Russia Now

THURSDAY, 31 MARCH 2011 A paid supplement from Rossiyskaya Gazeta (Moscow, Russia), which takes sole responsibility for the contents

SpaceFifty years after Yuri Gagarin be-came the first hu-man in orbit, Russia steps up its space exploration and co-operation pro-grams.

PAGE 8

After a suicide attack in Mos-cow, “black widow” label complicates life for Muslim women in the north Caucasus.

PAGE 2

Terrorism

Russia to stick to its guns on nuclear power

Just a few weeks ago nuclear power’s pros-pects in Europe were looking up. A quar-ter-century after the Chernobyl accident, modern nuclear technology seemed to have many advantages over fossil fuels. Then the

earthquake-battered reactors on the Japa-nese coast began leaking radiation into the air. The Japanese disaster has divided world opinion and heightened concern over a shift in the global energy balance back toward

oil and natural gas, Russia’s main exports, even as Russian leaders reaffirm their com-mitment to a nuclear future.

Europe’s risky game with gas

OPINION

European optimism about gas lacks a solid founda-tion. Based on fl imsy as-sumptions, the EU’s ener-gy policy is forcing Russia toward other markets, pri-marily China.

SEE PAGE 6

to affirm that Russia will continue to build new nu-clear power stations, al-though following Merkel’s decision he also ordered a comprehensive safety re-view of Russia’s nuclear as-sets. Putin’s comments were fol-lowed by similar statements

Germany’s Chancellor An-gela Merkel was forced into an embarrassing about face after all six reactors at the Fukushima Daiichi plant got into trouble in the days after their supporting infra-structure was washed away by the terrifying tsunami on 11 March. She ordered seven of the country’s old-est reactors to be shut down for extensive tests. Six months earlier Germany saw some of its biggest pub-

BEN ARISBUSINESS NEW EUROPE

Stunned by the disaster in Japan, western Europe reassesses its nuclear future even as the east affirms its commitment to atomic power.

Nuclear energy The average Russian reactor is half the age of the stricken units in Japan

from the leaders of Belarus, Ukraine and Turkey, all of which have recently bought Russian-made nuclear power stations. Russia will ensure that the plant to be built in the southern Turk-ish town of Akkuyu will be able to withstand powerful earthquakes, Russian Pres-ident Dmitry Medvedev said in mid-March during a visit to Moscow by Turkish Prime Minister Recep Tayyip Er-dogan. “The plant will be an ex-ample for the rest of the world,” Erdogan said dur-ing a press conference fol-lowing the talks with Medvedev.Russia and Belarus signed off on an agreement to co-operate in building a nu-clear power plant in Bela-rus on the same day. Con-struction is due to start in September. Russia and Hungary also opened talks on the possible participa-tion of Russian companies in a project to modernise

lic protests in a decade after Merkel forced through a plan to increase the amount of nuclear power the coun-try generates. While many western Eu-rope’s leaders find them-selves in a similar position, Russian Prime Minister Vladimir Putin was quick

Distributed with European Voice

EVERY LAST THURSDAY IN EUROPEAN VOICE

RBTH.RUPolitics, economics, business, comment and analysis

Eugene AbovPUBLISHER, RUSSIA

BEYOND THE HEADLINES

Dear readers,Welcome to Russia Now, an eight-page

supplement that you will receive once a month with your copy of the Europe-an Voice.Russia Now fi rst appeared in 2007 and now runs in 12 prominent newspapers in Europe, the Americas and Asia, including the Washington Post, Süddeut-sche Zeitung, the Daily Tel-egraph, Le Figaro and La Repubblica. We are happy to add the European Voice to this list in 2011.Our goal is to provide Eu-ropean Voice’s readers with a range of articles that show today’s Russia in all its diversity, warts and all – and, like any emerging economy, Russia has its share of problems. On these pages you will fi nd report-ing and informed opinion by independent authors on the changes Russia is un-dergoing, on international affairs, civil society, inno-vative ideas and on lead-ing personalities.For more information on Russia, please visit our website at rbth.ru. We wel-come your valuable feed-back and opinions at [email protected]. Happy reading!

EDITORIAL

Welcome toRussia now

ENERGY: SEE PAGES 1, 4, 5 AND 6

Hungary’s Paks nuclear power plant.Russia also signed a deal to build a nuclear power plant in Bangladesh, ITAR-TASS reported on 1 March, citing officials in the Bangladesh government.Ever since the explosion in 1986 of the Chernobyl re-actor in Ukraine spread a highly toxic radioactive cloud over much of west-ern Europe, European pub-lic opinion has naturally been wary of Russian-made nuclear power stations. Russia abandoned its So-viet-era RBMK class of re-actor following the Cher-nobyl disaster, although 11 RBMK reactors are still op-erating in Russia. Putin said that Russia would continue selling nu-clear technology to its al-lies and claimed that the new-generation nuclear power plants are safer than ever.

The nuclear spread of Russia’s Rosatom agency

CONTINUED ON PAGE 4

After the quake, the fallout

SOURCE: ROSATOM

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31 MARCH 2011Politics and Society

Marked as a dangerous woman

Zaira. Photograph by Oksana Yushko

Zaira, a petite woman liv-ing in Makhachkala, the busy capital of the Russian Republic of Dagestan, re-cently gave birth to a boy. But outside her home, peo-ple think of her as a poten-tial killer, not a mother. On a recent trip to a grocery store, she said, customers pointed and said, “Here comes the martyr.”

put me on that list!” Zaira said in a recent interview. “If I wanted to commit a terrorist attack, I would not have lived openly in Dag-estan’s capital. I would not have enrolled my son in school.”In the last decade, Russia’s security agencies have tend-ed to label all fundamen-talist Muslims as terrorist suspects. And the police have engaged in sometimes brutal tactics in an attempt to suppress a violent insur-gency, according to human rights activists. “Your house gets burned, and you and your family may ‘disappear’ or be murdered,” said Taty-

Terrorism As security forces step up the hunt for militants in the north Caucasus, the media finger terror suspects

ANNA NEMTSOVASPECIAL TO RUSSIA NOW

Muslim women labelled “black widows” after last year’s Moscow metro bombing find it difficult to go on with their lives.

The young woman says she prefers to stay “locked be-tween the four walls” of her apartment rather than con-front the accusing looks of strangers in this largely Muslim region of southern Russia.What has turned into a pub-lic nightmare for Zaira began last spring after two women, also from Dagestan, blew themselves up in the Moscow metro, killing 40 passengers and wounding more than 100.Like Zaira, their former husbands were slain insur-gents who had battled Rus-sian forces in the north Cau-casus.

