Dell Building Supercomputer in Russia Bigelow Aerospace Launches Private Space Station into Orbit from Orenburg Region
Charles Ganske
Friday, June 28, 2007 was apparently a big day for business news from Russia. The latest reports come from Russia's National Information Technology Development Center and Bigelow Aerospace, a U.S. company launching private space station modules into orbit from the Orenberg Region.
A new super computer aimed at solving Russian oil and gas industry tasks on the interior of the earth usage is to be constructed in Dubna special economic zone. The computing cluster delivery within the strategic partnership with the National IT Development Center in the oil and gas industry is to be carried out by the Dell company. Besides [taking delivery of the supercomputer], the scientists are going to turn to the company’s head Michael Dell with proposals to develop innovations in the Russian oil and gas industry.
While many industry analysts have criticized Russia for not doing more in research and oil and gas exploration, this report suggests that Russian energy producers are looking to the future. And while "Peak Oil" enthusiasts continue to insist that Russian oil production has topped out or will do so in the next few years, Russia has just begun applying the latest technologies to tapping its vast natural resources.
Yesterday Forbes magazine reported that Russia's leading "national champion", the state-owned natural gas monopoly Gazprom, nearly doubled its profits from the previous year.
"Russian gas giant OAO Gazprom reported a doubling of full year net profit as sales surged on higher oil and gas prices and the impact of its acquisition of Sibneft in 2005."
Gazprom acquired Sibneft, one of the leading private oil companies in Russia, for $13.1 billion in late 2005. The deal made Sibneft's then-CEO Roman Abramovich the richest man in Russia.
According to Forbes, "The company said full year net profit jumped to 636 bln rubles [$24.7 billion] from 316 bln rubles [$12.7 billion] last time, on sales of 2,152 bln [$83.6 billion], from 1,384 bln [$53.7 billion] last time."
On April 18, 2007 Discovery Institute's Real Russia Project was pleased to host distinguished Russian Studies scholar Herbert Ellison and international attorney Bill Robinson for an insightful and informative forum and discussion on the state of U.S.-Russia relations. The event was hosted at Ambassador John Miller. The speakers focused on recent events in the Russian Federation as well as Western stereotypes about Russia and how these stereotypes negatively impact trade and diplomacy.
This was an opportunity to hear the views of experts who are familiar not only with Moscow, but with Russia's more remote regions as well. Their insights into the politics, business and investment climate through out the country are helpful in discerning the truth behind many of the most common assumptions made about Russia in America and Europe.
Please continue to the extended post to read the full transcript of the event or download the PDF version.
Last week was full of events and significant news regarding Russia and investments. Renaissance Capital, one of Russia's leading investment banks, held its 11th annual investor conference titled, "Russia: Investing in Prosperity".
Last week I put up a post (“Former Secretary of State Colin Powell: America Needs a Strong Russia”) quoting from speeches made by Renaissance Capital CEO Stephen Jennings and former U.S. Secretary of State Colin Powell. At the same event, the American Chamber of Commerce held two of its regular breakfasts for members. Deputy Secretary of the U.S. Treasury Secretary Robert Kimmitt and former U.S. Senator and Democratic presidential candidate Bill Bradley were the guest speakers for AmCham (you can read the Moscow Timesstory here). Basically all of these guests tackled issues related to investing in Russia, and most of them did so in a positive way.
Last week also saw the release of a whole array of interesting research papers and corporate surveys related to Russian financial markets.
During my career here in Moscow, I have come across many American businessmen who were keen to play golf in Russia. In one case, we even cancelled a couple of business meetings in favor of taking our guests to the Moscow City Golf Club.
The question foreigners always ask at first is – does golf exist in Russia? Does the average Russian know anything about golf? The first answer is yes, it does exist; but the second question is more difficult to answer.
In the last few days, the Wall Street Journal has devoted a fair amount of column inches to sensational headlines like “A Chess Champion Unites Disparate Critics of Putin - Kasparov Tries to Turn Kremlin’s Crackdowns to Political Advantage” (June 20, 2007) and “From Russia, Without Love: New Movie Slams Soviet Union” (June 21, 2007).
