Wednesday, May 11, 2011
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NEWS IN BRIEF
Security The world is on alert after Osama bin Laden’s death, while one woman struggles to find peace
Kremlin Says Goodbye to Minister Chairmen Following promises to improve Russia’s investment climate, President Dmitry Medvedev has pushed for the removal of government officials from the boards of major corporations. Deputy Prime Minister Igor Sechin resigned as chairman of Rosneft, Russia’s largest oil company. Other top officials are expected to follow by July 1. Medvedev pointed out that people who will replace officials on company boards must be“impartial professionals respected on the market.”
Moscow Authorities Debate First-Ever Gay Parade
customers pointed and said,“Here comes the martyr.” The young woman said she prefers to stay at home,“locked between the four walls”of her apartment, rather than confront the accusing looks of strangers in this largely Muslim region of southern Russia. What has turned into a public nightmare for Zaira began more than a year ago after two women, also from Dagestan, blew themselves up on the Moscow subway last March, killing 40 and wounding more than 100 passengers.
After last year’s subway bombing at the hands of Black Widows, a Russian newspaper predicted which women from the Caucasus might be next. ANNA NEMTSOVA SPECIAL TO RBTH
Zaira, a petite woman living in Makhachkala, the bustling capital of the Russian Republic of Dagestan, recently gave birth to a boy. But outside her home, people think of her as a potential killer, not a mother. On a recent trip to a grocery store, she said,
The killing of Al Qaeda’s emissary to the North Caucasus, Abdullah Kurd, in a special operation by Russian forces last week, a few days after the killing of Osama bin Laden, was seen as an anti-terror coup. But it hasn’t helped Zaira, whose isolated life has been in a downward spiral for one simple reason: guilt by association. The women who carried out last year’s Metro bombing shared more than geography with Zaira. Like her, their former husbands were slain insurgents who had
battled Russian forces in the North Caucasus. A number of suicide bombers targeting Moscow have been the wives of dead rebels, leading to the term black widows. After the attack, Russian newspaper Komsomolskaya Pravda published the photographs of 22 actual and potential black widows, with personal information such as the districts in which they lived. The first portrait was of one of the Moscow Metro bombers.
Zaira, a widowed and remarried mother of two, prays at her home in Makhachkala, Dagestan, one of Russia’s restive Muslim republics.
CONTINUED ON PAGE 2
Regions The struggle to create jobs and bring revenue to the troubled North Caucasus
Tourism Where Terror Struck
Shunned by a Community, Marked as a Terrorist
In a landmark decision, Moscow city authorities recently gave permission for the city’s first official gay pride march, to be held on May 28. It was an important victory for the country’s gay community, said Nikolai Alexeyev, Russia’s top gay rights activist and the parade’s organizer. “The authorities must now ensure the security of the participants in line with the ruling of the European Court [of Human Rights],”Alexeyev said in a statement published on a community website, gayrussia.eu. However, authorities responded to the decision by adding that they were still studying the security situation. “Welcome to Russian politics,” Alexeyev added.
Jackson-Vanik amendment contested in court A lawsuit has been filed in the U.S. District Court for the District of Columbia demanding that the U.S. president annul the Jackson-Vanik amendment in relation to Russia. The plaintiffs, ex-Soviet dissident Edward Lozansky and his business partner Anthony Salvia, argue that the amendment, which was passed during the Cold War, lost its significance long ago and is now a serious hindrance to bilateral trade. Jackson-Vanik, which was passed by a majority vote and signed into law by President Gerald Ford in early January 1975, denied most favored nation trade status and the allocation of government loans to countries that didn’t recognize the rights of its citizens to emigrate. Russia has long been in full compliance.
IN THIS ISSUE OPINION bringing sorely needed employment, economic stimulus and a sense of purpose. For his part, Mr. Karsanov is determined to rebrand his native North Ossetia and turn the mountainous republic into a magnet for tourists. There is already a solid core of 100,000 visitors a year — mostly Russian, but including some 10,000 foreigners — and Mr. Karsanov wants to double the total by 2014. “I spend half of my time convincing investors we’re a good place to put their money, and the other half fighting red tape here on the ground,” he said, with the measured tone of a man on a mission. Mr. Karsanov, 43, spent eight years in London in the 1990s, running a consulting firm and attaining an M.B.A., before deciding to go back to his roots. After holding several posts in local government, he was tasked with nurturing regional tourism; he had developed a solid bank of targets four years before the federal model appeared.
