WEDNESDAY, OCTOBER 17, 2012

Space Russian space agency Roskosmos has ambitious plans, but reforms are needed to carry them out

Skolkovo’s Future is CubedArchitecture The innovation city gets its first building, a futuristic, environmentally friendly box

Prime Minister Dmitry Medve-dev met again in early October with top officials from Russian space agency Roskosmos and di-rectors of major Russian space enterprises to discuss how to turn around the national space indus-try following a series of high-pro-fi le accidents in 2011–2012.

The industry suffered its latest major setback on Aug. 6, when the Russian communications sat-ellite Express-MD2 and Indone-sia’s Telkom 3 were lost because of a booster rocket malfunction. Roskosmos reacted to the series of accidents by proposing a sweeping reform of the industry, consolidating the current 15 structures into seven in an at-tempt to eliminate the duplica-tion of development and produc-tion functions and make the industry more efficient.

Experts admit that the success or failure of the reform will de-termine whether Roskosmos is able to fulfi ll the ambitious plans described in its strategy for de-veloping space activities up to 2030, which was presented in April. The document includes such bold ideas as sending manned fl ights to the Moon, de-ploying stations on Mars and ex-ploring Venus and Jupiter. Ros-kosmos also announced plans to close 15 programs aimed at ex-ploring the planets and focus in-stead on the Arktika project, which involves launching sever-al satellites to monitor Arctic ter-ritories.

ANDREI KISLYAKOVRUSSIA BEYOND THE HEADLINES

ALEXANDER VOSTROVRUSSIA BEYOND THE HEADLINES

After a year of disappointments,

Roskosmos hopes a renewed

focus on R&D and efficiency will

allow it to carry out an ambitious

program of discovery.

For months, visitors to the site of

Russia’s much-hyped innovation

center outside Moscow saw

nothing but a field; soon, all that

will change.

CONTINUED ON PAGE 8

Fly Me to the Moon ... and Mars, Jupiter and Venus

Office of the

future: the in-

novative and

eco-friendly

hypercube is

the flagship

building of the

Skolkovo Inno-

vation Center.

A rocket takes

off from the

Baikonur Cos-

modrome in

Kazakhstan,

which is the

the main

launch site for

Russian space

vehicles and

satellites.

NEWS IN BRIEF

In its latest Russian Economic Report, the World Bank lowered its 2012 G.D.P. growth forecast for Russia to 3.5 percent, from the 3.8 precent it was predicting in June. The World Bank also lowered its 2013 growth forecast for Russia, to 3.6 percent from 4.2 percent. In justifying the decision, the Bank said: “Just at a time when Russia’s output level exceeded the 2008 pre-crisis highs, the econ-omy appears to be setting on the course of low growth. Russia’s economy performed well in the fi rst half of 2012. However, the economy is slow-ing down due to rising infl ation, weakening do-mestic demand and sluggish external demand.”

The second branch of the Nord Stream pipeline, which directly connects Russia’s gas pipeline sys-tem to Europe’s via the Baltic Sea, began opera-tion on Oct. 8. With the second branch’s opening, the trunk gas pipeline can now supply up to 55 billion cubic meters of gas for at least 50 years. The main Portovaya Compressor Station, in the Russian city of Vyborg near the Finnish border, can create a sufficient amount of pressure to trans-port gas without intermediary compression sta-tions along the 760 miles from Russia’s Baltic coast to the German port city of Lubmin.

Growth Forecast Lowered

Second Phase of Nord

Stream Pipeline Opens

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Russian Civil Society Finds a New Life Online

Arms Dealer Viktor Bout Describes Life in a U.S. Prison

At the recent Russia Calling investment forum in Moscow, President Vladimir Putin declared that the country has exhausted its supply of “simple solutions” for ensuring economic expansion, say-ing that further growth is only possible by creat-ing new production, modernizing production units and developing human assets. Putin said the Rus-sian authorities must provide a framework for creating and developing new sectors of the econ-omy and promised to take a few steps in this di-rection, including amending the tax code and re-forming the pension system.

Putin Calls for Development

Business

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Opinion

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American ballerina dances her way into the MariinskyP.07

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And on the political front, we should be developing private space exploration based on the American model. But if we con-tinue to infl ate managerial staff, lure space tourists and try to im-press the world with mythical space programs, then the Russian space industry will fall hopeless-ly behind — no matter how many meetings are held.”

In Polish director Andrzej Sekuła’s thriller “Hypercube,” the main characters of the fi lm are trapped inside the cube-shaped construction of a mys-terious genius. The cube build-ing is actually made up of cube-shaped cells with unique properties: some rooms make time run faster; some distort space. Those inside the cube must escape the building as soon as possible, but not everyone is so lucky. Although architect Boris Bernaskoni may have had Sekuła’s fi lm in mind when he designed the fi rst building for the Skolkovo Innovation Center outside Moscow, the building it-self is far more welcoming — and hopefully a place its resi-dents will want to stay.

The flagship building of Skolkovo, it features deliberate-ly ascetic interiors and exteri-

itude, they do not generate enough power for the entire building. There are no conven-tional radiators to be found on the premises, and heating is pro-vided by heat pump units that use ground energy. Water sup-ply is also unconventional: water is pumped from an artesian well, and wastewater is treated for use in landscaped areas.

Huge windows in the hyper-cube enable occupants to use as much natural light as possible, with light conductors allowing sunrays into the centrally locat-ed rooms. Normally, large win-dows are not used in Russia be-cause they leak heat, but special heat convectors in the hypercube create an air curtain that keeps the temperature in the building stable. Waste is also recycled in the building and transformed into gas. Finally, the front of the build-ing is also multifunctional. Be-sides being attractive, the hyper-cube’s stainless-steel mesh front turns the building into a giant screen for displaying images, pre-sentations and messages.

One of the space industry’s main problems is fi nancing. Rus-sia’s investment in space research and development is less than a tenth of that in the United States and Europe. According to Major General (ret.) Vladimir Dvorkin, who headed a Defense Ministry research institute, the lack of in-vestment shows.

“More than 70 percent of tech-

nologies that meet production needs are worn out and outdat-ed. More than half of the machine tools are past their service lifes-pan. The average age of employ-ees at defense-industry research institutes is almost 60,” said Dvor-kin. “What we should be doing is making an effort on the techno-logical front and launching a modest probe towards the moon.

feature of the building is its vir-tually autonomous communica-tions system. The only connec-tion from the building to the outside world is a power line, and even this is only partially necessary. Solar cell batteries are installed on one side of the hy-percube, but given Moscow’s lat-

ors stuffed with an ambitious concentration of innovative, high-tech solutions per square foot. The Skolkovo hypercube follows the 4E principle of ar-chitectural design and construc-tion, which stands for econom-ical, ecological, ergonomic and energy-efficient operation. A key

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Residents of Russia’s regions con-sider Moscow the best place to get an education, but an unsuit-able place to raise children. They also see Moscow as the best place to get ahead in business, but not

Big city For many Russians outside the capital, the most attractive roads no longer all lead to Moscow

Russians still consider Moscow to

be the most attractive city for

education and business; yet, the

capital is beginning to lose its

appeal across the board.

A Nice Place to Visit, But Who Wants to Live There?

PAVEL NIKULINSPECIAL TO RBTH

a city that is good for your health. These are just some of the fi nd-ings from a recent poll conduct-ed by sociologists at the All-Rus-sian Public Opinion Research Center (VTsIOM). According to VTsIOM, nearly half of all Rus-sians accept that Moscow offers better opportunities for obtain-ing a good education (49 percent) and a decent standard of living (47 percent), as well as for fi nd-ing a good job (46 percent) or get-ting a position in government (54

percent), but at the same time an overwhelming majority of Rus-sian residents (82 percent) believe that the capital prospers at the expense of the regions. Moreover, two-thirds of all respondents were convinced that tension exists be-tween Muscovites and residents of other cities and regions in Rus-sia (68 percent). This latest poll also indicates that, for the most part, the capital is not a city in which Russians would like to live permanently or build a family.

Zhanna Khlopina, a psycho-therapist in the southern Rus-sian city of Krasnodar, is con-vinced that Moscow is an expensive city and far too over-crowded. According to Khlopina, it is impossible to start a busi-ness there without a substantial amount of investment capital. “I do not consider Moscow ecolog-ical,” said Khlopina, “and I’m con-vinced that the social and med-ical services there do not work the way they should, because of the overcrowding.”

She would consider living in Moscow only as a temporary measure, in order to earn money. “Moscow can give you a quality education, but I would not get married or bring up a child there. I might live there for certain

length of time, but I would never move there for good,” Khlopina said.

She is not alone in her assess-ment. Over the past six years, Russians have begun to leave Moscow for regional cities in ev-er-greater numbers. In 2006, 60 percent of respondents believed that Moscow offers a decent stan-dard of living, quality education and career opportunities. Since then, however, the Russian cap-ital has begun losing its attrac-tiveness to non-Muscovites in search of a good education, a good job, or a start in business or politics.

Moreover, the capital is losing out to the regions in matters of ecology, health and personal safe-ty. An overwhelming majority of

respondents (68 percent) said that the environment in Moscow was unhealthy and nearly half (49 percent) said it was not safe.

There are several reasons for this, according to Nikolai Pet-ropavlovsky, director of a socio-logical center in Krasnodar. “Many people are not in a rush to move to Moscow because of the high standard of living. Peo-ple there not only earn a lot — they spend a lot, primarily on renting a place to live, on trans-portation and food,” Petropavlov-sky said. The recent VTsIOM poll found that 39 percent of respon-dents were discouraged from moving to Moscow because they were certain that they could not find affordable housing in the capital.

Another reason for Moscow’s declining popularity is the cre-ation of attractive jobs in the re-gions. Related to this is a gener-al feeling of disappointment among Russians regarding social mobility. “In the Soviet Union, people believed that a good ed-ucation could get you a good job,” said Petropavlovsky. “People don’t believe that anymore.”

People’s willingness to move to the capital is indeed decreasing, but this has not affected migra-tion from the regions, according to Alexander Vysokovsky, a dean at the Higher School of Urban Planning. “Residents of the prov-inces have never had a high opin-ion of the capital,” Vysokovsky said. “But the stream of migrants from the regions to Moscow is still not drying up.”

Despite its downsides, the cap-ital still has more opportunities for white-collar work — while higher salaries in Moscow also give residents the ability to af-ford the higher costs of living. According to Vysokovsky, in Mos-cow people can enjoy an inter-esting and modern lifestyle. This fact may continue to trump all of Moscow’s imperfections in the view of potential residents.

