been identifi ed for the nuclear tech-nologies cluster, based upon gen-

NATIONALITY: RUSSIAN

AGE: 32

EDUCATION: MANAGEMENT

Denis Kovalevich was born in 1979 in the Moscow Region town of Troitsk. After graduating from the Higher School of Economics in 2002, he managed a number of consulting projects in Russia’s Vol-ga River regions. Before becoming executive director of the Nuclear Technologies Cluster at Skolkovo, he worked on long-term strategy planning for Russia’s state atomic power monopoly, Rosatom. Since 2009, he has been a member of the President’s Commission for Modern-ization.

HIS STORY

eral development trends in the nuclear power sector, analysis of global progress and this country’s capabilities, including its person-nel potential.

I won’t go into detail, but sim-ply enumerate them. They include radiation technologies (radiation-based solutions); development of new properties of materials; tech-nologies to design, construct, model and engineer complex technological facilities and sys-tems; engineering, instrument-making and new electronics so-lutions. These all are spinoffs of the nuclear program, to a great-er or lesser extent.

Why was Skolkovo given authori-

zation to coordinate the “Radiation

Technologies” platform, not Ro-

satom?

There are more than 70 organi-zations currently engaged in ra-diation technologies within the scope of this platform, and Ro-satom is just one of them. As far as its competencies are concerned, it is, indeed, potentially the most powerful investor and a player capable of assembling end prod-

ucts. But, because of its sheer scope, Rosatom cannot support companies worth, say, $1 million dollars. A nuclear power plant is a tangible facility, but when it comes to what we are going to search for and nurture, the state corporation won’t even notice such things.

We pave the way. We support the creation and development of new projects and companies, that will later be included in the tech-nological chains of global tech-nology corporations by acquiring them, working with them in any way possible. We believe it is cru-cial that as many people and com-panies as possible choose this di-rection in which to move and this platform to rely on when build-ing their long-term strategies. This is the essence of my job. Fun-damentally, the main challenge is to start the wave, not just sup-port two or three projects, how-ever promising they might seem.

How much time will you require and

what steps need to be made? Are

there instruments for measuring and

assessing the wave you initiate?

I have a model in my head that looks roughly as follows. Essen-tially, we are talking about mak-ing a decision to launch a new industry. Judging from interna-tional practice, a decision of this kind requires fi ve to 10 years, de-pending on the country. For in-

stance, Singapore launches a new industry once every seven years. They take seven years to think, analyze, check and double-check. I perceive and interpret Skolko-vo’s potential in this context as “action research”.

When our grants committee de-cides to support some proposed project, invest in a startup, it is a chance to assess the viability of the applicant company. We can-not check it by way of analysis, using a piece of paper and a pen-cil. We need to give people a real opportunity, let them try, face cer-tain obstacles — when you have worked with them, you see their strengths and weaknesses. We need to organize this process.

You referred to Singapore’s expe-

rience. What about recent devel-

opments in Japan? Do you believe

they are thinking about diversify-

ing the nuclear industry and giving

priority status to sectors other than

nuclear power?

I’m sure that, following Fukush-ima, this has become much more relevant. They must think about ways to diversify.

In brief, what does Skolkovo resident

status offer your foreign partners?

To be very brief, I’ll mention just two benefi ts. First, this will en-able foreign companies to create their own R&D centers in Rus-sia. In Skolkovo, they will be able to establish them without red tape and on a very tight schedule. Sec-ond, foreign companies, as soon as they partner up with some of the Skolkovo startups, will enjoy the status of exclusive innova-tion partner of Russia. When a foreign company joins the center, it gets special status to position itself in Russia.

The Skolkovo team has expe-rience and an understanding of how to deal with administrative obstacles, tackle customs prob-lems, and much more. The center was designed and set up to shake up the existing bureaucratic model.

Prepared byAlexander Yemelyanenkov

In 2007, one of Russia’s leading banks, state-owned V.T.B., fl oated 22.5 percent of its shares by pub-lic subscription at 13.6 kopecks per share, raising over $7 billion from the fl otation. The action, one of several offerings by state-owned companies, was called a “people’s I.P.O.” and was intend-ed to encourage individual Rus-sians to take a chance on invest-ing in the stock market. The V.T.B. issue proved extremely popular, but its timing was off. In the cri-sis years that followed, the bank’s share price dropped by almost half, and is currently trading at 7 kopecks. Participants in the I.P.O., many of whom were nov-ice or unsophisticated investors, were outraged and claimed they had fallen victim to fraud.

Over the next few years, ru-mors of a possible buyback ap-peared from time to time, but V.T.B. always dismissed the mea-sure as economically unsound. However, during the Russia 2012 economic forum in February, Rus-sian Prime Minister Vladimir Putin recommended that V.T.B. reconsider the matter.

Shortly thereafter, the bank fi -nally agreed to buy back shares from I.P.O. participants at the of-fering price. While initially this seemed like it would inflict a heavy blow on the company’s as-sets, in reality, few initial share-holders have managed to hold on this long. Most of them have al-ready sold the stock. V.T.B. esti-mated that the bank will have to repurchase less than 1 percent of its share capital at the cost of roughly half a billion dollars. Still, the buyback is likely to be a pain-

Finance State-owned bank caves to pressure and offers a buyback program to participants in its I.P.O.

V.T.B. is planning to buy back

shares from disappointed

investors in its I.P.O. at the

offering price — almost twice the

current market value.

ful experience, said Alexander Lebedev, businessman and owner of the National Reserve Corpo-ration. He expects V.T.B. to be swamped with claims, since third-party interests will likely surface along with complaints about the number of shares subject to the buyback and the form of com-pensation. V.T.B. President Andrei Kostin, however, has announced that the odds of aggrieved share-

holders winning any lawsuit against V.T.B. over the buyback scheme are extremely low.

Putin, for his part, welcomed the decision. “The management has arrived at a fair and morally balanced solution,” the prime minister said after the announce-ment, and minority shareholders have hailed the bank’s move. But major shareholders and partners appeared befuddled — fi rst and foremost global depositary receipt (G.D.R.) holders, who are mostly foreign investors.

But Bank of Russia Deputy Head Alexei Ulyukayev is sure that the misunderstanding will soon be overcome. “The fact is that the transaction has no ma-terial fi nancial value,” Ulyukayev said, “since half a billion dollars is by no means a significant amount for the bank’s capital or dividends.”

Rating agencies also do not pre-dict that the buyback will have any negative impact on the bank. “These facts, although negative in essence, will have no material infl uence on the bank. Further-more, V.T.B. will be free to fl oat the shares again later,” said ana-lyst Alexander Danilov with the Fitch ratings agency. And the bank is indeed planning to fl oat some shares as well as partially transfer them to its top manag-ers as a bonus, said Vladimir Ta-

rachev, chairman of V.T.B.’s Share-holder Advisory Council.

In making this decision, the bank also rejected the premise of the initial I.P.O., saying that the idea of increasing the number of individual minority shareholders has been a failure.

“Selling shares to the public directly is unreasonable, so I be-lieve that the reduction of the number of individual sharehold-ers through the proposed buyback is well justifi ed,” Kostin said. He also emphasized that the pro-posed buyback was above all a move aimed at reinforcing the image of the bank’s brand by “al-leviating the negative attitude to-wards V.T.B”. This step to build goodwill, however, will most like-ly have negative consequences, said Alexander Khandruyev, head of the consulting group Banking, Finance, Investment: “This P.R. campaign is doing V.T.B. a dis-service. After all, it amounts to the bank admitting its own fail-ure and inefficiency.

