IN THIS ISSUE

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PAGE 8

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POLITICS & BUSINESS

MONEY & MARKETS

SPECIAL REPORT

SPECIAL REPORT

U.S.-Russia Trade TalksMoscow proposes a new round of dialogue

Russian Stocks Analysts see modest gains in 2014, with an eye on valuations

It’s Not About the PuckRussia hopes to prevent another “Miracle on Ice.”

Paralympians Dream of Gold

SPECIAL REPORT

Sochi 2014

Who to Watch, What to Look For

Experts hope the Olympics leads to better facilities and changed attitudes towards Russians with disabilities

PAGE 5

Russian Vodka Sponsors U.S. Women’s BobsledLack of state support forces athletes to get creative

If hosting the Olympics were a competition, Russia would be cruising for gold in at least two categories: spending and security measures.

With a record price tag to ex-ceed $50 billion, Russia is hoping the event will do no less than kick-start economic development in its southern coastal region. At the same time, officials are pursuing unprecedented security initiatives aimed at ensuring the Games runs smoothly in the face of terrorist threats.

Some observers have called Sochi itself — a subtropical coastal city dotted with palm trees, a city that had less pre-existing infrastructure than most Olympic cities have prior to selection — a challenging venue for the Olympic Winter Games in the fi rst place.

“You’d have to spend a long time searching the map of this huge country to fi nd someplace with no snow,” Russian opposition leader

Sochi 2014 The resort city on the Black Sea has been transformed for the Olympics

Boris Nemtsov quipped. “Putin found it.”

Nemtsov was exaggerating: mountains near Sochi do, indeed, get snow. But his comment under-scored the ambitiousness of the project.

Many in Russia’s leadership, in-cluding President Vladimir Putin, seem to feel the country’s prestige is on the line.

When the world tunes in to watch the Sochi 2014 Winter Olympics, the Kremlin wants viewers to see futuristic, state-of-the-art stadiums sitting next to the sea, breathtak-ing views from world-class ski re-sorts in the snow-capped Caucasus Mountains, and a sprawling new Olympic Park that’s bordered by subtropical palm trees.

The aim is to formally introduce a “new Russia” to the world as a great power and a modern econo-my, two decades after the fall of the Soviet Union.

The challenges of SochiWhat makes Sochi’s transforma-tion all the more ambitious is that none of this infrastructure even ex-isted a few years ago.

Indeed, the fi nishing touches on many of Sochi’s Olympic venues - including the Fisht Olympic Sta-

dium, the site of the Games’ Open-ing and Closing Ceremonies - were still being put in place in January.

As a result, the Opening Cere-mony will be a moment of high drama not just for the world-wide audience, but also for the Russian Olympic organizers.

While all of the new competition venues in Sochi have now hosted international events, they are near-ly as new to the Russian Olympic team as they are to the arriving for-eign athletes.

The ski-jump area just recently went into service, after signifi cant delays and cost overruns – over-runs so outrageous that the head of the project was publicly repri-manded on national television by President Putin himself.

This ski season is the fi rst time the new mountain train – trusted with the responsibility of whisking Olympic visitors between the Coast-al Cluster and the Mountain Clus-ter — has started making trips.

In fact, by selecting Sochi as the host city for the 2014 Olympic Win-ter Games, Russia turned the tra-ditional model on its head.

That model – which had existed as long as the Olympics took place in the U.S., Canada and Europe – was to take a proven winter resort

area, spruce it up, add a few mod-ern touches, and not worry much about anything else – like whether or not it actually snows.

What Russia proposed was to start from scratch in a city with lit-tle alpine ski tradition to speak of, a city that’s better known to Rus-sians as a summer resort town on the “Russian Riviera.”

Nemtsov’s quip carried a grain of truth. Sochi’s subtropical climate meant that having enough snow was a matter of some speculation, al-though plenty of it has fallen this winter.

A city’s transformationA decade ago, Sochi did not have a single world-class ski resort area, and certainly nothing that would have hinted at Sochi becoming a future Olympics host city.

That all changed when President Putin made the mountains of Kras-naya Polyana his personal ski re-treat. Now there are three world-class ski resorts in the mountains of Krasnaya Polyana. In convinc-ing wealthy Russians who might have gone abroad to instead visit Sochi’s ski resorts, no expense was spared.

CONTINUED ON PAGE 6

Russia Pulls Out All the Stops for Winter Games

Russia is gearing up for the most

expensive Olympic Games of all

time, amid complaints about

corruption and concern over

potential terrorist attacks.

DOMINIC BASULTOSPECIAL TO RBI

Russia’s biggest oil producer is expanding its horizons overseas.

Russia’s largest oil fi rm, Rosneft, purchased Morgan Stanley’s oil trading and transportation busi-ness in a move that gives the fi rm a new presence in the United States, as it prepares to tap Russian oil fi elds with its U.S. strategic part-ner, ExxonMobil.

The purchase follows Rosneft’s ascension to the No. 1 spot in glob-al oil output after buying out pri-vate investors in BP’s Russian oil venture, TNK-BP, last March.

The Morgan Stanley deal “rep-resents a breakthrough in strength-

Oil Morgan Stanley sells its oil merchanting business to Russia’s top oil producer, Rosneft

ening Rosneft’s commerce and lo-gistics unit, which will spearhead the company’s growth in the inter-national oil and products markets,” Rosneft CEO and chairman Igor Sechin said in a statement accom-panying the news in December.

The agreement involves the sale of an international network of oil trading, storage and shipment fa-cilities, along with 100 front-office executives – including oil traders in the U.S., U.K. and Singapore, or roughly a third of Morgan Stan-ley’s total commodities “merchant-ing” personnel – Rosneft said in its recent statement.

The terms of the deal were not disclosed. The Wall Street Journal cited an unidentifi ed person famil-iar with the details of the transac-tion as saying that the sale will cut about $4 billion in risk-weighted

assets from the Wall Street fi rm’s balance sheet.

Rosneft, which is majority-owned by the Russian government, has emerged over the past decade from relative obscurity to become the world’s biggest oil producer, respon-sible for four out of every 10 bar-rels of crude that Russia produces.

Sechin, a close ally of Russian President Vladimir Putin, has ex-tended Rosneft’s reach beyond Rus-sia’s borders after consolidating large swathes of the country’s pri-vately held energy assets under the state-owned company’s control.

The deal with Morgan Stanley

Russian Oil Major Rosneft Extends U.S. EmbraceRussia’s biggest crude producer

agrees to buy Morgan Stanley’s oil

merchanting assets as it ramps up

cooperation on new fields with U.S.

major ExxonMobil.

DAVID MILLERSPECIAL TO RBI

comes as Rosneft is ramping up co-operation with its strategic Amer-ican partner, Exxon.

Rosneft and Exxon are scheduled to begin drilling the fi rst oil wells in the far-northern Kara Sea and in the Black Sea together this year. The fi rms are also preparing to tap Siberian fi elds and export liquefi ed natural gas from Russia.

“We have a unique partnership,” Glenn Waller, the head of Exxon in Russia, said in an interview with Bloomberg News in January. “They have the world’s biggest reserves and we have the largest market cap-italization.”

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This supplement is produced and published by Rossiyskaya Gazeta (Russia) and did not involve the news or editorial departments of The Wall Street Journal

Distributed with The Wall Street Journal Saturday, February 1, 2014

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Politics & Business

NEWS IN BRIEF

• The Russian Central Bank plans to phase

out targeted interventions, reducing their size from up to $60 million a day to zero, as it gradu-ally implements a floating ruble exchange rate by 2015. The Central Bank currently buys or sells cur-rency whenenever the exchange rate heads to-ward the boundaries of a floating corridor of 3.1 rubles (about nine cents) — which is now set be-tween 35.1 and 38.2 rubles relative to a currency basket of the dollar and the euro.

• Traffic to Moscow’s Domodedovo airport

increased 9% in 2013 to reach a total of 30 mil-lion passengers. Some 85 airlines operate flights to 242 destinations out of Domodedovo, Moscow’s busiest airport.

• Anna Chapman: Ready to Wear. The former spy, expelled from the United States in 2010 along with nine other Russian citizens, showed her debut clothing line at a fashion show in Turkey on Jan. 9. The items will be available in Russian stores and online in early February.

• Russia will spend $240 million to fight crime,

according to a budget proposal covering the pe-riod 2014-2020. The budget allocates almost eight trillion rubles ($240 million) to the Interior Minis-try for the purpose of ensuring public safety and raising trust in law enforcement. Special attention will be paid to decreasing crime among minors.

• The Duma is debating a return to Winter

Time. The Russian parliament has begun discus-sion on changing the country’s clocks once again to move to a permanent state of Winter Time. Rus-sia has been operating under a permanent state of Daylight Saving Time since 2011, when then-President Dmitry Medvedev decided that the coun-try would not “fall back” in November.

