RBTH in SCMP #1

Wednesday, February 29, 2012

Russian companies are becoming far more inventive in their determined drive to profit from the lucrative market, writes Mark Zavadsky

Religion PAGE 15

City PAGE 16

Kalmykia Revival of faith in Buddhist region

RestaurantsCountry's cuisine is rare in HK

INSIDE

THE PROJECTRich pickings in China

There is more to Sino-Russian business ties than meets the eye, and that’s because “part of Russian investment goes through offshore companies

and it is impossible to assess how big a part [that investment is]”, says Rus-sian trade representative to China, Sergei Tsyplakov.

When a typical Chinese middle-class consumer buys meat for dinner at the New Co-operative Shop in Yan-bian in Jilin, four out of every 10 yuan (HK$12.3) from each transaction goes to the direct investment fund, My Decker Capital One (MDCO), creat-ed by Russian businessman Gleb Fet-isov two years ago.

“Immediately after the [2008 global financial] crisis, when people in China had less disposable income, we managed to agree with the Chinese Supply and Mar-keting Federation to set up a joint venture to which the Chinese part-ner would transfer more than 600> CONTINUED ON PAGE 8-9

> PAGE 3> PAGE 13

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Rusal's owner, Oleg Deripaska (centre), says China is a crucial strategic market. Photo: Reuters/Vostok-photo

Putin faces uphill road to KremlinIt appeared to be a foregone conclu-sion that Prime Minister Vladimir Putin would win the nation's top job when he announced in September that he would run in the presidential election.

At the time, it seemed that he would return to the position he held from 2000 to 2008, thanks to his high ap-proval ratings. But the United Russia Party’s poor showing in the State Duma elections and subsequent pro-tests may pose problems for Putin.

“People are demanding more re-spect from the authorities,” says Andrei Ryabov of the Carnegie Cen-tre in Moscow. Besides United

Russia, there are six nationally registered political parties, but there does not appear to be a strong candidate in any one of them.

Will Putin overcome his rivals? Photo: Reuters/Vostock-photo

Creative use of space

Real estate bounces back

The government will spend 346 bil-lion roubles (HK$88.7 billion) until 2020 to maintain, develop and use the national global positioning system, GLONASS, according to the federal programme adopted by the Russian Federal Space Agency and Ministry of Economic Development.

Last year, with a growth rate of 41 per cent, Moscow became the fastest-growing office rent market in Europe, second only to Beijing. The country's real estate sector, which was booming before the global financial crisis, is rap-idly recovering as the economy is gain-

ing momentum. The growing market and promising prospects are attract-ing foreign investors, especially main-land companies that are now becom-ing active players in this sector.

A new voice in Hong Kong

EUGENE ABOVPUBLISHER

Greetings from Moscow. Welcome to Russia Beyond the Headlines (RBTH). This is a monthly supplement that will appear in the South China Morn-ing Post on the last Wednesday of every month.

Our aim is to bring you compel-ling stories from Russia and offer you insights into the country. Our grow-ing team of journalists report from all over Russia to bring you topical and balanced stories. RBTH features diverse opinion writers who don't al-ways agree on the future direction of the country.

Russia is in the midst of an excit-ing transition in every sphere, from politics to culture. Like China, Rus-sia is a member of the BRICS (Brazil, Russia, India, China and South Afri-ca) community and our business cov-erage explores the Russian market-place. Our award-winning website, rbth.ru, is updated daily with addi-tional articles, and dramatic and di-verse multimedia. We can’t wait to hear from you.

> WHY WE ARE HERE IN HONG KONG : PAGE 2

Distributed with the

Monthly supplement from Rossiyskaya Gazeta (Moscow, Russia) which takes sole responsibility for the contents

Plenty to consider at this year's Apec summit

PAGE 4

Asia

PAGE 10

Leadership changes and bilateral ties

Opinion

PAGE 12

Eugene Kaspersky is the virus warrior

Science and Technology

March 28

SPECIAL REPORT

www.rbth.ru

2 Wednesday, February 29, 2012

RUSSIA BEYOND THE HEADLINES

Young people are becoming involved in monitoring a fair poll through online activism, writes Pavel Koshkin

Right time to make debut in gateway to China

All eyes zoom in on election

Russia Beyond the Headlines’ pub-lisher Eugene Abov says Hong Kong is an obvious choice for a paper cov-ering Russia's current affairs.

Why Hong Kong? Is Russia no longer interested in crisis-hit Europe?

No. We also have new European projects in the pipeline. Neverthe-less, Russia is also a part of Asia. So far, India and Japan are the only Asian countries where we are present, but we would like to expand our activi-ties in the Asia-Pacific region, par-ticularly China. As Russia begins its Apec chairmanship, I think the tim-ing is perfect to bring out this pub-lication.

Why start in Hong Kong, not the mainland, and why in English?

Hong Kong has always been a gate-way to China. Why don’t we also use it? Very soon, we’ll be publishing in a mainland newspaper and we already have a Chinese website (www.ezhong.ru). Nevertheless, Hong Kong is an im-

portant business and financial cen-tre where hundreds of Russian com-panies are active.

And who is funding this publication?

The project is funded from revenues of the government-owned Rossi-yskaya Gazeta. As the official pub-lisher of Russian laws, government regulations and presidential decrees, it is also Russia’s biggest general-in-terest newspaper.

So it’s government funded? How did other foreign newspapers in which you publish your supplements react?

At first everyone was wary that they were being lured into a risky venture and that the Kremlin would start pushing its propaganda in their newspapers. But our job is journal-ism – and quality journalism leaves no room for propaganda. We seek to provide coverage on Russia and its problems from every angle and give a variety of opinions without imposing any single one. We provide information about Rus-

sia that we believe bypasses foreign readers.

Do you think that Hong Kong readers don’t know enough about Russia or that their knowledge is superficial?

That’s our belief. In Moscow, there are dozens of Chinese media cen-tres, but not a single one from Hong Kong.

And who writes the stories for you?

Our authors are professionals writ-ing for well-known independent Rus-sian editions – Vedomosti, The Mos-cow Times, Kommersant, gazeta.ru – and in foreign media – American, British, German, French and Italian. When we start publishing in Hong Kong, we will be eager to involve local writers.

Do you think it will be interesting for SCMP readers?

Our experience has shown that in-formation about Russia is in great demand among foreign readers.

Since 2007, Rossiyskaya Gazeta, the largest national Russian daily news-paper, has produced monthly nation-al supplements that appear in major newspapers around the world. This supplement is now published in the South China Morning Post.

We believe that Russia is a diverse and complex country in a state of

major transformation, still coming to terms with its long – sometimes painful, sometimes curious – history that can only be understood through in-depth analysis of the nation. We would like to present significant facts and ideas that fall under the “radar” of major international news outlets.

Russia Beyond the Headlines — A GLOBAL MEDIA PROJECT

POLITICS

If more people participate in politics, the less fraud we shall seeYEVGENY MINCHENKO, INTERNATIONAL INSTITUTE FOR POLITICAL EXPERTISE

Observers keep a close eye on the vote counting at a Moscow polling station on December 4. Photo: ©RIA Novosti

Allegations of vote fraud dur-ing last December’s State Duma elections will mean a close scrutiny of the March 4 presidential poll.

However, some experts question whether the protest movement has the staying power to thwart any pos-sible voting irregularities in next month's election.

Elena Panfilova, the head of Trans-parency International - Russia - says that while she welcomes election ob-servers, she warns that “what really matters is whether the observers are able to fulfil their duties”.

Since early December, new and existing civil society organisations are becoming increasingly involved in ensuring that the presidential elec-tion is free and fair. RosVybory, a new organisation created by Russia’s vocal anti-corruption blogger, Alexei Na-valny, enrolled more than 10,000 vol-unteers by the end of January to monitor the election. The liberal op-position party, Yabloko, also saw its

ranks of monitors swell to between 20,000 and 25,000, according to the party's deputy chairman, Sergei Mitrokhin, who disclosed the figures in an interview with web-based mag-azine Slon. In addition, Russia’s As-sociation of Lawyers has enlisted 4,500 observers and hopes more will join. The League of Voters, an inter-net-based watchdog founded by prominent Russian journalists and bloggers, is also engaged in recruit-

ing and training volunteers. At the same time, Prime Minister Vladimir Putin’s headquarters is expected to provide about 35,000 observers, ac-cording to Slon.

Russia has also seen an increase in grassroots watchdog activity among internet users who are creating so-cial networks and special websites to monitor the elections.

Interest in vote monitoring is in-creasing, particularly among stu-dents.

“I am going to monitor the elec-tion because I want to see for myself that at least one polling station in Rus-sia will have no fraud,” says Roman Medvedev, a second-year student at the Moscow State Institute of Inter-national Relations.

Yury Korgunyuk, of the Indem think tank, views the rise of civil activity among Russians as a good sign, al-though he questions how much it will actually affect the election. “There are a lot of remote regions, ‘hidden cor-ners’, in Russia that are difficult to reach

and monitor,” Korgunyuk says. “They may be out of the reach of observers who can succeed only in big cities where you can easily monitor. We also should keep in mind that there are a

He adds that today in Russia, there is a high level of competition among such watchdog organisations, and that en-courages them to be professional and effective.

“Unfortunately, I didn’t sign up as an observer for the parliamentary elections, but now I want to be en-rolled as [one],” says Kira Tverskaya, a journalism student from Moscow State University.

“It’s very interesting to look at the presidential election from the inside, keep track of possible violations, and thus minimise the possibility of vote fraud. After all, it has proved to be ef-fective during the State Duma elec-tions, when observers filed a lot of complaints to the court, even though it remains unclear whether these [pleas] will be successful.”

The increase in the number of or-ganisations working to involve peo-ple in the political process is encour-aging ordinary Russians to be more politically aware, even if the trend is only a temporary one.

lot of fake organisations supported by the government that only create the illusion of social action.” Yevgeny Minchenko, from the International In-stitute for Political Expertise, says that regardless whether the election is free and fair, “if more people participate in politics, the less fraud we shall see”.

3Wednesday, February 29, 2012


Opposition takes aim at prime minister and hopes to win as many votes as possible, writes Nika Guitine

Putin faces tough hurdles

POLITICS

The presidential candidates unveil agendas and make their positions clear to voters

Protests erupted in Moscow following claims of electoral fraud in December’s polls. Photo: Vasiliy Maksimov/Ridus

Who can take on Prime Minister Vladimir Putin in next week’s presidential election? This question is being

asked by those in power and his political opponents, who are de-manding a free and fair election on March 4.

Former president Putin, who is viewed as the real power in Russia, seems to be the favourite to take back his job.

However, it does not appear to be a smooth road to power for him.

Following the December 4 legis-lative elections, allegations of wide-spread electoral fraud surfaced, which was witnessed and reported by local and international observ-ers. The election gave the ruling Unit-ed Russia Party a landslide victory. However, a wave of protests erupted in Moscow.

Despite freezing temperatures of minus 20 degrees Celsius on Febru-ary 4, tens of thousands of Musco-vites turned up to voice their outrage at the election results. They demand-ed the cancellation of the election results, release of political prisoners, and the introduction of democratic reforms. In just a few weeks, the mes-sage was loud and clear – “Out with Putin.” The protesters, who gathered in Bolotnaya Square, were also an-gered at what they felt was an auto-cratic regime, a police state mired in lies and corruption. They also be-lieved that as long as Putin was in power there was no hope of democ-racy in Russia. “Putin is leading us to stagnation and the collapse of our country, his system is corrupt to the core,” charges Dmitri Gudkov, a

VLADIMIR PUTIN is widely tipped by political analysts to win the elec-tion. His trump card is his previous achievements. He first came to pow-er during a period of instability in the late 1990s when the country was gripped by crime and property re-distribution. At the same time, the Caucasus region was gripped by war, and terrorist attacks were common. Today, Putin is still seen as a confi-dent politician backed by a strong administration. He promises a peace-ful life, stability and evolutionary de-velopment for the country.

GENNADY ZYUGANOV is the Commu-nist Party of Russia's (KPRF) candi-date. He narrowly lost the 1996 pres-idential election to Boris Yeltsin. The Communists hold the second-largest number of seats in the State Duma after United Russia. But supporters of the party are mostly the elderly who have fond memories of the So-viet Union. The Communists promise jobs, the rebirth of industry, a better life for farmers and workers, and a smaller role for big business. Howev-er, experts believe that Zyuganov is not a strong opposition leader.

VLADIMIR ZHIRINOVSKY, head of the Liberal-Democratic Party of Rus-sia, is making his fifth attempt at the presidency. However, he is not popu-lar. He has positioned himself as a radical opposition leader, focusing on social benefits, pensions, educa-tion and employee rights. His cam-paign slogan is: “Zhirinovsky, or it’ll be worse.” He is Russia’s most ec-centric politician, having insulted his opponents - and sometimes voters - during election debates. While many see him as just a clown, experts say he is a professional politician.