In the first article, the Journal’s Alan Cullison builds up the importance of Garry Kasparov as a major political leader in Russia. Never mind the fact that Kasparov the politician (as opposed to the chess master) is almost an urban legend in Russia. Russian liberals failed when they had their chance in the 1990s, and now even the best chess player in the world can’t help them to win the political game.
Another inconvenient fact is that Another Russia, the so-called political movement where Kasparov is the number one man, was until very recently sponsored by none other than the exiled oligarch Boris Berezovsky, who supports the forceful overthrow of the democratically elected Russian government and told the Financial Times that he had stopped funding the group because he viewed it as ineffective. Mr. Berezovsky is wanted in Moscow on multiple counts of fraud and racketeering. Nearly 500 contract killings and bombings related to Avtovaz took place during the oligarch’s unhappy ownership of that company, which is now under new management.
Russians recently launched another dastardly cyber attack, this time against one of Britain’s most venerable institution. Was this a follow up on the Litvinenko poisoning? Were the British bank accounts of exiled tycoon Boris Berezovsky being hacked?
No, this time the target was a report on the Russian language web site of the BBC--a study by the British medical journal The Lancet that found alcohol abuse in the Udmurt capital of Izhevsk to be the leading cause of death among working age males. Researchers estimated their death rate to be six times higher than that of males who drank rarely or not at all.
Now, since for most Westerners the words “Russia” and “vodka” are largely synonymous, this is hardly shocking news. What seems to have drawn the ire of Russian readers, beyond the article’s beguiling title “Eau de colognes ‘kill Russians’,” was the web survey inserted at the end of the article, which asked readers to admit: “How often do you drink eau de cologne, antifreeze or cleaning agents? Regularly, Very rarely, Never, I don’t drink.”
IBMED uses synthetic (not embryonic) stem cells to treat a variety of illnesses
A few days ago I visited the Institute of Biological Medicine, the company I referred to in my previous post on this topic. The IBMED is the first company in Russia to receive a license to treat patients with stem cell therapy from the Federal Inspectorate for Healthcare and Social Development.
“We turn the clock back” – that is the motto prominently displayed at the entrance to IBMED’s new offices. The company has a small clinic and each of the patients gets a symbolic souvenir - a clock that runs backward – to remind them of this motto.
It has been six months since Bloomberg produced a news story about IBMED. Last week, I arranged an interview between the Moscow bureau chief of one of the world’s top business magazines and the IBMED's chief executive, Alexander Kovalenko. Mr. Kovalenko, a distinguished academician, philanthropist, and former public servant, agreed to speak to us about the goals of his company.
Part 3 – A Brief Overview of the Russian Stem Cell Market
In Russia stem cell therapy technology is not as developed as it should be. This is the result of a weak regulatory environment and inadequate levels of investment. The market volume of stem cell therapies in Russia is much smaller than in the United States and in Europe. Human and animal stem cell transplantations are done in a select number Russian of clinics and medical centers aimed at the physical revitalization and rebalancing of hormones in the patient's body.
Americans thinking about stem cell research in the U.S. immediately recall the political controversy over the ethics of using embryonic stem cells. In Russia, however, the most widespread therapies are associated with the uncontroversial practice of cord blood banking – that is, collecting stem cells from a newborn baby’s umbilical cord.
The scarce statistical data available on this topic tells us that in 2005 only about 1,000 families in all of Russia used this service. Presently only ten Russian companies are officially licensed to provide these services. Basically these companies are small entities that have been established at different medical institutions. In Russia these companies are typically run by the individual doctors treating the patients and usually lack an internationally-minded business vision.
Click here to read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. Click on the extended post to read more background on this rapidly changing topic (see the post above this for details).
Russia's Declining Population - Who Do You Want to Blame?
Charles Ganske
This Russia Today video clip asks: what can the Russian government do to promote Russians having families again?