In August, overall unemployment in Russ ia dropped 15 .3percent, as compared to August 2011. By early September, just under 4 million people (5.2 per-cent of the labor force) were look-ing for work, according to analysts at Rosstat. These findings were based on polls conducted by the International Labor Organization.

“This represents a historic low,” said Andrei Korovkin, head of the labor resources forecasting labo-ratory at the Russian Academy of Sciences’ Institute of Econom-ic Forecasting. “The previousRussian record was established in May 2008 and comprised 4,097,000 people.”

Employment expert Igor Polyakov at the Center for Mac-roeconomic Analysis and Short-

Workforce Despite positive numbers, experts see challenges ahead as firms fail to modernize and create new job opportunities

Out-of-work Russians may face

substantial challenges finding a

job, even though the country’s

unemployment situation is far

better than in many places.

term Forecasting remarked that an even lower figure was most likely reached in 1993, but at the time the center was having dif-fi culties with its method of eval-uation. Therefore, the August 2012 showing will be considered the record.

“Unemployment simply can-not drop any lower — this is its

Unemployment Reaches Record Low

Does Orthodoxy really have an effect on how Russians work?

MIKHAIL MALYKHINVEDOMOSTI.RU

grew at all this year. Meanwhile, the bad harvest in agriculture will result, in his opinion, in a seasonal drop in employment in the processing sector and in transportation. According to Polyakov’s calculations, Russian unemployment should be around 5.7 percent in the fourth quar-ter of 2012 and increase in the first quarter of 2013 to nearly 5.9 percent.

Nonetheless, Russia’s Ministry of Labor does not anticipate any upheaval, even in the event of an-other global economic crisis. In order to regulate employment and provide social benefi ts to those people who have lost their jobs, the government plans to spend 594.7 billion rubles (some $20 bil-lion) between 2013 and 2020.

In August, the level of unem-ployment in the United States was 8.1 percent, while in euro-zone countries, it reached anoth-er record high — 11.3 percent. The average showing for overall unemployment in the European Union was 10.4 percent.

Moscow Assesses

Its Image Problem

The Ministry for Economic Develop-ment has decided to ask for outside help to determine how fast Moscow could improve its status as an inter-national financial center (I.F.C.) and become an attractive destination for foreign investors. The ministry intends to announce a tender this fall for “identifying opportunities” and developing a “road map” for raising the standing of the Russian capital in international financial cen-ter rankings. Although the amount that officials are prepared to spend for this purpose has not been dis-closed, experts believe it to be tens of millions of rubles.The consulting firm that wins the tender will be responsible for iden-tifying the most important I.F.C. rankings, investigating their struc-ture, reviewing the key assessment indicators and performing a com-parative analysis, said Rostislav Ko-korev, deputy director of the Min-istry for Economic Development’s corporate governance department.

natural minimum,” said Korovkin. However, the analyst does not see anything good in such a low level of joblessness: “This means that companies are not rushing to modernize their production and increase their labor productivity. Consequently, in the future, the labor market may suffer a new shortage of workers.”

In Korovkin’s opinion, Russian unemployment will soon see the usual seasonal spike, but the av-erage annual indicator will match that of the precrisis years of 2007 and 2008. His institute forecasted unemployment for 2012 at 5 million people at the beginning of the year, but it cur-rently anticipates an average an-

The natural reaction to shifting circumstances is usually wariness, rejection and a desire to fi nd a something to lean on, such as the government or the church. Rus-sia has had more than its share of transition, and while during the Soviet era people looked to the state to provide stability, today more and more Russians look to the church; a recent survey by the Levada Center shows that 75 per-

Religion Faith traditions may not determine success, but the behavior they encourage may be more influential than previously thought

A cultural survey shows that

Russians prefer to trust

authorities rather than take risks.

Economists fear these tendencies

are bad for business.

cent of Russians identify them-selves as Russian Orthodox. Some faith traditions, such as Protes-tantism and Confucianism, en-courage their practitioners to take matters into their own hands with mantras like “God helps those who help themselves.” The eco-nomic successes of Protestant-majority countries such as the United States and Germany is sometimes attributed to the so-called Protestant work ethic. But Orthodoxy’s teachings emphasize the role of the hierachy and in-stitution over individual initia-tives, and these tendencies were refl ected in a recent Geert Hof-stede cultural dimensions analy-sis survey of Russians. The Hof-

stede survey showed Russians as extremely risk-averse with an above-average willingness to trust the authorities — Russians scored 39 out of a possible 100 in the category of individuality; 36 for perseverance, ambition and the will to win; 95 for the desire to avoid uncertainty; and 93 for a belief in paternalism and author-itarianism.

Some experts see these char-acteristics as detrimental toRussia’s economy. According to Natalya Tikhonova, department head of the Faculty of Socio-Economic Systems and Social Policy at the Higher School of Economics, instead of trying to improve things for the better, Rus-sian managers instead strive to minimize the potential blowback of any kind of change. “People are wising up to the fact that ini-tiative leads to punishment, and it’s not worth pushing,” Tikhon-ova said. “Our economic system places the bean-counters far above the innovators.”

But not all is lost. Concepts of values and behavior can change over time, according to economist Alexander Auzan. “Things like high levels of avoidance are things you just have to work on,” said Auzan. He pointed out that the experience of Russians working in Germany and the United States shows that in a different envi-ronment, Russians can be indi-vidualists with a desire for self-fulfi llment. They fi t well into small innovative companies and suc-ceed in non-standard tasks.

Auzan also noted that religion is not necessarily a hindrance to development, citing the experi-ence of Germany’s predominant-ly Catholic region of Bavaria after the Second Vatican Council. “Ba-varians became better Protes-tants, in some ways, than Prot-estants themselves,” Auzan said, “because for a decade after the Second Vatican Council, the Cath-olic Church radically altered its interpretations of concepts of val-ues and behavior.”

Where Getting Ahead Requires More Trust Than Initiative

Job seekers in Moscow face less competition and fewer opportunities.

NADEZDHA PETROVAKOMMERSANT DENGI

Unemployment in Russia and the West

nual showing of 4.5–4.8 million, assuming that the fall’s season-al increase in unemployment will not affect the yearly average.

“Unemployment always goes up in the fall: if not in Septem-ber, then defi nitely in October,” said Polyakov. He noted that em-ployment, for example in the manufacturing sector, hardly

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03MOST READ

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Russia to Put More Women in Spacerbth.ru/18429 Special Report

Roskosmos With a reform underway and an ambitious strategy for the next 20 years, the space agency hopes its best years are ahead

Mars is the only planet whose surface can be seen in detail from the Earth; it may also be the only other planet that could sustain life.

Russian Space Agency Sees Its Future in the Stars (and Planets)The Next 30 Years

Among the plans Roskosmos has

for the near future are the construc-

tion of a new cosmodrome in east-

ern Russia and a base on the moon.

Roskosmos marked a mile-stone in 2011 with the completion of the Glonass navi-gational satellite system — Russia’s answer to G.P.S., which relies on U.S. satellites.

Unfortunately, 2011 was mostly notable for its di-sasters, includ-ing the loss of Phobos-Grunt, a probe intended to explore the Martian moon Phobos.

In 2011, construc-tion began on a new cosmodrome in the Amur Re-gion, which should allow Ros-kosmos to move launches out of Kazakhstan into Russia by 2015.

Roskosmos’ most ambitious near-term goal is the establishment of a permanent base on the surface of the moon. The agency hopes to fulfill this mission by 2030.

Russian scientists are making

advances that will allow a team of

astronauts to visit the Red Planet,

but there are challenges to a Mars

mission than cannot be replicated

on Earth.

The next step in mankind’s jour-ney of discovery in space is like-ly to be Mars, at least according to Vitaly Lopota, president of Rus-sia’s Energia Rocket and Space Corporation. “Over the next 50 years, Mars will be the focus of space research and exploration,” said Lopota. “This planet could be a relatively comfortable place to live — air pressure is just a hundredth of what it is on Earth. When looking into the task of space colonization, Mars is a good place to start. Moreover, Mars is the only planet with enough water to support humans.”

Russian scientists have already begun to explore this possibility. They have developed selection cri-teria for a team to fly to Mars, based partly on their experiences in the Mars-500 project, which confi ned six astronauts to a space-ship-sized facility for 520 days — the length of time scientists be-lieve necessary to fl y to Mars and back. The experiment took place from June 2010 to November 2011.

“In choosing a team for a Mars mission, we are mainly looking for

Preparing for Life on Mars

Mooning Over Earth’s Closest Neighbor

Igor Mitrofanov believes space

research benefits all of society.

Scientists closely monitor the sun’s surface for storms and flares.

ANDREI KISLYAKOVSPECIAL TO RBTH

Russian officials are speaking with growing confidence about the moon being the top priority of the Russian space program. Russky Reporter magazine asked Igor Mi-trofanov, chief of the gamma ray spectroscopy lab at the Space Ex-ploration Institute of the Russian Academy of Sciences, to share his thoughts on the subject.

Are space specialists seriously dis-

cussing lunar bases?

The moon is naturally our imme-diate objective in space. I believe its development will start in the 21st century. There will be lunar bases just the way we have bases in Antarctica. We used to have two rovers on the moon, and we brought back soil from there. The knowledge gained in Soviet times has not been lost, and we are ca-pable of doing all the things our predecessors did.

So far, the Russian program has only

two moon-related projects: Luna-

Glob and Luna-Resurs. What is their

progress?

The projects were revised early this year following investigations into the Phobos-Grunt crash. We have learned our lesson. We re-cently completed testing the en-gineering models of equipment for landers and will soon start integrated tests.

Luna-Glob is expected to land on the moon in 2015. The orbit will be explored in 2016 and the heavier orbiter Luna-Resurs is scheduled to land near the south-ern pole of the moon in 2017.

There is the Moon Test Ground proj-

ect — a robotic deployed base — at

the Lavochkin Research and Produc-

tion Association. Is this still being

discussed as your next step?

It is our plan for the future. I learned a great deal from the way [Sergei] Korolyov, the great So-viet rocket engineer and space-craft designer, used to work. He turned every project into a step towards the next one. The con-cept of the test ground is some-thing that we need to strive for on the current projects.

INTERVIEW IGOR MITROFANOV

genetic attributes and topresults on rigorous physical and psychological tests,” said Anatoly Potapov, a researcher for the In-stitute of Biomedical Problems at the Russian Academy ofSciences. “We now have every tool at our disposal to help develop a system that will ensure thebiomedical security of the Mars mission.”

Specialists at the Institute for Biomedical Problems believe the most pressing task is to find a way to create a self-sustaining system in space that will ensure a constant supply of oxygen, water and food, and also provide for the elimination of metabolic waste products. In order to cre-ate such a system, scientists say they need at least 10 years.