SERGEI MIRONOV, head of the Just Russia Party, is also seeking the presidency. Since his party was cre-ated six years ago, he and his team have failed to counter the party’s reputation as an opposition created by the Kremlin. Mironov has repeat-edly stated that he supports Putin, while criticising the ruling United Russia Party. “This dual position is still fresh in people’s minds. This is something voters cannot under-stand,” says Valery Khomyakov, gen-eral director of the National Strategy Council.

MIKHAIL PROKHOROV is a billionaire businessman and the only candidate not affiliated with a party. His lack of political experience is not the only way he stands out from the crowd. At 1.95 metres, he is easily recognisable. His programme includes developing small and medium-sized businesses, boosting industrial technology, and fighting corruption. Experts doubt that voters will support him. “A man who has so much money is depend-ent on the authorities,” says Sergei Mitrokhin, chairman of the liberal Yabloko Party.

member of the Russian parliament who represents the Just Russia Party.

However, at the other end of the city, Putin’s backers gathered in large numbers with their rallying slogan: “We have a lot to lose.” According to eye-witnesses, many of the demon-strators were civil servants who were ‘encouraged’ to join the pro-Putin demonstration with their bosses.

Putin’s backers accuse the anti-Pu-tin forces of trying to rock the boat and attempting to plunge Russia into chaos.

They claim that Putin is the face of stability, and the architect of a pow-erful country. “Under Putin, Russia has experienced one of the most pros-perous periods in its history,” says po-litical analyst Vyacheslav Nikonov. “Annual growth stood at 7 per cent during his first term of office, and many people remember the total dis-order that prevailed in the 1990s.”

With the presidential campaign now in full swing, opposition candi-dates are facing each other in a se-ries of debates live on television. The only notable absence from these de-

bates is Putin, who is using leading newspapers to publish articles.

The anti-Putin forces are not naive enough to believe that the former president won’t be elected. However, the strategy is to ensure that he gets as few votes as possible. But the op-position fears that if Putin fails to gar-ner an overwhelming mandate to rule Russia, his team may turn to election fraud to ensure he gets the right number of votes.

Putin’s opponents are joining forc-es to ensure that it will be a free and fair election. Facing them, the pro-Putin camp is resorting to Cold War rhetoric and scare tactics, warning that the country will spiral into chaos if the prime minister fails to win the election.

Putin’s backers are attempting to discredit the opposition by accusing them of being financed by the Amer-

ican government, which allegedly has only one aim, that is, to weaken Russia. “[United States Secretary of State] Hillary Clinton set the tone for the activists inside the country who have begun to act with the help of the US State Department,” Putin said in December during the first days of the protests.

“Putin is a revolutionary, he is caus-ing a revolution throughout the world, a revolt against the system construct-ed by the US,” says Maxim Mish-chenko during a televised debate. Mishchenko is the leader of the pro-Kremlin Young Russia movement.

Putin's backers allege that if the op-position came to power, the country would bow to the US and the coun-try would be plunged into a civil war, an economic crisis, nationalist vio-lence, leading to a “humanitarian dis-aster”.

As for Putin, he promises an ex-tensive programme of reforms, putting stability as a top priority. “Pu-tin’s message is clear – Russia is en-tering a new phase in its develop-ment. The post-Soviet era is over. And we all should pass between the ex-tremes of revolution and stagnation in favour of gradual progress,” says Dmitry Polikanov, deputy head of the central executive committee of the United Russia Party.

Putin's critics are sceptical and point out that he could have brought reforms during the past 12 years, but failed to do so.

According to Kremlin-friendly poll-ster VTsIOM, 58.6 per cent of Russians say they will vote for Putin. Other opinion polls, however, show 48 to 53 per cent, but Gennady Zyuganov and Vladmir Zhirinovsky are still far behind the leader with 9 per cent.



The focus of this year's summit in Vladivostok will be on economic assimilation, boosting connectivity, food security and promoting innovation, writes Igor Ivanov

Mark Zavadsky RBTH

We need a practical instrument that will allow us to disseminate technology

LEYLA MAMEDZADEHEXECUTIVE DIRECTOR, APEC BUSINESS ADVISORY COUNCIL

Apec leadership is a turning point for the country

Vladivostok is preparing for September’s Apec Summit. Photo: ©RIA Novosti

Eyeing its integration into the Asia-Pacific community, Russia is finalising its ambitious plans to host September’s summit in

Vladivostok.There are some who believe that

Russia has a split personality. Is it Asian or European? One look at the map is enough to see that Russia has the continent’s largest landmass, with an eastern seaboard occupying a size-able chunk of Asia’s Pacific coast.

Asia is home to Russia’s largest trade and economic partners, most impor-tantly China, which has advanced to top spot in terms of total trade turn-over with Russia.

Russia is a member of major Asian multilateral organisations, including the 21-member Asia-Pacific Econom-ic Co-operation forum (Apec).

Nonetheless, many in Asia still con-sider Russia to be “not quite an Asian” country.

Perhaps this is because ethnically, religiously, culturally and politically, Russia has traditionally gravitated more towards Europe, or because the bulk of the population live in the west-ern part of the country.

The country has largely remained on the sidelines of the emerging Asia-Pacific community, despite efforts to take a place in it, and its potential for being an Asian power remains large-ly unrealised.

This can be attributed to the fact that Russia is too slow and, at times, incon-sistent in rebuilding the economy of its eastern regions, and doesn’t create the required incentives for foreign in-vestment. The Asian part of Russia faces unresolved issues in infrastructure, stimulating small businesses and man-aging migration processes.

In international affairs involving the region, it doesn’t always manage to grasp the logic of its Asian neigh-bours, which occasionally results in unfortunate misunderstandings.

That said, our Asian neighbours are not beyond reproach. It appears that for some of them the Cold War never ended, as they continue building their Russia policy on principles dating back 50 years.

Others view Russia as nothing but a source of commodities from which to pump the resources they need – preferably on the most preferential terms. Still others believe that devel-oping relations with Russia can be delayed until better times because the priorities of Asian policy lie else-where at present.

Russia’s chairmanship of Apec this year presents a unique opportunity to take a new look at the country’s prospects for integration into the Asian-Pacific community.

The leadership attaches the utmost

importance to its chairmanship. Re-cent months have seen meticulous preparatory work to flesh out the agenda with real content.

Not only ministries but also many regions are taking an active part in this work.

Russia’s chairmanship of Apec should be the starting point for de-veloping multilateral co-operation in the Asia-Pacific region on a whole range of issues that are crucial to the country. First there is the liberalisa-tion of trade and investment, and re-gional economic integration. Certain steps in this direction have been taken under the chairmanship of the Unit-ed States, and Russia is ready to move forward on this path towards free trade and investment in the region.

Whereas the November summit in Honolulu mainly discussed the issues of trade liberalisation, it would make sense to focus on the long-term out-look for the integration of Apec econ-omies, including taking into account the Commonwealth of Independent States’ integration initiatives carried

Igor Ivanov is president of the Russian Council on Internation-al Affairs. He previously served as minister of foreign affairs from 1998 to 2004 and secretary of the Security Council of Russia from 2004 to 2007.

NATIONALITY: RUSSIANAGE: 66CIVIL STATUS: MARRIED

IGOR IVANOV

Initiative for technology transfer

Russia is using its leading role at Apec this year to input some ideas into the global agenda. The first signs of it came at the Honolulu Apec sum-mit in November last year.

Now it is Hong Kong’s turn. Last week, the Russian National Center for Apec and the Hong Kong Uni-versity of Science and Technology (HKUST) held talks on technology transfer, which also attracted partic-ipants from Europe and Apec coun-tries.

The Russian side believes that its technology transfer initiative will fos-ter Asia-Pacific growth potential and enhance economic and social well-being for all Apec economies by

bringing technologies that can stim-ulate economic development to the emerging economies where they can make a difference. “We need a prac-tical instrument that will allow us to disseminate technology around the world,” says Leyla Mamedzadeh, ex-ecutive director of the Apec Business Advisory Council.

Russian businesses propose estab-lishing a national technology trans-fer fund that would enjoy the full support of the government.

That entity would have sufficient expertise to identify technologies that are not being developed in national academic institutions and, at the same time, constitute significant value for the national economy.

Finally, the fund should possess a private-sector approach to financ-

ing technology transfer projects. For-eign experts in general welcome the idea, though some predict difficul-ties ahead.

“The main problem is that donor

out by Russia, and on preventing fi-nancial and economic crises in the region and globally.

Strengthening food supply secu-rity is another priority for this year. This issue will likely become central to the global policy of the 21st cen-tury, and Apec’s role in this can’t be overestimated.

However, multilateral co-operation is only just beginning in this area.

Russia lacks a co-ordinated region-al approach to food supply security risk management.

countries and technology recipient countries do not trust each other," says the author of the best-selling book World 3.0, Pankaj Ghemawat. “Each of the parties suspects that the new platform will not operate to its benefit.”

Nevertheless, Russia hopes that it can be done.

“This is crucial for us,” says the vice-president of the Skolkovo Insti-titute of Technology (SIT), Mikhail Myagkov.

The SIT is starting several inter-national research projects and al-ready sees problems ahead.

“Participating parties are very con-cerned about intellectual property protection and a new body would be quite handy to handle these wor-ries,” Myagkov says.

The time has come to deal with matters such as reducing food price volatility, cutting losses resulting from the transport of agricultural products within the region, and co-ordinating national efforts to improve crop yields.

Russia’s other priority is develop-ing the region’s transport and logis-tical capacity. Russia is a country of transit between Asia and Europe, but its intercontinental transport capa-bilities are still far from fully utilised. Cutting costs and wait times at bor-der crossings and implementing major infrastructure projects through private-public partnerships are all matters the country hopes will be dis-

cussed both during the year and at the Vladivostok summit. The event also represents an opportunity to pro-mote an innovative agenda for Rus-sia and the entire Apec region.

How to ensure the most effective forms of interaction between science, business and government; how to bring co-operation among innova-tion centres, universities, research in-stitutions and science towns to a new level; how to increase geographic mo-bility for scientists, educators, and in-novators; and how to ensure the pro-tection of intellectual property rights are becoming increasingly important, not only for Russia, but also for its neighbours in the region.

ASIA

5

RUSSIA BEYOND THE HEADLINESWednesday, February 29, 2012

China has signed a contract with Rus-sia to buy three IL-76 military cargo planes. This is the first military cargo plane deal after a US$1.5 billion Rus-sia-China contract for IL-76 and IL-78 planes was frozen in September 2005 because of disputes between the par-ties. The People's Liberation Army has already purchased 18 IL-76 planes from Russia.

Russian tourists are pouring into Hong Kong. According to the Hong Kong Tourism Board, more than 131,000 Russians visited the city last year. The figure represents a 51.5 per cent increase from 2010 and a three-fold growth compared with three years ago.

Deal for military planes reignited

Russians pour into Hong Kong

Sino-Russian bilateral trade last year reached a record high of US$80 billion (HK$621 billion). Despite turbulent global economic condi-tions, relations between the two countries continue to grow steadily, according to Li Hui, China’s Ambas-sador to Moscow.

Beijing is in talks with Moscow to increase oil imports from Russia by purchasing all 30 million tonnes shipped on the Eastern Siberia Pa-cific Ocean pipeline, according to Transneft vice-president Mikhail Barkov. China is eager to lock in long-term contracts on the greatest pos-sible volume, particularly given the political risks facing imports from Iran. China will have to compete with other consumers of east Siberian oil, such as the US, Japan and South Korea.

Trade reaches record volume

Beijing eager to increase oil imports

Iran not a friend or enemy of Moscow

When Russians look at Iran, they see a coun-try that has been their neighbour and rival. To Iranians, Russia is

perceived as a powerful threat. It was a long time ago, but Rus-

sians remember their own embassy crisis at the hands of Iranians in 1829. Alexander Griboyedov, the tsar’s am-bassador to Persia and an eminent Russian author, was murdered, along with his entire embassy staff, by an enraged mob in Tehran.

This bit of history is vital to un-derstanding Russia’s approach to Iran's nuclear programme.

Although Russia has backed lim-ited sanctions at the United Nations, it has clashed with the United States and Europe over much tougher ones, and it strongly opposes any use of military force.

Many Russians reason that if their neighbour wants to acquire nuclear weapons, it probably will.

Bombing known facilities would only set back the nuclear programme,

not eliminate it. The only way to prevent Iran from having nuclear weapons is to craft a deal under which the country would agree to stop further development after achieving nuclear weapons capabil-ity, while the world’s leading powers would agree to reintegrate Iran into the international community.

The Russians are not resigned to the prospect of a nuclear Iran per-fecting its missiles to carry nuclear warheads.

Given their close proximity, Iran’s medium-range systems can reach deep inside Russia.

Russian diplomats have been try-ing hard to nudge the Iranians towards a compromise with the world’s powers. However, all their at-tempts have so far failed.