“There’s no talk of reimburs-ing minority shareholders for lost profi ts, although almost every one of them withdrew money from bank accounts, where it had been generating interest, in order to buy shares. In the four years since the fl otation, bank account bal-ances have increased by a factor of 1.5, or even more.”

Meanwhile, many experts are positive that the expected buy-back was hardly fi nancially mo-tivated. More likely, it was a pre-election maneuver by Putin, who was at the time in the midst of his presidential campaign. “This was obviously pure politics, part of the prime minister’s perfor-mance ahead of the election,” said Leonid Slipchenko, a banking an-alyst at Uralsib Capital.

Chairman of the Board of Ot-krytie Bank Yevgeny Dankevich, however, is certain that there are market reasons behind the move as well. According to Dankevich, the buyback “combines business with pleasure.

“On the whole, buybacks are, if economically feasible, a nor-mal practice. In the current situ-ation, when banking shares are cheap, it may be the right thing to do. On the other hand, it was also clearly a good election cam-paign move.”

V.T.B. Buys Its Way Out of a Public Relations Crisis

V.T.B.’s “people’s I.P.O.” attracted many first-time small investors.

NIKITA DULNEVRUSSIA BEYOND THE HEADLINES

Engineers inspect a magnetic

seperator at the Joint Institute

for Nuclear Research in Dubna.

We support the development of new projects that will later be included into the tech chains of global giants.

$25 billionis the currently estimated size of the global market for radiation manage-ment solutions.

10 percentannual growth has been seen in this segment in recent years.

200proposals for the peaceful use of nu-clear power were made by the So-viet Union at a 1958 Geneva Confer-erence.

IN FIGURES

Planning a Global Expansion

V.T.B. Capital is looking to hire about 200 bankers this year under a new incentive program linked to its parent company’s share price, according to recent reports by Bloomberg.“We have about 1,300 employees now at V.T.B. Capital, and we are looking to grow 15 percent,” said first deputy chief executive Yury So-lovyov. “We will be hiring in Singa-pore, New York and Hong Kong. We just hired an equity trading team in Dubai.”

V.T.B. Group chief Andrei Kostin created V.T.B. Capital in 2008 and pledged to spend $500 million building the business, including hir-ing Solovyov and more than 100 other bankers from Deutsche Bank. Within two years, the unit became the biggest organizer of Russian equity sales and the first domestic company in the post-Soviet era to underwrite the most bond sales.

Originally published inThe Moscow Times

is the percentage of value V.T.B. stock has lost since its widely tout-ed “people’s I.P.O.” in 2007. Many feel the bank duped first-time in-vestors out of their money.

50 IN FIGURES

“The management has arrived at a fair and morally balanced solution,” said Vladimir Putin.

“This was....pure politics, part of the prime minister’s performance ahead of the election,” said Slipchenko.

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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

After Vladimir Putin was fi rst elected president in 2000, journalists spent the next six months try-

ing to fi gure out who he was. Not one but two Putins quickly emerged. The fi rst is better known to foreigners. This is the politi-cal Putin, who nixed the popu-lar elections of regional gover-nors and drove the oligarchs out of the Kremlin. Putin’s image of strongman reached its zenith with the jailing of Mikhail Khodorkovsky, the former owner of oil company Yukos, in 2003. By the start of Putin’s second term in office in 2004, he was fully in control of the country

and imposed a political stabil-ity on Russia that has remained ever since. Although the politi-cal Putin has been demonized in the Western press, Russians welcomed him as a much-need-ed change after the chaos of the Boris Yeltsin era.

But the second Putin is much better known to the locals, and he is the reason that so many people still vote for Putin in na-tional elections. This is the eco-nomic Putin.

Even before the oligarch ar-rests or end of regional elections were introduced, Putin slashed income taxes to a fl at rate of 13 percent and corporate taxes to 24 percent. More subtly, he in-troduced a federal treasury sys-tem that put the center back in control of the nation’s fi nances and stopped the rampant steal-ing by regional administrations. Then he launched the Gref plan of liberal reforms. These reforms, together with rapidly rising oil prices, led to a sustained eco-nomic boom that transformed the Russian economy.

And it should be no surprise that the economic Putin is gen-uinely popular among many Russians. When he fi rst became president, the average income was a mere $50 a month; today it is $800 — a 16-fold in-crease.

Over the months of the 2012 Russian presidential campaign, it became clear that the country needs a new growth model; the old one of high oil prices accom-panied by heavy spending is not going to work for much longer. At the same time Putin, for his part, reverted to his tough-guy political persona.

Now, as Putin prepares to re-take his old job, pundits find themselves asking the same question again that they did in those fi rst months of 2000: “Who is Mr. Putin?” Is he a leader who can guarantee Russia’s stability and economic growth, or is he someone the West should fear on the international stage?

The obvious answer is that nothing has changed and Putin will continue to be the person he has been for the last 12 years: a politician prickly on the po-litical front, but progressive on the economic one.

MOSCOW BLOG

Ben ArisSPECIAL TO RBTH

Once Again, the Question: “Who is Mr. Putin?”

Last year was not a lucky one for investors in the Russian stock market. Its major index, the R.T.S., fell 19 percent, and only 20 per-cent of listed funds reported prof-its. At the same time, the number of individual investors playing the stock market independently increased 9.3 percent, according to R.T.S. data.

Economist Denis Strebkov, an assistant professor at the Higher School of Economics, believes that the percentage of Russians who personally invest in the stock market does not exceed 1 percent of the population. In contrast, in the United States, approximate-ly half of all households own shares in publicly traded stocks.

Russians’ interest in investing has grown slowly. Although the Russian stock market was estab-lished in 1992, for years it re-mained the exclusive domain of professional brokers. One reason was the underdeveloped market itself, but additionally, according to Strebkov, Russians lacked “el-ementary fi nancial literacy as an essential component of market economic culture.” Potential in-vestors did not trust fi nancial in-struments, and the possibility of making money on the stock mar-ket made no sense; they only re-garded securities as an alterna-tive to bank deposits.

The mentality began to change in the mid-2000s. The general

Investors Russians remain cautious about putting their money in stocks and other investment vehicles

A class of Russians with the

money and interest to buy stocks

emerged in the 2000s, but a

decade later, they are still a tiny

part of the population.

population was becoming more prosperous, and people increas-ingly saw investing in stocks as a way to manage their personal savings. Additionally, by that time, a sustainable growth in the cap-italization of the Russian stock markets had been achieved, and brokerages took off. A new kind of Russian was developing, one who did not depend on state pa-ternalism and wanted to take con-trol of his own fi nances.

“A new bourgeois personality

type emerged, gauging happiness, freedom and success by the yard-stick of money,” said Strebkov.

In contrast to developed mar-kets, where securities are acquired primarily to obtain dividends, the main objective of Russian inves-tors is to make money on the price difference. Many Russian public companies often fail to pay divi-dends, and even when they do, the dividend rate is insignifi-cant.

Prior to the 2008 economic cri-sis, unit funds secured their in-vestors incomes that were two to 10 times the infl ation and bank deposit rates. A yield of 30 per-

cent was considered low, espe-cially for companies in the oil and gas, metals and banking sectors. The trend came to a halt in 2008 and again in 2011; Russian pri-vate investors lost up to 50 per-cent of their capital in unit funds.

As a result, interest in the stock market waned. The drop in stock prices worldwide combined with the high volatility of the Russian market, which is mainly caused by dependence on fl uctuating raw material prices, prompted inves-tors to exercise caution or post-pone active investment.