A new force to be reckoned with

Police Sergeant Mikhail Menshenin dodges blows as he tries to subdue a scream-ing 86-year-old pensioner. He and his partner were called to the apartment by a social worker, who says, “She’s gone completely mad.” Calm is eventually restored, and back in the squad car the sergeant says he’s thank-ful the pensioner didn’t have her cane to hand. “They’re lethal with those things.” The 25-year-old Muscovite patrols in the south-west of the capital, supporting a wife and child on a month-ly income of about 25,000 roubles (€625), a small sum on which to live in one of

Menshenin wonders what the new law which took ef-fect on 1 March will mean for his employment terms, powers and social status.President Dmitry Medvedev ordered the overhaul last year. He was prompted to act after a police major

went on the rampage and shot dead two people in Moscow in 2009. Police pay will go up and staffing lev-els will be cut by 20%. And the tsarist-era name polit-siya has been restored in place of militsiya. To bring Russia in line with policing practices around the world, an officer’s au-thority will be limited to his precinct, citizens will have to be read their rights be-fore being arrested, and they will be entitled to make a free phone call after they are taken into custo-dy.Pay rises are an attempt to eliminate one of the root causes of low-level bribery and abuse of power. It is an important matter for both officers and a public that simply wants to feel pro-tected. In the latest survey by the Levada independent polling organisation, 60% of respondents said they were dissatisfi ed with the performance of the police,

Mikhail Menshenin (right) and his partner, Alexander

Kuzminov, on patrol in Moscow’s south-west.

ana Lokshina of the Mos-cow office of Human Rights Watch. “Brutal methods and the lack of free space for alternative opinion or reli-gious views push youth into the underground.”But police insist they are fighting a deadly enemy across the Caucasus. In Feb-ruary they arrested anoth-er young alleged “black widow” in the republic of Ingushetia. Gennady Gudkov, a deputy head of parliament’s secu-rity committee, complains that parliament has no con-trol over the National An-ti-Terrorism Committee, the main agency charged with leading the campaign against terrorism, and can’t even get basic information about its activities.“It is a big secret what methods they are using to fi ght terrorism. We have no idea,” Gudkov said.The case of Zaira suggests that some of those methods may be counter-productive. Since her fi rst husband was killed six years ago, Zaira said she has tried to move on and build a new life. She remarried, had another baby and got a job. All of that collapsed with the “black widow” article. Zaira lost her job as a cleaner. She said she took her 8-year-old son out of a secular school after a teacher beat him for being a “Wahhabi”. The po-lice, she said, frequently question her.“We wish we could fi t in,” she said. “But we are being pushed out.”

ARTEM ZAGORODNOVRUSSIA NOW

Russia’s police have a new name but face the same old problems of low pay and lack of trust. RN goes on the beat with Moscow’s cops.

Law enforcement New law cuts numbers and increases pay in an attempt to clean up the police’s image

the world’s most expensive cities.“It’s tough psychologically, but hard work is reward-ed,” Menshenin said. “The salary may not be great, but we get bonuses.” A member of the capital’s 98,000-strong police force,

" Nobody can win the war on terror in the north Caucasus as long as

there are wars in the Middle East. The terrorism we deal with is not just a purely Rus-sian phenomenon but a threat of international scale. The terrorist groups in the north Caucasus are supported by countries at war in the Middle East. The terrorism is inspired by multiple factors, including globalisation."

" Our main priority in the north Caucasus is fight-ing terrorism – we will

continue to destroy the guer-rilla nests and the individuals and organisations that finance them. We will also fight crimi-nal groups that finance the terrorist underground. Our third goal is obviously the fight against corruption. And our fourth priority, essential for progress, is creating new jobs in the north Caucasus. We plan to create 400,000 new jobs by 2025."

THE QUOTE

Alexander KhloponinPRESIDENTIAL ENVOY TO THE NORTH CAUCASUS, SPECIAL TO RUSSIA NOW

After that attack, the news-paper Komsomolskaya Pravda published the pho-tographs of 22 actual and potential “black widows”, as female suicide bombers have been dubbed by the media, with personal infor-mation such as the districts where they lived. The head-line of the article ran, “1,000 widows and sisters of Dag-estan guerrillas help terror-ists”.Zaira’s picture was among the 22, an unmistakable ac-cusation that she was a po-tential suicide bomber, someone to be feared and watched.“How reckless of them to

terrorist attacks occurred in Dagestan last year, five of them suicide bombings, Russian officials say. The toll in the north Caucasus republic: 68 deaths and 195 people injured.

112THE NUMBERS

and only one in ten fully trusted the force. Public anger at the police appeared to peak in Decem-ber, when thousands of youths took to the streets of central Moscow in vio-lent protests, accusing po-lice of taking bribes to re-lease key suspects in the murder of a football fan. But above all it is the rou-tine solicitation of small bribes that has soured Rus-sians against the force. The police, meanwhile, defend themselves vigorously.“What do you expect for the money we make?” asks Alexei, a lieutenant in a dif-ferent precinct who did not want to give his last name. “The good officers only take bribes for minor stuff, a few roubles from someone vio-lating immigration rules or something, just to make ends meet.” Some lawmak-ers fear that the new law will fail to end corruption or ease popular discontent with the police. “Instead of a new force, we get the same militia with a new name,” said Gennady Gudkov, deputy chairman

of the security committee in the State Duma (lower house of parliament) and a member of the opposition party A Just Russia.Some senior police officials are also sceptical that the reform will usher in a new era, and believe there needs to be a broad attack on cor-ruption, targeting both state institutions and public at-titudes. “If we don’t reform other institutions along with the police and clarify who’s re-sponsible for what, no staff cuts or increases will make any difference,” said Yuri Matyukhin, police chief of Moscow’s Southwest Dis-trict. Matyukhin even claimed that few institutions had at-tempted to combat internal corruption as aggressively as his.Back on the beat, Mensh-enin said that whatever the implications of the bill, lay-offs had already begun and had even had a positive ef-fect: “They’ve already fi red a lot of the bad apples in our ranks who were harm-ing our reputation.”

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31 MARCH 2011 Business

When Canadian Kane Cuenant was looking at MBA programmes, he thought about studying at Harvard University or Ts-inghua University in China. In the end he opted for Skolkovo Moscow School of Management.“I looked at different schools in developed markets, but it didn’t seem real enough. I knew that I wanted to work in emerging markets and I wanted to truly un-derstand how to do it,” he said.Cuenant is among the fi rst 40 Skolkovo MBAs to com-plete their studies at the campus outside Moscow in November. Thirty-three stu-dents enrolled in the sec-ond MBA class; an “execu-tive MBA” programme allows business people to study part-time.Cuenant said that what at-tracted him to the school was its emphasis on learn-

Education The MBA course that tackles marketing – and corruption

The first class at the Skolkovo business school emphasised practical skills such as living in a factory town in China.

ing practical skills in the markets he really wanted to work in. Skolkovo’s grad-uates hail from as far afi eld as Germany, India, Brazil and Australia, as well as from the former Soviet Union.It turns out that a Skolko-vo education costs just as much as a Harvard MBA: about $80,000 (€56,000).The young Canadian de-cided against the Chinese school because of its US-style theoretical pro-

gramme and opted to study at the fi rst Russian man-agement school more fo-cused on emerging markets. Skolkovo’s English-lan-guage syllabus is designed to teach students from around the world the day-

to-day realities of doing business.Skolkovo’s dean, Wilfried Vanhonacker, moved to Russia in 2008 after setting up the now highly ranked China Europe Internation-al Business School (CEIBS) in Shanghai in 1994. At Skolkovo, he shifted the emphasis from classroom learning to a programme where graduates spend more than 70% of their time in the challenging en-vironments of emerging-

market companies and gov-ernment departments.“We are trying to bring re-ality into the classroom,” Vanhonacker said.Multinationals will see most of their growth in the next 20 years in dynamic emerging markets where the business climate is vol-atile and uncertain, and managers face talent short-ages, infrastructure and in-stitutional gaps – as well as corruption. The Skolk-ovo MBA is designed to prepare students to face these challenges, Vanho-nacker explained. “Tradi-tional business schools were not preparing the tal-ent the market needed: en-trepreneurial leaders for difficult environments,” he said.Students at Skolkovo must vault hurdles such as liv-ing for two months in a dormitory in a Chinese fac-tory town and even help-ing Russian bureaucrats to draft laws that could then be passed by the country’s parliament. The programme features the building blocks of MBA courses in the West, such as fi nancial account-ing, macroeconomics and marketing, but also puts graduates in stressful situ-ations in alien cultures to hone their ability to cope.For Western students, the course means dealing with the bureaucracy and cor-ruption that come with doing business in emerg-ing markets. For many Rus-

Real-life MBA for emerging business challenges

Skolkovo's aesthetic reflects its program goals.