• Yandex will get access to public data from

Facebook under a deal signed in mid-January. Yan-dex, which controls 60% of Russian search traffic, will use its agreement with Facebook to better target its search queries.

• Moscow Mayor Sergei Sobyanin has named

the city’s first business ombudsman. Mikhail Vishegorodtsev, a member of Mikhail Prokhorov’s Civic Platform party, will now have responsibility for protecting the rights of the capital’s business-men.

• An additional 1,000 people could be freed

this year as part of the economic amnesty. More than 1,660 people have already been released under the amnesty program. Although the amnesty was supposed to end Jan. 4, national business om-budsman Boris Titov said that cases are still mak-ing their way through the courts and that the am-nesty would continue until all eligible cases have been heard.

Master Bank is the highest-profile Russian bank to have its license pulled.

Russian regulators are pulling bank licenses over allegations of money laundering and other irregularities while tightening regulations as part of a wide-ranging effort to improve the country’s fi nancial health.

Coupled with a strategy of high interest rates intended to stamp out inflation despite slow economic growth, the measures amount to tough love from the new head of the Russian Central Bank, Elvira Nabiullina, designed to put the na-tion on course for long-term growth, according to analysts. Some 30 licenses were pulled during 2013 over a range of infractions.

The closures are part of a drive to crack down on fi nancial irregu-larities in the banking sector among small and mid-sized banks, many

of which are little more than cor-porate treasuries. Russia’s banking sector, born during the tumultuous 1990s after the fall of the Soviet Union, still has hundreds of so-called “pocket banks.”

“The cleanup of the Russian banking sector by the Central Bank of Russia should be positive in terms of raising governance stan-dards and getting rid of non-via-ble banks,” the Fitch Ratings agen-cy said in a statement.

“However, the implementation of these measures could raise risks to depositor confi dence in the short term,” the statement continued.

The effort reached a crescendo in November, when officials ruffled markets by pulling the license of mid-sized Master Bank. The move left depositors in doubt over al-most $1 billion in savings and caused problems with withdraw-als from ATMs.

Banks Russia moves to clean up its financial sector, pulling licenses and toughening standards

Announcements of bank license withdrawals have caught both bankers and their depositors by surprise. In December, investors broke down the front door of In-vestbank’s headquarters in Ka-liningrad on the day after regu-lators pulled the company’s license, according to a report from Russian news agency Interfax.

Master Bank, the 41st-largest bank in Russia by deposits ac-cording to a RIA Novosti rating, was found guilty of conducting “large-scale suspicious opera-tions” and had violated laws against money laundering and the fi nancing of terrorism, the Cen-tral Bank said in a statement about its decision.

The fi rm had been mired in a money-laundering investigation since 2011.

The move against Master Bank was also noteworthy in that Pres-ident Vladimir Putin’s cousin, Igor Putin, has a seat on the compa-ny’s board of directors.

Russia’s Deposit Insurance Agency said that initial estimates put payments owed to depositors at Master Bank at about 30 bil-lion rubles ($914 million). Central Bank officials said that there was also a two-billion-ruble hole in Master Bank’s balance sheet, gen-erated by loans made to compa-nies affiliated to the bank’s own-ers.

Master Bank’s branches were closed, and its Web site went down in the immediate aftermath of the license withdrawal. Other Rus-sian banks that had partnered with it to use its large network of ATMs cautioned their customers about withdrawal problems.

Russian police officers entered Master Bank’s central office and confi scated materials, apparently in connection with the long-run-ning money-laundering investi-gation at the bank, officials said.

Igor Putin, who fi rst joined Mas-ter Bank in 2010, defended the lender against money-laundering accusations last year, after the homes of top executives were raid-ed by police, suggesting that the law enforcement agencies’ atten-tions were part of an effort to dis-credit the bank.

Russia Tries Tough Love With Small BanksRussian officials are taking a

muscular approach towards

cleaning up the nation’s financial

sector, targeting smaller banks and

tackling irregularities.

RIA NOVOSTI

is approximately

how many licenses

were pulled in 2013

rubles were owed to deposi-

tors after regulators pulled

Master Bank’s license

was Master Bank’s posi-

tion by deposits relative

to other Russian banks

30 30billion 41st

IN FIGURES

Ruble gets new symbol via popular vote

Russian Deputy Prime Minister Igor Shuvalov is spearheading negotations.

Russia has proposed a new round of trade negotiations with the Unit-ed States, aimed at kickstarting economic ties, at a time when po-litical relations between Washing-ton and Moscow have been other-wise increasingly strained.

The initiative stands in contrast to a series of other political prob-lems between the two former Cold War adversaries, ranging from Rus-sia playing host to secret-document leaker Edward Snowden to dis-agreements over the civil war in Syria.

“We have proposed...establish-ing a comprehensive economic agenda that would...mean creating a kind of a free trade zone by a certain period,” First Deputy Prime Minister Igor Shuvalov told report-ers in Washington in mid-Decem-ber. During the trip Shuvalov met with Secretary of Commerce Penny Pritzker and U.S. Trade Represen-tative Michael Froman, as well as with private American investors.

President Barack Obama and Russian President Vladimir Putin are expected to discuss the propos-

International Relations Moscow looks to kick off a new trade dialogue with Washington

als at the next G8 summit, sched-uled to take place in the Olympic host city of Sochi in June 2014, Shu-valov said.

Despite mounting political dif-fi culties, however, trade has been something of a silver lining in U.S.-Russian relations in recent years.

“Politics is on one side of the table, business is on the other side of the table, and fortunately they don’t interfere with each other,” Dmitry Akhanov, head of Rusnano USA, the Russian state technology fi rm that has carried out more than a billion dollars of investments in U.S. start-ups and venture capital funds, told Russian Business In-sight earlier in 2013, before the trade initiative was announced.

Russia Proposes Fresh Round of U.S. Trade Talks Russian officials are looking to

open talks on reducing trade

barriers with the country’s former

Cold War adversary, despite facing

a host of political disagreements in

other areas.

DAVID MILLER SPECIAL TO RBI

“In the business climate, we see interest growing from both sides,” Akhanov said.

U.S. exports to Russia rose 38% in 2011, 29% in 2012 and 11% in the fi rst quarter of 2013, according to fi gures from the U.S. Trade Rep-resentative’s Office, which linked the improvements to Russia’s entry into the World Trade Organization.

Between 2004 and 2011, U.S. ex-ports to Russia rose an average 16% per year. Russian exports to the U.S. rose 35% in 2011.

“Market-opening changes made by Russia during the course of its WTO accession process may already have brought benefi ts to U.S. ex-porters,” the U.S. agency said in a report released during the summer of 2013.

Several U.S. companies have moved into Russia in recent years.

Memphis, Tenn.-based Interna-tional Paper Co. has invested $1.2 billion into Russia, primarily to up-grade a paper mill intended to turn Siberia’s vast forests into paper products for neighboring China.

U.S. car makers General Motors and Ford have pushed into Russia to access the country’s automotive consumers.

Irving, Texas-based ExxonMo-bil has teamed up with Russian national oil champion Rosneft to spend billions of dollars exploring for oil in the Arctic and also ex-porting liquefied natural gas to Asian markets.

General Electric Co., America’s biggest conglomerate, and Russian state-controlled power trader Inter RAO have established a joint ven-ture to manufacture gas turbines.

Reporting from RIA Novosti was used in this story.

Getting Past Politics

Hopes for U.S.-Russia trade relations have been high since the U.S. Con-gress finally repealed the Jackson-Vanik amendment in December 2012. The provision, which had been in place since 1974, placed trade restric-tions on Russia as punishment for So-viet laws restricting emigration of So-viet Jews. While Russia had regularly been granted a waiver from the restrictions since the mid-1990s, analysts said its revocation was symbolic of deepen-ing trade relations between Russia and the U.S.

Announcements of bank license withdrawals have caught both bankers and their depositors by surprise.

Russia has introduced a new symbol to represent the ruble, based on the Cyrillic letter “R” — which looks like the Latin letter “P” — with a horizontal line through the middle. The design was approved after a public vote in which the winning design took 61%. Critics have said the symbol may confuse English-speaking for-eigners, who might see no obvious connection to the word “ruble.” Other varia-tions originally proposed by the Central Bank included different forms of the Latin letter “R.” Russian Central Bank chief Elvira Nabiullina has dismissed the criticism, saying, “The word ‘Dollar’ does not begin with the letter ‘S.’”

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Money & Markets

Stanislav

SavinovSPECIAL TO RBI

Natalia

OrlovaSPECIAL TO RBI

New leadership has given the Russian Cen-tral Bank a fresh dynamism that was sore-ly lacking. The new head, Elvira Nabiullina, is shaking things up, in part by making in-

flation Enemy No. 1. We here at the Moscow’s UFS Investment Com-

pany welcome the change. In the mid-term at least, we think that targeting inflation should indeed be the priority. This drive will hopefully help win inves-tors’ trust, and ultimately benefit capital markets. If successful, the Russian fixed-income market should rally from its currently low levels.