Trend toward independenceBut in the midst of crisis, a new group of semiprofessional inves-tors with access to online trad-ing emerged. Futures on the R.T.S. and Micex indices (the two merged in late 2011) became pop-ular trading instruments with these private investors, who played the stock market by them-selves. Short-term speculation using automated software en-abled private players to increase their original investments sever-al times over. According to data from Investfunds.ru, in the fi rst half of 2011, net investments in unit funds were in excess of 5.8 billion rubles ($198 million), which is triple the amount in the same period of 2010. In August 2011, however, the indices fell and earnings generated in the fi rst six months depreciated.

Despite the overall increase in the number of private clients with brokerage accounts, their activ-ity decreased in 2011, according to fi gures from R.T.S. The num-ber of private investors conduct-ing more than one transaction a

month fell to 96,000 in 2011 from 104,000 in 2010. Finam remained the market leader in terms of the number of clients, with 18,373, followed by Brokkreditservis with 15,852 and Sberbank with 13,738.

Alternative to banksAnalysts are certain that, for the private investor, especially a rel-atively prosperous one, the stock market is a good alternative to banks. Yet the Russian unit fund market is very small. Vladimir Savvov, head of the analysis de-partment at Otkrytie Bank, said: “The total net asset value of all

Russian unit funds is less than 500 billion rubles, which is not much compared to the 10 trillion rubles in bank deposits.”

The government’s strategy for promoting the Russian stock mar-ket for the period up to 2020 en-visages an increase in the num-ber of private investors to 20 million. The fi gure was dismissed by the Audit Chamber, which cited the low activity of domes-tic long-term investors. “If the sit-uation proves favorable, with no new waves of recession, we might reach 4–5 million, but by no means 20 million,” said Finam President Vladislav Kochetkov.

Individual Investors Not Quite Ready to Stock Up

Russia’s flagship R.T.S. exchange is failing to attract young investors.

VLADIMIR RUVINSKYRUSSIA BEYOND THE HEADLINES

Potential investors did not trust financial instruments, and making money on the stock market made no sense.

Despite the overall increase in the number of private brokerage clients, their activity decreased in 2011.

$198 millionwas invested in unit funds in the first half of 2011, triple the amount invested over the same period in 2010.

96,000 private Russian inves-tors conducted more than one transaction a month in 2011, down from 104,000 in 2010.

50 percentof the capital invested in Russian unit funds was lost in 2011, result-ing in a significant drop in interest in investing.

IN FIGURES

A revolution is underway in Rus-sia’s domestic capital market. In the first week of Feburary, de-mand for Russian government bonds outstripped supply more than fi vefold as traders in Lon-don and New York snapped up the high-yielding 10-year Rus-sian paper.

“It was pretty spectacular de-mand, and the strange thing was that 70 to 80 percent of the bids came from foreign investors,” said a trader at Deutsche Bank, who preferred to remain anonymous. “I’ve never seen such high de-mand for [Ministry of Finance bonds] of this duration.”

The auction raised 35 billion rubles, ($1.2 billion), more than twice as much as originally tar-geted.

It was the fi rst sale of Russian government bonds since a policy change opened up the local mar-ket to foreign investors without accounts or branches in the coun-try. The new policy came into ef-fect Jan. 1.

Further liberalization of the bond market will come in April when the Russian capital market

International Foreign investors finding much to like in Russian government bonds after a new law eases trading rules

A change in Russian law easing

requirements for foreigners

seeking to invest in government

treasuries has resulted in high

demand for domestic bonds.

will be hooked up to Clearstream and other international settlement systems, making it even easier for foreign traders to tap the Rus-sian market.

The changes in the bond mar-ket are just the latest step in the ongoing reform of Russia’s fi nan-cial system.

“Russia’s fi nancial infrastruc-ture is undergoing its greatest transformation since the begin-ning of the 1990s, when the coun-try made the switch to a market economy,” said Chris Weafer, chief strategist with Russian invest-ment bank Troika Dialog in Mos-

debt jumped 42.5 percent in 2011 to 4.2 trillion rubles ($138.8 bil-lion), including government guar-antees, half of which is in fi xed coupon bonds. This is slightly more than the total outstanding Euro-bond market, which was worth $115 billion at January’s end.

According to Weafer, these changes are just more proof of an ongoing shift in the center of gravity of the global fi nancial sys-tem.

“The opening of the Russian market in the 1990s moved the global fi nancial center from New York to London, while the rise of emerging Asia moved the center of gravity from Florence to the Black Sea,” Weafer said. “The fi -nancial center is still moving, as Hong Kong is the fastest grow-ing market in the world. But as Moscow lies between London and Hong Kong, its geographic posi-tion is perfectly placed to emerge as a major regional market.”

Traders Forming New Bonds With Russian Treasuries

BEN SEEDER, BEN ARISSPECIAL TO RBTH

Local vs. international bonds in 2011 Growth in Russian bond purchases

cow. “These changes could result in a massive re-evaluation of as-sets and removal of any risk pre-mium associated with Russian equity valuations versus other emerging markets in the next two to three years; we will start to see the fi rst benefi ts arrive in the next six months or so.”

While higher-than-expected oil prices meant that Russia ended 2011 with a small surplus, the government expects a mild defi -cit to appear this year. In Janu-ary, a deputy economics minister told reporters that Russia’s fed-eral budget defi cit in 2012 may

amount to 1 percent of G.D.P. after a 0.8 percent surplus in 2011.

To fi nance this gap, the state is turning to the domestic market, where domestic borrowing over-took foreign issue of Eurobonds for the fi rst time in 2011. Accord-ing to the Finance Ministry, the Russian government’s domestic

Although the political Putin has been demonized in the Western press, Russians welcomed him.

Is Putin a leader who can guarantee Russia’s stability and growth, or is he someone the West should fear?

The changes in the bond market are just the latest step in the ongoing reform of Russia’s financial system.

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THE STATE-RUN PAYOUT POLICY

Ian

Pryde SPECIAL TO RBTH

In the run-up to the recent elec-tions, the Russian governmentannounced that it was work-ing on a proposal to increase

dividend payouts at state-owned companies to a standard 25 per-cent of net earnings, with a pub-lic discussion to precede any fi nal decision on the issue. Initially fl oated by presidential economic advisor Arkady Dvorkovich, the government’s move is aimed at im-proving Russia’s investment cli-mate. The details are now being worked out under Deputy Prime Minister Igor Shuvalov.

As often happens, however, Russia’s plan is rather out of line with both fi nancial theory and international practice, at least in the U.S. and U.K. The dividend policy — the target percentage of net earnings paid out in cash to the shareholders, usually quar-terly or semiannually — is a func-tion of various factors, including the type of company in question. There is not any standard fi gure, but as a rule, fast-growing com-panies reinvest earnings into ex-pansion, while more mature com-panies make higher payouts.

Rapidly expanding companies need large amounts of cash as working capital since making, storing and distributing more products pushes up costs before the company has time to recoup the extra outlays from sales. This

A RACE NOT WON ON CAMPAIGN SLOGANS

BEWARE OF A POST-ELECTION BUBBLE

Michele

Berdy THE MOSCOW TIMES

Dieter

WermuthTHE MOSCOW TIMES

This presidential race sure was exciting. The suspense was killing me. In fact, I got so caught up with the

race that I forgot to rate the cam-paign slogans and posters.

Ratings methodology: Get into car to do errands around town. Get stuck in traffic jams. Stare out the window at campaign bill-boards.