A plan to tackle unrest in the North Caucasus by boosting tourism has many critics. RBTH joins one of its champions to see what is at stake. ARTEM ZAGORODNOV
The drive from Vladikavkaz airport into the North Ossetian capital passes through the village of Beslan and by the monument to 334 victims — more than half of them children — of the 2004 school siege that won the region global notoriety.“A horrific tragedy; several of my relatives are buried here,”said Oleg Karsanov, the republic’s tourism minister, as we pass by the graves, the nearby mountains obscured by overcast skies. Here, as in many parts of Russia’s troubled North Caucasus, one would expect the history of violence and horror to blight hopes of attracting visitors. But amid a wider $15 billion federal program to develop resorts across the entire region, presented by President Dmitry Medvedev at the Davos summit in January, tourism is now seen as a remedy for many ills,
RUSLAN SUKHUSHIN (2)
RUSSIA BEYOND THE HEADLINES
The monument to the victims of the 2004 Besland school siege (above), a tragedy that occurred in picturesque North Ossetia (below).
CONTINUED ON PAGE 2
Beyond the Reset U.S.-Russia relations need an economic backbone, expert says IN BRIEF
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A Russian soldier manning an anti-aircraft gun in North Ossetia during the August 2008 war in nearby Georgia. The sign reads: “Welcome!”
Oleg Karsanov sees huge tourism potential in North Ossetia.
Tourism Where Terror Struck The region’s grim legacy meant that his work was cut out for him.
The sins of the past In 1999, a bomb at the central market of Vladikavkaz left more than 50 dead; in 2010, another attack in the same location killed 19. The culprits were convicted and sentenced, but these blasts, along with the Beslan atrocity, caused lasting damage to the republic’s reputation. Moreover, image is not the only problem. “In Soviet times we got by pretty well as a transit point for tourists,” Mr. Karsanov said, steering down a valley between pristine snowcapped peaks. “Nowadays the places they used to go to, like Georgia and Abkhazia, are either an independent country or no longer popular. We have to be the destination, and that’s a lot harder.” The flow of visitors, however, is growing. Near one upscale hotel under construction, a tourist group from St. Petersburg was boarding its bus.“We’re here to ski,” said a tourist named Alyona. “So far it’s been fun.” Oleg Karsanov’s plan is twopronged: to build up basic infrastructure such as roads, plumbing and electricity via state grants, and to provide incentives for investors to open hotels and other amenities.“The infrastructure is the expensive part we have to take care of ourselves,”he said.“Nobody’s going to invest until it’s here.”
livestock like they did hundreds of years ago.” Meanwhile, his department is trying to get eco-tourism off the ground by exempting locals from taxes while they open their properties to paying guests.“Right now,” he said,“it’s just about letting people try to make an extra buck.”