Less than a year into Nabiullina’s appointment, over two dozen banks have been stripped of their licenses as part of a sector-wide cleanup. It took her predecessor, Sergey Ignatyev, over 18 months to do the same. The country’s banking system has been in need of a health check for a long time. The speed with which these events are taking place has provoked a wave of criticism. But while the meth-ods may be up for debate, no one denies that change was necessary.

The new leadership has taken equally radical steps with regard to the refinancing system. The set of monetary policy instruments has been simplified, and the number of operations has been cut.

One of the most important changes is that the main benchmark tool, the refinancing rate — which did not play a big role under the old guard — has been replaced with the one-week repo rate.

That brings us back to inflation, which is the main reason why the new tool, the key rate, hasn’t been reduced in spite of slow growth. Inflation in Russia has been largely driven by non-monetary assets, such as food prices and tariffs charged by natural monopolies. In 2014, those tariffs are planned to stay steady for industrial consumers and to be raised by less than the rate of inflation for households.

Consumer prices rose 6.5% in December, com-pared to a year earlier. For the next three years, the bank set an ambitious goal of gradually bringing inflation down to 4%. Low inflation is one of the conditions necessary for a favorable investment cli-mate. A lack of investment is one of the main prob-lems of the Russian economy, which is today going through a period of structural change.

The downside to this approach is the inability to provide a stimulus to economic growth. Yet the bank remains adamant that any easing of the policy would only spur inflation.

Stanislav Savinov is a macroeconomic analyst at UFS Investment Company in Moscow.

While developed economies face the need to deleverage, emerging markets still have the opportunity to grow by tak-ing on more debt. Russia is no excep-

tion: government debt is only 10% of GDP, and cor-porate debt 57% of GDP. Households’ exposure to bank loans is 13% of GDP. That last area would ap-pear, at first glance, to offer huge upside potential, given that retail loan penetration in developed coun-tries is 80% of GDP. It suggests that the Russian pop-ulation can continue to take on debt in order to fi-nance consumption.

However, the reality is not that rosy. Of the 13% of GDP overall retail lending penetration in Russia, 10 of those percentage points come from consum-er loans. In 2003, the figure was a mere 1% of GDP, but thanks to 50% average annual growth over the past decade, the level in Russia is now comparable with that in developed countries. Russia’s non-mort-gage debt is around 160% of the average monthly salary, in line with the level in developed European countries. To put these figures into plain speech, the Russian consumer-lending market appears to have reached its ceiling.

Indeed, concern for potential overheating on the retail lending market was probably the basis of the Russian Central Bank’s introduction of tighter pro-visioning requirements for unsecured loans last year.

Decelerating growth has caused a deterioration in loan quality. Slower growth hit borrowers that managed their debt positions poorly. A widely cited report from Svyaznoi Bank suggests that 19% of Russian borrowers are servicing at least five loans.

Given continuing income growth in Russia, we at Alfa Bank expect growth in the non-mortgage lend-ing market to stabilize around 25%-30% this year. It is unlikely to accelerate going forward. The main cause for hope is the mortgage market, which equals only 3% of GDP, making it virtually non-existent compared with other countries. Only a little over a million Russians, or a mere 1% of the population, have mortgages, suggesting tremendous growth potential given the 40% penetration in the EU.

However, there are constraints on both the sup-ply and demand sides. Russian banks lack long-term funding, and the complex regulation of the mortgage-lending segment is also an issue.

The conclusion to be drawn from all this is that there is still strong upside potential for retail lend-ing, thanks to the mortgage segment, but this po-tential is unlikely to be realized in the near term.

Natalia Orlova is the Chief Economist at Alfa Bank in Moscow.

VIEWPOINT

VIEWPOINT

Targeting Inflation: The Right Move For The Long Haul

Russian Retail Lending: Hitting A Growth Ceiling?

Analysts forecast that Russia’s benchmark RTS Index will recover from last year’s losses in 2014.

Russian equity had one of its worst years on record in 2013, especially compared to the champagne year in U.S. and European markets. Yet analysts are more sanguine about the prospects for Russian stocks in 2014.

Despite the country’s image prob-lems abroad, including concerns over minority shareholders’ rights and state infl uence in the market-place, Russian equities have fre-quently been among the best-per-forming in the world in the years since they came into existence.

After the Russian stock market was founded in 1995, Russian stocks returned at least 8% dur-ing 13 out of the past 18 years, and generally returned over 20% in any year where there wasn’t a crisis. The real trouble is that those cri-ses tended to destroy most of the previous gains. In both the crash-es of 1998 and 2008, the market lost some 75% of its value in a mat-ter of months.

With that in mind, investing in Russian equities may be a relative-ly simple process of asking, “Is this a crisis year or not?”

While predicting a crisis accu-rately is impossible, predicting which years will not be crisis years should be easier. (Notable excep-tions to this rule of thumb include 2000, when the RTS fell 18.2%, and 2011, when it fell 21.9%.)

So what about this year? In 2014, analysts predict the dol-

lar-denominated RTS Index will rise to 1,500, according to a poll of 11 analysts conducted by Reuters. That indicates an increase of ap-proximately 8% relative to the year’s open at 1,390. That is per-haps not spectacular. But it is no crisis, and it would represent a re-covery from the 5.6% loss in 2013.

Russian stocks have frequently outperformed their emerging-mar-ket peers. From 2000 to 2010, Rus-sia-dedicated funds were the best performing in the world of any asset

Stocks After a fall in 2013, Russian equity analysts expect single-digit returns in 2014

class, taking spots 1, 2, 3, 4 and 6 out of the top 10, according to fund rating agency Morningstar. The best-performing professional in-vestor fund was Prosperity Capi-tal Management’s Quest Fund, which produced a return of over 3,600% in this period, while the best-performing retail fund was East Capital’s Russia Fund, which rose more than 1,500% over the same period.

The year just ended was one of Russia’s worst on record in which an outright crisis did not occur. The almost universal prediction for 3.5% growth in 2013 made at the start of the year failed to materi-alize. Instead, the economy sput-tered, eventually finishing 2013 with about 1.5% growth.

This poor result weighed on the value of stocks, which in Russia have historically been driven large-ly by rising earnings and energy prices, and produced one of the rare years where the RTS Index fell de-spite the absence of a crisis. The RTS’s 5.6% decline was mainly due to the impact of a weakening ruble, which lost 10.4% against the Cen-

tral Bank’s basket of currencies, said Chris Weafer, senior partner at Macro Advisory. (The ruble-denominated MICEX fi nished the year just above the break-even line with a full-year gain of 1.9%.)

Economists believe 2013 became Russia’s annus horribilis due to a combination of the soggy global

recovery with the collapse of con-fi dence inside the country, which hurt investment in particular. How-ever, simply because 2014 is start-ing from such a low base, many of them expect the new year to be a lot better than the last and for Rus-sian stocks to rise, partly because they are cheap – even by Russia’s historically low standards.

At the end of 2013, Russian shares were trading at a 25% dis-count to their emerging-market

peers, an improvement over the 50% discount shares were marked down to in 2009. As the year began, Russian stocks had the cheapest valuations among 21 emerging-market economies monitored by Bloomberg, with shares on the benchmark trading at 4.5 times projected 12-month earnings, com-pared with a multiple of 10.4 for the wider benchmark MSCI Emerg-ing Markets Index.

One event that spurred cautious optimism was the reopening of the IPO market in 2013. A total of $7.9 billion was raised via a combina-tion of fi ve IPOs and four Second-ary Public Offerings.

The biggest factor that could af-fect the markets in 2014, say econ-omists, would be a return of con-fidence and the resumption of domestic investment, one of the main economic drivers this year.

“The key to the valuation of the Russian equity market is not among assets but rather in investments,” said Alexey Zabotkin, an analyst with VTB Capital. “Only once the investment pattern changes will the Russian market start to re-rate.”

Russian Equities: A Case For Cautious Optimism Russia’s benchmark RTS Index fell

6% in 2013 for one of the poorest

performances on record. But

analysts expect 2014 to be a better

year for Russian stocks.

BEN ARISSPECIAL TO RBI

History of Russian IPOs and SPOs Price performance of 2013 IPOs and SPOs

In 2014, the benchmark RTS Index may rise 8% to 1,500, according to a poll of 11 analysts conducted by the Reuters agency.

Yota Devices CEO Vlad Martynov presented the phone Dec. 4 in Moscow.

Russian developers have unveiled the country’s fi rst locally designed cellphone with a novel twist: It has screens on both sides.

The YotaPhone, which uses Google’s Android operating system, was designed by Yota Devices.

On the front of the YotaPhone there’s a standard smartphone screen. On the back is an e-paper screen, which resembles the low-energy-consuming screen found on a Kindle e-reader.

The idea is that the black-and-white screen stays on, to display specifi c kinds of information, such as calendar items, the current weather or text messages that can be updated in real time.