Russia is often portrayed as Iran’s ally. Yet that notion is unfounded. True, Russia has been selling arms to the regime, but Russian weapons dealers are looking at it purely from a business point of view.

Moscow sees nuclear energy as one of the few areas in which it is globally competitive and would be loath to cede the Iranian market to rivals.

Russia is continuing its nuclear en-ergy co-operation with Iran, but on one condition: Iran has to return all spent fuel rods to Russia for process-ing, thus preventing their use in a nuclear weapons programme.

However, Russia’s assessment of the Iranian threat differs from that

of Washington, in terms of capabil-ity and intention.

Russia’s frequent references to the “lack of hard evidence” of the mili-tary nature of the Iranian nuclear programme are probably meant to keep the door open for dialogue.

Russians are watching warily as tensions around Iran continue to rise. Further sanctions, they think, would weaken Iranian moderates and em-power its hardliners.

Russia believes that tougher sanc-tions imposed by the US and its Eu-ropean allies won’t accomplish what the West wants – stopping the Iranian nuclear programme or turning the Ira-nian people against their government. Nor will they fail to stave off an Israe-li air strike, which would inevitably drag the US into the conflict.

This means that unless diplomacy is given a chance, the two things that concern Russian leaders most – a US war against Iran and an Iran armed with nuclear weapons – may become a reality soon.

Pakistan ‘plans nuclear fleet’ Vladimir Skosyrev Special to RBTH

Only a diplomatic solution can stop the country from producing nuclear weapons, writes Dmitry Trenin

The lease deal has led to specula-tion about an arms race in South Asia. India, with its growing military and economic clout, is keeping a close eye on a much more powerful rival, China, whose navy is a potent force.

Pakistan, however, sees India as its primary threat. This explains why Pa-kistan, despite its deep political and economic crisis, is spending millions to upgrade its nuclear arsenal. Ac-cording to online global security mag-

azine Bulletin of Atomic Scientists, Pakistan has more nuclear warheads than India. Early last year, Pakistan had 70 to 90 warheads. However, most of Pakistan's and India’s warheads are not fully operational.

If reports of Pakistan’s nuclear plans are true, it means both countries will have to increase their defence spend-ing, says Tatyana Shaumyan, head of the Indian Studies Centre at the In-stitute of Oriental Studies, the Rus-

sian Academy of Sciences. Is Paki-stan ready to finance its ambitious nuclear submarine programme? Ac-cording to Shaumyan, this is unlike-ly as the country’s nuclear arsenal is

The Nerpa nuclear powered Russian attack submarine was leased to India for 10 years. Photo: Reuters/Vostock-photo

The Bushehr reactor is Iran’s first. Photo: Reuters/Vostock-photo

Russia’s lease of Nerpa to India has sparked speculation about an arms race

Days after Russia handed over the Nerpa nuclear submarine to India last month, media reports surfaced about Pakistan planning to build its own fleet. Experts, however, doubt if Pa-kistan is up to the task. A spokesman for Pakistan’s navy refused to com-ment. However, the project is said to have been approved by Islamabad, with the first submarine expected to go into service in five to seven years.

Mansoor Ahmed, an expert on nu-clear and missile weapons at the Uni-versity of Islamabad, speculated that this information could have been spread intentionally by navy head-quarters to send a message to India. Pakistan is concerned about the lease of Russia’s submarine to India for 10 years. Renamed INS Chakra II, it is the only nuclear submarine in the In-dian navy and will be based at Visa-khapatnam. It will also provide a train-ing platform for sailors who will serve on the first Indian-made nuclear sub-marine named Arihant.

being closely monitored by the Unit-ed States.

But the scenario of a nuclear con-frontation between India and Paki-stan appears to be exaggerated as both countries are aware of the cat-astrophic consequences.

Back in the late 1980s, they signed an agreement not to attack each oth-er’s nuclear targets – an agreement both nations still observe, Shaumy-an says.

BRIEFS

ASIA



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GUANGZHOU INTERNATIONAL TRAVEL FAIR 2012MAR 1-3, 2012,JINHAN EXHIBITION CENTREGUANGZHOU, CHINAGITF has been recognised as one of the most significant international travel fairs in the Asia-Pacific region. Russia’s exposition at GITF, man-aged by the Russia Federal Agen-cy for Tourism, will be dedicated to the Year of Russian tourism in Chi-na held in 2012. The business pro-gramme features presentations high-lighting the most popular national tourist destinations, business meet-ings and negotiations, tours, and a cocktail reception. WWW.VISIT-RUSSIA.RU

TOYS & KIDS RUSSIA 2012MARCH 14–16,CROCUS EXPO, MOSCOW, RUSSIAThe leading fair for the Russian toy industry takes place for the sixth time and offers optimum facilities for market entry. Russia stands out as a toy market for the great inter-est shown in international products and its high growth rates. Besides toys, the event will present baby and infant articles, baby fashion, prams, children‘s furniture, playground equipment, Christmas articles, crea-tive design, stationery, outdoor and sports articles, gifts and many other products. WWW.TOY-RUSSIA.RU

1ST RUSSIA INNOVATION WEEK EXPOINEX 2012 APRIL 17-20,EXPOCENTER, MOSCOW, RUSSIAThis year, Expocenter combines a number of exhibitions in innova-tive technologies into a three-day EXPOINEX forum. Within the frame-work of this event, Expocenter will hold the international forum “High Technology in XXI Century”; the business forum “New Electronics 2012”; the international exhibition “Navitech 2012”; the sixth interna-tional forum on satellite navigation exhibition “Photonics. The World of Lasers and Optics 2012”; and others.WWW.EXPOCENTR.RU

DIGITAL BUSINESS RUSSIA 2012MAY 21-22, 2012,RENAISSANCE MONARCH CENTRE HOTEL MOSCOW, RUSSIADIGITAL BUSINESS Russia 2012 is the only elite event that looks at how leading businesses manage dig-ital projects as part of their strate-gies. This is a meeting place for busi-ness owners and managers seeking to boost their revenue from digital projects. The elite speaker panel will feature the digital sector’s movers and shakers, who are implement-ing digital strategies as part of com-panies’ business models, as well as those whose businesses are entirely based in the digital space. WWW.ADAMSMITHCONFERENCES.COM

Executive director of the business association is confident that more Russian firms will list in the city

HK is key to regional markets

Born July 1, 1968, in Moscow region. In 1992 graduated from Moscow Pedagogical State University. From 1992-1994, worked in Alpha Consult-ing. From 1994, headed Moscow of-fice of the Hong Kong Trade Develop-ment Council. Owner of Eurasia Link consulting bureau. Member of the Russian Journalists’ Union. Member, from 2004, of the Board of the European Forum in the Federation of Hong Kong Foreign Business Associations Worldwide. Earned second degree in econom-ics and management. Consultant to InvestHK, the investment arm of the Hong Kong government, and Hong Kong and Russian firms.

LEONID ORLOV


Are Hong Kong investors familiar with Russian firms? If so, how confi-dent are they in Russian businesses?

At the moment, Russian companies are not well known in Hong Kong. Nevertheless, investors will no doubt be familiar with aluminium giant Rusal, owned by Russian billionaire Oleg Deripaska. The company list-ed on the Hong Kong stock exchange in January, 2010, and the initial pub-lic offering (IPO) raised more than HK$16 billion.

However, since then, there has not been a single Russian IPO in the city. Nevertheless, the Hong Kong stock market will be more signifi-cant for new Russian IPOs, as the city is becoming a better alternative for IPO-inclined Russian companies than London. This is because Rus-sian companies feel that Hong Kong will give them access to some of the fastest-growing Asian capital mar-kets in the world.

Another important factor is that local foreign exchange regulations allow for a free flow of capital. As far as I know, we will see at least one more Russian IPO here before the end of the year.

Regarding Hong Kong investors trusting Russian companies, it de-pends on the involvement of these companies’ assets in Asia, meeting market trends, expectations and strategic initiatives inside China. An-alysts say that most Russian com-panies meet these criteria.

Apart from Rusal, what other firms are represented in Hong Kong, and is the presence of Russian business here significant? Who are the members of Russia-Hong Kong Business Associa-tion, and what do they do here?

The expanding presence of Russian

business is conspicuous compared to 20 years ago, but lagging behind countries such as the United States, Britain and France, who established their presence in Hong Kong a long time ago.

Russian companies, actively op-erating in Hong Kong, now include Far East Shipping Company; Alrosa, the diamond industry monopolist; and Norilsk Nickel, which is the larg-est mining company in the country. When it comes to the toys and gar-ment sectors, nearly all Russian mar-ket players are represented here. Of course, Russian business is also using Hong Kong as an infrastruc-ture centre, a platform for operat-ing in the Chinese market and those of Southeast Asia. Hundreds of Rus-sian companies run affiliated struc-tures in Hong Kong to work with contractors in China and Southeast Asia.

As far as the association is con-cerned, there are about 50 active members. They include big and me-dium-sized firms working in serv-ice, commercial, production and technology sectors. The association includes well-known Russian brands, such as the Scarlett and Binatone groups, and the big Sportmaster and O’Stin Russian retail chains.

two years should convince Hong Kong businessmen and investors from Southeast Asia.

Russia and Hong Kong have not yet signed an agreement to avoid dou-ble taxation. Is this going to happen soon?

Work on this agreement is under way. During the past two years, the Hong Kong authorities have stepped up their work to conclude agree-ments to avoid double taxation with Europe, South America and South-east Asia. An agreement of this kind with Rus-sia will happen in the near future, especially since we have a regula-tory framework for our relations. We have signed an agreement on legal assistance and have fully agreed on stock exchange regulations.

What is your forecast for the develop-ment of bilateral trade and economic relations in 2012?

We do not anticipate any break-through events. We hope for a pe-riod of sustainable development. The Russian consumer market keeps growing and there is an obvious con-solidation trend on the Russian fast-moving consumer goods market.

This means fewer players and a more competitive market. The number of players will dwindle amid growing volumes of purchases. This enhances the appeal of the Russian market and increases its competi-tiveness for Hong Kong suppliers.

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at www.rbth.ru

You have been communicating with Hong Kong businessmen a lot and accompanying delegations of inves-tors. What draws them to Russia, what difficulties do they face, and what are their prospects?

Hong Kong investors who come to Russia see that the situation is dif-ferent from the markets where in-vestors are actively invited, such as African or South American ones. In Russia, they have money and there is a competition between domestic capital and investors from the US and the European Union for attrac-tive projects.

Nevertheless, the Russian market has its appeal – in terms of the scope of its economy and the fact that, against the current global econom-ic backdrop, Russia remains a “light spot” if not an island of stability, compared to today’s Europe.

As for difficulties, they are the same for all investors in our coun-try: red tape, excessive economic regulations and the uncompetitive environment.

In my opinion, the service sector has considerable potential for Hong Kong investments, especially infra-structure and logistics, in Russia's far east. It is into this sector that bi-lateral investment efforts should be channelled.

Certainly, there are some difficul-ties but, hopefully, the development of the region will gain momentum, especially at the upcoming Apec summit in Vladivostok. The chang-es Vladivostok has seen over the past

Hong Kong trade fairs attract hundreds of business people from Russia. Press photo

INTERVIEW

7


Real estate continues to attract investors despite global economic volatility, writes Viktor Kuzmin

Sector enjoys steady growth

Lending rises as interest rates decreaseVladimir Ruvinsky RBTH

Mortgage lending continues its resur-gence in Russia, according to forecasts and, by the end of the year, home loans will be close to pre-crisis levels.

The real estate sector’s recovery is being aided by a reduction in mort-gage interest rates, now at an histor-ic low of 9.6 per cent, according to data from Penny Lane Realty.

Although mortgages are increas-ing in Russia, they are not the most popular way to buy housing.

According to the state agency for housing mortgage lending, AIZhK, mortgages make up only 17.4 per cent of all housing transactions.

After living in Moscow for six years,

Ksenia, 28, who works as an art di-rector for an advertising agency, de-cided to buy an apartment.

The 200 sq ft, one-room apartment near a metro station and convenient for her workplace, cost 3.7 million roubles (HK$933,653). She borrowed 3 million roubles from a bank, on standard terms, and used 700,000 rou-bles she had saved as the deposit.

Surveys show that Russians don’t generally consider mortgages to be a good deal because of the interest pay-ments. Those who do take mortgages try to pay them off ahead of time.

Ksenia doesn’t think she will be able to pay back the loan in advance, but she can easily afford the monthly pay-ments. “I used to pay 25,000 roubles a month in rent. Now, my housing

expenses have grown a little, but they are part of my apartment’s cost.”

Most Russians participate in equi-ty construction projects or by co-in-vesting in a building under construc-tion. The system works like this: A construction company planning a new apartment complex will an-nounce the beginning of construc-tion and sell apartments in a build-ing that doesn’t yet exist, then the building is constructed from the amount of money collected.

It is beneficial for both the buyers and developers, since the price of apartments at this stage ranges from 30-60 per cent less than the cost of a finished apartment, and the devel-opers do not have to take out a loan to pay for the construction.