Thomas P.M. Barnett is an influential author and consultant who gets paid to present his theories about global politics to high ranking military officers and corporate executives around the world. He is also a former Sovietologist who was educated by the U.S. Navy to analyze what the Kremlin was up to during the 1980s. This is why a recent post Barnett wrote on his blog caught my eye.
In a post on June 20, 2007 (“A Good Sign for Russia’s Political Future”) Barnett wrote about the former world champion chess player and Russian opposition leader Garry Kasparov:
“I don't expect Kasparov to dislodge Putin's crowned successor, but the sheer reality that he's been able to unite the opposition is a modest step forward. When this evolution moves into something more recognizable as rough pluralism, Russia's establishment and its opposition will move beyond the dregs/stars of the Soviet system, or the last generation of KGB versus the last generation of celebrities/poseurs.”
UPDATE: Tom Barnett has written a couple of funny responses to this post here and here .
Technicians for Mostransgaz check on a pipeline station
RussiaIC.com reports this piece of good news, both for the environment and for the Russian natural gas industry:
Russian Ministry of Natural Resources has held a meeting on the problem of casing head gas utilizing. Participants discussed that burning of this gas damaged environment both in Russia and the world...
Russian state authorities decided to put the issue of gas utilizing under special control and to stimulate oil producing companies to utilize oil production by-products more carefully.
You can read more about the global problem of flaring natural gas in this Boston Globe article.
Video clip of the Russian Red Army Choir singing "The Sacred War" (Священная Война) This movie clip shows some typically Russian dark humor...
66 years ago today Nazi Germany launched Operation Barbarossa, the fascist invasion of the Soviet Union. You can read some thoughts about whether young Russians are forgetting the Great Patriotic War (Belikiya Otechestvennaya Voyna) over at Sean Guillory's Russki Blog. You can also find reviews of new books about Russia's role in the Second World War at Kunikov's Book Reviews.
Click on the extended post to watch a clip from the 1973 BBC documentary "The World At War" describing this fateful date in world history, and for links to other Russia Blog posts on this topic.
Former U.S. Secretary of Colin Powell delivering his keynote speech (All photos by: Renaissance Capital)
Renaissance Capital, the leading global emerging markets investment bank headquartered in Russia, Is hosting its eleventh annual meeting this week with the theme “Russia: Investing in Prosperity”. This event is by far the largest annual finance conference in the country – with more than 1,000 leading investors, corporate executives and government officials attending.
Renaissance Capital is well known in Russia for meticulously planning high-quality events. This time it is being held in the famous Gostiny Dvor – just a few steps from the Kremlin and Red Square. Everything at the conference was catered to investors’ tastes - right down to the abundance of Internet workstations and Bloomberg terminals.
This year’s speakers were also top notch:
- Former U.S. Secretary of State Colin Powell (keynote)
- BP PLC’s Group Chief Executive Tony Hayward
- Deputy Prime Minister Sergei Naryshkin
- Minister of Finance Alexei Kudrin
- Minister of Telecommunications and IT Leonid Reiman
- Minister of Energy Victor Khristenko
- Head of the Audit Chamber Sergei Stepashin
- Head of the Federal Financial Markets Service Vladimir Milovidov
The Industrial and Commercial Bank of China is hiring in Moscow
Every week we learn about more foreign banks coming to Russia. In a previous post I mentioned Barclays PLC. Now it is time for the Chinese ICBC. Some time ago the bank announced of its plans to extended operations in Russia and focus on corporate banking. It applied for a license in 2005 and was expecting to start operations in 2006. Now in 2007 it becomes a reality – ICBC’s Russian recruiting campaign has been under way since February. Everyone remembers its global IPO of $22 billion last year. With 355,000 employees worldwide the bank can easily start operations in Russia, but many experts point to the fact that it may require at least three years to undertake full scale operations in this country.
Some time ago I wrote that in order to efficiently manage its operations in Russia any company, especially a bank, needs to have a team that is well-seasoned with domestic personnel. The financial services industry’s awareness of this fact is reflected in the latest piece of business news from Russia. This week it was reported that JPMorgan Moscow lured the entire analytist team away from MDM Bank, including its director. This is a good illustration of what we here in Moscow call “the war for talent”. There is a huge shortage of experts in investment banking, primarily in the top management category. And this deficit is increasing day by day.