Additionally, while the Mars-500 experiment did much to in-crease scientists’ understanding of how humans cope psycholog-ically with prolonged periods in space, scientists were unable to recreate some of the conditions cosmonauts would have to con-tend with on a real fl ight. Victor Baranov, assistant director of the Institute of Biomedical Problems, explained that a similar experi-ment is set to be conducted with chimpanzees: “They will be sub-jected to the same radiation lev-els that are in space, whereas other issues will be examined using human testers.”

But even these tests cannot provide conclusive answers on the consequences to the human body of spending long periods of time in space — such as the effect of long periods of weight-lessness.

American scientists believe that people who have spent pro-longed periods of time in space suffer from a loss of bone den-sity. Observations carried out on 13 astronauts, each of whom had spent six months at the Inter-national Space Station (I.S.S.),

revealed that their skeletal mass had decreased by an average of 14 percent since they left Earth.

And, physical symptoms are just part of the problem; pro-longed space travel also places humans under immense psycho-logical strain.

The effect of being an unimag-inable distance from the Earth; the long monotony and isolation of space travel; the cramped con-ditions on board the spacecraft; the strange sensation of weight-lessness; personal tensions with-in the team; the substantial workload, both on board the ship and out in open space; the un-predictable nature of the job; the huge risks involved and a sense that the entire mission rests on your shoulders are all stresses a cosmonaut has to contend with daily. The experience of partici-pants in the Mars-500 mission and cosmonauts who spent time at the I.S.S. has contributed to a deeper understanding of the psychological consequences, but many questions still remain. Until now, cosmonauts have had teams of psychologists on hand at mis-sion control, and support has al-ways been readily available where the signal conditions were good. However, on a trip to Mars, mission control’s role will be sig-nifi cantly reduced. Signals from Earth will take 40 minutes to reach the Red Planet.

NATIONALITY: RUSSIAN

STUDIED: PHYSICS AND

ASTROPHYSICS

Born in Leningrad (now St. Pe-

tersburg), Igor Mitrofanov studied

physics at Leningrad State Univer-

sity, focusing on quantum me-

chanics. He did graduate work in

astrophysics at the Ioffe Physical

Technical Institute (also in Lenin-

grad) before leaving for Moscow in

1981 to take a job at the Space Re-

search Institute (IKI), where he still

works. MItrofanov specializes in

high-energy astronomy.

HIS STORY

Russia’s space program is direct-ing more time and money to its Intergelio-Zond vehicle, which will allow scientists to get closer to the sun than ever before. The vehicle, which is projected to launch in 2018, is currently in the research stage. Intergelio-Zond will help scientists gain a deeper understanding of solar flares, which have a signifi cant impact on space weather, which in turn affects advanced technological communication systems on Earth.

“The vehicle will be sent close to the sun with the help of a grav-

Space Weather NASA and Roskosmos focus on the importance of solar flares

Russia and the United States are

both redoubling their efforts to

study the relationship between

solar flares and space weather —

and how they affect life on Earth.

ity-assist maneuver near Venus,” said Lev Zelyony, director of the Space Research Institute (S.R.I.) at the Russian Academy of Sci-ences. “It will be delivered into orbit with a perihelion [the or-bital point closest to the sun] of 42 million kilometers [26 million miles]. The perihelion may be eventually halved to 21 million kilometers [13 million miles], fol-lowing other gravity-assist ma-neuvers that make it possible to monitor the same areas of the surface of the sun for longer pe-riods — up to seven days.

“The module may descend even closer to the sun: its minimum altitude will be limited only by the evaporation of the protective screen caused by solar emission. This will give the vehicle its own ‘atmosphere’ that will distort measurements.”

Here Comes the Sun, But Everything Might Not Be Alright

ANDREI KISLYAKOVSPECIAL TO RBTH

Solar Storms Dangerous for Technology

In September 2009, the Ameri-can G.O.E.S. meteorological system detected an unusually high inten-sity of the Sun in the X-ray range, while astronomers discovered two bright regions on the Sun. Scien-tists were concerned about the discoveries because solar activity causes the radiation belts around the Earth to expand, threatening

THE NUMBERS

687 

Earth days is how long it takes Mars to orbit the Sun.

A Martian day is about half an hour longer than an Earth day.

15 miles is the height of Olympus Mons, the tall-est volcano on Mars. It

is three times the height of Mount Everest.

38 pounds is how much a 100-pound person would weigh on Mars.

Mars has less mass than Earth and therefore less gravity.

Understanding the effect of solar fl ares on space weather is also an important aspect of NA-SA’s Living with a Star program, which studies radiation belts — the rings of high-energy particles

surrounding the Earth. These ra-diation rings depend on solar ac-tivity and space weather created by the sun, and can disturb the operation of satellites and com-munication systems.

“We still don’t understand how the belts behave, more than 50 years after they were fi rst recog-

Wouldn’t it be wiser to invest in the

development of cheaper launch ve-

hicles and then think about lunar

bases?

I’m doing my best to fi ght the stereotypes that the project is expensive. We need to remem-ber that the first projects I’m talking about cost about 10 bil-lion rubles. When we speak about ambition, this is small change. We also need to remem-ber that this money doesn’t fl y to the moon, but stays here as infrastructure, jobs and new ma-terials.

the work of satellites. The stron-gest solar storm ever was registered on Aug. 28 1859. The storm caused a breakdown of the telegraph sys-tem, which suffered a voltage spike. Storms of this scale only happen once every five centuries, but those half as strong take place about ev-ery 50 years. The most recent one occurred on Nov. 13, 1960.

nized and described,” said Lika Guhathakurta, a NASA program scientist. “Nor do we have the ability to make any predictions, which is really very important.”

Solar activity, such as flares, magnetic storms and fire out-bursts, can vary in intensity from hardly perceptible to powerful storms. Poor space weather is also known to impede the work of all orbital systems. The U.S. Depart-ment of Defense has estimated that space weather disruptions to government satellites add up to nearly $100 million each year. In 1996–2005, insurance compa-nies paid about $2 billion to cover damages and losses of space ve-hicles caused by solar activity.

The American continent is most vulnerable to fi erce solar storms because of its proximity to the north magnetic pole.

Space weather disruptions to U.S. government satellites cause $100 million in damage each year.

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Expert Predicts an E-Commerce Boom

QUESTIONS & ANSWERS

Oleg Ryazhenov-Siems has led the ambitious online strategy of Svyaznoy, the second largest Rus-sian consumer electronics retail-er, since 2009. Recognized as one of Russia’s best e-commerce pro-fessionals, he has reently been ap-pointed Svyaznoy’s Director of Strategic Marketing and Adver-tising. Ryazhenov-Siems spoke with East-West Digital News about the challenges in Russian e-commerce.

Why did Svyaznoy launch an online

business when its offline activities

were thriving?

Nowadays, developing a business through different channels is a necessity. Furthermore, in the case of Svyaznoy, our online and of-fl ine audiences are not the same; the overlap represents just from 20 percent to 40 percent, depend-ing on the segment. So, adding the two audiences means signif-icantly growing the business.

How much of Svyaznoy’s business

do online sales represent?

From $25 million in 2009, we grew to $120 million in 2011. In 2011, e-commerce accounted for 5.6 percent of Svyaznoy’s total sales, up from 3.6 percent in 2010. This is 3.5 times more than the aver-age market ratio.

How do your sales develop in the

regions?

In 2011, Moscow and the Mos-

cow region represented no more than 25 percent of the site’s sales — compared to an industry av-erage of approximately 45 per-cent — even though sales in the capital continued growing inabsolute fi gures.

Svyaznoy was the pioneer in this exciting regional business. We began rolling it out about four years ago; we soon had seven re-gional warehouses across the country. This gave unbelievable results. Of course, this was made possible by Svyaznoy’s hugeoffline network. We use everyretail outlet as a pick-up point. This is much more convenient than waiting hours and hours for an order to be delivered. Our cus-tomers can choose any outlet across the country as a pick-up point. There is likely to be one located near the customer’s home or workplace: we found that every Russian passes by two or three Svyaznoy outlets during the day.

When transactions are truly convenient for consumers, busi-ness grows easily. That’s whatactually happened with thisonline-offline formula.

What is the size of your market

segment?

This market is chaotic. Estab-lished players — Svyaznoy, Eu-roset, Ozon and M-Video, and a few others — represent perhaps half of the market. The other half is made up of a plethora of small players, which is difficult to con-trol since many of them work in-formally and illegally. This busi-ness is particularly developed in the regions, where it covers up to 90 percent of the market. The market is developing so fast, in-cluding its gray part, that no one wastes time assessing it.

Several organizations, from Data Insight to R.A.E.C. to Gos-komstat, try to assess the size of the market. But their methodol-ogies, their classifications and their results may diverge signifi -cantly. For instance, Data Insight has estimated the portable elec-tronics market at $1.1 billion in 2011. That fi gure may be wrong, but if there is no other estimate available, I have to trust it.

How do you envision the Russian

e-commerce market in the coming

five years?

It will grow explosively. There will be more and more players com-ing into the market, with many more customers purchasing. The regions, where the current aver-age Internet penetration doesn’t even reach one-third, will devel-op at high speed. So far, Russian Internet users haven’t been very active online shoppers, but just a few years ago, our parents were scared to send an SMS. Now they are used to it. As soon as our younger generation realizes that purchasing via the Internet is con-venient, profi table and safe, they will make a massive switch to it. This business has golden years ahead.

Svyaznoy mobile phone stores can be found across Russia; the average person passes two or three a day.

Oleg Ryazhenov-Siems developed

his firm’s online business.

Apple’s decision to dump Google Maps will benefit third parties.

Yandex is following in the foot-steps of Google in a bid to retain its leading positions on the Rus-sian domestic market. In July 2012, Yandex dominated Google, with 60.5 percent of the market compared to Google’s 26.7 per-cent. However, Google is outdo-ing its Russian rival in terms of revenue and income growth. Yan-dex hopes its new products tar-geting the end user might turn the tables.

Yandex Browser has taken all the best features from Chrome and Opera: the former contrib-uted the engine and the free Chro-mium shell, while the latter pro-vided its Turbo Web traffic reduction technology, expected to be introduced in the upcom-ing versions of the browser, which Yandex has promised to update every few weeks.