If a buyer finds that he cannot pay off the entire amount or changes his mind, he can resell his apartment under construction to someone else.

The Levashovs bought their apart-ment this way.

In 2008, they agreed to buy a 400 sq

ft, two-room apartment on the out-skirts of Moscow for 3.05 million rou-bles. “It was the crisis time, banks ceased giving mortgage loans,” says Tatyana Levashova, 54.

The couple agreed to pay 60 per cent of the cost immediately and the rest in instalments of 72,000 roubles per month over 18 months.

As a result, their interest payments raised the price of the apartment only 7 per cent over the initial cost.

This kind of deal appeals to Rus-sians who don’t have a lot of savings and don’t plan to live in the same apart-ment forever. The main drawback is that the construction is not guaran-teed, and the developer may run out of funds to finish building, or may be running a scam.

Mortgage market

Investment in real estate worldwide

Russia emerged as a global leader in commercial prop-erty investment growth last year. Yet, the overall trad-ing volume is still fairly

modest: the entire country has just managed to catch up with tiny Hong Kong.

Russia’s real estate, along with its natural resources, has continued to attract investors even against the backdrop of global economic volatil-ity.

Last year, it set a new record, with investment in commercial property doubling to reach US$8.3 billion, ac-cording to real estate services firm Jones Lang LaSalle.

This figure is not, however, over-whelming compared with global lead-ers – it is roughly equal to Hong Kong’s similar showing, ranking sixth among the world’s biggest investment mar-kets in terms of commercial proper-ty, with London (US$24.3 billion), New York (US$19.2 billion), Paris (US$14 billion), Tokyo (US$13.9 bil-lion) and Singapore (US$9.1 billion) taking the lead.

The growth was mainly driven by the recovery of the debt capital mar-ket in Russia. Loans to legal entities surged 25 per cent last year, accord-ing to Knight Frank’s research depart-ment.

Investment was almost equally di-vided between the retail and office segments, each claiming a 40 per cent share.

Hotels and warehouses tradition-ally enjoyed a lower demand, with 13 per cent and 7 per cent, respectively.

In the Moscow market, the office segment topped the list in trading vol-ume, as it did in previous years. The difference is linked to the high invest-ment appeal of regional retail prop-erty, according to global property net-work Knight Frank.

Companies from the United States, Britain, Scandinavian countries and Russia traditionally made the biggest investments in Russia’s commercial property.

Chinese companies proved to be the most active investors from Asia. In 2009/2010, China contributed some US$480 million to Russian property, with the bulk of this amount (roughly, US$350 million) sunk into

the Greenwood Business Park on the outskirts of Moscow. The Baltic Pearl, a major commercial property invest-ment project in Russia’s second larg-est city, St Petersburg, is yet another project supported by the Chinese gov-

The property sector is buoyant, thanks to the recovery of the nation's debt capital market. Loans surged 25 per cent last year. But the country’s real estate market lags behind world leaders. Photo: Ilya Varlamov

ernment that deserves special men-tion.

President of the Russian Builders Association Nikolai Koshman an-nounced last year in Beijing that Rus-sia was ready to provide extensive

project opportunities to Chinese com-panies in exchange for investment. According to Koshman, the associa-tion had already entered into more than 20 co-operation agreements with Chinese subcontractors regarding projects in Russia, the total value of the contracts reaching some 3.6 bil-lion roubles (HK$116 million).

When asked to assess the contri-bution by Hong Kong-based compa-nies to the Russian property market, consulting companies merely shrugged their shoulders.

Only a few cases of Hong Kong in-vestment in Russian commercial property projects are known. As such, only one major project involving Hong Kong capital is known to be under way in the closest Russian city to Hong Kong, Vladivostok: a residen-tial area on Fedorov Bay.

In April last year, Russian President Dmitry Medvedev urged Hong Kong companies to join co-operation pro-grammes with Russia’s Eastern Sibe-rian and Far Eastern regions, and

preparations for the Apec summit in Vladivostok.

Jones Lang LaSalle expects that this year the “Asian tigers” might join the pool of Russia’s biggest investors, pro-viding an impetus for Hong Kong in-vestors to enter the game.

According to Bloomberg, citing Bar-clays Capital Research, Hong Kong’s property market might slip into a re-cession in the next few years, with prices likely to drop by 35 to 45 per cent in the worst-case scenario.

Against this backdrop, the Russian commercial property market might emerge as a safe haven. Analysts es-timate that, although the trading vol-ume will not be as high this year as it was last year (at merely US$6.5 bil-lion) in Russia, it will still be signifi-cantly above the 2010 showing – almost by a factor of 1.5.

This year, the state of the global economy and the euro zone sover-eign debt crisis are expected to be the main drivers for the investment mar-ket. International investors are most likely to adopt a wait-and-see atti-tude, which will take its toll on the Russian market, including investment activity.

Despite the persistent activity in the rental market, financing is grow-ing more expensive and less easily available, which might influence cap rates, says Olesya Cherdantseva, head of Jones Lang LaSalle retail and cap-ital market research.

She says: “Compared to the previ-ous year, when we saw positive trends on the market – high activity by ten-ants and affordable bank loans – clos-ing deals with foreign investors is like-ly to be more difficult this year.”

PROPERTY



> CONTINUED FROM PAGE 1

shops and supermarkets in six Chi-nese regions,” says the fund’s man-ager Zheng Song.

The fund, 90 per cent owned by Russians, accumulates US$50 mil-lion and is US$15 million more than the official Russian figure of non-fi-nancial investments in the Chinese economy in the first half of last year. Russia accounts for just 0.03 per cent of foreign investment in China, ac-cording to the Russian embassy. How-ever, one should take that figure with a pinch of salt.

The major foreign investors in China, which has a US$11 trillion economy, are based in economical-ly advanced jurisdictions such as Hong Kong and the Virgin Islands, so it is virtually impossible to track the origins of that money.

“Russian businessmen shun pub-licity and try to deal as little as pos-sible with official agencies,” says the representative of the Russian Cham-ber of Trade and Industry in Shang-hai, Artem Vdovin.

However, big businesses also have their share of problems. Yet big Rus-sian businesses, that are gradually discovering China, are not afraid of the state and, indeed, make active use of the state to lobby their inter-ests in China. Rusal, Evraz, Petropav-lovsk, VTB, Akron, Rosneft, Sibur and Rosatom are either already running investment projects in China or are actively discussing them with Chi-nese partners.

In the absence of a master plan, big Russian businesses in China are proceeding on the basis of an intri-cate combination of political inter-ests and practical considerations. The biggest bilateral project on Chinese territory is set to be the joint Rosneft-China National Petroleum Corpora-tion oil refinery. Further down the road for the Eastern Petrochemical Company, set up to build the refin-ery (Rosneft has a 49 per cent stake in it), is the building of some 500 pet-rol stations. Yet that project, too, may be considered to be a long-shot as, for now, China controls internal fuel prices, so money cannot be made through retail.

Rusal in China has a more focused development strategy. “China is ex-tremely important for Rusal, the com-pany is banking on it, and it is no ac-cident that it was the first Russian company to float its shares on the Hong Kong stock exchange,” a source in Beijing told Russia’s leading busi-ness magazine Expert . Rusal started supplying aluminium to China in the late 1990s and went on to build two plants for producing cathodes, en-abling it to cut costs at its main pro-duction facilities in Russia.

“Chinese plants meet 85 per cent of the holding’s need for cathode blocks,” a company spokesman says. Rusal’s latest investment is to be the purchase of 33 per cent of the com-pany, Shenzhen North Investments.

Expert’s sources in Beijing are vague about the prospects of a joint venture with Rosatom, as the project is in the early stages of development. Sinopec and Sibur signed a protocol of intent in October, whereby the companies will build two rubber production plants in Shanghai and Krasnoyarsk. Yet a memorandum is not a binding document, so it is too soon to speak about the project seriously.

Production or outsourcing?

Very few Russian companies decide to start production in China, most confining themselves to placing or-ders with Chinese factories.

There is a logic to this. “Legal and tax risks are high in China, the laws are different and liable to change, and the changes are sometimes difficult to track down,” says Obuv Rossii di-rector Anton Titov. “The second rea-son is the mentality and the language barrier.

“Managing workers in Russia and managing workers in China are two very different propositions. We have no intention of opening our own pro-duction in China.

“It is easier to outsource an order and to develop a partnership with a factory in China than to own enter-prises there.” Obuv Rossii buys 1 mil-lion pairs of footwear from 20 facto-ries every year.

The choice of an outsourcing model is fraught with risks as great as in setting up one’s own factory.

Banking laws are tough hurdlesMark Zavadsky Expert magazine

First, there is the quality of the prod-ucts. Not infrequently, the quality is good when you receive a sample or small batch, but when the order is big, the Chinese workmanship is often substandard.

Among other risks are failure to meet deadlines, design-theft and un-reliable suppliers, who may abrupt-ly refuse to co-operate the moment they get a more solid and lucrative order.

That is why companies try to be-come major partners of a factory and, sometimes, even its informal co-owner. Sometimes Russian investors do not want to spend money to cre-ate a foreign company in China and, therefore, register in the name of a Chinese citizen they know. That sim-plifies the registration procedure, but there is a risk that the company might be taken away from its real own-ers.

“A Russian coming on an inspec-

tion mission may be surprised to dis-cover that he is no longer the owner,” Vdovin says.

Less than half of Russian produc-tion projects in China have been moderately successful, says Mikhail Drozdov, a partner with the China Window consultancy.

The reason is ignorance of local realities, managerial mistakes and poor location. “China is ceasing to be a cheap factory,” says OPORA Ros-sii’s East Asia representative, Dmitry Chuprakov.

“The Chinese today claim ‘normal’ world-standard wages and working and living conditions. It no longer makes sense to produce cheap con-sumer goods here.”

Formerly known as Vneshtorgbank, VTB opened in Shanghai in December 2007 and, by November last year, had a credit portfolio of US$56 million.

It hopes to increase the portfolio to US$170 million by the end of this year.

“We mainly finance trade operations of Russian companies and credit in-vestment activities of their Chinese subsidiaries,” says branch director Al-exander Milyukov.

KuibyshevAzot, one of the biggest clients of VTB China, is successfully developing production of polymers at a plant near Shanghai.

Until now all transactions have been in US dollars.

Nevertheless, VTB expects to obtain a licence to conduct transactions in yuan later this year.

Banking on the mainland calls for major financial investments, whereby 200 million yuan (HK$246 million) is required to open a single branch.

To obtain a yuan licence increases that sum by a further 100 million. VTB is not in a hurry to develop its net-

work and plans to open branches only where clients are sufficiently numer-ous.

“We also plan to co-operate with Chinese companies that have inter-ests in Russia and the CIS,” Milyukov says.

VTB is the first Russian bank to open a branch in China, and is not ruling out a retailing presence there. Photo: Getty Images/Fotobank

bank and it can claim to have custom-ers among state-owned companies. Others will be left with crumbs from the table. Perhaps Gazprombank might do some business if a gas con-tract is signed,” a former representa-tive of a Russian bank in Beijing told Expert magazine.

In addition, VTB has a key function to perform in China through promot-

ing the rouble as a currency of global trade and trying to persuade Chinese companies to trade with Russia in rou-bles. “From a legal viewpoint, dollars and roubles are the same for Chinese exports.

“A company can also get a VAT re-fund but, if trade is in renminbi, that is possible only for authorised com-panies,” Milyukov says.

For a major company, it only makes sense to enter China as part of an overall strategy

VTB has a key function in China to promote rouble as a currency of global trade

Direct and indirect investments

The path of Russian investments into China is sometimes tortuous and the reason is not just a reluctance to dis-

The Russian bank is not ruling out going into retailing in China. “We will think about it in 2013,” he says.

Other Russian banks are unlikely to enter China any time soon, although many have placed representatives in Beijing in order to understand the lie of the land.

“There simply will not be enough clients for them. VTB is a state-owned

Ambitious firms look for opportunities

BUSINESS


RUSSIA BEYOND THE HEADLINESLargest Russian projects in China

Oil pipeline from Skovorodino to Daqing is one of the largest Russian projects in China. Photo: Photoshot/Vostock-photo

Innovative technology is key to business development Mark Zavadsky Expert magazine

0.8BILLION US$ - accumulated Russian direct investment

close the origins of the money. Rus-sian business went global a long time ago and often enters China via other countries. Russian interests are be-hind a joint venture between the American producer of lithium cells Ener1 and the Chinese company Wanxiang.

Ener1 is owned by the Russian Z1 direct investment fund, founded by Russian businessman Viktor Zel-derovich.

The Norwegian producer of bat-tery-driven cars, Think, also owned by Z1, is considering joint projects with the Chinese. If the two projects get off to a good start, Russian bat-tery-driven buses may be seen on the roads of Hangzhou in the future. A new joint venture may be set up to implement the project.