RACHEL MORARJEEBUSINESS NEW EUROPE

The Russian government got a giant privatisation programme under way with the sale last month of its 10% stake in VTB Bank, the country’s second-largest, raising a record $3.3 billion (€2.3bn). The sale showed “proof of trust in the Rus-sian fi nancial system”, Prime Minister Vladimir Putin told the press after the deal was closed. The secondary public offer (SPO) was met with luke-warm, but sufficient, de-mand from investors. VTB’s stock was initially offered in May 2007 in what was called “the people’s IPO” and raised $8bn (€6bn at the time) in the biggest IPO of that year.Small investors fl ocked to that sale, but the govern-ment was left with egg on its face after the share price tanked when the world fi -

Equities The Russian state begins shedding its wealth of assets

The Kremlin hopes to raise almost 2 trillion roubles by selling stakes in hundreds of state-owned companies in the coming years.

nancial crisis struck, end-ing in a market crash in September 2008. VTB share prices never fully recovered: the state raised $10.56 per share during the IPO but was only able to muster $6.25 with the SPO this time around.Understandably, Russia’s retail investors remain livid at “the people’s IPO”, and the debacle has impaired the state’s ability to fl oat more companies amid broad pub-lic scepticism about its in-vestment promises.

Just getting the share offer off the ground was an im-pressive achievement given the current dire market con-ditions. After a strong run in 2010, equity investments in emerging markets have done badly this year as fears of infl ation rise, although Russia has been a partial exception to the trend.While the new VTB offer-ing was not a great success, it will do, and there are plans to roll out more blue chips this year. It is all part of the effort to fund an enor-

VTB sale launches hugeprivatisation drive

BEN ARISBUSINESS NEW EUROPE Chinese investors have al-

ready come to places like the Amur Region and the Primorsky and Khabarovsk territories in Russia’s far east, as well as the Jewish Autonomous Region, invest-ing €2.1 billion in various projects. That compares with less than €0.7bn in di-rect state investment allo-cated for the same areas by Moscow in 2011. The Rus-sian government has said that it wants to invest €71bn to develop the region over the next five years, and China will be a key part-ner.“We know that Russia needs to co-operate with another country to open up the Far East and the natural part-ner is China,” said Boris Krasnojenov, mining and metals analyst at Renais-sance Capital.The K&S iron ore project in the Jewish Autonomous

Chinese money for the far east

sian students, it means un-derstanding corporate life in China and India as well as their native land.Cuenant said the sheer vol-ume of paperwork needed to get things done in China and Russia really took him by surprise. “A common banking task in the US re-quires one form, three or four pieces of information and one signature. In Rus-sia, the same task requires four forms, fi ve pieces of information and four sig-natures,” he said. However, despite the stress-es of experiential learning, the small classes enable the school to give students one-on-one career coaching, as well as customised leader-ship development classes. Each student works with a mentor from the business world who helps direct the student’s goals and provides him or her with insight into the business culture of dif-ferent companies.Teachers also handpick groups of students to work on projects that refl ect the culture clashes graduates will face. “We don’t allow students to pick their own groups until they get to the final phase of the course and have to launch a start-up. You don’t pick your col-leagues in a company,” Van-honacker said.“Most of the students who sign up at Skolkovo are not after a simple desk job. They want something more,” Cuenant said.

mous 1 trillion rouble (€25bn) programme of badly needed infrastructure in-vestments. However, the state has also said that it wants to get out of business. Taking stock in exchange for loans and bail-outs during the crisis, the Kremlin has doubled its ownership of listed compa-nies in the past two years and now controls about 40% of Russia’s total mar-ket capitalisation.“The state is now the big-gest shareholder in Russia, and so, for once, its inter-ests are aligned with those of investors, as it wants to see the market do well,” said Chris Weafer, the head of strategy at UralSib.The privatisation is also in-timately linked to the fi ght against corruption and at-tempts to boost productiv-ity, as the Kremlin has re-alised that employees steal from publicly owned com-panies, which are generally badly run.The state plans to raise 1.8 trillion roubles (€45bn) in the medium term through the sale of 900 state-owned companies.Next up will be an SPO of state-owned Sberbank – the biggest bank in the coun-try and the bluest of Rus-sian blue chips. The share sale is slated for the end of this year.

Region is a good example. The Kimkhan mine, the fi rst stage of the project, is cur-rently exporting about 1.2 million tonnes of ore to China with plans to in-crease annual Chinese ex-ports to 10m tonnes.“This area is a hugely ex-citing one for companies like ours and we would wel-come new companies in the region, which would in-crease investors’ comfort,” said Jay Hambro, the exec-utive chairman of the Hong Kong-based mining group IRC.The region’s key challenge is infrastructure, Krasno-jenov said, and China has the funds to solve the prob-lem.

“Skolkovo is preparing entrepreneurial leaders for difficult environments”

Miners near Khabarovsk.

Investment Metals and mining

Privatisation of major companies

SOURCE: CEEMARKETWATCH, ECONMIN, DEUTSCHE BANK GLOBAL MARKETS RESEARCH

RACHEL MORARJEEBUSINESS NEW EUROPE

China’s insatiable demand for raw materials is driving infrastructure development in Russia’s remote provinces.

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31 MARCH 2011Energy

Overturning reports of South Stream’s demise, Germany’s Wintershall signed up to a 15% stake in the project on 21 March. Your move, Brussels.