The designers of the YotaPhone say that using the low-energy screen in this way will encourage smartphone users to break the habit of constantly fl icking on their phone screen to check for new messages

Mobile technology Russian designers develop smartphone with twice as much to look at

or updates, thereby lengthening its battery life.

Speaking at a media launch on Dec. 4 in Moscow, company CEO Vlad Martynov paid tribute to Ap-ple’s success and innovations, say-ing that Yota Devices’ goal would be to use the stiff competition to produce top-end products.

“Apple is a great company and a role model for us. I think we need to learn from people who are very good at what they do — and then try to beat them at their own game,” Mr. Martynov said.

The gadget will also be able to replace dedicated e-book readers, and developers say the battery should last at least 50 hours in the reading mode. Users can also share quotes from the books they read on social media, using the sensory pad under the e-paper screen.

Yota Devices has not made any sales projections for this new prod-uct, but about 10,000 units had been pre-ordered online by the time of the launch.

“It is difficult to make any pro-jections when an entirely new type

Two Screens are Better than OneDevelopers say that the YotaPhone

can serve as both a smartphone

and an e-reader, but analysts say

that the device may not have

enough specs for its price point.

EKATERINA TURYSHEVA RUSSIAN BUSINESS INSIGHT

of device is being brought to the market,” Martynov said.

“But we hope the product will be a success, of course.”

The hybrid phone has been given a lower retail price than was orig-inally anticipated: it will cost 19,990 rubles ($600) in Russia and €499 ($680) in Europe.

Nevertheless, some experts argue that at the current price point, this device is not much cheaper than some of the bestsellers in the same market sector.

“I don’t think there will be a huge demand for the YotaPhone,” said Evgeny Alminov, head of mobile devices and IT at J’son & Partners Consulting, which conducts re-search in Russia. “For the money it costs, one can fi nd a more high-spec smartphone.”

The phone went on sale in Rus-sia in December, but there are cur-rently no plans for bringing the fi rst generation of the device to the American market. The company’s key export market is Europe, where the YotaPhone will be distributed via U.S. fi rm Ingram Micro.

The YotaPhone will be available in Europe, Asia and the Middle East by the end of the fi rst quarter.

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Opinion

CRISIS IN UKRAINE: A CATALYST FOR LONG-OVERDUE CHANGE?

A WISH LIST FOR GROWTH

Ukrainian President Viktor Yanukovich set off a fresh crisis in his country in fall 2013, when he rejected a trade deal offered by the European Union in favor

of closer ties with Russia. Thousands of Ukrainian citizens took to the

streets in protest, and clashes with riot police resulted in injuries.

What are we to make of these events? Understanding the choice before Ukraine and

the motives of Yanukovich and Russian Presi-dent Vladimir Putin requires a nuanced appre-ciation of the economic history of the post-So-viet landscape.

The break-up of a single economy that re-sulted from the collapse of the USSR had harsh economic consequences that are still playing out in the region.

In the 1990s, Russia’s economy contracted 40%, and Ukraine’s economy fell as much as 60%. The Soviet economic system was destroyed, and new types of co-operation between coun-tries are only just beginning to emerge. This is by no means an easy process.

In the Soviet era, Ukraine was the most eco-nomically and technologically advanced repub-lic in the USSR. But as a sovereign state today, Ukraine is one of Europe’s poorest countries.

The EU and the U.S. began to compete with Russia for infl uence over Kiev soon after the breakup of the Soviet Union. But their actions lack strategic vision and are currently not backed by economic resources.

Not so long ago, Ukraine was the third larg-est recipient of U.S. aid, after Israel and Egypt. The EU too has implemented numerous reform assistance programs for Ukraine.

But the scale of that support was far from meeting Ukraine’s needs. The 2008 crisis had a devastating effect on its economy.

A $16.4 billion agreement with the IMF signed in November 2008, and a follow-up $15.1 billion agreement in August 2010 were only able to slow down the country’s slide into an economic abyss. There were also difficult social consequences, showing the country’s leadership that the path of ultraliberal re-forms would be dangerous for social stability. It was at that period of uncertainty that Rus-sia joined in the politico-economic rivalry over Ukraine.

When inviting Kiev to sign an association

Russia suffered a poor economic per-formance in 2013 and the government is desperate to avoid a repeat in 2014. Realizing the goal of returning growth

back towards the 3% level will require fi scal and monetary policy changes and faster prog-ress with the reform agenda. With that in mind, an investor’s wish list from the government for 2014 would include:

• Greater efficiency in budget spending, and a shift of resources towards growth-boosting projects and away from nonproductive areas such as defense spending;

• The initiation of cuts to the Central Bank’s benchmark interest rate, and a big cut in the commercial bank’s average lending rate to small businesses;

• An increase in infrastructure spending; • Greater determination to meet OECD

membership conditions, which means improv-ing investors’ perception of Russia, of risk and of the business environment;

• An improvement in corporate governance, especially among state-run companies.

Although already urgent, the debate over specifi c action is not expected to intensify until spring 2014. For the next two months, one policy priority will eclipse all others: deliver-ing a controversy-free and efficient Winter Olympics.

Overall growth in 2013 is expected to be closer to 1.3%, instead of the over-3% rate achieved in 2012, even though a similar num-ber was originally forecast for last year. The slump in growth has come despite the fact that the country boasts a very strong balance sheet with total sovereign debt at only 10% of GDP, the world’s fourth largest fi nancial reserves, and quite a modest budget defi cit.

The problem is that confi dence among con-sumers, business owners and investors is too low, while the average commercial bank lend-ing rate, especially to consumers and small-to-medium-sized enterprises, is too high.

It is encouraging that President Vladimir Putin has fi nally acknowledged the cause of the current slump in growth is domestic pol-icy failures, rather than contagion from the rest of the world. That is an important change of position. It suggests that Mr. Putin will now

agreement in November 2013, the European Union in effect agreed that the task of improv-ing Ukraine’s situation lay fully on the Ukrai-nian authorities and people. The EU, after all, had its own fi nancial and economic crisis to deal with fi rst.

Kiev had expected Brussels to come up with a modern version of the Marshall Plan, and those expectations were dashed. In effect, Ukraine was being invited to join a Eurocen-tric model as one of its periphery states.

By contrast, Russian leaders believe that be-coming “a second-rate European country” is not what Ukraine deserves. The Kremlin is offer-ing Ukraine a more attractive short-term de-velopment path as a partner in the Moscow-led integration bloc called the Eurasian Union.

The aid package that Russia offered to Ukraine in December 2013 (a $15 billion loan; a con-siderable price cut on Russian gas; joint tech-nological projects) prevented a default and pro-vided some breathing room to develop plans for saving the Ukrainian economy.

Champions of integration within the Eur-asian Union say one should not overestimate the destructive consequences of the collapse of the unifi ed Soviet economy.

Much of the shared Soviet legacy has indeed been preserved. For instance, Russia and Ukraine still have massive trade in goods and services ($55.5 billion in 2012), visa-free travel and free movement of labor, an integrated gas transpor-tation and power system and military-indus-trial cooperation. Russia still has its naval base in the Crimea, Ukraine. In political economics, relations like these are termed “interdependence” and they are an important condition for eco-nomic integration.

But it is doubtful whether the model pro-posed by Russia will remain sustainable in the long term. Experts are well aware that the effective functioning of a modern state de-pends on such institutions as strong property rights and market sophistication. Property rights protection in Russia is poor, institutions

of the required quality have not yet been cre-ated and the country’s authorities are not doing anything to create them. What the Russian economy needs is not micromanagement from the Kremlin, but reforms that could ensure the operation of the economic institutions of a modern state.

If Russia’s next move after involving Ukraine in a process of reintegration is to carry out the kinds of radical institutional reforms that econ-omists have been urging for the past 10 years, then the protests in Kiev’s Independence Square and the unexpected rapprochement between Russia and Ukraine could have long-term pos-itive consequences for both countries.

Russia and Ukraine are united in that their future prosperity lies in developing European-type democratic societies. Yet Russia also as-pires to become an independent center of grav-ity in world politics. Its current efforts are aimed at attracting Ukraine into its own integration project, which runs counter to the interests of the EU and the U.S. The need to deepen coop-eration with Ukraine within an integration proj-ect will hopefully spur reforms both in Russia and Ukraine, leading to the creation of a win-dow of opportunity for a real modernization of the politico-economic system in both countries.

But in the meantime, Russia is unlikely to adopt a policy that reconciles itself to passive-ly watching Ukraine develop as a peripheral member of the European Union.

Leaders of the countries that once constitut-ed the Soviet Union share certain similarities in their worldview. One is that they tend to downplay the concept of ”values” as a motivat-ing factor for national policy, preferring instead to focus on “interests,” both national and per-sonal.

Russian leaders are convinced that interna-tional relations within the Commonwealth of Independent States (as the loose-knit organi-zation of former Soviet states is known) is a zero-sum game territory. That means every de-feat suffered by a partner from outside the re-gion translates into a victory for Russia. Such outsiders would include the U.S. and China, as well as the EU.