Businesses associated with the Russian entrepreneur Yuri Milner are also eyeing China. Milner holds

ling stakes in Chinese companies to give us a say in management”, Zheng explains.

Entry and exit

Exit from the country if things do not go well is every bit as difficult as en-tering China.

Not infrequently, the managers of foreign companies have been detained at the border because they had been sued by Chinese partners and suppli-ers, and have been forced to stay in the country until all debts are paid.

Russian companies continue to broaden their presence in China, but proceed cautiously. Early in the pre-vious decade, many in Russia be-lieved that China was a land of un-limited opportunities.

It is now clear that unlimited op-portunities entail infinite difficulties. China is an arena of fierce competi-tion for the local consumer, while the attitude to foreign investments is cooling.

For a major company, it only makes sense to enter China as part of an overall development strategy.

“If you sit on the board of direc-tors of a supply company, you can influence the cost and obtain cheap-er products,” says the head of the Chi-nese unit of a major Russian holding company.

The Russian Far East has long ceased to regard European Russia as a promising area of development and, increasingly, entrepreneurs and in-vestors are seeking a niche in China.

It is not easy to make good investments in China, which is awash with its own and foreign money

stakes in the Chinese Innovation Works incubator, the 360buy online magazine and the Alibaba.com trad-ing floor. Milner’s managing com-pany DST Advisors opened an office in Hong Kong last spring. He is plan-ning to set up venture funds to in-vest in start-ups in China and India.

My Decker Capital One is also plan-ning to expand. It is about to com-plete subscription for a second in-vestment fund.

“It will be larger than the first,” says Zheng, though she declines to give the exact figures. The fund will invest in retailing, medicine, the media and the entertainment industry. “Our task is to buy significant but not control-

Of late, Russia has been creating a new type of production facility in China. Its products are intellectual. The pioneer was the Kaspersky Lab, which has about 150 staff in the coun-try. The anti-virus software maker is one of the market leaders in China, with its adverts displayed on stands at computer markets, in specialised journals and on buses in Beijing.

Kaspersky is not, however, the only intellectual Russian presence in the country.

The staff at the Beijing office of the St Petersburg IT company, i-Free, which produces games and advanced mobile phone applications, increased from two to 25 during the past year.

“We have invested US$2 million in developing our Chinese division,” di-rector of i-Free Asia Yevgeny Ko-solapov told Expert magazine.

In addition to Beijing, i-Free has an office in India. “We are going to roll out the applications we create in China to the Indian market. We are also working with Latin America and

Africa, and we have joined the bill-ing business in Nigeria,” Kosolapov says.

Within China, i-Free makes money by distributing its own software and games and the software of other Rus-sian companies. Kosolapov believes the presence of Russian companies producing software and games for mobile phones in China will increase dramatically.

Russia is acknowledged as a world leader in the field, second only to the Americans.

“We are aware that we can repre-sent their interests only in the initial phase, before they understand the promise of this market and enter it directly,” Kosolapov says. “Nobody needs Russian money. What they need are ideas, ideas that China does not yet have.”

This philosophy is shared by Riki Group China, which promotes the Smeshariki brand. “The company was set up by a group of Russian and Chinese investors, including the founder of Riki Group in Russia Ilya Popov,” says Riki Group China direc-tor general Eduard Konovalov. The

shareholders have contributed more than US$20 million to the authorised capital Riki Group China is going to use for a massive promotion of Sme-shariki on the Chinese market, rang-ing from comics and mobile appli-cations to kindergartens and theme parks.

“In China, we want to play in the same league with Disney,” Konoval-ov says.

Smeshariki has already enjoyed its first season on Chinese TV, to be fol-lowed by the second one this year. One of the main problems when en-tering a foreign market with such a product is adapting the series to local realities and customs. That's why new episodes of Smeshariki will introduce two new characters to the plot - a dragon and panda. The drawing of the characters will be outsourced to China.

Comparatively small IT enterpris-es are also discovering China.

For instance, one-eighth of the staff of the Russian Internet marketing agency Sterno work in China.

“I came to Beijing and, to start with, worked remotely before suggesting putting together an international team consisting of one Russian, one Chinese and several Europeans,” says the director of the Beijing office, Yevg-eny Demchenko.

Initially, the project recruited 10 people, but today only five staffers remain because the global financial crisis slowed business down.

Sterno’s Chinese branch is trying to gain a foothold in the country and is planning to hire local sales person-nel and sell its services on the Chi-nese market.

“We will try to make quality our competitive advantage, because our prices are likely to be somewhat high-er than those of Chinese companies,” Demchenko says.Popular Smeshariki characters ‘learn’ to speak Chinese.



Alexander Lukin Special to RBTH

Eswar Prasad The Moscow Times

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Solid basis for partnership

This year will be momentous for Rus-sia and China. Both countries will see a change of leaders. Russia will elect a new president next Sunday and, in China, the 18th Congress of

the Communist Party will hand over power to the “fifth generation” of leaders in the au-tumn. People in both countries are wonder-ing whether the changes will make a differ-ence to Moscow and Beijing’s foreign policy, and, in particular, their bilateral relations.

There are reasons to believe that relations will continue to progress under the new leaders. The likely leaders, Xi Jinping and Vladimir Putin, have much in common. They are of a similar age; they made their careers in party and government structures; and both have been promoted to leadership positions by the respective elites.

It was during Putin’s first presidential term that Russia invigorated its Asia policy, especially relations with China. The frame-work bilateral Treaty of Good-Neighbourli-ness Friendship and Co-operation was signed in 2001.

The Shanghai Co-operation Organisation (SCO) was officially created in the same year. In 2004, a mutually acceptable com-promise was reached on the remaining dis-puted issues of border demarcation, ending territorial disputes. The official status of “strategic partnership of coordination” was conferred on relations between the two countries.

Sino-Russian relations go back almost 400 years. The models have varied. The present strategic partnership is one of equals, re-quiring close co-operation. The two coun-tries have gone through great changes in the second half of the 20th century in attaining that model. It was aided by the normalisa-

It is worth reflecting on how a decade of strong economic growth in emerging mar-kets led to last year’s resounding political transformations.

From the dramatic events in the Middle East, to the groundswell of support for the anti-corruption crusader Anna Hazare in India, leaders in emerging markets are get-ting a clear message from the streets that growth is not everything. Emerging-market economies delivered solid growth during the 2000s and even survived the global financial crisis without a growth collapse. But the spectre of rising corruption is compromising the legitimacy of their economic gains and eroding support for further reforms needed to sustain their growth momentum.

Corruption takes many forms, but in emerging markets a combination of factors has turned it into a cancer that ultimately topples regimes. Relentless low-level corrup-tion is a major irritant for poor people in many of these countries. Indeed, it limits their access to the social services and basic government functions that they often de-

An exclusive focus on GDP growth may not be good for economic and political stability

But freer political regimes are not a pana-cea. In a democracy like India’s, the political-ly well-connected benefit from skewed growth, thus increasing the resentment of those left behind.

blackouts or a combination of authoritarian measures. China, for example, blocked media coverage of the Egyptian protests. The Arab Spring, however, reveals the fragility of repressive political regimes that try to main-tain their legitimacy by limiting information flows. The main lesson for dynamic emerging market countries is that an exclusive focus on GDP growth may, ultimately, not be good for economic and political stability.

These economies need measures that help to keep the poor out of poverty traps and that give them realistic opportunities to im-prove their economic well-being.

These lessons apply equally to advanced economies, which also suffer from rising ine-quality and subtle forms of corruption. But for those wealthy economies, restoring de-cent growth is now the major priority.

Emerging markets have a golden opportu-nity to build on their economic gains by tackling deep-seated problems like corrup-tion.

As the past year’s events have shown, the costs of inaction could be calamitous.

At the time, in May 1989, the paramount Chinese leader, Deng Xiaoping, uttered a wise phrase: “let’s close the past and to open the future.” History has shown that allied re-lations between the two are hardly possible. A succession of governments in Russia and China entered into allied relationships at least three times: in the late 19th century, in 1945 and in 1950. Each time, the union proved ineffective and lost its meaning long before the treaties expired. Suffice to say that, in the late 1960s, when bloody clashes occurred on the Soviet-Chinese border, the Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance, signed for a term of 30 years, was still valid.

At the same time, strategic co-operation between Moscow and Beijing, falling short of an alliance, has a good chance of suc-

pend upon for their very survival. Another type of corruption involves siphoning enor-mous sums of money from large-scale projects.

For ordinary people, large-scale corruption is less visible because, while the sums in-volved are mind-boggling, the costs are not as directly felt as they are in the case of low-er-level graft.

In countries such as China and India, rapid economic growth has lifted a huge number of people out of poverty. But the fruits of glo-balisation and rapid growth have not been evenly shared. The rich become super-rich, even as a large fraction of the population re-mains destitute.

Rising income inequality is hardly limited to emerging markets, but their combination of open corruption and pervasive inequities creates a toxic brew that is undermining sup-port for reforms that would strengthen and consolidate their economic gains.

In many emerging markets, a lack of politi-cal freedom adds to the combustible mix. The combination of corruption, inequality and political repression builds up enormous pressure, and there are no institutional chan-nels through which to release it.

Emerging markets get clear growth message

Eswar Prasad is a professor of economics at Cornell University.

Alexander Lukin is Vice-president of the Diplomatic Academy, Russian Foreign Ministry.

It is difficult to predict what triggers popu-lar protest, but economic factors are key. For example, rising food prices tend to hurt the poor, especially the urban poor, who spend a large share of their income on food. Unlike agricultural workers, they receive none of the benefits of higher food prices. With swelling urban populations, it will become increas-ingly difficult to keep a lid on these pressures.

Some governments have reacted to recent events with political repression, information

ceeding, because it is based on real geopo-litical and economic interests, not on ideo-logical unity or similar political systems. Russia needs good relations with China for political and economic reasons. China is an important strategic partner. It is thanks to links with China and other Asian partners that Russia can become a centre for world influence. China is a key economic partner for Russia, which needs to co-operate with it to develop Siberia and its far eastern re-gions.

China is Russia’s important regional part-ner. Both countries are working together in the SCO to solve problems in Central Asia, fight religious extremism and terrorism, support secular regimes, and economic and social development of the states in the re-gion. Co-operation with China within the BRICS (Brazil, Russia, India, China and South Africa) group is also very important.

China also needs Russia as a geopolitical and economic partner. Beijing would like to see Russia as a counterweight in its compli-cated partnership-rivalry relations with the United States and Europe, as guarantor of its “independent” foreign policy. Stability on the border with Russia is important for Chi-na’s economic development. Finally, Rus-sia is a key source of some goods that China cannot buy from other countries – weapons – or, in sufficient quantities, oil, timber and other commodities. That is why China has been working persistently to solve border, migration and bilateral trade problems.

Even though there may be differences, and despite the natural rivalry between companies in the two countries, there is a solid basis for a strategic partnership. That is why it is sure to progress, no matter who assumes power in Moscow and Beijing. tion of relations that started in the late

1970s, after a reformist government came to power in Beijing, and was crowned by Mikhail Gorbachev’s historic visit to China.

OPINION

11


The National Literature Award ‘Bolshaya Kniga’ (Big Book) is known as a leading Russian literature award. It was founded to inspire talented writers to make a substantial contri-bution to the artistic culture of the country, to raise social significance of modern Russian literature and to make reading popular activity. This award represents several gen-erations and unites people of various professions to show the importance of reading. There are no restrictions: every year hundreds of authors, writing in dif-ferent genres, present books and man-uscripts to compete for the most pres-tigious award in the country. Among honoured recipients are both known and unknown writers.The single criteria is human talent, which has sparked dozens of stars in literature.

The Man Asian Literary Prize has sev-eral major goals, the most fundamen-tal being to bring the best of Asian writing to the world. This entails other aims: encouraging publication, as well as translation into English, of more gifted Asian writers. We also see our prize as giving recognition to both individual writers as well as the cul-tures from which they come.We aim to encourage readers to read the best Asian literature, to talk about it, to take part in the discussions going on in the press and blogs and to pro-mote reflection. We aim to see the millions of educated Asians who are literate in English deepening their perspectives about human well-be-ing and the fundamental moral and political questions facing humanity, all of which will be encouraged by reading.

Literary prizes

Big Book v Man Asian Literary Prize

A novel approach

Russia’s reading population welcomed the 21st centu-ry with shelves full of bor-ing detective novels. These dry whodunnits, poorly ed-

ited and hurriedly written, along with the popular mysticism genre, a la Paulo Coelho, topped the best-sell-ers. Editors of the literary journals were on the lookout for new talent, but quality prose was unable to dis-tract people from the appeal of “pop-ular” literature, page-turners designed for the mass market.

No one could have predicted that Mikhail Shishkin would help to re-introduce intellectual prose to main-stream Russian culture. In 2000, he won the Russian Booker prize for his novel The Taking of Izmail. Then, last year, his novel Letter-Book (Pismovnik in Russian) won the main Big Book Award and the “people’s version” of the award, where the public vote for their favourite book online.