The German energy com-pany Wintershall signed a preliminary agreement to acquire the stake for around €2 billion, Deputy Prime Minister and chairman of state-owned oil major Ros-neft Igor Sechin said.The news is a coup for Russia, which has been pushing the South Stream pipeline as a rival to the EU-backed alternative Nabucco pipeline, which aims to break Russia’s near-monopoly over the gas pipeline network from the large gas fi elds in cen-tral Asia. Russia operates the Druzh-ba pipeline that runs through Ukraine and car-ries about 80% of Russian gas deliveries to western European clients. Russia is also building the Nord Stream pipeline that will

connect Germany’s north coast directly to a large gas fi eld in Russia’s north-west and supply northern Eu-rope. South Stream is in-tended to complete the trio and supply southern Eu-rope. But the project is fraught with politics. Part of the rationale for the two new pipelines is that they would allow Russia to bypass Ukraine. The two countries clashed in the winter of 2006 over tariff rates. The row came to a head on New Year’s Day when Russia turned off the taps and plunged much of western Europe into darkness. The EU, keen to diversify its gas supplies away from Russia, has been backing Nabucco, a pipeline that would avoid Russian terri-tory and link western Eu-rope directly to central Asia’s gas reserves – if enough gas and demand exist to fi ll it. The wrangling between the two projects has gone on for years, with each side ac-cusing the other of lacking economic sense. While

South Stream is tentative-ly set to reach southern Eu-ropean markets by 2015, carrying 63 billion cubic metres (bcm) of Russian gas under the Black Sea to Italy, Nabucco has yet to get more than a half-prom-ise from Azerbaijan to sup-ply the gas it needs and no

commitment from Turk-menistan, home of the re-gion's biggest gas fi elds. Without Azerbaijan’s gas, the Nabucco project is dead in the water. And on 4 March, the Dow Jones news service cited unnamed sources as saying that a de-cision to allocate gas for Nabucco of up to 10 bcm from the second phase of Azerbaijan’s big Shah Deniz gas fi eld had been put back, from the first half of this year to the second. The re-port said that the consor-

Knitting pattern: a latticework of pipes will weave together countries in Europe and Asia

BEN ARISBUSINESS NEW EUROPE

SOURCE: RUSSKIY PEPORTER MAGAZINE

BIG BOOST FOR SOUTH STREAM PROSPECTS

THE MAIN COMPETITOR TO THE EU’S NABUCCO

GAS PIPELINE IS SET TO GET A WELCOME

INVESTMENT FROM GERMANY

GAS AND OIL

Russia to stick to its guns on nuclear power CONTINUED FROM PAGE 1

“We now have a whole ar-senal of progressive tech-nological means to ensure the stable and accident-free operation of nuclear power plants,” Putin said. Russian reactors are the youngest in the world with an average age of 19 years against 26 years in western Europe and 30 in the US, Bloomberg reports. Fuku-shima Daiichi, at 38, is one of the oldest nuclear plants in the world still in opera-tion. It was originally sched-uled for decommissioning this year, but its licence was renewed for another ten

nuclear capacity. “Inevitably, some of these plans might have to be re-considered,” Bubnov said. “Russia has a vocal envi-ronmental lobby, which might lead to the delay or even cancellation of some projects, in turn leading to higher prices.” However, as the Russian economy returns to strong growth, the government may try to convince the public that it has little choice but to build new nu-clear facilities. Prior to the crisis, supply and demand for power were evenly matched. The collapse in de-mand that followed the cri-

sis bought the government some time, but as econom-ic growth picks up again the window is closing fast. Russia’s energy ministry says it need to add 164 gi-gawatts worth of power ca-pacity by 2030 at a cost of 1 trillion roubles (€25 bil-lion), Vasily Nikonov, a de-partment director at the ministry, said in March. “It is impossible to speak about a global energy bal-ance without the nuclear power industry,” Putin said at an intergovernmental council meeting of the Eur-asian Economic Communi-ty just days after the earth-quake struck Japan.

Nuclear power plants in seismic zones

years.“Until now, countries in emerging markets have been well out in front of the nuclear industry revival,” says Sergei Bubnov, who heads the utilities fund at Renaissance Asset Manag-ers. Of 62 reactors current-ly under construction, 48 are being built in China, Russia, India and South Korea, Bubnov said. Nuclear plants produce 16% of Russian electricity, making the country the most nuclear-reliant among emerging economies, fol-lowed by Ukraine at 15%. And over the next 20 years, Russia plans to double its

tium of companies behind Shah Deniz, including BP, Statoil and Azeri state fi rm Socar, had found the nego-tiations with the pipelines bidding for the gas, includ-ing Nabucco, “unexpected-ly complex”. By joining the South Stream consortium, Wintershall has given a fillip to South Stream’s prospects. As re-cently as the beginning of March, several reports had written off the project after Prime Minister Vladimir Putin suggested building

several new liquid natural gas facilities in Russia's west to transport gas across the Black Sea by ship.Gazprom chief Alexei Mill-er evidently sought to put lingering doubts to bed at the signing ceremony with Wintershall, saying: “This means that the South Stream project has been de-cided and Gazprom will re-main a supplier of gas to Europe for many decades to come,” AFP reported. “Liquefi ed natural gas can only be viewed as an addi-

tional option.”Putin too praised the deal with Wintershall, saying that participation by its parent chemical concern BASF in the project was a “sign of stability” on the en-ergy market. “This is a tre-mendously important agree-ment considering the processes occurring today on the international energy markets,” he continued. “Gazprom has the markets and, most importantly, Gazprom has the vol-umes.”

There is not enough gas to fill both Nabucco and South Stream. If and when they are built.

Is the Kremlin serious aboutfighting corruption?

Businessmen in jail and how they got there

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31 MARCH 2011 Energy

Russian oil mustinvest to surviveprice shocks

Concerns over oil prices on the Russian and interna-tional markets were first voiced in late January when unrest broke out in Tunisia and Egypt. The burden on national economies of buy-ing more expensive oil is reaching the levels typical of a recession, VTB Capital analysts say . Energy analysts’ major con-cern is whether the wave of uprisings will reach Saudi Arabia.Saudi reserve capacities are being kept at moderately high levels, but should any interruptions in Saudi oil supplies occur, the situation in the global market will spi-ral out of control. When for the fi rst time since 2008 the price of Brent crude oil ex-ceeded $100 per barrel in London, Rafael Ramírez, Venezuela’s minister for en-ergy, predicted that global oil prices might soon reach $200 a barrel.The devastating earthquake in Japan has exacerbated the situation. The world’s third-largest economy is facing an energy defi cit as a consequence of damage to its nuclear plants, which produce about a third of the country’s electric power. This will put upward pres-sure on the prices of oil, gas and coal in the short term, Citibank analysts say.Russian Finance Minister Alexei Kudrin recently said that oil prices might soon grow to $150-200 per bar-rel because of the situation in Japan and the Middle East. The US Department of Energy at the end of last year forecast oil prices hit-ting $200 by 2035 as global consumption climbs from about 84 million barrels in 2009 to almost 111m bar-rels.Most of the oil production growth, the US Department of Energy believes, will be in Brazil, Russia and Ka-zakhstan, none of which is a member of the Organisa-tion of the Petroleum Ex-porting Countries (OPEC).