The traffic compression tool was not the only thing the Rus-sian search engine purchased from Opera: It also bought a soft-ware distribution licence for 40,000 applications, which al-lowed it to open its proprietary Yandex.Store, offering programs for both software engineers and users. The digital marketplace will operate globally, featuring a stock of software products de-signed by Russian and foreign de-

Internet With the launch of a new browser and an app store, Russian search engine Yandex isn’t taking its dominant marketshare for granted

Yandex Takes a Shot at GoogleRussian Internet search firm

Yandex has opened a new front in

its ongoing war with Google with

the addition of two new products

aimed at end users.

ALEXANDER PANOVRUSSIA BEYOND THE HEADLINES

velopers. Yandex plans to strike a number of deals with smart-phone and tablet manufacturers to have Yandex.Store preinstalled on their devices instead of the default Google Play. The Russian company has already reached agreement with PocketBook, 3Q

and Texet, which manufacture tablets and e-readers, as well as with one of Russia’s big three mo-bile carriers, MegaFon.

In developing its browser, Yan-dex leveraged its long experience of working in the Russian-speak-ing part of the Internet with the

previously designed solutions. “Understanding the structure and content of Web sites, as well as using technologies that only In-ternet search companies have, helps us create a new-generation browser that will assist users in everything they do,” said Tigran

Khudaverdyan, head of software and mobile development at Yan-dex in a press statement.

This means that the user can benefi t from Yandex services in-tegrated into the browser, which are almost identical to those pro-vided by Google: searching, e-mail, cloud data storage and a machine translation tool capable of processing words and Web pages. Other features include dis-play functions for PDF fi les and Flash animations, as well as play-ing audio tracks with no exter-nal applications required. The built-in Kaspersky Labs module will protect users from malware.

According to Yandex designer Konstantin Gorsky, the compa-ny’s browser has the leanest in-terface on the market: screenshots reveal it only has a search bar, a tab panel, a Back button and a clickable Yandex logo. The de-tailed browser development re-port uploaded by Yandex software engineers to Habrahabr, a spe-cialized Russian-language online community, mentions that the user interface will only show the Forward button, a traditional browser element, when there is some destination to which it can lead. The visuals were yet anoth-er focus of the company: Yandex software developers wrote that 50 various designs were made for the above-mentioned button alone. Most navigation tools are identical to those in other brows-ers. Yandex Browser is not the company’s fi rst attempt at the me-dium. It already has Yandex.In-ternet, which is also based on the Chromium freeware but had sig-nificantly fewer modifications. The statistics compiled by the Russian Web counter LiveInter-net show that the company’s old browser has been able to secure only 2 percent of the national market, with Google Chrome cur-rently on top with 22 percent.

By launching its own browser and app store, Yandex built the missing infrastructure link to the end user, according to Yandex C.E.O. Arkady Volozh. The num-ber of search queries directly in-fl uences the contextual advertis-ing revenues, the biggest source of income for search engines, and browsers remain one of the key distribution channels.

Part of the reason Yandex has developed its own browser might be the decision by Mozilla, the developer of Firefox, in June to make Google the default search engine for Mozilla’s Russian-lan-guage installation package. Yan-dex is still available as an option, but most users are reluctant to change the initial settings.

Russian I.T. giant Yandex has en-tered into a partnership with Apple to have its Yandex Maps location service integrated into Apple’s new iOS 6. The deal is defi nitely a plus for the Russian fi rm, as Yandex will enjoy a glob-al promotion campaign almost free of charge. Yet analysts agree that the American corporation will reap most of the benefi ts.

Eldar Murtazin, lead analyst at

Mobile Internet Apple’s longstanding competition with Google pays off for Russia’s Internet search powerhouse

The conflict between Apple and

Google pays off for Yandex; its

maps will be feature on new

iPhones and iPads in Russia in

place of Google’s product.

and shops on those streets. The database is therefore a powerful advertising tool.

Vasily Prozorovsky, analyst at CNEWS Russian IT Review, said: “Integrating Yandex maps into the Apple operating system should be considered in the con-text of the rivalry between two mobile operating systems: iOS and Android. The latter belongs to Google, and Apple’s eagerness to phase down its cooperation with its competitors is under-standable. Apple will end up ‘making friends’ with any non-competitor; and companies from Russia, Brazil and so on have a good chance to get into its eco-system.”

Yandex Maps: Coming Soon to an iPad Near You

ALEXANDER VOSTROVSPECIAL TO RBTH

Mobile Research Group said: “Yandex is a perfect starting block for Apple, which made the momentous decision to remove Google Maps from its operating system. Apple opted for the open format of OpenStreetMap; but this requires local mapping data. Yandex will be the one to pro-vide these data.”

The company’s data applies pri-marily to queries that users enter when searching for specifi c loca-tions. Queries of users are care-fully collected and consolidated into a large database, which is designed to store information about the preferences of each user —not only what streets they search for, but what restaurants

is Yandex’s share of the Russian search market, according to statis-tics from LiveStat. The company al-so dominates search in Ukraine and Kazakhstan.

million is the monthly audience of Yandex according to a recent sur-vey by ComScore. The company hopes to grow its audience through its new products.

60%

48.6

THE NUMBERS

Yandex C.E.O. Arkady Volozh plays with a plush version of the Yandex Browser logo.

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Russia Beyond the Headlines ONLINE

In the third year after the 2008–2009 fi nancial crisis, the Russian banking sector looks enviablystable. The assets of Russian banks have reached 77 percent of gross domestic product, with annual growth of about 20 per-cent. Another indicator of Rus-sia’s fi nancial resilience is the fact that Russian banks have turned from net-borrowers in interna-tional money markets to net-creditors. Last year, the return on capital of Russian banks sur-passed the pre-recession level.According to the Central Bank of Russia (C.B.R.), in state-owned banks the margin reached 20.6 percent and in foreign banks, 17.4 percent.

Foreign banks currently ac-count for 24 percent of the coun-try’s banking assets, but the per-centage seems unlikely to grow. Tough competition from state banks and the end of easy money combined with shrinking profi t margins caused a number of for-eign banks to reconsider their in-volvement in Russian retail bank-ing in 2008–2009, and few are willing to consider re-entering. Spain’s Santander, Belgium’s KBC Groep NV and Baltic lend-er Swedebank AB all sold busi-ness or wrote down losses in Rus-sia in 2010. In the spring of 2011, they were joined by two top-rank-ing British banks — HSBC and Barclays. As a spokesman for Bar-clays told the Financial Times, the decision to sell its retail arm was

Banking Despite stability in the sector, foreign banks remain wary

Foreign banks that opted to wait

out the global financial crisis in

Russia are now poised to reap the

benefits of the country’s

relatively stable financial sector.

made because the bank needed a higher return on equity and this line of business in Russia could not meet its long-term objectives.

For those banks interested in remaining in the country, two op-tions appeared: consolidation of assets by acquisitions or mergers with local lenders or investing heavily in the country’s fastest-growing sector: retail banking. UniCreditBank Austria AG, a member of the fi nancial group UniCredit, became No. 8 among Russia’s 10 largest banks by value of assets by acquiring a 100 per-cent stake in International Mos-cow Bank, Russia’s oldest private

credit institution. UniCredit now has a network of 106 offices and provides fi nancial services to 1.1 billion customers.

The ninth position belongs to Rosbank, a brand name acquired by the French fi rm Société Gé-nérale S.A. after it bought 82 per-cent of the Russian bank’s shares. Rosbank has 700 offices in 70 re-gions and boasts of having 3 mil-lion customers. Another large for-eign retailer, OTP Bank, which belongs to a Central and Eastern European banking group,

strengthened its fi nancial posi-tion by acquiring a controlling stake in Investsberbank. The lend-er has 163 end-to-end service points and claims to be operat-ing through a large network of partners providing 28,000 loans to individual and small business clients all over Russia.

In retail banking, where hard-earned prestige and customer loy-alty are major guarantees of sus-tainable business growth, two foreign banks stand out as the most successful in Russia. These are ZAO Raiffeisenbank, a sub-sidiary of Raiffeisen Bank Inter-national AG, and ZAO Citibank, a subsidiary of Citigroup. Raif-feisenbank has been operating in Russia since 1996 and, after ac-quiring retail lender Impexbank in 2007, now ranks fi fth in terms of private customers’ deposits and 10th in household lending. With 210 offices in major regions, the bank is set to expand retail op-erations “in line with a growth of profi t volumes but not ahead of the market,” the bank’s C.E.O. Sergei Monin told Russian busi-ness daily Vedomosti.

Still more impressive is the stance of Citibank, which is now celebrating 20 years of work in Russia. The Citi’s local subsidiary is an expression of the group’s global strategy which, as Citi-group C.E.O. Vikram Pandit re-cently told the Financial Times, is “to glean the majority of its business from emerging markets.” Amit Sah, the head of consumer business at Citi Russia, said that Russia has always been a top pri-ority for his company. “Today, Citi is the only global bank that has grown organically in Russia. It is the country’s third-largest inter-national bank by assets, both in

consumer and corporate business. We have over one million private customers who are served from 50 retail branches in 12 cities and provide services to over 500,000 credit card holders,” Sah said. Ci-tibank’s marketshare can be par-tially attributed to its primacy in offering Internet banking to Rus-sian clients and introducing cash-back credit cards and cash-in A.T.M.s. This pioneering of state-of-the-art banking technologies and revolutionary products in Russia is based in the bank’s con-sumer business strategy, Sah said, which is founded on empower-ing the emerging middle class and serving them at their convenience. Citibank focuses on products and services in which it has proved to be truly professional — cards, wealth and cash management.

These foreign banks that re-mained committed to their Rus-sian business now fi nd themselves in a position to take advantage of the explosive growth in Rus-sian retail banking. The number of Russians with debit accounts increased from 11 percent to 19 percent last year.

Hoping to Cash in on a Long-Term Investment

Foreign banks that weathered the financial crisis in Russia hope their knowledge of the market will pay off.

FELIX GORYUNOVSPECIAL TO RBTH

Foreign banks currently account for 24 percent of Russia’s banking assets, and this number is unlikely to grow.

In retail banking, two subsidiaries of foreign banks in Russia stand out: ZAO Raiffeisenbank and ZAO Citibank.

Foreign banks in the Russian market

While many economies around the world are running out of steam, China’s purchasing power continues to grow. The world’s second-largest economy has an almost insatiable demand for re-sources, and China is looking for places to get it — acquiring com-panies in Russia and the United States, among others.

At the beginning of October, the 2012 International M&A Ad-visory Summit gathered special-ists in mergers and acquisitions in New York City for an exchange of best practices in M&A with concentration on the BRICS countries, but China dominated the discussion.

“During the next 10 to 15 years, China will invest around $1 tril-lion abroad,” said Yuan Tian, chairman of the China Entrepre-neurs Forum Yuan Tian.