There is a certain logic to the fact that Letter-Book was met with such enthusiasm. The role of a writer in Russia is often linked with that of a teacher, or prophet, whom people can turn to as someone who promotes truth and justice. This is what Rus-sian literature was like in the 19th cen-tury. Shishkin has tried to continue this in his work, and his books main-tain a clear thread of post-modernist irony. He does not feel constrained by his predecessors. Once he had made a reputation for himself as a writer, Shishkin took on the mantel of “educator”.

The protagonists in Letter-Book may not be princes, but the parallels with Hamlet are striking: for them too “the time is out of joint”; destiny has been knocked off course and things are not as they should be. For all his love of the intricacies of language, of pithy phrases loaded with meaning and context, Shishkin describes ob-jects and events that are simple, some-times coarse and down to earth. He focuses on ordinary people patching things up, he shows them trying to reinstate the natural order.

The title was borrowed from the 18th-century writer Ephim Kurganov, who wrote a popular epistolary hand-book entitled Pismovnik. This was a collection of exemplars for letters, ranging from business notes to dec-larations of love. It is hard to imagine a book like this today, since the tra-ditional letter form has been replaced by social networking sites with their torrent of meaningless digital noise. However, for many, a well-thought-out, hand-written correspondence; a meaningful conversation contin-ued one letter at a time, remains the revered form of heart-felt communi-

background are the references to the Boxer Rebellion. Volodenka plays a part in suppressing it. He goes to China in June 1900, and dies after the storming of Tianjin. “The only thing I really want to do is to forget every-thing as soon as possible. But I am still going to write about all that hap-pened anyway. After all, someone has to make sure it is never forgotten. Maybe the reason I am here is to see and to record,” Shishkin says.

When he was working on the novel, Shishkin used letters written by a Ger-man military doctor working in China,

Mikhail Shishkin’s Letter-Book won the Big Book prize last year. Liza Novikova explores why the book's success was greeted enthusiastically

Mikhail Shishkin gives a speech during the awards ceremony for the Big Book prize in 2011. Press photo

COMMENTS

GEORGIY URUSHADZE, BIG BOOK PRIZE DIRECTOR

DAVID PARKER, THE MAN ASIAN LITERARY PRIZE CHAIR DIRECTOR.

The Man The Big Book

Prize US$30,000 US$200,000

Number of jurors 3 100

Foundation year 2007 2006

Who can nominate?

PublishersPublishers, writers and advisers

What can benominated

Fiction Any book

In English and published

In Russian and may be unpublished

Where the money comes from

The Man Group Plc

“Nobel Prize principle” and interest on capital donated by major Russian firms

In my novel, the suppression of the Boxer Rebellion is a metaphor. It is a symbol of wars past and present

There’s nothing to be really scared of

When you are a child, some words seem very frightening. China is one of these frightening words. I am eight years old.

The grown-ups are always talking about battles on Damansky Island, that it is the start of a war, which the Russians have no chance of win-ning.

The first glimpse we got of China was a film shown on television. We saw countless soldiers, brandishing “little red books”.

I am scared because these people are our enemies; they are fanatical and merciless.

Many years have passed. The So-viet Union no longer exists, the Chi-na of that time no longer exists, and that little boy no longer exists. He has grown up and become a writer.

I have now had a chance to visit

Beijing, and I took an evening walk down Hohai Bar Street. There was a stall selling memorabilia for tourists, and, among all the souvenirs and kitsch, I found these same “little red books” of Mao quotations – and they even had them in Russian.

I bought one. These books were published in 1966. How many were printed back then? Hundreds of thousands? Millions?

And 40 years on this particular lit-tle book had found its reader.

In China, I was surprised to find out that Russian troops had stormed Beijing. No one in Russia, neither before nor after the fall of Commu-nism, liked to be reminded of this war.

Every nation generally wants to be proud of its victories in war, but what was there to be proud of here?

cation, the sort we would all use in an ideal world. Shishkin must have sensed this. He created a brilliant les-son in written conversation.

The lesson is not a simple one. The novel’s protagonists, Sashenka and Volodenka, are not your average people. The two main characters are also lovers, but they are not destined to meet. The actual setting is left in-tentionally vague. Sashenka lives in abstract “Soviet” times. Volodenka seems to be writing more in the early years of the 20th century.

The only clear indication of the

which were discovered in the German Historical Museum archives in Ber-lin. The diaries and memoirs of Rus-sian soldiers serving in China at the time, first published around 1902-1904, were rarely republished.

A chronicle of the terrible conflict becomes part of the lovers’ dialogue. As circumstances deteriorate, inter-action between the protagonists be-comes more tender, and readers can appreciate the preciousness of life lived in peace.

However, after the fictional “cou-ple” are able to establish a mutual connection, they then have to try to come to terms with the “passage of time” and what it means. This is the main message of the novel. Judging by what Shishkin wrote about the “Chinese” theme in the story – his next book may well turn out to be more politically orientated.

“In my novel, the suppression of the Boxer Rebellion is a metaphor. It is a symbol of wars past and present. Global wars are a thing of the past, but somewhere in the world there will always be strong people trying to teach the weak humanity and civili-sation. Back then stalwarts from Rus-sia, the United States, Germany, Japan and other developed countries ‘si-lenced’ the Chinese.

“In our lifetimes we have seen the stronger parties use bombs to teach democratic principles to nations such as Serbia, Afghanistan, Iraq and Libya. There will always be wars. As far as Russia is concerned, if these are not in Chechnya, then they will be in Geor-gia, if not in Georgia then in Abkhaz-ia, or in the Crimea, or in Moscow.”

Hong Kong is home to a big literary prize – The Man Asian Literary Prize. Winners will receive their awards on March 15. The directors of both priz-es explain their missions and goals.

LITERATURE



Eugene Kaspersky began stud-ying computer viruses in the late 1980s, when personal computers in Russia were re-stricted to elite government

institutions. Now, he’s built a US$329 million business empire, designing and producing software that identi-fies and eliminates bugs and viruses before they wreck his clients’ com-puter systems.

Founded in 1997, his namesake company, Kaspersky Lab, is now ranked the world’s fourth largest an-ti-virus and anti-malware software company. With a whopping 38 per cent growth rate from 2009 to 2010, it’s also the only Russian firm that holds a place on a list of the world’s top 100 software companies, in terms of revenue.

Kaspersky Lab still lags behind American anti-virus giants Norton and McAfee, and Japan’s Trend Micro, in terms of revenue. These compa-nies netted US$6.0 billion, US$2.1 bil-lion and US$1.09 billion in revenue in 2010, respectively.

But Kaspersky shrugs off the com-petition. “We all know from sports that the winner is not the team with the largest budget, but the one that plays better,” he says.

In the anti-virus business it’s said that it is the company with the most “brains” that prevails. And in the cer-ebral department, Kaspersky scores highly. The lab’s security experts and malware analysts are always on the move, developing new programs to speed up the detection and neutral-isation of threats.

Kaspersky lists the varying types of malware – malicious software – that often have intriguing names, includ-ing: “worms, Trojan horses, spyware botnets, rootkits, backdoors and zero-day attacks”. More than 3,500 signa-tures that detect threats are added daily to the company’s database.

With new malware being spawned literally every second, Kaspersky claims that recruiting top-notch vi-rus-busting programmers to his stel-lar international team is a priority – you must know how a virus is built in order to create its antidote.

In 2009, a new group of software engineers signed on from St Peters-burg. Before they joined, however, they made it clear that they wouldn’t relocate from Russia’s second city. Kaspersky and the lab’s human re-sources department never attempted to convince them otherwise.

“They wanted to switch companies but didn’t want to move to Moscow. So we said fine, and set up a research and development office in St Peters-burg just for them,” Kaspersky says.

“How could we have done other-wise? People are our most valuable assets.” Harnessing mathematical and engineering prowess has been the key to Kaspersky’s entrepreneur-ial success.

In 1991, when the Soviet Union was dissolved, and four years after Kasper-sky graduated with a degree in math-ematical engineering from Moscow’s Institute of Cryptography, Telecom-munications and Computer Science, he was offered a job designing anti-virus programs for a Ukrainian com-pany that imported computers.

“I had been studying viruses as a hobby, but I never knew that I could make money from it,” Kaspersky says.

Cybercrime expert’s firm develops programs to eliminate threats, writes Jessica Bachman

So when the offer came up, he jumped at it.

“I thought to myself, ‘wow, I can buy a car with the money they’re of-fering’,” he says. “Well, I could have bought a used car but a car’s a car, and it was 1991. The economy was not doing well.” The project, howev-er, was a temporary one and, soon after it ended, a former teacher of-fered him a job doing similar anti-vi-rus work for Kami, one of the first Rus-sian hard and software firms. The company gave him a computer and paid him about US$100 a month, and Kaspersky considered himself lucky.

“I was a one-man band doing an-ti-virus work at Kami until two old friends approached me, asking about a job,” he says. “I knew they were bril-liant engineers, so I convinced the owner that we needed to bring them on board.”

From the ground up

In the first few years, the team’s prow-ess in developing virus detection and disinfection software flew under the radar. “Kami was indeed selling do-mestically, but the software market was practically non-existent in Rus-sia,” Kaspersky says. But in 1994, after Hamburg University’s computer sci-ence department recognised Kasper-sky’s anti-viral toolkit as possibly the

best anti-virus scanner in the world, the phones began ringing.

Kaspersky’s three-man team was soon inundated with anti-virus soft-ware licensing requests from Euro-pean and American computer com-p a n i e s , b u t t h e v o l u m e o f administrative and sales work in-volved soon became overwhelming. It was cutting into their lab time, which they could not afford.

Kami was barely breaking even at the time, and it didn’t have the funds to get a seasoned sales director. So Natalya, Kaspersky’s wife at the time – who also came from a technical background – agreed to join. She proved extremely adept at sales and public relations, and became the driv-ing force behind the team’s decision to leave Kami to set up their own ex-clusively anti-virus software firm in 1997.

As Kaspersky was already well-

known in Europe and Asia, Kasper-sky Lab’s stock grew dramatically. From 2000 the company launched operations in all the major markets and it now employs more than 2,300 people internationally and is contin-uing its expansion. It is now active in over 100 countries.

Mounting interest in Kaspersky an-ti-virus software in the United States, a traditional Norton and McAfee stronghold, has prompted the com-pany to set up an office with an ex-pert analyst team on the West Coast. Without a re-evaluation of compen-sation packages, however, convinc-ing Silicon Valley professionals to join will prove challenging.

“We’re still a private company, so we can’t offer stock options. But our compensation programme is one of the most important issues discussed at board meetings, and we’re fine-tun-ing it,” says an upbeat Kaspersky.

Stock options won’t be on the cards for some time.

But the financial downturn hasn’t dampened Kaspersky’s ambitious or-ganic growth-strategy, which, he is eager to point out, does not include any mergers and acquisitions. It will focus on expanding the company’s designated enterprise segment, tar-geting small businesses and emerg-ing corporates.

Planning for the future

Securing more corporate contracts will drive long-term growth, Kasper-sky explains. “Success in the consum-er segment is important too, but there is little brand loyalty with home users. People don’t believe it matters much which antivirus product they use,” he says.

With businesses, he notes, it’s a dif-ferent story. Once they find a security system they trust, they will stick with it. This means a more sustainable rev-enue stream for Kaspersky Lab.

This would have meant overtaking Trend Micro, which is roughly three times the size of Kaspersky Lab. Al-though the lab is number two in Eu-rope, it has only captured 5 per cent of the global market share.

This year, Kaspersky Lab celebrates its 15th anniversary. The main value of the company is the unique knowl-edge and experience accumulated over decades of fighting against com-puter viruses and other computer threats. Today, the company has local offices in 29 countries and its prod-ucts and technologies are used by more than 300 million users world-wide. The company averages more than 10 million product activations per month.

Kaspersky believes the firm’s global approach holds the key. “For our Amer-ican competitors, the domestic mar-ket is the major cash-cow,” he says.

“But we’re different. We’ve never been a Russian company because our major markets have always been out-side Russia. We know how to behave differently in different countries and pay close attention to local features. “It’s our global approach that will move us forward.”

The article was first published in Exceptional magazine, produced by Ernst & Young

In 2009, Vice-Premier Wang Dejiang presented Eugene Kaspersky with China's National Friendship Award for his work in the information security sector. Photo: www.kaspersky.ru

STUDIES: Institute of Cryptography, Communication and Informatics (Moscow)AWARDS: 2009 – The State Award of the Russian Federation in the Field of Science & Technology2010 – SC Magazine Award Europe (www.scmagazine.com)WORK EXPERIENCE: Research institute with the Ministry of DefenceProgrammer at Kami, a Moscow-based information- technology company

EUGENE KASPERSKY


Empire expands global reach

Eugene Kaspersky proves it’s possible to build a Russian IT start-up from scratch. Photo: Photoshot/Vostock-photo

PRESS PH

OTO

SCIENCE AND TECHNOLOGY

13


GLONASS and BeiDou challenge GPS in the satellite navigation market, writes Vasily Kashin

All systems go for exports

Russia has sent 31 satellites into space to secure a strong presence in the civil global-positioning market. Photo: ©RIA Novosti

Last December, the GLONASS Russian satellite navigation system achieved full global coverage for the second time. There are at present 31 satel-

lites in the GLONASS constellation, including the 24 operational satellites required to transmit signals, three spare satellites and four satellites under maintenance and flight tests.