The American experts say this trio will need increased investment and modernised infrastructure if there is to be a signifi cant increase in oil production.Investment is the key word. Without foreign investment, Russia cannot expect to see a rapid increase in oil-pro-duction volume. Russia’s national energy strategy as-sumes that, “with domestic investments only”, oil pro-duction volume will in-crease by a mere 13% or 14% by 2035, from 470m tonnes to 535m tonnes.The world’s oil consumers have only two alternatives – invest in the oil sector today, or fi ght over increas-ingly expensive oil on the stock exchange tomorrow.A rise in oil prices may cause long-term infl ation problems. In the long run, economists foresee two main scenarios. The fi rst is a new global economic cri-sis. According to Torsten Slok of Deutsche Bank Se-curities, a steady growth in oil prices to $110 per bar-rel would slow the world’s GDP growth rate by 0.4% in 2011, while oil prices at $150 would snatch away 2% in growth. That would be a bitter pill to swallow, as slowing growth rebounds on the oil industry, tempo-rarily bringing the oil fever down and restoring eco-nomic equilibrium. The second scenario is more optimistic. It looks to new technological developments and a gradual phasing out of oil in favour of alterna-tive energy resources and fuels over the next 20 to 30 years.“The next decade will be-come the decade of natural gas,” says Mikhail Kru-tikhin, the lead analyst at Exploration & Production magazine. “Its role may sig-nificantly increase in the electric power production sector and automotive in-dustry.”Rising oil prices will spur the oil and gas companies to pump more money into exploration and production, including the so far low-profi t projects along Rus-sia’s Arctic shoreline. The first bold explorer to tap into the reserves of this new Klondike will come out the winner.

YURI SOLOZUBOVRUSSIA NOW

The situation in Africa, the Middle East and Japan could lead to dramatic jumps in world oil pricesand a new global economic crisis.

The Russian government approved a 9.5 trillion rou-ble (€237 billion) energy ef-fi ciency programme last Oc-tober. Will it be too little too late, or is Russia about to embark on a genuine green energy revolution?“The political winds have changed at the top, and there is a growing consen-sus that climate change is happening and a will to change and build a more efficient economy,” said Kevin James of London-based Climate Change Cap-ital. He added that the forest fi res of the summer spurred a growing belief that cli-mate change may not be en-tirely positive for Russia.Prime Minister Vladimir Putin once famously quipped that global warm-ing meant Russians would need to spend less on fur coats.President Dmitry Medvedev, however, has taken a much tougher line on the environ-ment, backed by a report from the World Bank, which says that improving energy efficiency will improve the

country’s productivity and competitiveness. He has said that investment in this sector could save the equiv-alent of almost 70 million tonnes of oil annually. Russia is the world’s big-gest oil and gas producer, and cheap, government-capped domestic energy prices have drained the mo-tivation to conserve energy. Medvedev hopes attitudes will now change, and, aim-ing to make the country’s economy 40% more energy efficient by 2020, has intro-duced initiatives to help re-duce Russia’s dependence on oil – from the decision to phase out incandescent light bulbs to setting re-quirements on the share of electric power generated through the use of green technologies.Russia lags far behind China, which is already the world’s leading manufac-turer of wind turbines and solar panels and is on track to produce the world’s fi rst totally battery-powered car. However, Russia has made moves in the right direction. Eight plants that will pro-duce energy-saving lamps are to be built, and the fi rst Russian solar plant will probably break ground in the north Caucasus resort city of Kislovodsk next year.

RACHEL MORARJEEBUSINESS NEW EUROPE

Every year, Russia wastes enough energy to power the French economy. But energy efficiency is the new mantra.

With an output of 13 meg-awatts (MW) the 3 billion rouble plant is small, but more solar and wind plants are in the pipeline, includ-ing plans to develop wind and solar power worth some €210m in the southern Krasnodar Region. The wind project will be im-plemented in two phases with a total eventual capac-ity of 100 MW. Work on the wind farm could start as early as next year, pending necessary approvals, with German engineering group Siemens slated to co-oper-

ate in the project. In addition, the hydro-pow-er producer RusHydro has plans to build a wind-pow-er park in the city of St. Pe-tersburg, and the Russian company signed a co-oper-ation agreement last June with Italian fellow energy giant Enel to work in other areas of renewable energy, including tidal and geother-mal power projects, as well as in retail power sales.Biofuel development is making similar progress. Russian natural gas produc-

er Itera plans to build a methanol complex in the Urals Federal District.In June, presidential eco-nomic adviser Arkady Dvorkovich said the gov-ernment should support small energy-generating projects that use biofuel by offering them tax breaks and subsidised interest rates.Biofuels could also benefi t from recycling plans cur-rently afoot. Russia’s Natu-ral Resources and Environ-ment Ministry drafted a bill in August to promote recy-cling. While the separation of tin cans and garden waste seen in Western European households is a long way off, under the bill factories will have to recycle the ma-terial they currently throw away.Pulp and paper factories could easily sell much of their waste to biofuel plants, resulting in economic gains for them as well as reduced waste. Russia is even entering the hybrid car business. At the start of this year, multibil-lionaire Mikhail Prokhorov said he would launch the mass production of inex-pensive electric cars in Rus-sia with a project that has Putin’s personal backing. The fi rst three prototypes of the €8,500 car rolled off the production line in De-cember.And fi nally, after a long and slow start, Russia’s carbon trading sector also got off the ground this year with the government signing off on 15 projects worth €21m, with more in the pipeline.

Is Russia’s economy ready to go green?

The Libyan oil port of Ras Lanuf seen on 12 March.

Energy The Kremlin tries to get serious about trimming the fat

Oil Prices rise reflects instability fears

Russia lags far behind China in wind energy, solar power and hybrid automobiles

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31 MARCH 2011Opinion

EUROPE’S GAS POLICY MUST COUNT ON RUSSIA

Russia-EU energy rela-tions cannot but sur-prise. After all, Europe

is our biggest target gas mar-ket, while for the EU we are the most reliable supplier of gas. Yet, we watch in amaze-ment as European politicians and experts repeat that Rus-sia is just about the main threat to EU energy securi-ty. Such a policy is, putting it mildly, rather strange. But what is much worse for Eu-rope is that the bet may not even be a winning one. Eu-rope has begun a rather risky game. Recall that only three or four years ago the EU was predominantly pessimistic on energy. There was talk of a looming energy drought and the question on every-one’s lips was, “Will Russia produce enough gas for the EU?” The situation changed in 2009-10. Europe sudden-ly got a boost of optimism. Now another idea has be-come predominant: that Eu-rope is in for five to ten years of gas surpluses and

Heavy turbulence in North Africa and the Middle East has

forced us to rethink a number of international norms. In recent weeks the kleptocratic regime of Lib-yan leader Muammar Qadd-afi has killed at least 4,000 of its own citizens, appar-ently with some help from foreign mercenaries. Show-ing symptoms of the com-mon psychological ailment that cripples aging dicta-tors, Qaddafi ’s delusive dis-order has reached such an acute state that he may truly believe, as he openly says, that the people still adore him – even as he kills thousands of them.Freezing the accounts held by Qaddafi and his family is a sign of progress when compared with the way similar measures were im-plemented against the rul-ers of Tunisia and Egypt only after they had been overthrown. But I ask West-ern presidents and bankers: Don’t you harbour similar doubts as to whether Yem-en’s Ali Abdullah Saleh, Syria’s Bashar Assad, Zim-babwe’s Robert Mugabe or Myanmar strongman Than Shwe amassed their for-tunes honestly?How bad must the leader