Ratings criteria: Do the ads convey the essence of the candi-date and his platform? Can you recall them five minutes after you’ve seen them? Do they make you want to vote for the guy?

As Russians voted for a new president this month, their country was back in fashion with foreign

investors.The ruble has gained 12.2 per-

cent against the dollar-euro bas-ket since last fall and is not far from its post-2008 crisis high. The rebound of stock prices since the beginning of the year has been an impressive 13.7 percent in ruble terms for the Micex, and an even more impressive 25.4 per-cent in dollar terms for the R.T.S.

Given that the balance-of-trade surplus is running at 12 percent of this winter’s gross domestic product, the strength of the ex-change rate looks plausible and will probably continue — pro-vided there is no new crash of the oil price and imports do not go through the roof once again. To be sure, neither of these two risks can be ruled out, and must therefore be watched closely.

The stock market, valued at a price-to-earnings ratio of 5.9 on the basis of last year’s earnings and at a price-to-book ratio of

Summary conclusion: A weird-er batch of campaign ads is hard to imagine.

The award for the most gram-matically challenged slogans goes to Liberal-Democratic Party of Russia leader Vladimir Zhirinovsky. One billboard read: Жириновский или будет хуже (Zhirinovsky or it will be worse). Another white billboard reads: Жириновский и будет лучше (Zhirinovsky and it will be bet-ter). No comma, no verb, no gram-mar as we know it. On the other hand, you get the message — even if it is a bit short on detail.

The award for the strongest vi-suals goes to Gennady Zyuganov of the Communist Party. In one retro-style poster, the candidate

1.03, is fundamentally on fi rmer ground than the exchange rate. But, of course, the stock market is hostage to oil prices.

At the same time, however, the country’s fi xed-income markets remain neglected. The ruble-de-nominated government OFZ No-vember 2021 bond, for example, yields nearly 8 percent and has thus a rather high real return, particularly considering the fact that consumer price infl ation had been just 4.2 percent year over year in January. Equally, the dol-lar-denominated April 2020 gov-ernment eurobond with a yield of 3.98 percent is about 250 basis points higher than that of a com-parable U.S. Treasury note.

Nonetheless, Russia has a bad reputation among investors, de-spite the government’s budget surplus and minuscule debt lev-els. On the whole, this bad repu-tation is undeserved.

The real estate market has probably bottomed out, but there are wide regional disparities. Moscow is where all the wealth and the population growth is con-centrated, while the regions con-tinue to struggle. Meanwhile, the Central Bank hesitates to cut in-terest rates because it doubts that infl ation can remain so low. Judg-

stands in shirtsleeves in front of a montage of a Kremlin tower and the Monument to Minin and Pozharsky. Blue skies, white

clouds and a red banner evoke both the Russian tricolor and the symbol of communism. One page of a Soviet-era calendar has the Communist Party emblem, and another shows March 4 as a red-letter day. The simple slogan,

ing by the strength of the ruble and falling import prices, the in-fl ation outlook is actually quite good. To buy real estate as a hedge against infl ation does not make sense in such an environment.

Economic growth is certainly fairly moderate. Real G.D.P. had expanded by 4.3 percent in both 2010 and 2011, and it is gener-ally expected to increase by an-other 4 percent this year. Before

Выбираем Зюганова (We’re vot-ing for Zyuganov), is next to a checked election ballot box. The whole package is out of a Soviet propaganda textbook — perfect-ly on target for his core elector-ate but totally out of touch with everyone else.

Mikhail Prokhorov’s campaign slogans win the award for under-stated style — understated to the point of obscurity. One is: Требуйте большего! (Demand more!) More what? From whom? Another Prokhorov slogan, Новый президент — новая Россия (A new president — a new Russia), conveys, albeit obliquely, the need for change. And Управлять, а не царствовать (Lead, don’t reign) implies, I guess,

a different approach to gover-nance and muted criticism of the current regime. Too bad the whole campaign is like a dissident So-viet-era play: You have to read between the lines to get the mes-sage.

The award for most illusory ads goes to Sergei Mironov. If they exist in Moscow, I didn’t see them. Nor do they appear to be on his Web site, which shows a curious lack of brand consciousness. As far as I can tell, one slogan is: Миронов — честный выбор! (Mironov — an honest choice!). Another seems to be: Твой голос изменит страну! (Your vote will change the country!). Is he kid-ding?

Vladimir Putin’s ads win the

bland award. They’re like a cam-paign for Mr. Nice of the Year. One billboard reads, Владимир Путин 2012 (Vladimir Putin 2012), with the tiny tagline: Счастье народу (Happiness for the people). An-other is: Слышать людей, работать для людей (Hear the people, work for the people). Only the slogan, Великой стране — сильный лидер (A strong leader for a great country), conveys something of his leadership style and worldview. But what’s with the poster, За Путина и всё (For Putin and that’s it)?

That’s it?Well, I guess that’s it.

Michele Berdy is a Moscow-based translator and interpreter.

The other reason is more wor-rying. It could be that the capi-tal exports refl ect Russia’s uneven income distribution. The coun-try’s wealthy may be afraid of a popular backlash — Putin has raised this theme several times recently — and have thus decid-ed to stash away part of their funds in safe places.

The main risk is that high oil prices are not sustainable because they could cause a global reces-sion, which in turn would bring the price down, perhaps violent-ly. Apart from this, at an annual growth rate of real G.D.P. of about 2.25 percent since last autumn, the world economy is not exact-ly booming. Rather than being determined by economic funda-mentals, the oil price today is mostly a political tool.

Since the risk of a war between Iran and Israel is exaggerated, the oil price itself is not well sup-ported. In all likelihood, we are looking at a new bubble. Inves-tors must be aware that they will face an entirely new game once it pops, and they would be wise to remember the age-old axiom: Bubbles always pop.

Dieter Wermuth is a partner at Wermuth Asset Management.

Prokhorov’s campaign slogans win the award for understated style — understated to the point of obscurity.

Rather than being determined by economic fundamentals, the oil price today is mostly a political tool.

is one reason that fast-growing companies can go bankrupt if they fail to take out bank loans in good time. Technology and other innovative companies also have to engage in expensive R&D. Classic examples are Microsoft and Apple, which for years held on to their earnings and paid no dividends; Apple is currently sit-ting on a cash pile of nearly $100 billion and is due to pay its fi rst-ever dividend later this year.

But these retained earnings can also be used simply to build up the most interesting part of the balance sheet, the “owners’ funds,” often with the aim of making ac-quisitions. This usually applies to successful mature companies ca-pable of paying out much more in dividends because they see lit-tle or no scope for organic growth or acquisitions. Companies can also spend the retained earnings on buying back shares from the shareholders, who benefi t from a large “terminal” dividend and re-ceive more money than would otherwise be the case, which they can then decide to spend or re-invest elsewhere. The companies also benefi t from buybacks be-

cause they have to pay the share-holders an equity premium, which is usually about 5–6 percent above the return on their corporate bonds. So, fi nancing expansion using bonds is much cheaper and reduces the cost of capital to the company, providing it does not take on too much debt.

When companies announce a dividend policy, they try hard to stick to it. As long ago as 1956, John Lintner conducted a clas-sic survey of boards of directors in the United States. They did in-deed set long-term target divi-dend payout ratios, but believed that shareholders prefered a steady progression in dividends. So even when earnings might ap-pear to warrant a high payout, managers only move slowly to-wards the payout ratio and wait before increasing dividends too much to see if the higher earn-ings will be permanent. Manag-ers thus “smooth” dividends, so they fl uctuate far less than earn-ings and give investors a reason-able degree of certainty. Too high a dividend target runs the risk of failing to meet investor expecta-tions, which can then be taken as a sign of bad management and in turn hit the share price quite badly. Investors then lose out on both fronts, losing any capital gains they made on the stock and receiving a lower dividend than they expected.