NEW YORK (CNNMoney.com) -- If your boss wants to transfer you to Moscow this year, he'd better offer you a fair sum to do so - or even a downright handsome one depending on where you live now. That's because Moscow has just been designated the world's most expensive city for the second year in a row by Mercer Human Resource Consulting.
Using the cost of living in New York as a base, Mercer determined Moscow is 34.4 percent more expensive after taking into account the cost of housing, transportation, food, clothing, household goods and entertainment.
"The appreciation of the ruble against the U.S. dollar, combined with ever-increasing accommodation charges, has driven up costs for expatriates in Moscow," Mercer research manager Nathalie Constantin-Metral said in a statement.
A luxury two-bedroom in Moscow now rents for $4,000 a month; a CD costs $24.83, and an international newspaper, $6.30, according to Mercer. By comparison, a fast food meal with a burger is a steal at $4.80.
Read more on CNN website. Click on the extended post to watch a Russia Today TV video on this topic.
Ballistic Insults: The War of Words Over Missile Defense
Charles Ganske
Congressman Lantos (D-CA) and President Bush on Capitol Hill
Last week President Bush joined many distinguished members of Congress to dedicate the U.S. Memorial to the Victims of Communism. After the U.S. Holocaust Museum was opened in Washington D.C. near the National Mall in 1993, several members of Congress and non-profit organizations began calling for the creation of a similar memorial to the victims of Communism in the nation's capitol.
The groundbreaking ceremony for the new museum was held on Tuesday, June 12, 2007. While the ceremony was intended to honor the victims who suffered under Communist dictatorships in the 20th century, Congressman Lantos's remarks at the event veered into current events related to post-Soviet Russia. Specifically, the Congressman insulted former German Chancellor Gerhard Schröder for taking a job with Nordstream, a subsidiary of Russia's state-owned natural gas monopoly, Gazprom.
"I referred to him as a political prostitute...now that he's taking big checks from (Russian President Vladimir) Putin. But the sex workers in my district objected, so I will no longer use that phrase." Lantos reportedly said to "scattered applause" from the thousand people in attendance.
"Russia is increasingly turning out to be a tale of two different countries. At one level, the state is becoming more assertive and is seeking to broaden its influence in the 'strategic' sectors of the economy...but the rest of the economy is caught up in one of the most powerful domestic-demand booms in the emerging-market universe."
"The divergence in performance between the natural-resources sector and the rest of the economy is evident in the stock market. Shares of banking, media and consumer companies remain on a tear and have in fact risen more than their emerging-market counterparts even this year. Meanwhile, stock prices of oil and gas companies have been drifting aimlessly over the past year, with a 'Russia' discount assigned to them, as investors fear further government intervention."
"But in sum, it is rather remarkable that Russia's economy has expanded an average 7 percent over the past five years, despite negative population growth and a per capita income of $7,000—a relatively high base compared with most other developing countries. That dynamic has made Russia an attractive destination for foreign direct investment, or FDI. This year about $30 billion in FDI is expected to flow into the country, with most of it headed toward the non-oil economy."
Click on the extended post to read more excerpts from this excellent Newsweek International article ("A Tale of Two Russias") by the head of emerging markets at Morgan Stanley, Ruchir Sharma.
Several songs from "Black Star" were featured in the soundtrack for Fedor Bondarchuk's recent hit romantic comedy Zhara
Timati/Ratmir: Moi Put (My Way) Тимати/Ратмир: Мой Путь
This music video is a tribute by Russian rap star Timati to a friend who was killed in a car wreck. The M's the rappers make with their fingers stands for Moscow. This video features the actress Anastasia Kochetkova, who played the photographer in the movie Zhara. Timati and several business partners recently opened a hip-hop night club in Moscow by the same name.
Click here to read Russia Blog's previous post about Timati. Click on the extended post to watch another music video from Timati's 2006 album, Black Star...