Energy efficiency, for in-stance, is a good thing, but Europe has already done a lot to promote it. It cannot be taken for granted that en-ergy efficiency will restrain demand. In 2010, gas demand grew by 8%, and that in a Europe still struggling to re-cover from the recession!The trouble with renewable-

ultra-low prices. Let us consider the three pil-lars of this European opti-mism. The fi rst is the bet that the energy-efficiency policy will be successful. That would reduce energy con-sumption and demand con-siderably. The second pillar is the hope placed in renew-able-energy sources. And, fi -

nally, the third pillar is the firm conviction that new players will enter the EU gas market, thus generating a gas surplus. In this scenario, the EU’s role would be con-fi ned to liberalising access to the gas transmission in-frastructure. The problem is that the pil-lars may not be so sturdy.

of a developing country be before Western countries stop showering him with honours and awards? Why was Mugabe given Britain’s revered Order of the Bath? Did Gabon’s President Ali Bongo Ondimba — who came to power in 2009 after his father’s 42-year rule as a dictator — really deserve the Legion of Honour?Closer to home, why did Russia’s St. Andrew the First-Called Foundation – headed by Russian Railways chief Vladimir Yakunin, the Kremlin’s model “Orthodox businessman” – award Yem-eni dictator Saleh its Inter-national Prize of the Holy

Apostle Andrew?Saleh was honoured for his contributions to the notion of “dialogue among civili-zations” (intended to be an alternative to the “clash of civilizations”) in 2004, the year marking the ten-year anniversary of the civil war in Yemen that Saleh had started – a war that took the lives of more than 10,000 people.Dictatorial regimes around the world that plunder and suppress their own people will weaken in the coming years. Gabon, Myanmar, Ni-geria, Sudan, Syria, Yemen and Zimbabwe are the most fragile links in the interna-tional system. Their rulers will stop at nothing in the struggle to preserve their power and wealth.It is time for Russia and the West to recognise that the heads of kleptocratic re-gimes are the main threat to international stability. The Soviet Union and the United States were once united in supporting colo-nial peoples in their strug-gle for independence. Of course, they had geopoliti-cal motivations for promot-ing the collapse of Europe-an empires , but the opportunity for co-opera-tion remains.Russia and the other global powers must take the lead and stop governments from carrying out massacres of

their own ethnic minorities who, along with the popu-lation at large, are rising up and protesting the govern-ment’s egregious abuses of human rights. Almost 40 years ago, Article 6 of UN Resolution 2908 recognised “the legitimacy of the strug-gle of the colonial peoples and peoples under alien domination to exercise their right to self-determination and independence by all the necessary means at their disposal”.The time has come to frame a similar resolution in sup-port of people struggling against governments will-ing to kill thousands of their own citizens. The rules gov-erning humanitarian inter-vention must be codified and boldly implemented wherever people have given their blood in their fi ght for freedom. The world should unite in providing aid and assistance to countries that have overthrown their dic-tators.Today, when the abuse of power is becoming more prevalent, Russia, the US, the European Union and other global leaders should unite forces to develop a new code of conduct for the 21st century. If this idea were discussed at US-Rus-sian summits, the “reset” in relations would produce even greater benefi ts than arms reductions.

Konstantin Simonov, di-rector of the National En-ergy Security Foundation

Vladislav Inozemtsev is a director of the Centre for Post-Industrial Studies in Moscow

energy sources is their cost. Today they are uncompeti-tive in price compared to hy-drocarbons. Publicity cam-paigns have been launched to promote renewables, all built around one message: yes, renewables are expen-sive but they are essential, as they provide an environ-mentally friendly solution. In reality, from the environ-mental perspective, gas is a rather promising fuel, in many ways as good as re-newables. And it is the Eu-ropean states that have to pay the high price for renew-ables. Indeed, Europe ben-efi ts from the new jobs that are created, but they might just as well build pyramids, as this also requires a work-force. In fact, the develop-ment of renewable-energy sources is a typical Keyne-sian project where the state artifi cially generates employ-ment and injects cash into the economy.The question here is a sim-ple one: will the EU be able to follow its generous policy going forward when most of its members must deal with budget deficits and when there is serious concern about the euro?Now for the most important point: additional gas resourc-es. It is true that shipments of liquefied natural gas (LNG) to Europe increased very signifi cantly in 2009-10, but this was a blip caused by a surplus of Qatari LNG coming on the market.

American Vice-Presi-dent Joe Biden was in Moscow in mid-

March. And what exactly was he doing there? Reiter-ating American support for Russia’s membership in the World Trade Organization? Repeating, for the ump-teenth time, the administra-tion’s promise to repeal the Jackson-Vanik amendment? Listening to the never-end-ing whining of Russian hu-man-rights activists and 'opposition leaders”? For all that, Obama could have sent Secretary of State Hillary Clinton, giving her a much-needed break from relent-less efforts to unseat Mua-mmar Qaddafi . Since Obama sent his vice-president to talk with the top Russian leaders, pre-sumably their conversations dealt with the most impor-tant questions in US-Rus-sia relations. Today, one such question is not the WTO or bilateral trade – with all due appreciation of the long-term importance of both – but, rather, the issue of mis-sile defence. The pressure is building on the Obama administration to move into the post-New

Eugene Ivanov, Massachu-setts-based analyst

Konstantin Simonov

SPECIAL TO RN

WHY DID BIDEN GO TO MOSCOW?

Start era. In the resolution ratifying the treaty, the US Senate instructed the pres-ident to initiate talks with Russia on cutting arsenals of tactical nuclear weapons. So far, Russia has fl atly re-jected this idea, insisting that tactical nuclear weap-ons can only be discussed along with other arms-con-trol issues. Among these, missile defence is by far the most complex and contro-versial, and the clock is tick-ing: some contours of a po-tential agreement should emerge by June, when Rus-sia and NATO meet.As the godfather of “reset”, Biden was sent to Moscow to give his godchild a new life: to fi nd a solution that could bridge the two coun-tries’ very different positions on missile defence, a solu-tion that will be fully sup-ported by the next president of Russia, whoever he might be. For his part, the vice-president could promise his Moscow partners that if Obama is re-elected in 2012, Biden, too, will be around for the next four years – shepherding “reset” through adolescence. And then Rus-sia will have another chance to enjoy his smile.

Nor, in truth, are there that many sources of pipeline gas. The operators of three prominent European pipe-line projects are fighting over Azeri gas, and we are only talking 12-15 billion cubic metres. Turkmenistan remains a question mark. Events in north Africa are complicating the picture. The “domino effect” of the revolutions could cut the EU off from major hydrocarbon suppliers Libya and Alge-ria. Europe’s own produc-tion of conventional gas is falling off. This is a signifi -cant development and it is no accident that EU gas im-ports increased by 13% in 2010. Shale gas provides a vague hope but its environ-mental impact and cost will work against it. Shale gas production can only start when gas prices are high, but Europe wants cheap gas.The assumption that gas will be in good supply thus looks doubtful, and if there is no surplus, the whole con-cept of liberalising access to the pipeline system makes no sense. The situa-tion is not as straightfor-ward or as optimistic as it might seem and the EU’s perseverance in forcing Russia out and towards other markets, primarily China, cannot but sur-prise.

Eugene Ivanov

ANALYST

DOWN WITH DICTATORS

THE POLLS

Enemies of Russia

70% OF RUSSIANS BELIEVE

THEIR COUNTRY FACES ENEMIES.