“More and more Chinese manu-facturers would like to go to other countries to set up the manufac-turing there and sell locally,” Tian said. But where that isn’t possi-ble, an alternative way of pene-trating a market is to buy a busi-ness that has its own technology, competitive brand and distribu-tion channel in place.

Speaking about the situation

Acquisitions China’s path to energy supplies goes through Russian companies

in China, Alexis Rodzianko, chief financial officer of Russia’s Metropol international invest-ment and industrial group, said: “China is intensely consuming energy, so they are interested in buying energy production sites, as well as steel and metal pro-duction.”

The abundance of natural re-

China Eyes Russian Assets

Yuan Tian, chairman of the China Entrepreneurs Forum, speaking at the recent M&A summit in New York.

Société Générale plans to in-

crease its offerings in Russia.

ANNA ANDRIANOVARUSSIA BEYOND THE HEADLINES

A recent seminar on mergers and

acquisitions in emerging markets

focused on China and its

purchasing power both vis-à-vis

Russia and within the country

itself.

Société Générale, France’s sec-ond-largest bank, is looking to increase the profi tability of retail operations at its subsidiaries in Russia by the end of 2013, ac-cording to C.E.O. Frederic Oudea. Société Générale Group’s main retail subsidiary in Russia is Ros-bank; it also owns Delta Credit and Rusfi nansbank. Since the be-ginning of 2012, Rosbank’s retail portfolio has increased by 8 per-cent, and growth of 18 percent is slated by year’s end, according to Vladimir Golubkov, chairman of Rosbank’s board. “People’s cred-it activity is quite high. In Au-gust, we issued loans worth more than 12 billion rubles ($384 mil-lion),” Golubkov said. “The an-chor product is a mortgage; it al-lows you to build lasting relationships with customer. Cash loans and traditional auto loans are also popular.”

Rosbank’s retail portfolio in the fi rst half of this year totaled 193.6 billion rubles ($6.1 billion), of which mortgages made up rough-ly 23.8 percent, auto loans 34.5 percent, and credit cards and

Credit French firm expands retail business

Disappointed with its retail

business worldwide, the French

banking giant sees an opening for

growth in its Russian subsidiaries,

particuarly Rosbank.

overdrafts 7.6 percent. Rosbank’s profi t for the fi rst six months of 2012 was $188 million.

If growth continues at the pres-ent rate, the bank’s loan portfo-lio could see an increase of 18 percent by year’s end, according to analyst Olga Ulyanova of Moody’s. According to Andrei Maltsev, deputy chairman of Nor-dea Bank, Société Générale’s de-cision to focus on retail is per-fectly logical: Western banks can borrow on attractive terms, which gives them a competitive advan-tage and allows them to vie with state-owned banks — but the same benefi ts don’t apply in the corporate segment.

Société Générale to Let the Consumer Lead the Way

DARIA BORISYAKSPECIAL TO RBTH

Russia is attractive for China not only for energy, but also for infrastructure that gives access to Europe.

" “In its geographical area Russia has strong com-petition. The Polish and

Turkish stock markets have out-performed the Russian market.”

THE QUOTE

Sascha HodlPARTNER, SCHOENHERR LAW FIRM

sources in Russia attracts Chinese investors, who have also acquired a lot of companies in the Far East. Rodzianko said that Russia has stable growth, but it is cheap to enter the market since the coun-try is perceived as riskier than it rationally should be.

Rodzianko said that his com-pany has been in discussions with Chinese parties about buying as-sets in Russia but has not yet fi -nalized any deals. The negotia-tions go more slowly with Chinese enterprises, as the companies need to receive approval from the state for any major transaction.

Wei Wang, chairman of the

China Mergers & Acquisitions As-sociation, said that Russia is at-tractive for Chinese investors not only for oil and gas, but also for the infrastructure that provides access to Europe.

Russia itself has shown inter-est in buying companies in Eu-rope in recent years, but this ac-tivity slowed following the 2008 fi nancial crisis. The latest big ac-quisition was the February pur-chase of Austria’s Volksbank by Russian banking giant Sberbank for approximately $800 million. The deal earned Sberbank the Fi-nancial Service Deal of the Year award at the summit.

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Putin at 60 Struggles With Image at Home and Abroadrbth.ru/18917Opinion

DOWNFALL OF THE DOLLAR?

Nikolai Podguzov SPECIAL TO RBTH

Stanislav Mashagin SPECIAL TO RBTH

The most recent data from the International Monetary Fund (I.M.F.) shows that the composition of global for-

eign exchange reserves has changed only gradually over the past several years despite pres-sure on both the U.S. dollar and the euro. At the moment, the U.S. dollar retains its place as the lead-ing reserve currency, at around 62 percent of total reserves. The U.S. dollar, however, is on a gradual trend of decline.

The eurozone crisis has slight-ly dented the amount allocated to the euro, though not by much — euro reserves still stand at just below 25 percent. However, un-certainty surrounding the future of the monetary union has result-ed in a loss of confi dence that is refl ected in the periodic pressure put on the euro.

This loss of confi dence is also evident in the fl ight of deposits from banks in the south of Eu-rope to safe havens in the north. In going forward, much depends on the ability of eurozone poli-cymakers to resolve the debt and banking crisis, as far as future developments in world currency reserves are concerned.

However, sovereign debt prob-lems are not confi ned to the eu-rozone. The U.S. faces a major challenge in its unsustainable fi s-cal position, which fi nds the coun-try’s federal debt-to-G.D.P. ratio at its highest level since 1950. In the aftermath of the U.S. presi-dential election in November, eco-nomic failure could result in cred-it rating downgrades for the United States, as well as adverse interest rate volatility and weak-ness in the U.S. dollar.

In the event of a break-up of the European monetary union, the immediate risk facing inves-tors is the introduction of new currencies or, more accurately, the return of national currencies.

In any case, the international monetary system is evolving to-ward a multipolar currency sys-tem that refl ects changes in the global economy over the last 15–20 years. The center of grav-ity has shifted from West to East, and now the emerging economies are making a signifi cant contri-bution to global economic growth and world trade. The importance of their currencies will grow as these economies expand. But re-serve currency status is a func-tion of not only economic size but also liquidity and transparency in money markets and capital markets. By this scenario, Asian

The balance of world cur-rencies established at the close of the 20th century has not changed for sever-

al decades. The principle share of the market belongs to the U.S. dol-lar, with the euro (which inherit-ed the shares of the German Deutsche mark and French franc) in second place and the Japanese yen in third place. However, over the past decade a couple of the leaders have taken some hard blows.

Meanwhile, several hitherto rel-atively minor currencies have staked their claim to a share of world markets. The most serious overtures have come from the Chi-nese yuan, but the currencies of the other BRICS countries can-not be disregarded.

In recent years, foreign ex-change investors have talked non-stop about what the confi gura-tion of the world’s currencies may look like in the future; nonethe-less, despite stern and constant predictions of the death of the dollar or the hopelessness of the euro, the actual balance rates re-main unaltered. That is to say, in-vestors are not rushing to switch

BARACK OBAMA OR MITT ROMNEY: WHO WOULD RUSSIANS CHOOSE?

Eugene Ivanov SPECIAL TO RBTH

It’s safe to say that Russians are fed up with presidential elec-tions. Having gone through a high-profi le presidential elec-

tion campaign at the beginning of the year — a campaign accom-panied by heated and often nasty political rhetoric and then fol-lowed by a series of protest ac-tions organized by the opposition — Russian citizens, to be sure, can live the next few years in quiet.

Naturally, there is even less in-terest in presidential elections in other countries. Yet there is evi-dence that many Russians are paying close attention to the on-going presidential election cam-paign in the United States. This attention has its roots in a deep, even bordering on obsessive, in-terest in all things American and — whether or not Russians them-selves would be willing to admit it — on the fact that the United States still remains perhaps the only country whose opinion ac-tually matters to Russia.

So, if given a chance, who would Russians vote for in the U.S. presidential election: the sit-

currencies such as the Chinese yuan could easily become impor-tant investment and trading cur-rencies in the East.

The role of the Russian ruble in the global economy may in-crease as well. There are strong preconditions in place for the ruble to become a regional re-serve currency within the next several years. The Russian econ-omy has maintained a moderate but sustainable positive growth rate of 3 to 5 percent since the

2008 economic crisis. Further-more, Russia’s debt burden is the most conservative among G20 countries: it has only a 10 per-cent debt-to-G.D.P. ratio. Russian budget policy has also been pru-dent enough in recent years, with the absence of a budget defi cit.

Russia’s balance of payments remains in positive territory,primarily due to a current account surplus. Consequently, Russian reserves have been on a sustain-

their dollar portfolios into anoth-er currency. Turbulent times give rise to much speculation about the reliability of one currency over another, but the overriding strat-egy remains the calculated and cautious approach of keeping funds in trusted currencies.

Market players assess curren-cies on the basis of three main criteria: infl uence, stability and future outlook. The most infl u-ential are the U.S. dollar, the euro, the Japanese yen, the Swiss franc

and the British pound. Current-ly, the most stable currencies (in descending order) are the Japa-nese yen, the Hong Kong dollar, the Chinese yuan, the U.S. dollar, the Singapore dollar, the Swiss franc, the Russian ruble, the South Korean won, the Indian rupee and the Israeli NewShekel.

In terms of future outlook, the small currencies of countries that are less dependent upon global

able recovery trend since 2008, and currently the Central Bank of Russia (C.B.R.) has the third-largest reserves in the world.Russia abandoned capital con-trols in 2007, and, even during the 2008 economic crash, author-ities had no intention of bring-ing them back.

Russian monetary policy has recently been moving toward in-fl ation targeting and currently the C.B.R. operates under a nearly fl oating exchange rate regime. As a result, interest rate volatility has been reduced and the C.B.R. is better positioned to keep infl a-tion under control. Infl ation in Russia has been brought down from double digits to 6.3 percent in 2011 and is forecasted to stay around 7.0 percent this year.

Russian regulators have also been working to improve the local bond market infrastructure. Rus-sia’s local bond market cap amounts to almost $300 billion. By the end of the year, a central depository will be launched and nonresidents will be allowed to open nominal holder accounts. This improvement creates the necessary preconditions for the largest international clearing houses in the world to begin set-tling Russian local bonds. Hence, the process for ruble-denominat-ed local bonds will be brought in line with best international prac-tice over the next few months.

The rise in the ruble’s stand-ing is a refl ection of the general strength of Russia’s investment position, particularly when con-trasted with the current challeng-es facing the eurozone.

Nikolai Podguzov is head of Fixed Income Research at V.T.B. Capital.

There are strong pre-conditions in place for the Russian ruble to become a regional reserve currency.