From left to right: FINAM General Director Victor Remsha, MICEX President Alexander Potemkin, Russian IT and Technology Minister Leonid Reiman, and MICEX General Director Alexey Rybnikov (Photos by: Vladimir Kuznetsov)
Today the Russian Minister of Information Technology and Communications, Leonid Reiman, inaugurated the Innovation and Growing Companies (IGC) index of the Moscow Interbank Exchange (MICEX).
With the tolling of the trading bell, the FINAM Venture-IT Fund commenced trading– and its first day proved to be a smashing success.
Within 90 minutes, all units of the Fund were sold for 501,000,000 RUR (about $20 million). The book was oversubscribed by 10%.
In reality – for whom did the bell toll? For those investors that missed out on this opportunity. ”Opportunities are never lost; someone will take the one you miss” – this well-known quotation was confirmed today, as Russian investors placed their money in a new market.
Click here to read the press release from Business Wire. Click on the extended post to read more about today's milestone for Russian financial markets.
Russian President Vladimir Putin at the 2007 G-8 Summit in Heilingdamm, Germany: "We have no intention of trying to increase the number of state assets from beyond their present size"
The International Economic Forum held last week in St. Petersburg has proven to be a major public relations success for Russian business and government executives. The event fueled mostly positive news coverage around the world focused on Russia’s growing economy. Even American newspapers like the Washington Post and the Wall Street Journal that are usually pessimistic about Russia acknowledged the increasing amount of foreign investment in this country.
Dr. Daniel Thorniley, the senior vice president of the group which which publishes The Economist (a magazine which has been harshly critical of the Kremlin) had this to say:
"If you do business in Russia, you will lose all your money because your Russian partner will steal it from you, and you will die, because he will kill you in your hotel bedroom... this is the CNN and Wall Street Journal view of how business in Russia is done, and it is 95% rubbish."
Last week Aeroflot Russian Airways announced that it will buy 22 Boeing 787 Dreamliner airplanes. Aeroflot formally signed the contract with Boeing at the St. Petersburg Economic Forum on Saturday, June 9, 2007. The $3 billion order was part of $13.5 billion in new business deals announced over the weekend at the conference, which drew over 10,000 visitors to multiple venues in Russian President Vladimir Putin's hometown. President Putin joined several of his cabinet ministers and many Russian business leaders at the showcase event to promote Russia's booming economy.
A year ago, Russia Blog reported the widespread speculation in the Russian newspapers that the Boeing-Aeroflot deal would become a casualty of deteriorating U.S.-Russia relations. However, at the end of the day, healthy international competition and the attractiveness of Boeing's product trumped the legacy of the Cold War. In March 2007, Aeroflot agreed to purchase 22 A-350s from Boeing's European rival Airbus - but also pressed ahead with plans to purchase 787s.
This week there have been many articles regarding investments in Russia and whether these will be affected by international politics. The heated rhetoric between Washington and Moscow, followed by President Putin’s surprise offer extended last week at the G-8 Summit to host American missile defense radars in Azerbaijan added more fuel to the fires of media speculation.
Richard Shaw (QVM Group) posted an article titled “Investing in Russia: The Good News and the Bad” . While offering reasons to expect continued growth in Russia’s economy, Mr. Shaw concludes by saying: “The big gains in the Russian stock market could well be more history than future. The political risks to your wealth in Russia are much greater now than they were perceived to be a few years ago.”
The Motley Fool posted an article by Zoe Van Schyndel “Russian Bear or Bull?” that also ends on a sour note: "Russia is an emerging economy which, a decade ago, was nearly bankrupt. A lot has changed since then, but whether the opportunities in the Russian market are outweighed by the risks is a tough decision at this point. If oil prices stay at their lofty levels, this market is a safer bet, but if oil drops significantly, I wouldn't want to be anywhere near this bear.”