WHOM DO THEY FEAR THE

MOST? THE TOP FIVE:

SOURCE: LEVADA CENTER

Vladislav Inozemtsev

ECONOMIST

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31 MARCH 2011 Comment

President Boris Yeltsin is of our time. We don’t have the distance to

evaluate him fully, or une-quivocally. Many of my friends worked close to him as journalists or as speech-writers, interpreters and ad-visers. They remember how he spoke and how he moved, when he was rude, or crack-ing jokes, drinking cham-pagne and vodka. To some of us it seems only yester-day when he made his fa-mous pronouncements, in-cluding “Default is not going to happen!” and “I will lay down on the rail-road tracks if the prices go up!”I talked to him only once, in 1990. I was a young TASS reporter in Moscow atten-ding his meeting with a de-legation of the Polish par-liament. He had just been elected chairman of the Su-preme Soviet of the Russian Federation, and after the meeting I was supposed to get his clearance for my copy. Yeltsin said, “As far as I can see, you are an expe-rienced man [this was not true by any means]. It’s up to you to decide.” And then my hand disappeared in his giant grip as he shook it.I saw him speak at Moscow State University in 1988 and he seemed larger than life, just as everyone had said. Once I saw him give a bear hug to the Polish dis-sident Adam Michnik. And when Yeltsin was expelled from the Communist Party politburo I put his portrait on a bookshelf in our house. My wise grandfather threw it away with the reproach, “Don’t be an idiot, while they are fi ghting for power, you are taking sides.”Among my friends who worked with him, most say that he was a great states-man with enormous charis-ma. The best characterisa-tion came from Strobe Talbott, the Clinton admin-istration’s Russia man, who said Yeltsin had a volcanic

For taking tough deci-sions and staying the course even when it

was unpopular, Mikhail Gorbachev has earned his place in history. There are leaders who pre-sided over the renewal of their countries: Adolfo Suá-rez, Margaret Thatcher, Hel-mut Kohl, Ronald Reagan, Václav Havel. Then there are leaders who changed the world. Vladimir Lenin cre-ated the communist system that stood up to the West. Mikhail Gorbachev brought that system down.Between 1985 and 1990, Gorbachev showed that he was a different kind of So-viet leader. First, he recog-nised that the arms race was futile. He put forward the idea of a nuclear-free world, which resulted in the Sovi-et-American dialogue on nuclear disarmament and the signing of a treaty on the liquidation of medium- and short-range missiles. The two sides decided to de-stroy a class of weapons

ARCHITECT OF PERESTROIKA

did not give him much choice. I strongly support-ed his actions in 1993 against the attempted “mil-itary-fascist coup”, as the veteran politician Anatoly Chubais correctly said, that was staged by the Supreme Soviet. I understood the fra-gility of the economic model he built in the early 1990s and predicted the default of 1998 – a turning point for Russia and Yeltsin. After 1998, he was a differ-ent man, exhausted by po-litical struggle. He was not free of bad habits, and had a serious heart problem. He criticised America and ar-gued with his friend Bill Clinton. He was not the same man on whom we pinned our aspirations and expectations in 1987.In the manner of his resig-nation, Yeltsin again showed himself to be the man we used to know: a human being who was capable of a gesture, a step, a deed. He asked for forgiveness. That is something that not many politicians can do. I will re-member Yeltsin as someone who cared about his nation and as someone who always felt himself to be on the side of good, on the right side of history.

PeterCheremushkin

SPECIAL TO RN

LiliaShevtsova

SPECIAL TO RN

ON THE RIGHT SIDE OF HISTORY

character. He could be un-predictable, but his politi-cal instincts were without comparison on the Russian political scene. I have also heard the opinion that Yeltsin brought the coun-try to its knees with crucial mistakes, like initiating a privatisation process dur-ing which mobs and thugs

seized Soviet property. He also started a war in Chech-nya and brought into power as his successor “someone we won’t be able to get rid of for a long time”. But for me this is a simplistic view of the man.His supporters say he brought Russia freedom. Others say it was Mikhail Gorbachev who permitted freedom of the press, opened the borders, arranged the fi rst democratic elections, published Solzhenitsyn and refrained from using force against his opponents.The mid-1980s was a peri-od of expectation for the Russian people. Gorbachev looked like an unusual and promising man compared to his grey-faced colleagues. However, his goals were not clear, and it became obvi-ous that he cared much more about his Communist Party friends and his polit-ical ambitions. Yeltsin looked like a doer, a fi xer, like someone who was ca-pable of bringing real change. And he did. Yeltsin revised and changed the Communist ban on private property, his most signifi -cant achievement.Yeltsin did not make eve-ryone in Russia happy. Com-plicated ethnic confl icts in the north Caucasus – the af-termath of the Soviet na-tionalities policy and the result of a power vacuum in societies where feudal in-stincts were still strong –

that could have triggered a nuclear war. This decision was followed by negotiations on strate-gic nuclear arms reduc-tions, cuts in conventional weapons, and a ban on chemical, and biological weapons. Gorbachev’s dia-logue with Reagan on se-curity matters was not

merely an admission that the Soviet Union was no longer able to compete with the United States in the nu-clear arms race; he took the decision to stop maintain-ing a nuclear arms indus-try that had propped up the Soviet system.Gorbachev’s second great departure from his prede-cessors was his conviction that every nation is enti-tled to choose its govern-ment, a belief that was cru-cial in his decision to release

Peter Cheremushkin is an Interfax News Agency cor-respondent in Washington, DC.

Boris Yeltsin would have turned

80 on 1 February. Boisterous,

charismatic and controversial,

he left a huge legacy to the

modern Russian state and 14 more

independent republics of the former

USSR. Russia Now pays tribute to

the first Russian president and to the

last Soviet leader, Mikhail Gorbachev.

THE DUO THAT SHOOK OUR WORLD

eastern Europe from the Soviet grip. When revolu-tions swept across East Germany, Czechoslovakia, Hungary and Poland, their leaders made frantic calls to the Kremlin pleading for help, but Gorbachev re-sponded with a fi rm “Nyet”. Soviet troops were still sta-tioned in these countries, but Gorbachev did not want a repeat of the Prague Spring. His actions were crucial in reunifying the German people and return-ing the former Soviet sat-ellites to the European fold. Gorbachev buried the world communist system.By renouncing the Commu-nist Party’s monopoly on power and opening the fl oodgates for the freedom of expression, Gorbachev accelerated the disintegra-tion of the Soviet Union. True, he had hoped to pre-serve the country as a com-munity of allied states, but national republics were dis-tancing themselves from Moscow much too quickly for disintegration to be averted. Gorbachev let the Soviet Union evaporate and, probably without in-tending to, turned out to be a great reformer. The former Soviet president comes across as a dramat-ic personality fi rst and fore-most because after starting the country’s great trans-formation, he did not carry it through all the way to the end. He was the first man in Russian history to have left the Kremlin with-out clinging to power.History knows no reformer who managed to destroy an established system and build a new one in its place. Even today, Gorbachev's name evokes mixed feelings in Russia. No society has ever perceived reformers as heroes during their lifetime. Great politicians are rec-ognised for their achieve-ments only when they pass into eternity. Gorbachev, however, has become a monument in his lifetime. Gorbachev is his-tory. Having assured him-self a place in eternity, he remains a remarkable man of a calibre and personal-ity that are larger than life.