The original GLONASS constella-tion was completed in 1995, but then the system fell into a long period of decline because of lack of funding.

Investments in GLONASS resumed in 2001 and, over the next decade, Rus-sia spent US$4.7 billion on the navi-gation system, about a third of its space exploration budget for that period. An-other US$11.7 billion will be invested in the system by 2020, in line with the GLONASS expansion programme pre-pared by the Russian Federal Space Agency earlier this month.

GLONASS became the second gen-erally accessible satellite positioning system after GPS. It is clear that Chi-na’s BeiDou-2 Navigation System will be the third, capable of covering all of China this year and achieving glo-bal coverage by 2020. Although the European Galileo system was expect-ed to be launched in 2019, the pro-gramme is stalled by continuous fi-nancial disputes. So far, China has 10 satellites in orbit, while Europe has launched only two.

Both GLONASS and BeiDou were originally military projects. The mil-itary application of satellite position-ing systems will continue to expand throughout the world. Even second-ary military nations, such as Iran, cre-ate weapons that use satellite navi-gation solutions for their guidance systems. Russia and China aim to equip each infantryman with a sat-ellite navigator and plan to launch large-scale production of cheap guid-ed bombs analogous to the Ameri-can JDAM smart munitions, which have a GPS guidance control unit.

The risks of Russian material using American GPS signals became obvi-ous during the Russian-Georgian war of 2008, when the Americans blocked the GPS signals in the conflict zone to help their Georgian allies.

Yet GLONASS and BeiDou will have to secure a strong presence in civil markets, which is a challenge when the market is already orientated on GPS-compatible devices. The Russian government which is, for the first time, faced with competing with GPS, has to take unpopular measures, some of which may be repeated in China.

Specifically, the Russian authori-ties have obliged all municipal trans-port companies to equip their buses with GLONASS receivers. Although this move has made transport com-panies disgruntled, since it causes ad-

GLONASS navigation system Chinese position latest technology

Other satellite navigation systems GPS is completely deployedThe US’ GPS at present has 31 satel-lites in orbit. GPS provides navigation and accurate time services to 95 per cent of users.

Galileo to be operational in 2014Only one of the first two test satel-lites of the Galileo system is operat-ing. It is expected to begin transmit-ting navigation signals from 2014.

IRNSS is in commissioning phaseThe Indian Regional Navigation Sat-ellite System's (IRNSS) comprises seven satellites and is expected to be operational by 2014.

BeiDou/Compass was launched as a pilot project last December. Accord-ing to Ran Chengqi, director of the China Satellite Navigation Office, navigation and positioning services are now available in China and neigh-bouring countries.

“Our system not only shows your exact location and tells what time it is, it also enables users to exchange short messages,” Ran says.

The BeiDou satellite constellation includes 10 satellites and covers an area from Australia to Russia. The signal reaches the Xinjiang Uyghur Autonomous Region of China and the Pacific.

Next year, six more satellites will be launched to cover a larger area and, by 2020, the constellation will have 35 satellites.

The BeiDou system is accurate to within 25 metres but next year, accuracy will increase to within 10 metres.

BeiDou is expected to boost the national navigation industry.

ditional expenses, buses are being ac-tively equipped with GPS units. In some Russian cities, such as Velikiy Novgorod, the mandatory installa-tion of GLONASS receivers in munic-ipal buses has been given as the main reason for the rise in fares at the start of this year. The Russian authorities also approved a 5 per cent increase in import duties on all mobile devic-es with GPS receivers, unless they are also compatible with GLONASS.

Furthermore, it will be mandatory to install GLONASS receivers in all ve-hicles operated by state agencies and special services, including the police, firefighters, medics and rescue work-ers. This policy has delivered its first

results – Nokia and Apple have an-nounced plans to develop GLONASS-compatible devices. Talks over use of the GLONASS system are under way with Motorola and Qualcomm.

Apparently, the Chinese authori-ties, which control a much larger con-sumer market, will be able to pro-mote their navigation system through global telecommunications equip-ment producers more effectively.

The increasing number of global navigation systems means more free-dom and additional opportunities for the entire world. When used simul-taneously, several global satellite po-sitioning systems improve the accu-racy of positioning and minimise

political risks. The United States, Rus-sia and China have various views on global issues and the likelihood of a simultaneous shutdown of the three systems over some part of the world is minimal. In April last year, Sweden’s Swepos, which provides accurate po-sitioning services, started using GLO-NASS solutions, saying that the Rus-sian system worked better than GPS in northern latitudes.

GLONASS is also used more active-ly by the military in large developing countries wishing to avoid excessive dependence on the American GPS system. Russia has already signed GLONASS co-operation agreements with India, Brazil, Venezuela and

Cuba. Russia is successfully promot-ing use of the domestic navigation system throughout the former Sovi-et Union, especially in Kazakhstan and Ukraine. Such agreements en-visage supplies of Russian equipment and technical consultations on inte-grating GLONASS systems.

Even so, the navigation system can already be used without special agree-ments with Russia, as GLONASS nav-igation equipment is available on the commercial market. As soon as Bei-Dou and Galileo have been launched, accurate satellite navigation services will be available around the world, irrespective of changes in interna-tional politics.

SCIENCE AND TECHNOLOGY



Ilya Varlamov’s agenda-free Ridus website attracts all shades of political opinion, writes Clémence Laroque

After studying at the Moscow Ar-chitecture Institute, Ilya Varlamov founded a 3D graphics company in 2002, that is now known as iCube.

In 2008, he set up his business with 50 employees in the centre of Moscow and became the company of reference in his field. He created his

Architect builds on his success

Citizen journalist draws debate

Blue buckets movement fights injustice Olaf Koens The Moscow News

They simply purchased little blue buckets and installed them on the roofs of their cars. Strictly speaking, the blue buckets themselves don’t break the law.

Carrying a blue bucket is not an offence, and the only problem most drivers faced was a 100-rouble

(HK$25.70) fine for “carrying luggage inappropriately”. There’s something special about cars in Moscow. Not only are there way too many of them, but they are often bought as expen-sive status symbols.

It’s about pride – the first thing many young Muscovites do with a

“More than 10 years ago, one of my best friends was killed in a traffic ac-cident involving a drunken police of-ficer,” Sergei says.

“So I vowed to get justice, and here we are.”

In his little one-room office, he fights injustice on the roads, and says

Moscow’s blue buckets protests have been viewed as a success. It’s a unique way of venting anger at injustice. Photo: ©RIA Novosti

One of my best friends was killed. I vowed to get justice, and here we are SERGEI KANAYEV, THE FOUNDER OF THE FEDERATION OF CAR OWNERS

It’s a question they’re asking them-selves in the Kremlin, over and over. Where has this wave of protests come from, and how did it start?

One answer is, of course, the al-leged falsified results of the Decem-ber 4 State Duma elections, and per-haps the opposition protests played a role. But most likely, it’s the “Blue Buckets” movement that really got the ball rolling.

Over the years, officials and rich businesspeople in Moscow have caused havoc on the roads by flash-ing their blue lights (migalki in Rus-sian) and flouting road rules.

The resulting series of fatal acci-dents involving Mercedes-Benzes and other posh cars led to a series of pro-tests, as ordinary drivers fumed as they spent hours in traffic jams caused by official motorcades.

Then something snapped – and a couple of people decided to protest against the migalki in a creative, no-nonsense, and rather brave way.

that now he’s making real break-throughs.

Every other day, Sergei hits the streets to check up on problems at crossroads, dangerous highways and avoidable traffic jams. Armed with just a video camera, he gets the traf-fic police to work properly, and when necessary maintains order himself.

After years of hard work and doz-ens of angry officials, nowadays, the traffic police themselves inform Ser-gei about violations, and wherever he shows up even the most corrupt traf-fic police get nervous.

“The Blue Bucket protests were a great success, but it’s a kind of flash mob,” Sergei says.

“You can’t keep repeating it all the time. We have to think ahead and plan other things.”

Soon, he’ll be driving look-alike po-lice cars through Moscow to help, as-sist and prevent any road problems. The first two cars are already on the road, and more will follow, he says.

“We’re waiting to get permission for green flashing lights,” he says. “And that’s just the start of it.”

Slumped in his chair, the young man stares at his Mac computer, almost the only object tolerated on his table. The room is spacious

and minimalist, despite a few figu-rines scattered here and there. What is he doing in this office up here on the third floor of a business centre? Is this where the Ridus news web-site was created? “I’m not doing an-ything,” he replies nonchalantly. He taps rapidly on the computer key-board and exclaims in French: “I’m a real lazybones!” His face then breaks into an angelic smile.

The 28-year-old is a well-known character on the Russian web. His mass of curly hair and his camera never go unnoticed, especially not at demonstrations. Ilya Varlamov combines the talents of a photog-rapher, a “start-up manager” – as he likes to call himself – but he is above all, a highly influential blogger in Russia and one of the brains behind Ridus.ru which claims to be a “citi-zen journalism” agency.

Seeking the truth

“In Russia, there is a problem with television, it no longer shows real-ity,” Varlamov says. “That is why eve-ryone is now seeking truth on the internet.” According to this blogger-businessman, lack of trust in the tra-ditional media is the main explana-tion of this citizen-journalism phenomenon, though it is not the only one.

“With all the recent technologies, anyone can become a reporter. On

Ilya Varlamov says ordinary citizens are taking over the news. Varlamov is an influential blogger in Russia. Photo: Personal archive

In fact, the site was recently classi-fied as the 10th most important source of internet information used by Rus-sians.

The young man explains that even-tually he hopes to “organise an ex-panded and serious network for cit-izen journalists” and acquire fame. That is because this new form of jour-nalism has its own rules and needs to prove its professionalism.

Citizen informing citizen

What makes Ridus different from the traditional media “is that we publish all the articles offered to us”, Varlamov says, “whether they are for or against the present govern-ment.

“In a wider perspective, we try and help citizens to participate actively in the process of news-gathering, analysis and broadcasting of news so that they become information activ-ists and not merely its targets,” he ex-plains, still staring at his screen.

There are, nevertheless, limits to publication, however, because “only articles and photographs that com-ply with the Russian Constitution are accepted”.

This rule explains why this new site, its creator says, suffers no gov-ernmental pressure while the elec-torate – which is asked to rate each article with a score – seems to fa-vour the opposition.

By presenting his site as a “plat-form for free expression with no po-litical agenda”, Varlamov has found a way of being taken seriously by all sides.

Libya, for example, where did the first images of the dictator Muam-mar Gaddafi’s death come from? Local Libyans who were on the spot,” he says, adding, “ordinary citizens are taking over the news, the phe-nomenon is gaining in importance”. And Russia is no exception.

An innovative platform

In founding the site Ridus.ru last Sep-tember, Varlamov wanted to “create a wider information platform, that functioned in a new way but that did not promote a particular political line”. In short, an agency for citizen journalists.

The blogger, who is popular in the journalism profession, is considered by many people to be “the brain of reliable information”.

This is a title acquired thanks to his Livejournal, which doesn’t seem to displease him and which he hopes will serve to expand the site and achieve recognition for it. This should not pose too many problems for him.

Livejournal blog the same year, using Zyalt as his username.

Varlamov launched the online me-dia site Ridus in September last year. As of last December, he had 47,000 subscribers to his blog, classifying it as the sixth most consulted Livejour-nal blog in Russia.

delayed pay cheque is to slap down a deposit on a new car, for example. Sergei Kanayev, the founder of the Federation of Car Owners, laughs when he thinks back to how the Blue Bucket protests began.

SOCIETY

15Wednesday, February 29, 2012


Buddhist revival manifests itself in a corner of the country, writes Anna Nemtsova

Faith survives persecution

A third of the population of Kalmykia was deported during Stalin’s reign of ter-ror. Today, the struggling southern region draws on

its ancient belief system.“Let all our wishes come true. Let

all living creatures be free of suffering, of danger, of diseases and sadness. Let peace and happiness govern on earth.”

More than 2,000 Buddhists chant-ed this mantra, kneeling on mats be-fore the Golden Abode of Buddha tem-ple in Elista, capital of the republic of Kalmykia, one of three traditional Bud-dhist regions in Russia. They repeated words of prayer after the Kalmyk Bud-dhist leader, Telo Tulku Rinpoche.