Russian practice deviates some-what from this. Gazprom only paid out 5 percent in 2008 and 9

percent in 2009 before increas-ing the dividend to 22 percent in 2010. Rosneft, on the other hand, links its dividend payout to its net profi t. As a result, its payout was 10 percent in 2004, 20 per-cent in 2005, 13.3 percent in 2006, 10.5 percent in 2007, 14.4 percent in 2008, 11.7 percent in 2009 and 15.2 percent in 2010. So while the dividend has always been at least 10 percent since 2004, its vari-ability also represents a risk for investors since their returns are uncertain. Sberbank, Russia’s big-gest bank, has never reduced its dividend since 2001, when it paid out 6 percent, and since then has steadily increased its payout in line with international practice to 12 percent in 2010 — and plans 15 percent in 2011. It has already announced its intention to in-crease its dividend payout to 20 percent in the next three years. As elsewhere, dividends are much higher at Russian telecom com-

panies. Rostelecom paid out 22 percent in 2010, but at M.T.S., the dividend was 60 percent and at Vimpelcom, 78 percent.

Some local analysts believe the change will help improve the chronic undervaluation of Rus-sian stock, but of course that un-dervaluation is attributable not only to dividends, but also to the perception of Russia as a high-risk country with a very negative reputation.

The Russian government ex-pects higher payout ratios to make the companies more attrac-tive to investors. But German Gref, a former economic minis-ter and now head of Sberbank, pointed out that if implemented, the policy would also reduce the money available to companies for investment. “I don’t think 25 per-cent for all companies is a good idea — especially now, when the banking sector, for instance, needs huge amounts of investment and

capital to maintain high growth rates and expansion” Gref said. “On the one hand, we’re seeing some demands for a certain level of payout, while on the other, the government is helping banks to increase their capitalization. There’s a clear contradiction.”

It remains to be seen whether the government will force the 25 percent payout through, but as Gref implied, Russian companies, like their counterparts every-where else, should really decide their investment and dividend policies on an individual basis.

But despite the lack of consis-tency on the part of some Rus-sian companies with regard to dividend payouts, most investors look at the earnings per share — which in Russia is comparable with international levels.

Ian Pryde is founder and C.E.O. of Eurasia Strategy & Communi-cations in Moscow.

the 2008-09 crisis, growth rates had averaged about 7 percent. This suggests that capacity uti-lization remains low. A 4 percent growth rate will therefore not cause any serious frictions or im-balances, nor will it lead to an acceleration of infl ation. Inves-tors appreciate this new stabil-ity. It is much better than wild swings around a steeper trend, and may help to explain why the

ruble and the stock markets are so strong.

While foreigners are putting more money into Russia, Russians themselves are net capital export-ers to the tune of almost $10 bil-lion a month. Technically speak-ing, in the absence of Central Bank interventions in foreign ex-change markets, that $10 billion is the fl ip side of the current ac-count surplus. Since the Central Bank’s foreign reserves have been more or less unchanged at around

$500 billion for several months now, the private sector, by defi -nition, must be accumulating for-eign assets.

Why is this? One reason is that exporters, in the wake of the re-cent oil price boom, may feel over-whelmed by the sudden increase of their revenues and have no plans on how to spend these windfall gains. They’d rather park them abroad for a while.

Russian companies, like those elsewhere, should decide their investment and dividend policies on an individual basis.

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Russian Prodigies Tour the U.S.rbth.ru/14963 Culture

John

FreedmanTHE MOSCOW TIMES

Phoebe

TaplinSPECIAL TO RBTH

A group from the Center — in-cluding director Marat Gatsalov and playwright Nina Belenitska-ya — visited Yale last spring. That was followed by a trip to Mos-cow involving a group of young playwrights currently studying at the Yale School of Drama. Their works were translated into Rus-sian and given staged readings of varying sophistication during a public workshop.

It was “one of the most valu-able new play experiences” Cham-bers said he had ever had. He ex-plained that the American writers were “challenged, thrilled, excited and frustrated” by the en-counter and that it was a pro-found learning experience for them.

Accustomed by their own na-tional tradition to having signif-icant control over the staging of their works, the American play-wrights were surprised to find that in Moscow, they not only were not invited to attend re-hearsals, they were not allowed to be present. Thus, when they witnessed the staged readings along with packed houses of spec-tators at the Playwright and Di-rector Center, they were amazed at what they saw. In some cases, that meant they were exhilarat-ed by what directors revealed in their work; in others it meant they were horrified to see how they had been misinterpreted.

As Chambers describes it now, these directorial interpretations were “thrilling, quite different from what American interpreta-tions had been.”

The experience had an imme-diate effect on Chambers’ work at Yale, he said: “We brought some ideas back and have remodeled the first-year playwright anddirecting laboratory on theexperience.”

and boiling laundry are woven into the narrative streams of con-sciousness. These minutiae are important on several levels. They parallel the details of the strug-gle to survive the Leningrad blockade: starving children chew-ing coal or wallpaper glue, a fac-tory worker saving her family by hiding dough under her breasts. They also link the novel to a tra-dition of feminist writing that re-fuses to see domesticity dismissed as traditionally women’s business and champions it instead as a vital and under-represented area of life. This may be partly why some critics felt “The Time of Women” should not have won the Russian Booker Prize. It is atension Virginia Woolf identifi ed in “A Room of One’s Own:” Is a book important if it deals with war and not if it deals with “the feelings of women?”

Chizhova’s fragmented mono-logues embrace war and women, famine and food preparation. The title and the style both challenge more conventional narratives. The mixture of eavesdropping, whis-pered dialogue and stories is set against the official versions of re-ality on the new TV.

Sofia’s muteness becomes a metaphor for the enforced silence of the times. In “The Time of Women,” the difficulty of living with trauma and oppression is represented in broken grammar, shifting narrators, unfi nished sen-tences. It doesn’t always make for easy reading, but it does convey a powerful sense of the almost inexpressible tragedies of life, of poverty and sickness, the legacy of terror and the need to look hon-estly at the past.

It was politics and Bertolt Brecht that brought David Chambers to Russian theater many years ago. As Chambers

recalls it now, he could feel the great Russian director Vsevolod Meyerhold “looming in the back-ground” as he studied the work of Brecht. The connection with Meyerhold fi nally happened dur-ing a visit to a conference in Montreal in the late 1990s. There, Chambers met the Russian ped-agogue and scholar Nikolai Pe-sochinsky and they launched into an ambitious joint project — a reconstruction of Meyerhold’s famous 1926 production of Niko-lai Gogol’s “The Inspector Gen-eral.”

“We began to stage what we thought it looked like, and then we built a frame around that,”Chambers said. The result was, in his words, “a production about a production.”

Chambers is a professor of di-recting at the Yale School of Drama, and his connection to Russia and Russian theater now runs deep — personally as well as professionally.

“I found myself feeling very comfortable in Russia,” he said. “I feel very connected.”