Any attempt to understand the economic con-sequences of the current events around Ukraine without taking into account this worldview of the regional elites is bound to fail.

Stanislav Tkachenko is an associate professor of Inter-national Relations at St. Petersburg State University

side more with those in government who de-mand fi scal and monetary policy changes.

So, what are the chances of the investor’s wish list being realized?

On the issue of spending efficiency, the Duma recently passed a revised three-year budget, which still has far too much money allocated to defense equipment and to other “secret” and nonproduc-tive areas. The basis for optimism that this may be revised to shift more resources to growth-boost-ing projects has recently improved, after Presi-dent Putin acknowledged that current spending is inefficient and voiced support for changes.

The battle for lower interest rates will be tough. The Central Bank is opposed to any cuts

Russia and Ukraine’s future prosperity lies in developing European-style democracies. Integrating Ukraine’s economy may create a window for reform.

Chris WeaferANALYST

in its benchmark rate so long as infl ation is even close to the 6% level. Infl ation has been rising again recently, and it is expected to end the year close to 6.5%. The president’s econom-ic advisor has recently demanded a rate cut as part of a growth stimulus package. This will likely be a key battle in the spring.

One traditional way to boost economic ac-tivity is to invest in infrastructure. Russia clear-ly needs to expand and modernize a lot of in-frastructure, and the catalyst may come with the start of preparations for the 2018 FIFA World Cup, to be hosted in 11 Russian cities. The state has agreed to make money available from the National Welfare Fund.

OECD membership is an important goal. To qualify, Russia will need to demonstrate much greater progress in reducing corruption and bu-reaucracy, as well as improving the rule of law. The Kremlin has made membership a key pri-ority for the next couple of years.

Poor standards in corporate governance are among the main reasons why the risk premium in many state companies is so high. But it does seem that the message of higher standards lead-ing to better valuations is fi nally getting through to the state – and to controlling shareholders.

Chris Weafer is a senior partner at Macro Advisory, a Moscow-based research consultancy.

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Stanislav TkachenkoEXPERT

Russian officials consider 2013 nothing less than a triumph for the country’s foreign policy. Alexan-der Gabuev, a member of Russia’s Foreign and Defense Policy Council, outlines top challenges facing Russia in 2014, including strengthen-ing Eurasian integration, managing natural re-sources and repairing its relationship with Europe.

Dr. Richard Weitz, di-rector of the Center for Political-Military Affairs at the Hudson Institute, highlights areas of po-tential progress in the U.S.-Russian relationship to watch for in 2014. These include enhanced business and cultural ties as well as greater coop-eration in crucial areas like counter-terrorism and Syria.

Russia Direct explores the special challenges needed to prepare Sochi for the Olympic Winter Games, including build-ing infrastructure, fight-ing terrorism and turn-ing a seaside resort into a skiing paradise. In this report, experts from Rus-sia and abroad discuss these issues and specu-late on the future of the North Caucasus region.

What to expect from Russia

in foreign policy this year

January Monthly Memo:

Russia-U.S. Relations

Quarterly Report:

Going for the Olympic Gold

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Special Report

Whatever else the 2014 Olympic Winter Games will be, they must certainly be considered unique.

Seven years and over $50 billion have gone into making Russia’s fi rst such event a success. All that remains is to actually stage it. The sheer grandeur of the operation alone ensures that Sochi 2014 will be a topic of discussion for years to come.

As with the similarly extravagant Beijing 2008, Sochi 2014 bears the indelible mark of the gov-ernment overseeing this prestige project.

Marked by high-fl ying architectural designs and fueled by cash from natural resources – while also riddled with allegations of corrup-tion and spurred on by organizers desperate-ly hoping to impress the international community – the event is almost a Russian national avatar.

The sheer engineering challenge matches Pres-ident Vladimir Putin’s political goal of restor-ing the heft and credibility of Russia, which was lost after the collapse of the Soviet Union.

For a sense of perspective: this is going to be a Winter Olympic Games set in the subtropics. Even the connecting road to the mountain ven-ues cost nearly as much as Vancouver 2010.

“It’s a big responsibility and a lot of work still, setting up the operations,” a senior official overseeing the fi nishing touches to Sochi 2014 told RBI.

Sochi 2014 The Olympic Winter Games promise plenty of drama, set in a seaside resort town specially remodeled for the purpose

The venuesAny spectator in the Fisht Olympic Stadium for the ceremony will see the entire vision for Sochi 2014 distilled into two spectacular views: at one end of the arena, the snow-capped Cau-casus mountains; at the other, the sparkling Black Sea.

Those two views sum up the entire phi-losophy of Sochi 2014, the fi rst Olympic Winter Games to put venues in clusters. This is a conscious attempt to replicate the Olympic Park buzz of summer-host cities like London and Sydney.

By the water’s edge, the Fisht stadium nestles alongside hock-ey, skating and curling venues in a meticulously landscaped coastal park. Inland, a scat-tering of brand-new ski re-sorts dot the mountain ridges.

The two locations are a con-stant reminder of the city’s leg-acy plans as a beach resort and also a base camp for winter sports.

Preparations have generally gone smoothly, despite a rush to fi nish the Fisht stadium, which hosts only the open-ing and closing ceremonies.

A year ago, there were concerns when snow melted at some rather balmy mountain test events. But those worries have now large-ly evaporated, as the white stuff has poured from the heavens this winter.

In echoes of Beijing 2008, security is extreme-ly heavy - double the police presence of Lon-

Thrills, Chills and Bills: Sochi 2014 Is Geared Up for A Spectacle

From figure-skating at the Coastal Cluster to

downhill action at Roza Khutor, these Olympic

Winter Games have something for everyone.

JAMES ELLINGWORTHSPECIAL TO RBI

Russia’s Putinka vodka brand is sponsoring the U.S. women’s bobsled team this year

If U.S. Olympic bobsled team member Jamie Greubel takes home gold at the Winter Olym-pics, she’ll have to thank Russian vodka.

Like many of her fellow U.S. athletes, Greu-bel relied on private sponsorship to help stave off fi nancial ruin as she strove to make the na-tional team at the Games in the southern Rus-sian resort town of Sochi in February.

Among this year’s sponsors of the U.S. bob-sled team is the Putinka vodka brand.

“We’re excited to have great sponsors for this season, because it’s really expensive to get to Russia [twice],” Greubel said, referring to the team’s training trip to Sochi last month and the upcoming Winter Games.

Unlike most countries, the United States does not provide federal subsidies for its Olympic athletes, leaving them to rely on sponsors, grass-roots donations, family support, an array of odd jobs and, more recently, online crowdfunding to fi nance their Olympic dreams.

The U.S. Olympic Committee’s approach is refl ected in an old slogan: “America doesn’t send athletes to the Olympics, Americans do.”

Meanwhile, Russian vodka brands have been forced to promote themselves in creative ways due to restrictions on advertising. The brand “Putinka” plays with Russian President Vladi-mir Putin’s last name, although it is not actu-ally endorsed by him.

“If one of the contract provisions requires us to drink a vodka shot, we will,” team manager Lenny Kasten told the RBK news agency.

Greubel, 30, said that even though her trav-el costs, expenses and health care are covered,

Finances Without federal subsidies, American Olympic athletes must find creative ways to finance their dreams

thanks to sponsorship money earmarked for members of the U.S. team during an Olympic year, remaining fi nancially solvent is a constant struggle.

“We’re kind of forced to work night jobs and waitressing jobs,” she said. “There we are, train-ing all day and then running off to work an eight-hour shift to make money.”

Greubel estimates her total training-related costs this year at around $17,000, and that’s on top of the student loans she has to pay off. To fund her training last season, she racked up $5,000 in credit card debt that she was only able to pay off earlier this year.

Nonetheless, she decided not to work nights this year to focus exclusively on making the U.S. women’s team for Sochi.

Greubel’s teammate and sometime racing partner Emily Azevedo launched her bobsled

career seven years ago. She felt the fi nancial pressure after just one season.

“I had 12 cents left in my bank account, and my family had helped with a majority of my bills that season,” Azevedo said.

Even top U.S. athletes in higher-profi le Olym-pic sports, such as gymnastics and swimming, sometimes reach the pinnacle of their career only as a result of sacrifi ces by their families.

Last year, gold medal-winning gymnast Gabby Douglas’s mother declared bankruptcy to es-cape her money woes. Meanwhile, the family of swimming champion Ryan Lochte faced pos-sible foreclosure on their home due to their al-leged failure to make mortgage payments.

Both of those athletes have gone on to secure endorsement deals worth millions of dollars. But many Olympic competitors never see that kind of payday.

American Bobsled, Brought To You by Russian VodkaA vodka whose brand name is a playful nod to

Russian President Vladimir Putin is sponsoring

the U.S. women’s bobsled team.