The overriding strategy remains the calculated and cautious approach of keeping funds in trusted currencies.

ting president Barack Obama, a Democrat, or his Republican op-ponent, the former governor of Massachusetts Mitt Romney?

Answering this question is tricky. For starters, even the elec-toral preferences of Russians liv-ing in the U.S. are far from clear. Back in the 1980s and 1990s, the consensus was that Russian-Americans overwhelmingly voted for Republicans. The explanation was that, being intrinsically “con-servative,” Russians were better aligned with the conservative so-cial and economic views of the Republican Party. Besides, as po-litical refugees from the Soviet Union, they idolized Republican President Ronald Reagan, whom they credited with forcing the So-viet leaders into allowing Jewish immigration.

But much has changed since then. In the intervening years, scores of Russians came to the U.S. not as political refugees, but as skilled workers, bringing along a diversity of social and political views. And, as aging refugees of the 1980s and 1990s are becom-ing more dependent on state pro-grams, such as Social Security and Medicare, they may feel more appreciative of some policies as-

sociated with Democrats. But what about Russians liv-

ing in Russia who are not versed in the intricacies of U.S. domes-tic politics and who view Amer-ican politicians from mostly per-sonal points of view?

One factor that would play against Obama in the eyes of Rus-sians is his race. It’s no secret that a disturbingly large number of Russians hold a negative view of Obama because he’s African-

American. On the other hand, Russians seemingly favor known quantities over unknown person-alities and clearly have no prob-lem with the politicians who have been in public service forever. From this point of view, many Russians would be expected to favor Obama because they’re used to him. More importantly, Rus-sians see Obama’s policies toward Russia as generally friendly.

Another factor in Obama’s favor is the strong anti-Russian position of his Republican oppo-nent, Mitt Romney. Gone are the days when Russian pundits hailed the pragmatic views of Republi-can presidential candidates on arms control and human rights. There is nothing pragmatic in the way Romney views the future of U.S.-Russia relations: He called Russia America’s “No. 1 geopo-litical foe” and went on record describing the New Start nucle-ar arms control treaty as Obama’s “worst foreign-policy mistake.” Few in Russia would doubt that under a President Romney, U.S.-Russia relations will be serious-ly damaged.

So, again, who would Russians vote for in the U.S. presidential election? Hopefully, a Russian public opinion agency will pose this question in one of its future polls. But in the meantime, I’d make a wide guess: 60 percent to 40 percent for Obama. Just don’t let Central Election Comission head Vladimir Churov count the vote.

Eugene Ivanov is a Massachu-setts-based political commenta-tor.

Gone are the days when Russian pundits hailed the pragmatic views of Republican candidates on arms control.

GLOBAL CHANGES FAVOR EMERGING MARKETS

IN UNCERTAIN TIMES, STABILITY TRUMPS RISK

LETTERS FROM READERS, GUEST COLUMNS AND CARTOONS LABELED

“COMMENTS” OR “VIEWPOINT,” OR APPEARING ON THE “OPINION”

PAGE OF THIS SUPPLEMENT, ARE SELECTED TO REPRESENT A BROAD

RANGE OF VIEWS AND DO NOT NECESSARILY REPRESENT THOSE OF

THE EDITORS OF RUSSIA BEYOND THE HEADLINES OR ROSSIYSKAYA

GAZETA.

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trends and determine their own monetary policy without looking over their shoulders at others rank fi rst and foremost. These in-clude currencies such as the Swedish krona, the Swiss franc, the Canadian dollar, the Hong Kong dollar and the Australian and New Zealand dollars.

These categories together cre-ate a list of the most liquid and trusted currencies, the ones in which investors would place funds over the midterm. But the only currency to meet all of these criteria is the Swiss franc. And yet, this is hardly a shining sub-stitute for the dollar. Dealing in Swiss francs is extremely limited by the quantities the Swiss econ-omy makes available; moreover, the current exchange rate of the franc is now artifi cially pegged to the euro.

The Russian ruble deserves sep-arate consideration, since it is sur-rounded by much controversy and opinions on it vary extensively. Several investment institutions and banks (particularly in the state sector) recommend buying the ruble, yet it does not seem that the ruble is capable of gen-erating exceptional results with-out being linked to the markets. The ruble is fi rmly tied to global markets as a result of raw mate-rials trade.

The ruble can win in two sce-narios: if world markets grow, or if the dollar, euro or other global currencies drop. No one believes in the fi rst scenario. As for the second, experience shows that the Russian government would not allow the ruble to devalue to mir-ror the U.S. dollar or the euro.

The most crucial thing for the Russian government today — in view of the weakness of fi nancial markets and the inability to in-stitute a fully fl edged program of federal borrowing — is to reduce the actual value of the ruble. This is the government’s trump card for addressing the federal bud-get defi cits and the pension fund shortages. What should be done with the ruble? It should be sold, spent, and used for borrowing.

The fact that the greatest weight in global fi nancial systems is commanded by the U.S. dollar should not be ignored; American investments are found in almost every country across the globe, and the United States is the world’s largest purchaser of goods and services. Whatever happens, this is a currency that will be boasting its dominance in the bal-ance of world currencies for many years to come.

Similarly, due to China’s enor-mous infl uence on the world econ-omy, China’s currency will remain strong in relation to the market and alongside the U.S dollar.

In uncertain times, investors will favor the strongest and most solvent currencies. This means that, these days, a good currency portfolio must include the U.S. dollar and the Chinese yuan.

Stanislav Mashagin is a partner at the management fi rm Person-al Strategies.

LETTERS TO THE EDITOR

On John Freedman’s column, Sept. 26

Mr. Freedman pokes fun of Leonid Subbotin’s advice to peasant farmers, but Subbotin is apt in his advice. “Subbotin says “The task is not to attack Alexei, but to show how he is attacked.” Very true. Art is not what you see but what you make others see, so says Degas about painting and it is true for the-ater. Subbotin again: “When peo-

ple’s thoughts and emotions on stage are transformed into action and movement — that is theater.” As many acting teachers have said, the skill in stage acting is to convert psychology into behav-ior. Mr. Freedman should bite his tongue, not stick it in his cheek.

John Frederick Jones, Costa Mesa, Calif.

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When Keenan Kampa joined the Boston Ballet two years ago, it was not quite as thrilling as it should have been. As happy as she was, the dancer quietly nur-tured another dream. After three long, grueling years of study at the prestigious Vaganova Ballet Academy in St. Petersburg, Kampa felt restless, and a little wistful in America.

“It was a hard period when I left Russia for Boston. You get used to that system,” Kampa said, referring to the style of Vagano-va, the feeder school to the Mari-insky Ballet, formerly the Kirov. Kampa is the fi rst American to graduate from the 274-year-old school that trained Anna Pavlova, Natalia Makarova, Rudolf Nureyev and Mikhail Barysh-nikov, among many other legends. “Your body ends up craving the work. It’s a completely different mentality,” she said of the tran-sition from Vaganova to Boston, “and I could feel my technique slipping.”

A year ago June, she woke up to her dream: She was invited to be the fi rst American dancer to join the Mariinsky. However she had signed a two-year contract with Boston, and could only join the Mariinsky this summer.

On Sept. 2, 2012, 23-year-old Keenan Kampa fl ew to St. Pe-tersburg to begin her fi rst full sea-son with the Mariinsky Ballet, and will join the company on its U.S. tour this month, which in-cludes stops in California and Washington, D.C.

As a new member of the corps, she intends to keep the mighty work ethic she has become known for — even in Russia. As the fi rst American dancer in the compa-ny, she does not want to step on toes. But she has her aspirations. “Like any dancer, I want to move up the ranks and become a world-

Ballet Russia’s most famous dance company takes a big leap by hiring Virginia native

For American Dancer at the Mariinsky, a Turning PointKeenan Kampa is the first

American dancer to graduate

from the Vaganova Academy and

to win a spot at the Mariinsky

Ballet, but hard work lies ahead.

NORA FITZGERALDRUSSIA BEYOND THE HEADLINES

The Mother of Theater Street

Balletomanes talk about the Mariin-sky Ballet in hushed, transcendent tones. The traditions and classics, three centuries of ballet, are kept alive in this company through an enlightened, if arduous, mastery.Considering the tumult of the 20th century, however, it is surpris-ing that ballet survived the Sovi-et Union at all. Many attribute that feat to one dancer, Agrippina Va-ganova. She struggled herself as a young dancer, only to go on and dance the demanding roles of Mar-ius Petipas. The syllabus she later developed, known as the Vagano-va method, is still used around the world. The Vaganova Ballet Acad-emy in St. Petersburg is the interna-tional headquarters for this exacting technique.

In a 1977 Oscar-nominated docu-mentary called “The Children of Theater Street,” a 90-minute film narrated by Princess Grace of Mo-naco, viewers get a glimpse of the intense and cloistered world of the Vaganova Ballet Academy of the Soviet Union, when dancers as young as nine years old came from thousands of miles away to endure excruciating auditions. The school has lost none of its luster since that time, and continues to attract even more students, including aspiring dancers from Europe and the Unit-ed States. Its reputation for great-ness — graduates include Anna Pavlova, Vaslav Nijinsky, George Balanchine and Diana Vishneva — is exceeded only by the aura of mys-tery that surrounds it still.

“learning how to work.” Kampa says she will never forget the daily corrections she received from her teacher at the prestigious acad-emy: “knees straight, turn out more.” And always, the rhetori-cal question, “Would you like to do that again?”

Kampa started dancing when she was four years old at the Con-servatory Ballet of Reston, Va. “There was always a joy in her body when she was moving,” said Julia Redick, her longtime teach-er. In class, Redick incorporated the Vaganova method, which she had learned in her native Hun-gary. At a recent presentation of the Ferguson fi lm in Washington,

D.C., Redick also quipped that she taught “Vaganova upside

down,” a more eclectic ap-proach, for American chil-

dren. Redick often brought her students

to the Kennedy Center for mas-

ter classes and when Kampa

was a teenager, s h e attended a class that was observed by Mariinsky ballet master Gennady Selyutsky. Afterward, he asked her to come study at Vaganova, an esteemed but under-wraps in-stitution rarely attended by for-eigners.

In late August, Kampa spent her last days in the U.S. shop-ping, packing and spending time with friends and family. She also seemed to be preparing herself for her most important year yet.