In addition to adopting a son from a small city outside Yeka-terinburg, Chambers has con-tinued to develop a working re-lationship with Russia and Russian theater. He has been a participant or catalyst in sev-eral projects bringing Russian and American theater cultures together. These have included, among others, Kama Ginkas’s world-premiere production of “Rothschild’s Fiddle” at the Yale Repertory Theater in 2004; sev-eral trips to St. Petersburg and Moscow to study the legacy of the infl uential Russian directors and teachers Georgy Tovs-tonogov, Maria Knebel, Anatoly Efros and Lev Dodin; and a joint program with Moscow’s Play-wright and Director Center that began last year.

Young Sofi a can’t speak, but she is one of the most important narrators in Elena Chizhova’s sad and

beautiful tale of life in Soviet Leningrad. We hear her thoughts (and her adult voice, framing the story) as she tries to make sense of life in a 1960s communal apartment, growing up with a single mother and three surro-gate grandmothers. They raise her on a mix of secret religion, parables and French while keep-ing her out of the orphanage.

Sofia’s silent commentaries are peppered with a child’s fears and fairy tales; in the poignant prologue, she remembers follow-ing her mother’s coffin which “should be made of glass. Then everybody would see that Mama is asleep, but will wake up soon.” There is not much mystery as to how the story will end, but the richness of both characters and atmosphere pulls the read-er through a plot whose folk-tale motifs — ghostly brides, sleeping daughters and schem-ing old women — are part of a very real world of factories and dormitories haunted by war.

One of the delights of “The Time of Women” is the sense of ordinary domesticity that is used as backdrop and foil to some of the 20th century’s horrors. Chop-ping onions, peeling potatoes

THEATER PLUS

READ RUSSIA

Russian Directors Take on Yale Drama Playwrights

The Language of Silence Finds a Voice

The interpretations were “thrilling; quite different from what American interpretations had been.”

TITLE: “THE TIME OF WOMEN”

AUTHOR: ELENA CHIZHOVA

PUBLISHER: GLAGOSLAV

RBTH CONTINUES ITS COLUMN ON AUTHORS WHO WILL BE FEATURED AT

BOOKEXPO AMERICA. THE EVENT, SCHEDULED FOR JUNE 4–7 IN NEW YORK CITY,

WILL HIGHLIGHT RUSSIAN LITERATURE.

Music “Far From Moscow” Finds a Home in L.A.

INTERVIEW

DAVID MACFADYEN

PROFESSOR HOSTS A FREE WEB RESOURCE DESIGNED TO PROMOTE, CATALOG

AND INTRODUCE NEW MUSIC FROM RUSSIA AND POST-SOVIET COUNTRIES

How do you select the music for the

Web site FarfromMoscow.com?

Originally I had to search for the music myself during many trips to Russia. It took a great deal of physical effort, but now an enor-mous amount of material is avail-able online, and due to the suc-cess of the Web page, much of the content is actually sent to me. There is a constant fl ow of audio files between Los Angeles and Moscow.

Unfortunately, though, every-thing on the site is written by me. It would be wonderful if theproject were completely bilingual, but that’s physically impossible. I have been doing this for three years now, and the site remains noncommercial. It’s a cultural ex-ercise.

The biggest problem of all is that Russian and Slavic music doesn’t have an obvious “center.” People don’t know where to look. In addition to the site itself, I’ve started to put together some com-pilation albums. The next logical step would be a regular podcast, maybe streaming audio, that kind of thing. There need to be more ways to give people regular ac-cess to new sounds.

If you ask someone in the West if they want to hear “Slavic music,” they usually imagine folk music. There’s one Russian pro-moter in Berlin who’s managing a pretty good fl ow of Russian and Ukrainian artists to Germany; she says that “folky” issue is both a plus and a minus. It’s mucheasier to promote bands with a connection to tradition, but it’s also very hard to escape thoseclichés.

What do you think about the copy-

right situation in Russia?

It’s difficult to say. I don’t see how piracy can be stopped unless somebody invents a magical, tech-nical way of doing so. Because of piracy’s effects, bands have to tour constantly. That may sound romantic, but in Russia, where distances are so big, it’s often im-possible to do so. Musicians re-peatedly complain to me that local promoters are difficult to fi nd: you don’t know who is re-liable outside of major cities, and fi nding accommodation is equal-ly tricky. A lot of regional clubs are also badly behaved: they may, for example, promise you a cer-tain percentage, so you play the concert — but then get nothing.

Online concerts could become a solution. People could agree on

a certain viewing time and the performance would take place “live,” but online. In the U.S., for instance, people are starting to watch ballet and opera in thecinema. For the same reason,international football games are also shown in theaters: audienc-es get a much better sense of the spectacle. Russia faces lots of these media challenges. For those same reasons, I don’t understand why state media does nothing to help young artists. The British Broadcasting Corporation offers a very good example to follow. After primetime shows, most of national pop scheduling in the evening is given over to young musicians and local performers. No one needs that system more than Russia. You have to start with something.

What I see are wonderful little blogs all around the country de-signed for different styles of Rus-sian music, whether it’s techno or folk, but they remain small and typically don’t collaborate. Then, of course, there’s a second issue connected to radio stations. They tend — on the American exam-ple — to choose one narrow genre and not mix styles. As a result, the surprises are few and far be-tween. Publications don’t collab-orate and styles don’t combine.

Do you envision Russian groups

gaining popularity in Europe or the

U.S.?

Yes, but a lot is determined by the genre in question. The more

a style is connected to a given language, the harder things will be. The worst example would be something like rap or hip-hop; I don’t see how something so lin-guistically complicated could sur-vive in an international market. The best chance might be for dance music or wordless electron-ic genres, perhaps. I already see a lot of international Net labels

within electronic music inviting Russian performers. In those cases, geography doesn’t really matter, but those projects still don’t involve truly commercial music. It all remains on a mod-est scale.

There are some Russian elec-tronic artists who live and work here in L.A., but a lot of instru-mentalists, both here and at home, have given up; they see no hope of making money from their craft, so they start writing incidental music for advertising, computer games, TV series and so on. That’s something we have already seen in the West. It’s an option, but not the best.

What’s has been the most memora-

ble Russian concert for you?

Something rather strange, actu-

ally: it was outside of Russia al-together. My brother lives in To-ronto and I went to one of Alla Pugachyova’s concerts there. An entire generation of émigrés was present, folks in expensive furs and enormous jewelry who hadn’t seen their favorite star for 30 years. That was absolutely re-markable. Everyone was dressed as if it was the last party of their lives! They made one heck of a noise.

Foreigners in Russia often go look-

ing for traditional sounds, such

as the balalaika, but increa sing ly

they are astonished to discover

contemporary bands. How do you

strike a balance between those

rural roots and urban trends?

Here the issue of geography re-turns again, in that “provincial” musicians sometimes feel them-selves far from anything modern or stylish. Performers, therefore, frequently don’t want to mention their address. They actively hide it. It’s as if homelessness creates an ability to sidestep clichés and stereotypes. Whenever a rural or provincial artist moves to Mos-cow, though, then all of a sudden all their social profi les refer to “Moscow.” In the long term, that’s clearly not a good way to work. There needs to be an equal bal-ance between urban centers and the “periphery,” between the fu-ture and the past.

Prepared by Darya Gonzales

Jonathan Holmes, a highly ac-claimed British writer and direc-tor, plans to stage a work-in-prog-ress at the Bush Theatre in the Notting Hill neighborhood of London in mid-March based on the recent demonstrations against alleged electoral fraud in Russia. Holmes hopes that early raw per-formances of his new play might generate some debate about the goals and causes of the protests that have occurred in cities across the country since December.Elements of these discussions could then become part of the larger production, scheduled to take place this fall.