CARL SHRECKRIA NOVOSTI

Around half of U.S. track-and-fi eld athletes who rank in the top 10 in their events earn less than $15,000 annually from sponsorships, grants, prize money and other sources associated with their sporting careers, according to a study last year by the Track and Field Athletes Associa-tion, a U.S. nonprofi t.

Of the U.S. national ski team competing in Sochi, most of the top skiers are fully funded by their federation through a mix of sponsor-ship, member fees and fi nancing from the U.S. Olympic Committee.

Azevedo and Greubel say they are grateful for the support from sponsors of the U.S. Bob-sled and Skeleton Federation, which in addi-tion to the Russian owners of the Putinka vodka brand – the Eastern European Distribution Company – include German car-maker BMW and U.S. real estate giant Century 21.

Spectators at the Opening

Ceremony will see the entire vision for Sochi 2014 distilled

into two views: on one side, the snow-capped Caucasus Mountains;

at the other, the sparkling

Black Sea.

is the amount that U.S. bobsled team member Em-ily Azevedo had in her bank account a few months ago as she was pursuing her dream of competing in the Olympics.

is the percentage of Russian viewers over 18 who tuned in to watch broadcasts of 2013’s Bobsleigh World Cup, according to marketing research firm TNS Global.

is the amount that American bobsledder Jamie Greubel spent in 2013 on expenses related to train-ing. She has worked odd jobs after training sessions to support her dream of being an Olympic athlete.

$0.12

2.8%

$17,000

IN FIGURES

The Olym-

pic Winter

Games kick

off Feb. 7

as Russia

goes for

gold.

don 2012. Protests are limited by law to a small town eight miles from the nearest venues.

HockeyThe men’s hockey gold-medal game is the un-rivaled blue-ribbon event at any Winter Olym-pics, but here it arguably means more for the

host nation than at any previous Games.With no Olympic gold since Soviet days

and with a rowdy home crowd, Russia’s team is under pressure.

They certainly have all the ingredi-ents, with the forward fi repower of

Alex Ovechkin, Evgeni Malkin and Ilya Kovalchuk, the last of whom

has been playing on Olympic-size rinks all season in St. Pe-

tersburg.“All in all, it is a power-

ful Russian team,” Canadi-an pundit Tony Ambrogio

told RBI.“The key for me will be how

quickly they bond and how they cope with the immense pressure

that will be on this team. I can’t think of any other Russian team that has

had to deal with such pressure.”Up against them: the Canada of Sid-

ney Crosby and (hopefully) the injured Steve Stamkos, burning to defend their Vancouver

2010 gold.

Figure skatingIt may not have the celebrity status of its 1990s heyday, but fi gure-skating could be back in the

spotlight at Sochi 2014.North American fans have plenty to cheer

for - in Canada, the men’s world record hold-er Patrick Chan; in the U.S., the veteran Jer-emy Abbott, who reached new heights in qual-ifying for Sochi 2014.

The Russians could emerge with three gold medals, resulting in a crowd-pleaser for the host nation. Their emerging ladies’ skaters will challenge reigning champion Yuna Kim, while pairs team Tatiana Volosozhar and Maxim Trankov are odds-on for gold.

In the new team event, scores across all the four disciplines are added together, making for a podium battle between Russia, Canada and the U.S.

Alpine skiingFor U.S. fans, there’s someone missing at these Games, and that’s Lindsay Vonn. Injury stopped this downhill skiier from reaching Sochi, but there’s still lots of action on the slopes.

Colorado’s Mikaela Shiffrin is the reigning slalom world champion at just 18, while there will be an emotional farewell for 36-year-old legend Bode Miller.

The men’s slalom and giant slalom are Aus-trian Marcel Hirscher’s to lose, and there could be a rare medal for one of the world’s tiniest countries.

Liechtenstein’s 36,000 people will be pray-ing that Tina Weirather can put them on the Olympic podium for the fi rst time in 26 years. She has the pedigree - members of her family have won six Olympic medals between them.CONTINUED ON PAGE 7

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Rosa Khutor, the crown jewel, has one of the longest vertical drops in the world and was built with the help of Western European and Ameri-can ski experts. At the highest elevations, it re-sembles Switzerland or Austria. Sleepy moun-tain roads are now fi lled with European-style ski chalets and pastel-colored hotels. U.S. Olym-pic skiers who have visited Sochi called it sur-real, as if Russia had built a winter-themed Dis-neyland in the mountains.

Critics – and there are many, both in Russia and abroad – would argue that Sochi 2014 is a personal prestige project of Vladimir Putin, a grand attempt to put Russia back on the map by wildly overspending.

Others point to the escalating price tag that officially makes Sochi the most expensive Olym-pic Games in history.

Western critics have complained that the $50 billion-plus total has been infl ated by both en-demic corruption and Russia’s byzantine bureau-cracy. In a report analyzing the costs of Sochi 2014, Christopher Hartwell and William Wilson of the Skolkovo School of Management in Mos-cow concluded, “As a model of development, the enormous amounts of public investment in Sochi are unlikely to be replicated any time soon across Russia…the costs are too great.”

And, given that the project required the trans-formation of a subtropical resort into a winter wonderland, Sochi became one of the largest construction zones in Europe.

For the locals, it wasn’t just that the construc-tion was staggeringly expensive. It was that it never seemed to stop.

In the lead-up to Sochi 2014, residents com-plained about endless traffic jams, inexplicable power outages, and the constant noise of con-struction cranes working around the clock to complete everything on time.

The documentary “Putin’s Games,” which was screened at a Moscow documentary fi lm festi-val in December, takes the most controversial complaints about Sochi and gives them a human face.

The fi lm’s director, Alexander Gentelev, claims that the evidence of corruption and incompe-tence in Sochi is so glaring that Russian author-ities offered him more than €600,000 ($814,000) simply to make the fi lm go away.

In the fi lm, Elena Panfi lova, executive direc-tor of anti-corruption body Transparency Inter-national Russia, summarizes the dilemma faced by the people of Sochi: “You can be an accom-plice or a victim. The choice is yours.”

There are real concerns that all of the con-struction in the mountains – including that of new bridges and tunnels – has disrupted the fragile ecological balance of the region. The new-est concern is that, with the actual deadline right around the corner, all of the Sochi 2014 orga-nizers’ efforts at making this the “greenest Olym-pics in history” are about to go out of the win-dow.

There is no doubt Sochi will be one of the big-gest, most extravagant Olympic Winter Games in recent memory, or perhaps ever. The 123-day

Olympic Torch Relay has already included a space walk aboard the International Space Station, a visit to an active volcano, and a trip underwa-ter to Lake Baikal. The highest medal count ever in the history of the Olympic Winter Games, and the largest number of events ever, have also been promised at Sochi 2014.

The real test, of course, will come after the event itself is but a memory. Can Sochi really pull it off and become an international tourism and sports destination?

It’s here that Russia may have a leg-up on na-tions that have previously hosted the Olympic Winter Games. While other nations are dogged by the legacy of barely used stadiums, Russia has already begun laying out plans to avoid suf-fering the same fate. For each of the competi-tion venues, there is a very clear post-Olympics outline. The main ice-hockey venue, the Bolshoy Ice Dome, for example, recently hosted the Sochi International Investment Forum.

The Olympic Village near the Black Sea coast will become an upscale residential complex. There are even plans to pack up and move some of So-chi’s facilities elsewhere, as a “gift” to the nation.

And, to make all this a reality, Sochi has been busy lining up events to make the city a true year-round destination. In June, Sochi will be the site of the next G8 Summit. New Formula One Grand Prix events are scheduled, starting this fall. Then, in 2018, Fisht Olympic Stadium will become an official host of the FIFA World Cup when it comes to Russia. At the same time, the new winter resorts built in the mountains will attempt to woo visitors from both Russia and Europe.

From the outset, President Putin has stated his desire that Sochi should become an econom-ic model for the rest of the nation. In a best-case scenario, the success of Sochi can be exported to other parts of the country, including Siberia and Russia’s Far East. Western investors may be cheered by the example of Sochi, and be will-ing to invest in deals throughout Russia, not just in Moscow or St. Petersburg. That would go a long way toward diversifying Russia’s national economy, as well as reducing the country’s eco-nomic reliance on natural resources such as oil and gas.

Sochi 2014 should be viewed as part of a broad-er geopolitical trend - what New York Times col-umnist and author Thomas Friedman has re-ferred to as the “fl attening” of the world – as new global powers take their turn hosting interna-tional events and announcing their debut on the world stage.

The list continues to grow: Beijing (Olym-pic Games 2008); South Africa (FIFA World Cup 2010); Brazil (FIFA World Cup 2014 and Olympic Games 2016); Pyeongchang (Olym-pic Winter Games 2018) and Qatar (FIFA World Cup 2022). From this perspective, Russia host-ing the Olympic Winter Games in Sochi in 2014 is not a strange anomaly but a sign of things to come.