In Boston, she said, she had a life outside ballet. “I was making friends, I had a second job at American Apparel, and I was doing a little modeling,” she said. In St. Petersburg, she acknowl-edged, she doesn’t have time for a lifestyle. Mostly, she is dancing.“I feel more in shape in Russia,” she said. “There is much more repe-tition, and they have such a clear idea of what they are demand-ing. In the U.S., there is more ar-tistic liberty. In Russia, there is a style that has been preserved. It’s a sacred church, and I want to respect it.”

class dancer and an artist,” she said. What remains unsaid is whether the foreigner-averse Mariinsky, already breaking new ground by hiring Kampa, would ever cultivate an American all the way up to fi rst soloist or princi-pal dancer.

Kampa, a seasoned vet-eran of Russian ballet, has a fi ghting chance of suc-cess. Though her fi rst year at Vaganova may be a chroni-cle of adversity, it is far from a caution-ary tale.

T h o u -s a n d s o f

students com-pete for about 70

openings each year. Very few foreigners are accepted to the school, and most stay but a year. The mean girls, bulimic roommates, language problems, demeaning teachers, and small conspiracies — much of it recounted in a fi lm about Kampa produced by Ken

Ferguson — only fueled her drive and her ability to “detach” as she says. In her darkest and loneli-est hours, Kampa rediscovered her Catholic faith, using prayer and meditation to calm her agitation.

By the second year, Kampa could communicate and her muscles had molded to the new routines. Her confi dence grew and so did the support she re-ceived — she was se-lected for plum roles in school produc-tions. Vaganova, and Russia, was all about

It remains to be seen if the Mariinsky will cultivate an American all the way up to principal dancer.

John

FreedmanTHE MOSCOW TIMES

Phoebe

TaplinSPECIAL TO RBTH

Kozhevnikov with literaryassistance from Yekaterina Bond-arenko; “Labor Campers” by Valery Shergin; “One’s Own Land” by Alexander Arkhipov; “Plant Eaters” by Maksym Kurochkin; and “Three Days in Hell” by Pavel Pryazhko.

This is interesting and impor-tant, but it’s not what compels me to write about the festival. Ever since the festival moved a decade ago from Konstantin Stanislav-sky’s verdant Lyubimovka estate outside of Moscow to the hot, air-less space at Teatr.doc, there has been another star invariably in attendance — The Spectator.

Audiences at Lyubimovka are famous for being highly opinion-ated. Nobody fears sending a ver-

bal punch to the chops of a writ-er or director whose work has just been shown.

Following the reading of “Femen’ism,” a play by Dan Gu-menny, actress Irina Vilkova fl at-ly stated: “That was bad. I didn’t like anything. Not the play, not the directing, not the acting.”

This is expected and, I would emphasize, it is appreciated.

Opinions were split more even-ly after Anton Pakhomov’s pre-sentation of “Three Days in Hell.” Moderator Kristina Matviyenko declared that this was Pryazhko’s “most socially oriented play” ever. A speaker from the audience, a literary scholar, declared the op-posite. She said the play experi-mented with language and insist-ed, “The social aspect in this play exists only in the margins.”

Praise, derision, laughter or groans are not the point at Lyu-bimovka. What matters are the connections that happen. All are to the good, because all represent a public plugged into the festi-val’s efforts to encourage the search for new art and the shar-ing of diverse opinions.

They stress the power of story-telling, collecting tales of the road. The anthropomorphized road it-self becomes a character in the central novel and in Igor Save-lyev’s “Pale City,” the opening story. “Pale City” is a fresh and vivid roadside love story, wind-ing through the Urals and fol-lowing each interconnected hitch-er across the “vast expanses of his [or her] native land.”

One reason for Kerouac’s par-ticular resonance in Russia is a shared sense of distance. The boundless Russian steppe is a re-curring motif: “our immense, im-mense country,” Bogatyreva’s her-oine, Titch, calls it. One of the traits shared by all three writers is a powerful sense of place, lost in the forest or having coffee in Diyarbakir. Russia, distinct and massive, is always present, wheth-er they are traversing its endless roads or comparing it with other countries.

Savelyev’s chief protagonist, Vadim, talks about watching the shooting stars beside the unlit highways: “Russia’s not like Bel-gium, where they have fl oodlights on the motorways.” Over here, “it’s just you and the stars.” Loneli-ness becomes a key image in the novel. Savelyev observes at the end that many hitchhiking terms have been borrowed from Eng-lish, but “the roads, the solitude and the melancholy are quintes-sentially Russian.”

Tatiana Mazepina, whose mem-oirs end the book, also loves to “scare the locals with stories about Russia. To tell Austrians who can cross their country in fi ve hours that in order to get from Moscow to Vladivostok it takes six days by train.” Mazepina trav-els not to be alone, but to discov-er kindness, “to disprove all the things people so love to say against each other.”

Lyubimovka is a festival that presents readings of new plays — plays so new that writers may still be

scribbling fresh dialogue in the margins as actors head out onto the tiny basement stage at Mos-cow’s Teatr.doc.

Following the customarily frank discussions that occur after each reading, some of those writers might head back to the drawing board and start all over again from scratch. Some may just discard their work in de-spair. Or, as has happened often enough, some of the plays may be snatched up to become the Next Big Thing.

The whole purpose of thisfestival, founded in 1990, is to help emerging writers andestablished theaters fi nd each other. It has always been strict-ly about the play — texts are read simply by actors standing in place or seated on chairs. The 2012 version of the festivalintroduced audiences to 15 new plays participating in thecompetition segment, and seven new non-competition plays by established writers.

Whether the plays are good or bad, whether tomorrow they will be forgotten or will change the world, they all share the aroma of the here and now. Many drip with the blood of politics. In fact, that has become a tra-ditional aspect of Lyubimovka: giving public airing to social and political themes that get short shrift in Russia’s mainstream media.

The readings of probing new plays at Lyubimovka attract a thinking young audience, en-courage them to develop their own voices and provide them the faith that those voices can be heard.

A few of those generating talk this year were: “Presentation” by Ksenia Dragunskaya; “Nine Months, 40 Weeks” by Alexei Ku-lichkov and Sergei Shevchenko; a project called “Kidnap” conceived by Konstantin

While the great era of American hitchhik-ing has faded, there are still numerous

Russians for whom it is a way of life. This fascinating collec-tion of stories by young travel-ers is a topical addition to the growing number of contempo-rary Russian novels available in translation.

“Off the Beaten Track” (Glas, 2012) is a compilation of three works written by Russian hitch-hikers. The fi rst two are novels, clearly based on the authors’ ex-periences on the road and in the subculture of shared houses of modern Russia. The last piece, “Traveling to Paradise,” charts an autobiographical walking/hitching odyssey from Russia to Egypt through the Middle East.

Jack Kerouac’s influence is most obvious in Irina Bogaty-reva’s “Off the Beaten Track,” the longest, central novel from which the volume takes its name. Bogatyreva’s prologue, repeated towards the end, sets out her characters’ lifestyles and philos-ophy: “wayfarers on roads with-out end… We are legion, dots scattered along the road, roman-tic followers of our guru, Jack Kerouac…” They are young, they are free and their motto is “The Road Is Always Right.”

The young authors and nar-rators seek reassurance in new rituals or resurgent religion.

THEATER PLUS

BIBLIOPHILE

The Play Becomes Personal at the Lyubimovka Festival

Russian Writers and Their Adventures on the Road

Many plays drip with the blood of politics. In fact, that has become a traditional aspect of Lyubimovka.

TITLE: OFF THE BEATEN TRACKAUTHOR: IGOR SAVELYEV, IRINA BOGATYREVA, TATIANA MAZEPINAPUBLISHER: GLAS

RuArts’ gallery space in central Moscow seems an unlikely venue for an exhibition on the theme of noir: It’s an airy place, with long corridors, abundant natural light and a sense of possibility, all in line with RuArts’ aim to encourage the development of contemporary art.

But for the ongoing show, Noir, the mood is brooding and sultry. Art director and curator Cathe-rine Borissoff brought together 12 artists for a philosophical in-vestigation of a subject she be-lieves should not confi ned to Hol-lywood. “Noir is an emotional state,” Borissoff said, “and it’s present in everyone.”

The familiar tropes are certain-ly recognizable in the artists’ in-

Visual Art Moscow gallery encourages Russians to embrace their inner darkness

For an ongoing show at the

contemporary art gallery RuArts,

curator Catherine Borissoff

sought to express the tension she

sees in today’s Russia.

terpretations, but they are updat-ed and redefi ned.

The fi rst painting in the exhib-it is Vita Buivid’s portrait of a naked woman wearing high heels, taken from the series “Prime Time.” She is knitting a long black scarf, which is physically attached to the canvas and rolls off along the fl oor. A cigarette lazily droops

from her mouth and her expres-sion is one of calm defi ance. Next to this work are Vladimir Glynin’s stills of ballerinas performing Swan Lake.

Borisoff stressed that her view of noir is “not purely black and white, light and dark, but a com-bination of the two.” Heroes and villains, said Borissoff, “aren’t

positive or negative; they have characteristics of both. Noir should simultaneously attract and repel you.”

The showpiece representation of this in the exhibit is the work of Dmitry Tsvetkov, a recent nom-inee for the Kandinsky Prize, who shows the violent side of the genre through his series “The Heads of Heroes.”

He presents the severed heads of famous fi gures including Marie Antoinette, Cleopatra and Eme-lyan Pugachev, who led an insur-rection against Empress Cathe-rine II (the Great).

The concept of the leading man is also explored by Vitaly Push-nitsky, another participant in the Kandinsky Prize, who cuts pat-terns into photographs of classi-cal statues and religious iconog-raphy, partially distorting the images and forcing viewers to re-consider representations of fa-mous historical fi gures.

Such a historical range repre-sents Borisoff’s vision that noir

is timeless, that its cynicism, frus-tration and bleakness have long been part of humanity and never more so than in the present cli-mate.

Borisoff believes that Russian society is poised to reconsider the concept of noir: “I saw the inter-nal tension in society, the pessi-mistic mood, and I realized that noir is more than an artistic genre or the color of your clothes. It’s a state of mind. I realized that quite a lot of people are in this state, and I want this exhibition to inspire people to embrace noir.”

Exhibit Brings Society’s Inner Tensions Out

GEORGE BUTCHARDRUSSIA BEYOND THE HEADLINES

Ja’bagh Kaghado’s Majestic is

featured in the Noir exhibit.

RuArts curator Catherine Borissoff believes that Russian society is poised to reconsider the concept of noir.

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A History of St. Petersburg’s Vodka Densrbth.ru/18747Feature

According to Prime Minister Dmitry Medvedev, tax advantag-es and state funding have not been enough to revive the Rus-sian fi lm industry, and the gov-ernment must look to other ways to bolster domestic cinema. Med-vedev made his statements at a late September meeting of the governmental committee respon-sible for the development of Rus-sian fi lm in front of new Culture Minister Vladimir Medinsky, who added that some state support will not be renewed in the future if the proportion of homegrown fi lms in circulation in 2012 is less than 18 percent.