Holmes said his interest in Rus-sian politics started as a child, when the collapsing Soviet Union still had a quasi-mythical status among the militant left move-ments of 1980s Britain, but this is not the fi rst time he has taken international events and reimag-ined them, with sometimes con-troversial results. Holmes drama-tized the invasion of Iraq in a 2007 work, entitled “Fallujah,” and ex-plored the aftermath of Hurri-

Theater A British playwright finds stories to tell in today’s history-making moments

cane Katrina in a play complet-ed in 2009.

Holmes said that it is a sense of underreported histories that draws him to these controversial topics: “When you question the silence, controversy follows,” he said. “I don’t enjoy the hate mail, but it’s usually a sign that you’re doing something right.”

In the case of his latest project, Holmes says he has long had the feeling that “Russia was being startlingly underestimated and undervalued by mainstream com-mentary,” and now has “the sense that something momentous is passing us [in the West] by.” He sees the demonstrations as par-ticularly suited to dramatic treat-ment. “Protests and rallies are, of

course, performative; their rela-tionship to space and to audience is purely theatrical,” Holmes said. “They share this with religious rituals. Theater was born from such moments.”

Before he became a playwright and director, Holmes was a se-nior lecturer in drama at the Uni-versity of London. His Ph.D. the-sis was on Shakespeare in performance, and he has since written books on the subject, so he is well placed to explore both the roots and the cutting edge of theatrical practice.

Holmes sees ethical question-ing and interaction with the au-dience as crucial components of traditional drama. He welcomes the expression of different views as part of the ongoing process of creation. “All I want to do is re-discover something we’ve lost, which is the ability to partici-pate,” Holmes said. In his plays, members of the audience are often free to move around and make judgments about how close to stand to any particular charac-ter. Holmes admits that he now fi nds conventional plays increas-ingly hard to watch: “I can’t fi g-ure out why the people with the lights pointing at them are ignor-ing those of us in the dark — which is an apt metaphor, I sup-pose, for the connection of theater with current enthusiasms on the streets and squares of Moscow.”

Dramatizing Russia’s Protests

Jonathan Holmes at the rehearsal of his latest play in London.

PHOEBE TAPLINSPECIAL TO RBTH

The recent protests against

alleged electoral fraud in Russia

are nothing less than inspirational

for a British playwright who finds

the dramatic in what others see

as news.

NATIONALITY: BRITISH

HOMETOWN: LONDON

STUDIED: RUSSIAN

David MacFadyen was born in London, but has spent his ca-reer in North America. Cur-rently he is a professor of Slavic Languages & Literatures at the University of California, Los Angeles, specializing in contemporary Russian culture. His interests include animation and film and how social net-works affect cultural trends. He launched the Far From Moscow project in 2008.

HIS STORY

Writing about

America

Holmes’s 2007 play “Fallujah,” about the occupation of Iraq, pro-voked death threats, but it also helped publicize the use of chemi-cal weapons in the title city. “Ka-trina” (2009) was similarly ground-breaking, drawing on verbatim testimonies from survivors of the New Orleans hurricane to expose the negligence of the U.S. authori-ties in the disaster. The theatercritic for British daily The Guardian called it “a staggering picture of of-ficial lies and personal heroism.”

I have been doing this project for three years now, and the site remains noncommercial. It’s a cultural exercise.

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MOST READ08 RUSSIA BEYOND THE HEADLINESSECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA

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Russian Ad Sales Online Top Those in Print rbth.ru/14918Feature

Russia’s Invisible Infrastructure BoomApril 11

It seems clear to both fi nancial in-stitutions and independent ana-lysts that the Russian information technologies market has recovered completely from the 2008 fi nan-cial crisis. Russian Minister of Communications Igor Shchegolev has reported that the sector grew 14.6 percent in 2011, and the Min-istry of Economic Development predicts that it will continue to show positive growth — roughly 16 percent in 2012, and 18 percent in 2013.

Currently, Russian I.T. compa-nies control 1 percent of theglobal market for information technology products and services, worth roughly $16 to 20billion. The Ministry of Economic Development forecasts that the volume of the Russian I.T. market will hit $32 billion by 2013. But behind these positive numbers are questions about the sector’s over-all potential. In 2011, the World Economic Forum rated Russia 77th in the world for growth in the in-formation and communications technologies sector and third among resource-oriented countries. Today, Russia exports at most $1.5 billion of I.T. services, and no more than 300,000 people work in the country’s I.T. industry.

The future is in the cloudsHardware continues to dominate the Russian I .T. market ,making up more than 50 percent of the sector. In contrast, hardware is only 30 percent of the Europe-an I.T. market. The rest of the seg-ment there belongs to I.T. services (50 percent) and software (20 per-cent).

Technology In order to continue growing, Russian information technology needs to diversify beyond hardware into software and services

Information technology is one of

Russia’s fastest-growing

economic sectors, but new

companies still face many

barriers to entry.

One place Russian companies hope to compete with internation-al players is in cloud technology. Although this sector is fairly small at the moment, Konstantin Cher-nyshov, an analyst with Uralsib-Capital, believes its growth rates will blow away similar figures across the entire I.T. services mar-ket in the period up to 2015. Mar-ket intelligence fi rm IDC predicts that the value of the cloud ser-vices market in Russia in 2015 will reach $1.2 billion; in 2010, the market was valued at just $35 million. Cloud technology is one of 15 priority areas supported by the Skolkovo Innovation Center,

the government’s “Silicon Valley” rising outside of Moscow. Cloud technology is part of Skolkovo’s information technologies cluster, which also includes multimedia search systems, video and audio processing and recognition, mo-bile applications, complex engi-neering solutions, green informa-tion technologies and wireless sensor networks. The Skolkovo project is just one way the gov-ernment has ramped up its sup-port of the sector over the past two to three years. An increasing number of state agencies are now accessible online; various infor-mation projects have begun; and the state has stepped up its war

against pirated property and com-mercial raids. Moreover, the gov-ernment has talked about devel-oping online media and the commercial operation of fourth-generation networks. State-spon-sored industrial parks are emerg-ing, and the government has introduced special economic zones that have reduced taxation and other benefi ts.

But because the Russian gov-ernment has suddenly become the biggest customer on the I.T. mar-ket, many companies are being created to serve governmental purposes, which has both posi-tive and negative consequences. For one thing, it makes the sec-tor much more sensitive to chang-es in the state budget. Growth in the I.T. sector lags three to four months behind that of other sec-tors, such as manufacturing, par-tially for this reason.

“Officials just need a tick in the documents while business is fo-cused on the profi t,” said Ilya Ra-chenkov, an analyst with Invest-Cafe. But government support is needed to make any positive de-velopments in the system and even skeptics admit that its infl uence is not all bad.

Rachenkov confi rms that he has heard good opinions on Skolko-vo from businesses of all sizes. “For them it’s a place where they can come and get real investment without long bureaucratic proce-dures,” he said. “Everybody is sur-prised because start-ups are tra-ditionally supported by investment angels, not government.”

Both Rachenkov and Cherny-shov believe the private sector would do a better job in develop-ing the I.T. industry than the gov-ernment, but here there are bar-riers to entry.

Russia’s I.T. market is dominat-ed by several big companies. The top 10 Russian I.T. fi rms account-ed for 70 percent of all revenue

For Russia’s Growing I.T. Sector, the Cloud Has a Silver Lining

Hardware continues to dominate the Russian I.T. market, making up more than 50 percent of the sector.

VSEVOLOD PULYASPECIAL TO RBTH

One place Russian companies hope to compete with international players is in cloud technology.