Playing Soldier
By Vladimir Kozlov Special to Russia Profile, June 2, 2007
According to most recent data, the television series Soldaty (Soldiers) broadcast on the Ren-TV channel, is among Russia’s most popular television shows. The series, focusing on the day-to-day life of young conscripts in today’s Russian military, attracts the attention of people from all walks of life, since military service is something of nearly universal concern in the country. With mandatory military service in place, thousands of teenage boys are following the episodes of "Soldiers" closely, trying to figure out what might await them, while parents and other relatives share their concerns following rumors of violence and hazing among conscripts.
However, like anything produced for entertainment, the series presents audiences with an embellished picture of what the contemporary Russian military is like, focusing on anecdotes and hardly touching on the most acute problems, such as corruption, criminality and physical abuse. Even the newscasts on state-owned channels show enough for viewers to understand that the military world painted in "Soldiers" is much softer and easier than what young Russians are likely to face once conscripted. Every year, hundreds of conscripts die in the armed forces while not involved in any military operations. This dark side of the domestic army is yet to be reflected in popular culture, since uncovering these issues remains the work of journalists rather than artists [Russia Blog - see this and this for evidence to the contrary - Russian pop culture is full of songs about the hardships and occasional cruelties of army life].
Still, the popularity of "Soldiers" is a clear sign that the military is once again claiming a large niche in film, literature and television...
You can read the rest of the article at Russia Profile. Click on the extended post to watch clips from other Russian movies and television shows with military themes.
Russian Finance Minister Alexei Kudrin at the G-8 Summit last year in St. Petersburg
Last week Russian Finance Minister Alexei Kudrin spoke at the Russian Duma about the phenomenal growth of Russia’s financial markets. The total value of Russian companies has now exceeded $1 trillion; Russia is ranked 13th in the world in market capitalization. About 70 companies are planning IPOs this year.
Last week also featured a historic breakthrough for the Russia Trading System (RTS) stock exchange. For the first time Russia’s second largest stock exchange began to trade its own equity. Although it was only a small trade – about 100 shares sold for $300 each – it highlighted the exchange’s market capitalization, which is valued at around $480 million.
In 2020, the Russians take Paris - a trailer for Tom Clancy's EndWar
The Russians, Tom Clancy's old reliable villains, are back. The American techno-thriller author has lent his name to several computer games, including the intricate new title from Ubisoft known as EndWar.
The video game's back scenario? In the next twenty years, America deploys a space weapons system to protect the U.S. and Europe from nuclear attack, while a sullen Russia stays out of the missile shield club. A few years later, the world's peak oil doomsayers are suddenly proven right and all of the world's major oil producers - except for Russia - are found to have massively inflated their reserves. The resulting collapse of the world economy puts a remilitarized Russia on a collision course with the America and Europe.
Naturally, the reasons why Russia's grown-up Nashi youth would rather level Paris than buy it are never quite explained. (On this point, a pessimistic Russian might ask: where will Russia find enough men to maintain a powerful army in twenty years? But the game designers seem to get around this question by having most of fighting take place between robots).
As one of the game's designers joked in an interview, the present war of words between the U.S. and Russia over missile defenses has given his marketing campaign plenty of free publicity.
My short answer is: no one. Living in America and travelling back and forth from Russia, it’s hard not to notice that both nations consist of normal people, whose interests are not wrapped up in complicated politics or disputes over missile shields, but in enduring values like family, faith and earning a living. My recent business trips to St Petersburg, Moscow, New York, Philadelphia and Washington have reminded me of these fundamental truths. Here in the Pacific Northwest, many Seattleites are getting ready for a wonderful summer, and the city is buzzing with activity. Friends are hiking, waterskiing, and golfing—and not exactly worried about the headlines screaming that there is a “New Cold War” underway.
Let me offer a very uncommon point of view on the recent Cold-War-style rhetoric between America and Russia: it proves that our respective nations are fundamentally friendly towards each other and have a lot in common. Any conflict between the two can be settled quickly and easily, just like between two kids who yell at each other and then are laughing at the next moment. To do this, you just have to put them together in a quiet room with “adult supervision.” It would seem that this is the role the G8 summit plays between our two countries—that of an adult to mediate between our heads of state. And it appears to be working.