Lilia Shevtsova is a senior associate at the Carnegie Moscow Centre.

Yeltsin looked like a doer, a fixer, like someone who was capable of bringing real change.

He was the first man in Russian history to have left the Kremlin without clinging to power.

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31 MARCH 2011Features

BOOKS

IKEA’s man finds love in Russia

In times past, Russia never received especially good reviews from those in-

trepid travellers who jour-neyed here from the West. Their memoirs of Russia are rife with epithets like “wild and barbaric” or “mysterious and strange”. Centuries have passed, but the picture of Russia abroad remains essential-ly the same. “People in the West know astonishingly little about Russia,” writes Sweden’s Lennart Dahl-gren, who worked for close to a decade as the head of IKEA’s operations here. Dahlgren, too, has pub-lished a memoir: “Despite Absurdity: How I Con-quered Russia and How It Conquered Me”.This book, published last

year in Swedish and Rus-sian, contains nary a word about business. Its value is in something else, in its attempt to explain to the reader why it is best not to approach Russia with the standard set of myths and stereotypes. “Those who call them-selves Russia experts usu-ally don’t understand the fi rst thing about it,” Dahl-gren writes. “People who say they don’t know much about Russia come much closer to understanding it.”Thanks to Dahlgren’s book, Westerners can dis-cover what he learned: that, in fact, anyone can get what he wants from Russia, be it pleasure and entertainment, or fantas-tic profits, or a terrible headache. One thing is cer-tain: “You can love Russia or you can hate it, but you can never remain indiffer-ent.”“I know for a fact that I will always miss that crazy space full of love, without fully understanding why,” Dahlgren writes. “Russia is a drug and I’m addict-ed to it.”

Svetlana SmetaninaRUSSIA NOW

NIKOLAI ALENOVRUSSIA NOW

A half-century after Yuri Gagarin became the first human to orbit the Earth, Russia is re-energising its space exploration and cooperation programs.

Fifty years ago this 12 April, with a rousing cry of “Let’s go!”, cosmonaut Yuri Gagarin raced sky-wards on a Soviet rocket to become the fi rst human in space.Blasting off at 9:06am that sunny day in 1961, the 27-year-old son of a carpen-ter circled the Earth once on a 108-minute fl ight.“No one could predict what effect Gagarin’s fl ight would have on the world,” Alexei Leonov, a member of the original squad of Soviet cosmonauts, told Russia Now. The race to build the best spacecraft was “the fi n-est competition the human race ever staged”, he said.Space exploration has be-come increasingly co-op-erative since the end of the Cold War, especially with the ongoing assembly of the 18-country International Space Station (ISS). But on 12 April, Russians every-

Gagarin flight opened the heavensFifty years in space Honouring the man who launched humanity’s “finest competition”

where honour the space-faring legacy embodied by Gagarin. The young pilot tragically died in an air crash in 1968 while training for a second space mission. But even in a day of megastars, he re-tains his iconic status, “our fi rst envoy into space, a star of a man”, as Leonov de-scribed him. Now, as in the past, the re-solve to go to space comes right from the top.

“Space will always remain a priority of ours. This is not just somebody’s inter-pretation; it’s our official state position,” President Dmitry Medvedev told the ISS crew in a radio link-up on last year’s 12 April Cos-monautics Day.Russia’s $3 billion (€1.9bn) annual space budget can-not compete with NASA’s almost $19bn (€13.3bn). But Russia is a world leader in the commercial satellite-

On 9 March, the world's first cosmonaut would have turned 77

VLADIMIR RUVINSKYRUSSIA NOW

Still cloaked in secrecy, the ageing Soviet-era space training centre near Moscow is splashing out on a futuristic makeover.

The sheer density of deco-rated Heroes of the Soviet Union and Russia living here – around 40 bearers of this prized medal among a pop-ulation of 6,700 – attests to a cosmic array of feats per-formed over the years.Built in the 1960s and still not marked on any map, Zvezdny Gorodok, or Star City, a collection of hang-ars and Soviet apartment blocks hidden in the pines 25 kilometres north-east of Moscow, was the starting point for all of the country’s cosmonauts, as well as many foreign guest astronauts.And while it boasts a futur-

Star City bets on tourist roublesProfits in space Hidden cosmonaut training centre could become a new Monaco

istic set of space training equipment, entering the com-plex is like travelling back in time. Formerly designated 'Closed Military Township No. 1', Star City became a curious monument to Soviet architecture. “Nothing has been done here for 45 years,” Mayor Nikolai Rybkin says, adding that 5 billion roubles (€125m) are needed for major renova-

tions. The government has now promised the funds in addition to the 200m roubles (€5m) provided to spruce the town up for the festivities on the 50th anniversary of Yuri Gagarin’s historic fl ight. A former KGB colonel who was elected mayor in 2009, Rybkin has ambitious plans. As investors appear, he aims to turn Star City into a tour-ist attraction linked to the

capital by special train, with futuristic hotels, business centres and places of enter-tainment.“I want to see the whole place abuzz,” Rybkin says, citing Monaco with its lux-uries and low crime rate as a model.The transformation effective-ly began in 1994, when NASA was allowed to estab-lish a permanent presence at Star City. Since then, Ryb-kin concedes, income from wealthy foreign space enthu-siasts has paid salaries and has kept the city going.But Star City remains fi rm-ly committed to its original task, and it hums with ac-tivity. During a recent tour, visitors were shown a hang-ar containing replicas of the three-seater Soyuz space-craft that, with the retire-ment this year of the US shuttles, will be the only

A crew trains on a submerged model of the space station

launch market, which fur-ther helps to propel its space industry. Russia then hopes to establish a Moon base by 2030 and stage a Mars mission shortly after.When NASA’s shuttle fl eet is fully retired later this year, the ISS will be de-pendent on smaller Russian craft to ferry crews and sup-plies. As Russia forges ahead with its international part-ners, the vision for space ex-ploration continues to come into focus.“The future lies in co-op-eration,” Roskosmos space agency chief Anatoly Per-minov said. “Space explo-ration of the future means ... industrial production will be transferred from Earth and our unique planet’s bio-sphere will be cleansed and restored.”Half a century after he be-held the spectacle of our precious and fragile world from above, Gagarin would surely have applauded such a lofty goal. “Orbiting Earth in the spaceship, I saw how beau-tiful our planet is,” he said after touching down. “Peo-ple, let us preserve and in-crease this beauty, not de-stroy it.”

means of ferrying crews to the International Space Sta-tion. Two Russians and an American were training in the Soyuz simulator. Then there is the giant centrifuge, which can simulate not only G-forces but also weightless-ness, and a mock-up of the space station that can be submerged in a giant pool to simulate low gravity.The esprit of the space com-munity is tangible every-where. Photos of men and women who underwent training here line the halls, including Russians, Ger-mans, Vietnamese, Americans and Chinese. A triple “hoo-ray” thunders from one room as a Russian team marks a birthday, likely raising the traditional cosmonauts’ toast of “To a soft landing”. In a square outside stands a statue of Gagarin, in whose footsteps they all follow. And where, if Rybkin’s plans come to fruition, many more for-eign visitors will also tread as Star City prises open its doors to the outside world.

NIKOLAY KOROLEV

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