CONTINUED FROM PAGE 1

SOCHI

HAS BEEN BUSY

LINING UP EVENTS

TO MAKE THE

CITY A TRUE

YEAR-ROUND

DESTINATION

Sochi hopes to be known as a world-class ski

resort after the Olympics, putting some of its

new infrastructure to good use.

RUSSIA PULLS OUT ALL THE STOPS FOR GAMES

GA

IA R

USS

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Special Report

On March 7-16, the Winter Para-lympic Games will be held in Rus-sia for the fi rst time. The event will bring together 1,350 athletes and team members from 47 countries. In addition to these impressive numbers, the program in Sochi will set another record in the history of the Paralympic Games: 72 sets of medals will be awarded during the nine days of competition.

The Paralympic movement began developing in Russia only 17 years ago, in 1996, with the creation of the Russian Paralympic Commit-tee. Nevertheless, since 2006 the Russian team has consistently me-daled in winter sports team events. In 2012, at the XIV Paralympic Games in London, Russia produced its best-ever performance. In total, the team picked up 102 medals and set 14 world records.

Hopes are therefore pretty high for the Russian team’s performance at Sochi 2014.

For those involved in the Para-lympic movement and who work with the disabled, there is more at stake than medals. The hope is that Russia’s hosting of the 2014 Para-lympic Winter Games will help change stereotypical attitudes to-ward people with disabilities. Ac-cording to statistics from the Rus-sian Ministry of Labor and Social Protection, there are officially 13 million people in the country with disabilities (9% of the population). For comparison, the U.S. is home to 56.7 million disabled people (about 19% of the population).

Paralympics There’s something greater than gold to aim for at Sochi 2014, say those who are working toward better integration

or school, or meeting up with friends, may be ruled out because of inaccessible subway stations and public transport. The Moscow Metro is not expected to be adapt-ed to meet the needs of people with disabilities until 2017-2018. Of the 2.57 million disabled people of working age in Russia, only 817,200 are employed (6% of the total num-ber of people with disabilities); the number of unemployed people with disabilities, meanwhile, is 1.8 mil-lion (70% of disabled people of working age).

In the United States in 2012, 17.8% of people with disabilities were employed, according to the U.S. Bureau of Labor Statistics,

The unemployment rate (that is, the amount of people looking for work who could not fi nd it) among people with disabilities last year in the U.S. was 13.4%. For people without disabilities, it was 7.9%.

For people with disabilities,

competing in the Paralympic

Games is a forum to increase

understanding and challenge

perceptions in Russian society.

OLEG BOYKORUSSIA DIRECT

The Paralympic Games are con-sidered a turning point in the long-term goal of removing barriers be-tween people with disabilities and society, and in assisting with their integration and acceptance, espe-cially in the Paralympic host coun-try. Since the 2008 Paralympic Games in Beijing, China has un-dertaken signifi cant efforts to im-prove life for the disabled. More than 329,000 jobs for people with disabilities were created in 2012 alone, according to official fi gures.

The Paralympic Games should not be seen as a universal panacea, but as a real opportunity to change society’s attitude towards people with disabilities and to draw pub-lic attention to the problems of so-cialization and rehabilitation. There is hope that the 2014 Paralympics will nudge Russia toward some qualitative changes in relation to people with disabilities.

In 2012, the country ratifi ed the Convention on the Rights of Per-sons with Disabilities, and is im-plementing the “Accessible Envi-ronment” program, although it remains fairly localized. Russia faces considerable challenges in the rehabilitation of the disabled, due to insufficient social infrastruc-ture and the lack of unified ap-proaches and standards to ensure an accessible environment.

In everyday life, people with dis-abilities encounter difficult and, at times, insurmountable obstacles. Transportation itself becomes a hurdle. Simply traveling to work

The hope is that Russia’s hosting of the Paralympic Games will help change attitudes and break down barriers.

From Curling to Slopestyle, Sochi Aims To Impress Fans of Winter Sports

Irek Zaripov

Anna Milenina

2010 SILVER MEDALIST, SKIING AND BIATHLON

2006 SILVER MEDALIST, 2010 GOLD MEDALIST,SKIING AND BIATHLON

Irek Zaripov lost his legs in a car acci-dent in 2000, when he was 17. After nearly two years of lying in bed, Zari-pov’s parents en-couraged him to participate in athlet-ics as a way to work out his depression. Zaripov tried a vari-ety of sports before he was noticed by a coach and began focusing on skiing. “When I started doing sports, I realized that life is not dull; I had a goal,” said Zaripov.

Anna Milenina was born with a pinched nerve, which caused a partial paralysis of her arm. But Mileni-na was from a family of champion cross-country skiiers. Her aunt, a cross-country skiing coach, raised Milenina on the track. She started racing at the age of six and joined the national team at 14. Said Mileni-na of her success, “You have to overcome yourself, and be stubborn and run until the end.”

THEIR STORIES

Russia’s Paralympic ski team hope to dominate the course at Sochi during Russia’s first Paralympic Games.

OFFICIALS SET UP PROTEST ZONE 7 MILES FROM OLYMPIC EVENTS

A park in the small coastal resort of Khos-

ta, seven miles from the main Olympic venues

in Sochi, has been set aside for demonstra-

tions approved by local authorities and securi-

ty services during the Olympics and Paralym-

pics, according to Russian Deputy Prime

Minister Dmitry Kozak.

The town of 20,000 was chosen after

President Vladimir Putin lifted a ban on pro-

tests and ordered a site for demonstrations to

be identified.

“At Khosta in the park people will be able

to freely express their opinion without breach-

ing the rights of other citizens and without

breaching the Olympic charter,” Kozak said.

“At the sports arena, at the sports facilities, in

compliance with the Olympic charter, express-

ing political opinions is forbidden.”

Some restrictions on protests have been

in place at all recent Olympics. At the 2008

Olympic Games in Beijing, authorities intro-

duced a strict permit system for protestors

and arrested some demonstrators.

The London 2012 Olympic Games restrict-

ed protests near venues, but saw a number of

demonstrations in other areas of the city dur-

ing the Games.

Security concerns As part of the effort to protect Sochi 2014

from terrorist attacks, restrictions on move-

ment in and around Sochi were imposed on

Jan. 7, with the introduction of “controlled”

and “forbidden” zones. The restrictions will be

in place unti March 21.

The controlled zones cover all Olympic

venues and infrastructure, including the coast-

al Olympic Park and the mountain cluster of

skiing facilities, and all transport hubs includ-

ing air, sea and rail.

The forbidden zones include the border

area separating Russia from Abkhazia, a few

miles east of the coastal facilities, and Sochi

National Park, which is an environmentally

protected area.

The government has also tightened up

Russia’s mandatory registration system for its

citizens visiting Sochi, and banned all except

local cars from entering the city without a

special Olympic accreditation.

RIA Novosti

For Paralympians, A Chance To Transform Attitudes Toward People With Disabilities

CONTINUED FROM PAGE 5

CurlingSince this ancient sport, thought to have orig-inated in medieval Scotland, joined the Olym-pics program in 1998 its popularity has soared.

Idiosyncratic as only a game involving a broom can be, curling offers a change of

pace from the frenetic nature of most sports at Sochi 2014.

As usual, the Canadian players are among the favorites, but their teams

lack Olympics experience.“I think it will be closer than

North American curling fans re-alize,” Scotland-based curling

writer Thomas Edmunds says.He predicts Sweden, Norway and

Britain as the main rivals to 2010 champion Canada in the men’s event,

while the British women’s team “are in the best position they could be.”Russia’s women won the European cham-

pionships in 2012, but have been wildly in-consistent. Off the ice, they’re engaging per-sonalities - skip Anna Sidorova is a PR specialist dedicated to sweeping away the image of curlers as, in her words, “pretty girls who push mops, throw pebbles and clean the fl oors well at home.” Her engaging teammate Kira Ezekh is breaking down barriers as one of the few black athletes both in Russian sport and in the world of curling.

Russia “should never be ruled out,” Edmunds says. “While the bonus of a home crowd could definitely see them pick up a medal, I don’t think it will be gold.”

Slopestyle: The new kid on the blockThe most notable of the new events on the Sochi 2014 program is slopestyle, a fl ashy, X-Games-style trickfest with jumps and rail grinds.

It joins the burgeoning freestyle program, with men’s and women’s ski and snowboard events.

Elsewhere, even hardened winter sports fans may be surprised to hear it has taken until 2014 for women’s ski jumping to become an Olym-pic sport. Japan’s Sara Takanashi is the hot fa-vorite to win the fi rst gold.

Ski halfpipe, biathlon mixed relay and a team luge event are among the other debutants.

A Russian team like never beforeAfter the shock of fi nishing 11th in the medal table at Vancouver 2010, Russia has stopped at nothing to chase glory in Sochi.

Vast sums have been thrown at once-obscure sports and legions of foreign coaches imported – even foreign athletes. Triple Olympic gold medal-winning speedskater Ahn Hyun-Soo im-migrated from South Korea and now calls him-self Viktor Ahn.