The top 10 Russian I.T. firms account for 70 percent of all revenue earned by the country’s top 30 I.T. companies.

I.T. market volume by percent of G.D.P.

earned by the country’s top 30 I.T. companies. These top 10 control 54 percent of the Russian I.T. mar-ket — 5 percent more than in 2009.

Chernyshov notes that none of the companies alone controls the lion’s share of the market, which leaves an opening for new play-ers. But more than established companies, I.T. start-ups struggle to fi nd funding. Additionally, they suffer more from high taxes on labor, which come to roughly fi ve to 10 percent of company expens-

es in noncommodities industries, thereby cutting into profi ts.

For companies willing to pay the labor costs, there are other problems. Foreign competitors such as Apple, HP, Foxconn and TrendMicro are entering the Rus-sian I.T. market in droves, and this expansion will only increase after Russia joins the World Trade Or-ganization. These companies have notable fi nancial resources and technologies to attract Russia’s top I.T. specialists.

Experts believe that the future

of the I.T. market is in the Rus-sian regions. The country’s I.T. sec-tor is currently concentrated in Moscow and St. Petersburg, but more and more residents outside these major cities are coming on-line, and the number of Internet users in the regions is expected to explode in the next fi ve to 10 years.

Other potential growth seg-ments include search engines and navigation software, according to Rachenkov. This is due to oppor-tunities and challenges that make the Russian market unique. The complexity of the Russian lan-guage has allowed local compa-nies such as Yandex to dominate the market for search (Google is a distant second in the Russian search market), while the fi nally active Glonass — Russia’s answer to G.P.S. — has stimulated devel-opment in navigation.

But overall growth in the I.T. sector, like in the rest of Russia’s economy, will depend on real eco-nomic growth, an increase in in-vestment activity, stabilization of the country’s fi nancial and polit-ical situation, an increase in per-sonal incomes, a stable exchange rate, moderate infl ation and ben-efi ts that can encourage new en-terprises to form.

Russian instant payments opera-tor Qiwi has put into service a series of terminals that will dis-tribute packages to consumers. The postal kiosks are vying with courier and ordinary postal ser-vices for the attention of theincreasing number of Russians shopping online.

“We want to cut down our last-mile expenses, which are incurred at the most cost-intensive stage of the logistics chain, when goods are handed over to the client,” said Qiwi Post C.E.O. Andreas Pre-gowski. “One terminal can do the work of several deliverymen.”

The Qiwi Post terminals make it possible for online buyers to pick up their orders themselves using personal identification numbers. The terminals allow on-line shops to cut their costs by up to 20 percent, while other types

Service Kiosks to benefit online shoppers

Hands-Free From Order to DeliveryQiwi, a company that operates

pay kiosks, is taking on the

Russian postal service with a

network of self-service package

collection terminals.

ANASTASIA NAPALKOVAEXPERT MAGAZINE

of long-distance sales outlets such as catalogue companies and net-work marketing fi rms can lower their shipping times. In Moscow, Qiwi Post has already installed several dozen metal lockers equipped with drawers of vari-ous sizes and cash acceptors, and intends to commission an addi-tional 400 units in 2012. The com-pany plans to invest $30 million in the project over three years.

Qiwi’s interest in this market is its connection with the com-pany’s core business — payment processing services, which it pro-vides to a number of clients, in-cluding online shops. Qiwi Post is not the only player in this mar-ket, however. PickPoint and Lo-gibox launched approximately 200 automated postal kiosks throughout the country last year. PickPoint forecasts indicate that postal kiosks will be serving 15 to 20 percent of all business-to-consumer dispatches in the near future.

Russia is becoming the next big thing for U.S. venture capitalists interested in foreign tech.Exemplifying the invest-in-Russia trend is Tiger GlobalManagement, a New York–based international investment manage-ment fi rm that has invested $12 million in two installments over the past two years in Russian e-commerce platform Wikimart.ru and contributed $10 million to on-line travel sales site Anywayany-day.ru.

Also of note is the rise ofOstrovok.ru, a clone of Booking.com, which received $13.6 mil-lion last July from Western funds and investment angels such as Zyngo founder Mark Pincus, early Facebook investor Peter Thiel and Skype founder Niklas Zenn-ström.

“There has been a lot of enthu-siasm among U.S. funds fortaking elements of successful e-commerce and social networking companies in one geography and transplanting them into another geography — fi rst in China, now increasingly in Russia,” said Mac Elatab, an investment analyst at TrueBridge Capital Partners, add-ing that the the high G.D.P. per capita growth in Russia’s econo-my between 1999 and 2010 indi-cates that Russian consumers have more money to spend.

Part of the appeal for foreign investors is the reputation of Rus-

Investment Venture capitalists are taking a risk on Russia’s high-tech start-ups

sia’s science and technology in-dustries. “In computer science and materials science, the Russians are as good or better than anyone in the world,” said Bill Reichert, man-aging director of Garage Technol-ogy Ventures, a major U.S. venture fund chasing Russian start-ups.

Labor costs are another reason for investors in high tech to come to Russia. Salaries are high at Mos-cow start-ups, but in a city like Tomsk, in Siberia — where every fourth inhabitant is either a stu-

dent, a researcher, a university teacher or an employee of the Rus-sian Academy of Sciences — a modest $2,500 per month can prove enough to attract the cream of the crop among local engi-neers.

Another positive factor is gov-ernment support for foreign and domestic investment in private eq-uity. This support goes wellbeyond words: At the federal and regional levels, the Russian state is investing tens of billion ofdollars in innovation. With its mas-sive subsidies and tax cuts for in-novative projects, Skolkovo, the giant tech hub outside Moscow now nearing completion, has at-tracted dozens of global venture funds and high tech firms. I.T. Park, near Kazan, is one of the

largest technoparks in Eastern Europe, while the Tomskspecial economic zone has attract-ed a number of domestic andinternational tech companies,including Nokia Siemens Net-works, Korea’s Darim Internation-al and the U.S.–based fi rms Mon-soon Multimedia and Rovi Corporation.

State funding comes in addi-tion to a dramatic increase in available Russian and foreign venture capital. While fewer than two dozen funds were actually operating in the country just three years ago, there is now more money in Moscow than in many other innovation spots on the global map. Silicon Valley entre-preneur Steve Blank described the situation as “the biggest pile of money I have ever seen.”

Despite all the positives, Rus-sian tech is not without problems. One of these is the lack of well developed proposals. “We some-times see very raw start-ups, lack-ing sound business models or busi-ness plans or with weak management teams,” said MarinaKuznetsova of BV Capital, a ven-ture fund operating from San Francisco and Hamburg.

Additionally, Moscow works at a 12-hour time difference from California, where many U.S. tech investors are based.

Russia still has a serious image issue as well. “Media coverage from Russia is almost uniformly nega-tive in the U.S.,” said Elatab. “That is not to say that only negative things are happening in Russia — the truth is somewhere in the mid-dle. At bottom, I think the Cold War still impacts how both Rus-sians and Americans view each other.”

Tech Has the Midas Touch

Investor Steve Blank (right) sees potential in Russian tech students.

ADRIEN HENNIEAST-WEST DIGITAL NEWS

Many American venture

capitalists find a lot to like in

Russia’s burgeoning tech sector,

but some remain hesitant due to

stereotypes left over from the

days of the Cold War.

Part of the appeal for foreign investors is the reputation of Russia’s science and technology industries.

Read more atrbth.ru/14961

Read more atrbth.ru/14284

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