Finally, the square grew quiet as the group entered a state of deep medi-tation. As night fell, thousands of can-dles were lit. Buddhist monks visiting from Tibet, Thailand and the United States, as well as Russian Buddhist re-gions of Buriatya and Tuva, blessed those who gathered from all over Ka-lmykia and the neighbouring south-ern regions of Russia.

They sent candles flying skyward in paper balloons, illuminating the dark night sky with a serene beauty.

The ceremony, an offering of light to Buddha, was introduced to Russian Buddhists for the first time as a sym-bolic event celebrating the beginning of the international forum, “Buddhism: Philosophy of Non-Violence and Com-passion”, held in Elista.

Despite objections from China, a group of 30 Tibetan monks from the Gyudmed Monastery, assigned by the Dalai Lama, arrived to bless the re-public’s main temple and 17 sculp-tures of eminent Tibetan Buddhist scientists inside.

At the ceremony, the candle kites formed a path of light in the pitch-black sky. “That is our white road,” somebody whispered in the crowd.

“Have a white road” is the most sin-cere greeting people traditionally give each other in Kalmykia.

It’s a fittingly modest wish for peo-ple in this poor region.

The republic of Kalmykia, with its population of more than 300,000, chose to revive the traditional philos-ophy and culture of Tibetan Buddhism. The religion was adopted by their pred-ecessors, the Oirat tribes in Mongolia, in the 13th century and imported to the Russian empire when Oirats mi-grated there in 1609.

It was violently destroyed, together with all Buddhist prayer houses, tem-ples and holy relics, during Stalin’s bru-tal repressions of the 1930s. The en-tire indigenous Kalmyk population spent 17 years in exile in Siberia.

Today, Kalmykia is the second poor-est region in Russia, after nearby In-gushetia.

Visiting Kalmykia last March, Pres-ident Dmitry Medvedev described the situation as “difficult”, with the 15 per cent unemployment rate in Kalmykia twice that of the national average.

Buddhism teaches tolerance and loving-kindness, so Kalmyks have learned to cope with their harsh real-ities. “We have seen it much worse,” Yevdokiya Kutsayeva, 84, says.

She has tears in her eyes as she re-calls Stalin’s deportations.

“One October night in 1943, they packed the entire population of the republic into dirty train wagons and

Phoenix rises from the ashesEvery religion was persecuted under Soviet policies, but Kalmykia's Bud-dhists were subjected to particularly harsh treatment. By 1941, all the re-gion's Buddhist monasteries and tem-ples had been closed or destroyed, and all the senior monks and Buddhist scholars were executed or sent to con-centration camps. A second wave of repression took place in 1943, when about one-third of the community's population was deported to Siberia.

Buddhism is the main religion in the republics of Buryatia, Kalmykia, Tuva, Altai Republic, Zabaykalsky Krai and Irkutsk Oblast. Buddhism came to Rus-

sia in the 17th century; in 1764 it was officially accepted as one of the state religions.

Today, there are about 1.4 million Buddhists in Russia, according to the most recent census. And Buddhists comprise 1 per cent of the popula-tion. The Dalai Lama made his first visit to the Soviet Union in 1979. The Dalai Lama was enthusiastically re-ceived when he visited Russia’s three Buddhist republics in 1994. But as Moscow’s relations with China be-came increasingly important after 2004, Russia stopped granting visas to the Dalai Lama.

Kalmyk monks observe a ceremony. Photo: ©RIA Novosti

“That is all we have left to make peo-ple happy and peaceful today,” says Alexander Nemeyev, a local business-man.

Nemeyev points at the golden stat-ue of Buddha in the temple that he has built for his village, Ulduchiny, two years ago. About 100 Buddhists prayed together with Tibetan monks visiting the republic. Not everybody in the vil-lage participated in the religious cer-emony. “The temple is not giving me

food for my two children,” says Khon-dor, a 47-year-old widower and an elec-trician who did not want to give his last name, showing the modest two-room house that he shares with his two teenage children.

Khondor says he is proud to be one of only two people who have full-time jobs in Ulduchiny. “Kalmyk people his-torically tolerated troubles,” he says, adding what could be said about the circumstances of many different peo-ple in Russia, “to cope with difficulties is our tradition”.

Khondor’s children, Aveyash, 14, and Nagaila, 13, say their dream is to leave Kalmykia, perhaps by going to study in Moscow, St Petersburg, or elsewhere. Their father says he does not mind this as he sees no future for them if they remain in the republic.

Kalmyk Buddhist leaders say that today, their efforts are not about sim-ply rebuilding the temples, something supported by the government, but about the revival of Kalmyk Buddhist mentality and culture more generally, along with basic secular human eth-ics such as compassion, love, kindness and forgiveness.

Exhausted after having to cope with two decades of economic and social crises, Kalmyks often come to the re-public’s main temple, or Central Hurul, saying: “my soul is damaged, please

help me”, Buddhist leader, Telo Tulku Rinpoche, says. “In a way we are a spir-itual, psychological centre giving peo-ple hope, moral support and spiritu-al guidance.”

According to Yulia Zhironkina, di-rector of the Moscow-based Save Tibet Foundation, Telo Tulku Rinpoche has become Russia’s major spiritual lead-er for Buddhists.

“He goes to India to consult with the Dalai Lama about most of his im-portant decisions for Kalmykia edu-cation and cultural programmes,” Zhi-ronkina says.

Kalmykia is one of the 19 Russian regions introducing experimental pro-

sent us to Siberia. Thousands died on the way. I remember the stacks of dead bodies along the platforms.”

Until the late 1980s, it was danger-ous for Kutsayeva and her family to light a candle for Buddha, much less send one into the sky in a hot air bal-loon.

To Kutsayeva’s joy, Kalmykia has built 55 new Buddhist prayer homes and some 30 temples during the past decade.

grammes on basic ethics for the fourth and fifth grades at Russian state schools. “The Dalai Lama consulted Telo Tulku Rinpoche about the concept for the school history and basics of Buddhism in Kalmykia,” Zhironkina says.

But there are areas where the Dalai Lama and his followers are power-less to help. On one of his visits in Kalmykia, Barry Kerzin, a Buddhist doctor from Philadelphia, says he was shocked by the scale of the problems which local doctors face simply to try and do their work. “The entire hos-pital, including the surgery rooms, had no running water that day,” he says.

This year, local activists criticised the authorities for failing to finish re-construction of the republic’s only hos-pital for children. About 300 Kalmyks, calling themselves “a partisan inter-net movement”, wrote a letter to Unit-ed States President Barack Obama, asking him to restore the hospital, which is presently in disrepair. The let-ter was also designed to shame the Russian federal government while at the same time calling attention to their own plight.

Doctors at the children’s hospital had trouble listing exactly what the most needed medicines and equip-ment were. “We need everything,” says Tomara Nemchirova, the hospital’s ad-ministrator. Kalmykia has not seen any bounty, nor promises of any infrastruc-ture from deals that Royal Dutch Shell signed this year for the exploration of oil fields on the steppe.

The former Kalmyk president, Kir-san Ilyumzhinov, was on hand for the ceremonies, having stepped down in 2010. The controversial former leader says that Buddhist teachings he sup-ported during his rule saved Kalmy-kia from getting involved in the ter-rorist wars in neighbouring Caucasus republics.

Despite their plight, Zhironkina says: “The peaceful and kind philosophy of Buddhism is a solution for the Kalmyk people amid the chaos and harsh re-ality they live in.”

RELIGION



The performers of “A Night of Rus-sian Music” promised to return to Hong Kong after their sell-out success of their City Hall event on February 25.

“We're not sure if [the event] will be a pure Russian night, but we want to continue our exploration of Rus-sian music,” says Frederick Koon, co-founder of non-profit group, Perform Now.

Why Russian music? Is it that popular in Hong Kong?

Many people know Russian music in Hong Kong, but usually it’s Tchaik-ovsky or Rakhmaninov.

We wanted to present to the pub-lic less-known names, including

Oxford Russian literature professor Mick Nicholson will talk about “Oxford student murders “mad monk” Raspu-tin” on March 14, at Club Lusitano.

So who is the killer? And why? Is it a scary story?

The story goes back to the early 20th century when a rich Russian aristo-crat comes to Oxford to study. His name is Felix Yusupov. He parties and drinks all the time, but still manages to finish his studies, and goes back to Russia, where he gets involved in killing “the mad monk”, or Grigoriy Rasputin. Are you scared now?

Do people still like studying Russian in the West?

Musicians vow HK return Spotlight on ‘mad monk’

In search of rare cuisine in HK

Once upon a time there was Yelts Inn, which had pho-tos of the first Russian president, Boris Yeltsin, on top of a tank alongside

snapshots of homeless people. The Troika restaurant was famous for its posh decor and complimentary vodka shots. Shi da Kasha, cabbage soup specialist, disappeared after only sev-eral months in business, and, final-ly, Balalaika in Lan Kwai Fong. It was shut down this month.

Hong Kong is famous for its varied

FEBRUARY MARCH

Nation's food has yet to take-off, but will the culinary delights tempt locals? Mark Markoff reports

cuisine and the city is well-known as a “food-lover’s paradise”. Italian, Span-ish, Vietnamese, French, Greek, not to mention the plethora of dishes from the mainland. Nevertheless, high rents mean that restaurants come and go, but you can always find a place for a decent tom yum goong or thin-crust pizza. But what about pel-meni? Or piroshky? Russian cabbage, anyone?

The dust is settling after Balalai-ka’s closure, so now it’s time to count the losses. The only place left, as of

the end of this month, is a rather dingy eatery, Ivan the Kozak, hidden behind more upmarket restaurants in the middle of NoHo. It specialises in east-ern European cuisine with strong Ukrainian and Russian flavours.

“I opened it in 2001 with the help of my Ukrainian wife,” says restau-rant owner Ivan Wang. The place ca-ters mostly to locals, and most of the Russians found the cuisine a bit un-usual for their taste. But even Ivan the Kozak is now in danger of fold-ing as its lease is ending this year and

Wang is not sure whether he can af-ford a rent hike.

Balalaika’s owner, the Kings Parrot Group, blamed high rent for the clo-sures of both Balalaikas (there used to be another one in Tsim Sha Tsui). “We are looking for a new place now, this time we will go ahead with the Ice Bar concept with a less extensive menu,” says former Balalaika man-ager Herbert Chau. However, Bala-laika needed to change, says musi-cian Gennady Agruch, who used to play Russian harmonica at both Bala-laika outlets. Now he performs every Friday at a new international restau-rant serving piroshky, “like in the old days at Lan Kwai Fong”.

One long-time Russian resident in Hong Kong, Yury Simakov, recalls going to Queen’s Cafe in Causeway Bay in the mid-1990s. Back then it was the only Russian eatery in town. “The legend is that it was opened by one of the White Russians, but by the time we went there the menu was rather dull,” Simakov says. Russian

QuestionIs there space for authentic Russian cuisine in Hong Kong? Please tell us what you think by writing to [email protected]

No more drinking in the freezer bar - Balalaika closed down, like most of its predecessors. Photo: www.velotut.ru

cuisine started in Hong Kong with the influx of immigrants in the mid-1950s. They came here from the mainland after the Communist take-over of Shanghai. Among the names long for-gotten now are Greg’s and Cherikoff bakeries, serving the best Russian pas-try in town. Then there was the pop-ular social hangout Tkachenko’s, which was right behind the Penin-sula. Tsarina still exists, but has lost its Russian atmosphere.

So is Russian cuisine about to go extinct in Hong Kong? Some would disagree as “Russian cuisine has it’s followers in Hong Kong, plus there are more Russians coming here every year”, says Alexander Prus, ex-cook from Troika and Balalaika, now work-ing at a French restaurant. “You need to do it properly, hire a Russian chief and interpreter to translate the names of the Russian dishes correctly.”

With the absence of real Russian cuisine in Hong Kong, one has to pick Russian-looking items out of local menus. There is a legend that says White Russians were to blame for in-troducing borscht to locals.

Nowadays, the Russian soup is an integral part of many menus in Hong Kong, but it has nothing to do with the real deal. So one has to wait until a real Russian restaurant opens here, hopefully it will not be too long.

still-living composers such as Kapustin and Rosenblatt.

We explored a lot of Russian com-posers and chose the most interest-ing pieces. Most of them were played in Hong Kong for the first time.

What do you like the most about Russian music?

We like its nostalgic character, plus Russian music carries a lot of very beautiful melodies. However, the most touching thing about it is the emotional depth, es-pecially if you compare it with the music from other countries.

French music can be very trans-parent, but not as deep as Russian music.

Yes, a bit less in the United States where interest dropped after the end of the cold war, but in Oxford we have 110-120 students every year.

Tell us more about your favourite Russian writers?

I like Solzhenitsyn, Shalamov. I’m nostalgic for the 1960s, when only two to three decent books were pub-lished every year and you could get all of them in “samizdat” or “tami-zad”. Nowadays, there's more choice.

The lecture is jointly presented by the University of Oxford China office and the Russian Club.

Details: www.russianclubhk.org/events

Professor Mick Nicholson. Press photo

CITY

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