Russian fi lm is completely de-pendent on state subsidies, and the government has been reas-sessing its subsidy system for at least a year. On Oct. 1, 2011, amendments to the tax code came into effect allowing V.A.T. to be

Cinema Domestic film production relies on state support, but the government is cutting back

charged on movie tickets; they had previously been subjected to a 0 percent V.A.T. rate. However, the State Duma reinstated the preferential rate in November 2011 following protests from fi lm industry professionals.

They may have less clout now. At the beginning of the Septem-ber meeting, Medvedev clearly stated that changes would be coming: “I would like to remind you that the advantageous fund-ing system in place for produc-ing Russian fi lms was introduced as an incentive to keep Russian cinematographers working in Russia. We need to acknowledge that nothing has worked.”

In the years leading up to 2008, the proportion of Russian-made movies in general circulation in-creased considerably — from 6 percent in 2002 to almost 28 per-cent in 2007. But then this fi gure began to fall, dropping to 15.5 percent in 2010. In 2011, the por-tion of Russian fi lms was 16 per-cent, and in the fi rst six months of 2012,16.7 percent.

But while subsidy programs haven’t worked, there is no con-sensus about what might. Medin-

sky has been quoted as saying he would prefer to introduce a quota system — requiring Russian cin-emas to show a certain number of Russian fi lms — to maintain-ing the 0 percent V.A.T., but fears

that this would hurt fi lmgoers. Industry insider Sergei Tolsikov, executive director of the Film Fund, has suggested subsidizing tickets just for Russian fi lms.

The situation is not unique to Russia. In terms of budgets, no country in the world can hope to compete with Hollywood block-busters. This is why so many countries, especially those with a rich cinema tradition, are doing what they can to protect their na-tional fi lm industry. In general, government support for national fi lmmakers either takes the form of grants from budgetary or non-budgetary sources, or it entails more protectionist measures, such as introducing quotas.

The leading country for state cinema subsidies is generally thought to be France, and in terms of forcibly protecting the nation-al fi lm market from foreign in-fl uence, the best-known example is China. In France, domestic cin-ema is directly supported by French viewers, who pay an ex-tra-budgetary tax of 11 percent on all cinema tickets. The money goes straight to the national fi lm agency and is used to fi nance na-tional fi lm production. In addi-tion, a tax concession system is in place for companies that in-vest in national cinema, and bank loans allocated to fi lmmakers can be guaranteed by the French In-stitute for the Financing of Cin-ema and Cultural Industries. As a result the proportion of home-grown fi lms in circulation stands around the 40 percent mark.

In China, the situation is very different. Determined to preserve its national cinema tradition, China refuses to release many for-eign fi lms. Until recently, the only way into the Chinese market was to co-produce fi lms with local cin-ematographers. However, follow-ing negotiations between the U.S. and China in February, Beijing increased the foreign fi lm quota from 20 to 34 fi lms a year. Quo-tas on national fi lms also exist in former Soviet states. For exam-ple, Ukraine has a law stipulat-ing that at least 30 percent of fi lms shown in theaters must have been produced in Ukraine. The law, however, is ineffective — Ukraine does not make nearly enough movies to meet viewers’ demands.

Has Russia’s Film Industry Lost It at the Movies?

Historical dramas like “Vasilisa Kozhina,” about the War of 1812, have traditionally been popular in Russia.

Despite some stellar years before

the global financial crisis, theaters

in Russia still favor foreign films.

Is there anything the state can

do?

VADIM NESTEROVSPECIAL TO RBTH

Anton Yakovenko, the general di-rector of the Skolkovo adminis-tration, said: “The hypercube is the fi rst building in the innova-tion center. It stands all alone, so the natural environment called for solutions that ensured itsautonomous operation. We aimed to keep a rigid aesthetic, bothinside and outside. It is split into clear sections; we decided against fancy fi nishing. The interior of the hypercube will be open soon — we developed a computer game in which the character gives a walk-through of all the fl oors of the building.”

The hypercube has seven fl oors. The first floor will feature thereception desk and cafés, and the second fl oor will house the offic-es of key Skolkovo partners,including I.B.M. and Cisco. The third fl oor will be given over to companies working on innova-tion projects with Skolkovosupport. A vast conference hall will take up the fourth fl oor. The remaining three fl oors will most likely accommodate more offices for fi rms dealing with Skolkovo startups. In total, 16 companies have been authorized to estab-lish offices in the building.

Maxim Kiselev, development director of Skolkovo, believes space in the building will be in high demand: “The hypercube will be of major importance to [resi-dent companies] and their adver-tising, as it will essentially serve as one giant showroom for every-one working there,” said Kiselev. “The hypercube building and

infrastructure are based on aninnovative open space concept, and it should become a model for developing the Skolkovo eco-system.”

Andrei Potapov, head of Sput-niks, LLC, which has space in the building, commented that the technology potential for the hy-percube is extremely high because the area is open enough to offer a lot of freedom to rearrange space. “Plus,” Potapov said, “the fi rst building has a lot of hidden treasures and surprises that both residents and architects will fi nd out about only later.”

For Skolkovo, the Future Is Cubed

The hypercube is the first building in the innovation center.

Domestic fi lms in

Russian cinemas

This fall promises to be a turn-ing point in the way Russian cin-ema is seen by the Western mar-ket. The week of Oct. 15–20, Moscow hosts the fi rst Red Square Screenings marathon of private screenings of Russian fi lms for foreign distributors. The goal of the screenings is to attract more international market players to Russian fi lms, enabling Russian fi lmmakers to earn money from the sales of fi lms, not just gov-ernment subsidies.

Russian cinema has already generated some buzz in 2012. At this year’s Venice Film Festival, a billboard with rotating posters for Kirill Serebrennikov’s “Be-trayal” was located directly op-posite the Movie Palace, while ads for “Me Too” from Alexei Bala-banov and “Anton’s Right Here” by Lyubov Arkus appeared daily in the press. The reason for this is simple — for the fi rst time, the Russian Cinema Fund provided the necessary budget for produc-ers to promote their fi lms.

Said Yelena Romanova, head of the Cinema Fund’s international

Promotion With support from the Cinema Fund, Russian films may finally have a chance at bigger distribution deals in the West

Russian films are now being

properly promoted to the

Western market. Directors hope

this will give them a chance to

earn money from sales.

department, “It was united mas-sive fi nancial support; we were working on three fi lms at once. One movie on its own doesn’t give you the leverage to get much done, but representing a complete pack-age of fi lms opened doors for us.”

As a consequence of the mar-keting efforts undertaken by the fund, the fi lms involved sudden-ly attracted major sales. Romano-va said that the producers of “Be-trayal” succeeded in signing deals with international distributor Elle Driver, while the rights for the fi lm’s Italian distribution were hotly contested.

Anton Mazurov, creative direc-tor of the Russians Are Coming agency, which is organizing the Red Square Screenings under the auspices of the Cinema Fund, de-scribed the challenges of selling Russian fi lms in the internation-al market this way: “Imagine the idea that each country has its movies on a giant hard disk, and all wired up to an international network. The problem is that Rus-sian fi lms aren’t linked to that kind of network at all. This kind of networked infrastructure is, in fact, the circuit of fi lm festivals and movie markets.”

During the Soviet era, the Rus-sian movie business was com-pletely detached from the rest of the world. Filmmakers survived on government handouts from the

ing in the fi lm industry. And then people appeared who started to communicate and get experience — and cinema began to grow with them.”

The result of this dialogue was the decision of the Fund to ex-pand from just making movies to funding their promotion and sales.

“The whole way that movie rentals are organized in Russia cuts cinemas off from any movie aimed at slightly older audienc-

es that might be interested in fi lms that raise more questions,” said producer Yevgeny Gindilis. “They have that kind of audience in Europe; so independent fi lms in Europe have a much better chance than in Russia. You can see that with a fi lm like Alexei Fedorchenko’s ‘Ovsyanki’ (Silent Souls), which did well at the box office in Europe.”

Until now, the more sophisti-cated European moviegoer has been aware of just a trio of names in Russian fi lmmaking — that is, Andrei Tarkovsky, Alexander Sokurov and Andrei Zvyaginstev. Movies that are aesthetically be-yond that trio drop off the dis-tributors’ radar. They’re hard to classify, hard to position and, as a result, hard to promote.

“Distributors — I mean those who buy movies for screening in their own country or part of the world — know very little about what’s happening in Russian moviemaking,” said Mazurov. “The history of Russian filmmakingis the history of an unsellable product”.

The organizers of the Russian international movie market see the answer in establishing com-munications between the major players. Said Mazurov, “It’s the only way that Russian producers can fi nd out what Western dis-tributors are looking for.”

Russian Cinema Launches Charm Offensive

Director Kirill Serebrennikov with actress Albina Janabaeva in Venice.

VASILY KORETSKYRUSSKIY REPORTER

CONTINUED FROM PAGE 1THE NUMBERS

40 hectares will be the eventual size of Skolkovo Innova-

tion Center. Homes and infrastruc-ture swuch as schools and shops for more than 21,000 permanent resi-dents are planned for the city

16 companies have been authorized in total to establish offices in

the flagship hypercube building. Skolkovo administrators believe the space will be in high demand.

7 floors is the total size of the hypercube. Offices will take up most of the space,

although cafes will be located on the first floor and a conference hall on the fourth.

State Cinema Agency (GosKino), and producers worked with no expectation of income from screenings. The system of fund-ing that developed under the structure of Soviet state funding was highly corrupt — films by favored companies or directors were greenlighted while others languished.

Eventually the production of animated fi lms, documentaries and low-budget art-house mov-ies was transferred to the Minis-

try of Culture. It was at this point that the Cinema Fund appeared, gathering together eight (now 10) of the largest Russian fi lm com-panies and channeling funds to them for commercial moviemak-ing, providing their accounting was scrupulously transparent.

“This criticism stimulated con-tact between the Fund and the movie industry,” said Mazurov. “Neither the Ministry of Culture nor GosKino had ever maintained links with people actually work-

" In the mid-1990s, there was a short period when, on one hand, the number of movies

decreased, because the entire mov-ie industry was in collapse, and on the other hand, doors opened for a small number of directors and films to get access to European financ-ing. Then that system shut down because the renewal of post-Soviet film distribution gave rise to the idea that, with such an enormous market, it should surely be capable of financing itself.”

THE QUOTE

YevgenyGindilisFILM PRODUCER

November 21

Special Report - Agriculture

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