On the slopes, an unusual husband-and-wife duo is among Russia’s medal hopes in snow-boarding.

Skaters Ksenia Stolbova and Fedor Klimov (below) are Russia’s national champions.

Russia’s

women’s curling

team (above) is

optimistic about its

changes in Sochi,

although their

performance has

been inconsistent

in recent

months.

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Special Report

QUOTE

Tony Ambrogio

" I think [defending Olympic champion] Canada’s forwards are probably deeper but the first two [Russian] lines are as good – if

not more offensively talented – than Canada’s. Any team with Ovechkin, Malkin, Datsyuk and Kovalchuk will be dangerous, especially on the power play.”

CANADIAN HOCKEY EXPERT AND SPORTS REPORTER

Rivalries Team Russia looks to take on the U.S. and Canada with

players hailing from both the NHL and

Russia’s Kontinental Hockey League

Another ‘Miracle On Ice’? Not If The Russians Can Help It

When Russia’s hockey team faces off against Team U.S.A. in Sochi on Feb. 15, the trans-Atlantic clash is like-ly to bring the host nation to a halt.

Not only is the men’s hockey tournament the single biggest event of Sochi 2014 for Russian fans, it represents a rare chance to contin-ue the sequence of superpower sport-ing summits that dates back to the 1970s.

The game will be the continuation of a sporting rivalry that once pitted political ide-ologies against one another – and that remains a barometer of national pride. Additionally, for Russian fans, an Olympic Winter Games on home ice is an unmissable opportunity to land a fi rst-ever hockey gold for an independent Rus-sia and reassert the sporting primacy estab-lished by the near-invincible Red Machine of the Soviet Union over the pampered stars of the National Hockey League.

Past meets presentBut what was once a clash of two seemingly alien cultures – East versus West, Communist versus Capitalist – is now a very different affair. The 1972 Summit Series, when the notional-ly amateur Soviet Olympic champi-ons played a team of Canadian pro-fessionals from the NHL was a confrontation between the best of the best. More than that, it was a clash of two unknowns: pre-viously only reputations had fi l-tered through the Iron Curtain.

Canada won the best-of-eight series 4-3 (one game was a tie), but only after an almighty shock on home ice that saw the Maple Leafs booed out of the arena by their own fans after four games in Canada. Heading to Moscow, they trailed 2-1 in a series they were expected to win easily, and pride was hurting.

The impact was far deeper than a few hockey games, though. Ted Nolan, now behind the bench of the Buffalo Sabres, watched the series as a teenage hockey fan and saw Eu- ro-pean stars for the fi rst time. “We realized they had some guys who could play hockey,” he said, and that impression stayed with him. Today, aside from his interim role with the Sabres, he is also head coach of Team Latvia, and will lead the former Soviet Republic’s team to the Olympics.

Nolan is typical of a new generation of Trans-Atlantic hockey enthusiasts, reared on the Summit Series and the “miracle on ice” of the 1980 Lake Placid Olympic Winter Games, when the U.S. national team upset the Soviet juggernaut. Al-though it took almost two de-cades to get from the Summit Se-ries to relatively free movement of players and coaches across the ocean, today’s Russian national team is dom-inated by NHL-based talent. More than half of Russian team coach Zinetula Bily-aletdinov’s roster plies its trade overseas, and the likes of Alexander Ovechkin (Washington Capitals), Pavel Datsyuk (Detroit Red Wings) and Evgeni Malkin (Pittsburgh Penguins) carry the weight of a nation’s demand for gold.

The potential break-out player at Sochi 2014 might be Valeri Nichushkin, just 18, and cur-rently playing for Dallas Stars after electrify-

The trans-Atlantic hockey rivalry between

Russia, Canada and the United States has come

a long way since the Summit Series of the

1970s, but winning remains a matter of national

pride.

ANDY POTTSSPECIAL TO RBI

ing Traktor Chelyabinsk’s play-off push last season in Russia’s Kontinental Hockey League.

Changing circumstances mean changing ri-valries: while in the 1970s, players like Boris Mikhailov or Phil Esposito knew each other only by reputation – and reportedly didn’t like what they heard of one another – Malkin shares a Pittsburgh locker-room with Canada’s top star, Sid Crosby. However, the defi ning battle among fellow Penguins may come in that Rus-sia-U.S. game, when Malkin will have to con-tend with grizzled defenseman Brooks Orpik, also of Pittsburgh. He’s the kind of gnarled vet-eran on which successful teams should be based, and his close-up view of Malkin’s game makes him ideally placed to combat one of Russia’s top goal threats.

The reverse story could be true in Los Ange-les, where the Kings will send Stanley Cup-winning defenseman Slava Voynov to Russia to face his club captain, Dustin Brown, a rough-and-ready forward whose solidly unspectacu-

lar scoring is eclipsed by the gritty leader-ship he brings in tight games. Voynov, a

rare example of a strong Russian blue-liner, might also come up against his

L.A. Kings colleague Drew Doughty, should we see a long-awaited match-up between Russia and Canada.

Doughty is arguably Canada’s top guy on defense and was called the top play-

er in the Kings’ 2012 Stanley Cup win.Elsewhere, though, Canada’s roster sprung

a few surprises: goal-getter Steve Stamkos got the nod despite struggling with a leg in-jury of late, but his Tampa Bay line-mate Mar-tin St. Louis missed out, as did the Flyers’ Claude Giroux. Then there was the decision to draft in St. Louis Blues’ defense pair Jay Bouwmeester and Alex Pietrangelo, both preparing for Olym-pics debuts and seemingly selected with the bigger ice of Europe in mind. But the buzz is still all about Crosby, the golden goal hero of Vancouver and back in action at last. His long spell out with concussion-related problems, fol-lowed by the enforced R&R of last season’s lock-out, led some to question whether his career was destined to wind down, but a league-lead-ing 68-point haul in the NHL suggests he’s going to be a threat to any opponent in Sochi.

Familiarity has taken some of the edge off this rivalry, but has done little to dampen

suspicions: when the Colorado Avalanche’s Russian goaltender Semyon Varlamov

was arrested on domestic-abuse charg-es in October, Russian State Duma

Pavel Datsyuk

Alexander Ovechkin

Evgeni Malkin

CENTER, DETROIT RED WINGS

WINGER,WASHINGTON CAPITALS

CENTERPITTSBURGH PENGUINS

Growing up in the Urals city of Sverd-lovsk (now Yekater-inburg), Pavel Dat-syuk wasn’t considered a leading player because of his size. He entered the NHL draft in 1996 amd 1997, but was only taken in 1998, by the Detroit Red Wings. In his long career with the Red Wings, Datsyuk has proven to be a con-sistent top scorer and a leader both on and off the ice. He will captain Russia’s Olyp-mic hockey team in Sochi.

Moscow na-tive Alexan-der Ovechkin began play-ing hockey at age 9 and was quickly recognized as a talent to watch. He joined the national team at 17. Ovechkin was the first overall draft pick in the 2004 NHL Draft and has been the star attraction of the Washing-ton Capitals.

WHO TO WATCH

The Sochi

tournament is a

continuation of

a rivalry that

dates back to

the 1970s

Deputy Igor Ananskikh, who heads the parlia-mentary commission on sport, claimed the case was motivated by a desire to scupper Varlamov’s impressive early-season form and see him locked up before Sochi 2014. The charges were dropped, and Varlamov is set to backstop Russia’s line-up in Sochi.

NHL pitfalls?Ironically, though, a rivalry that started out pit-ting the virtues of collective effort against the individual expressions promised by the West now sees those prejudices turned back on their homelands. Hockey in Europe is typically played on a bigger rink than in the NHL, and Russian fans insist that their hockey style allows great-er scope for individual brilliance, that game-breaking glimpse of skill that leaves opponents stumbling blindly towards defeat. By contrast, they claim, the NHL is a crude exercise in “dump-and-chase,” interspersed with on-ice violence, where creative fl air is sacrifi ced to per-centage-based play. The evidence, they say, comes from a host of Russians – from “Russian rock-et” Pavel Bure to Nichushkin – who play a dar-ing attacking game in the NHL, securing plau-dits as they go. On the rinks of North America, meanwhile, the feeling persists that Russian players are overhyped show-ponies, full of fl icks and tricks, but lacking the application and en-durance to tough out a potential 100-game sea-son culminating in Stanley Cup glory. What-ever happens in Sochi, it promises to be another lively instalment of a rivalry between nations which have been brought up to regard excellence on ice as a given and defeat in “our game” as a crushing blow to national pride.

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Evgeni’s father, Vladimir, also played hock-ey profession-ally and Evgeni learned to skate when he was three years old. Malkin began his career with his local team, Magnitorgorsk Metallurg. He began play-ing for the Pittsburgh Pen-guins in the 2006-2007 sea-son and won the Calder Tro-phy for best NHL rookie.

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