The minister said he initially hopes for the support of the large North Ossetian diaspora in Russia and abroad, which includes such names as former national football coachValery Gazzaev and conductor Valery Gergiev. Rostislav Khortiev, 50, a businessman, has already taken the plunge, returning from Siberia three years ago to build a $2.8 million hotel project 75 miles from Vladikavkaz. Employing 35 people, the hotel hosts groups from across Russia on skiing and
Gokashnavili, a teacher in Vladikavkaz.“They’ve been talking about building something like Mamison since the ’70s, and now we have a bad reputation. People from the surrounding area might go, but not from Moscow.” Oleg Kalayev, first deputy prime minister of North Ossetia, ac-
The most ambitious element of the plan revolves around Mamison, a $1 billion ski resort under construction two hours’ journey southwest of Vladikavkaz. The completed site will have more than 60 miles of slopes of assorted grades at altitudes of 6,200 to 10,800 feet. “Unfortunately, there are still few — if any — world-class ski resorts in Russia,” Mr. Karsanov said. “Mamison will offer our countrymen the opportunity to experience world-class skiing without leaving the country.” There is stiff competition across the North Caucasus for a piece of the federal funding pie. But Mamison is the largest of five approved resort projects, and is slated to receive $600 million. Skeptics, however, predict that the program’s impact will be limited.“Building up tourism is a legitimate way of injecting money into the local economy and boosting other sectors such as construction, but it won’t resolve the problems it’s designed to fix,” said Nikolai Petrov, a security expert at the Carnegie Moscow Center. For the locals, seeing is believing when it comes to grand projects.“It all sounds a little utopia n t o m e ,” s a i d G a l i n a
“The infrastructure is [what] we have to take care of ourselves. No one’s going to invest before it’s here,” said Karsanov. fishing packages.“The local government helps a lot by not interfering with what I’m doing, which is very rare in Russia. I haven’t paid a penny in bribes,”Khortiev said.“But the federal government still hasn’t built all the infrastructure that was promised. It will only become profitable once a road is in place.” Another half-hour’s drive west lies the abandoned 14th-century farming village of Tsemeti, a cluster of stone temples and roads perched atop a hill a few hundred feet above the valley floor. “It’s a great place to make an ethnic village for tourists,” Mr. Karsanov said, beaming. “Most of these stone buildings are in pristine shape. I want to convince a few locals to move in seasonally, accommodate guests and raise
“I’m Convinced We’ll Have a LongLasting Peace During My Lifetime.”
RBTH spoke to North Ossetian President Taymuraz Mamsurov about Beslan, jobs and bringing peace to this troubled region.
Why would people choose to vacation in the North Caucasus rather than a region seen as more stable? It’s a psychological barrier we have to overcome, and this will take time. We can’t do this through a barrage of advertising; that would only have the opposite effect. What we need is for people to come, have a good time and recommend it to their friends.
Last year, Dagestan led Russia in the number of terrorist attacks: 68 people died and 195 were injured in 112 attacks, five of them committed by suicide bombers. Human Rights Watch reported 20
abductions and eight murders of fundamentalist Muslims by the police in Dagestan in the last six months of 2010. According to deputy prosecutor general Ivan Sydoruk, there
Have the upcoming Winter Games in Sochi affected the republic? Of course. We supply raw materials and construction workers. After the Games, we will receive one of the Sochi ice arenas. It’s not the Sochi Olympics; it’s the Russian Olympics. And we all have to do our part to make them great. Which sectors could drive the republic’s economy in the future? Metallurgy and forestry are obvious choices based on our natural resources. They provide the materials for construction and manufacturing, specifically road-building and furnituremaking. We also must learn to take advantage of our hospitality via the services sector. We’re investing resources and providing basic management training for our youth. Does North Ossetia still feel the wounds of Beslan? There are things that are hard to forget, there are things that are impossible to forget, and there are things
that shouldn’t be forgotten. Beslan belongs to the second and third categories. We always have to remember Beslan, even when so much time has passed that it seems like it couldn’t have happened. Do you think success of the North Caucasus tourism development program would decrease violence? I’m convinced we’ll have a long-lasting peace during my lifetime, but I wouldn’t connect this directly to developing tourism. What factors, then, will facilitate this long-lasting peace? The younger generation has proven itself remarkably adept at adjusting to new realities, utilizing its talents and maintaining honorable values. We have had groups of young people here from Chechnya, Ingushetia and Kabardino-Balkaria, and the positive interaction that goes on between their youth and ours is remarkable. This youth will lead us to a prosperous future.
were twice the number of terrorist attacks in 2010 than in 2009 in the entire North Caucasus. In 2011, Russian authorities have stepped up antiterror efforts, but aside from the high-profile killings of bin Laden and Abdulla Khurd, there is no sense that the insurgency is diminished. “To reform Islam in Russia, the authorities need to make an effort to listen to all religious leaders, and not just to the loyal ones,”said Lokshina. “The development of civil society institutions that would protect human rights is the solution to Dagestan’s partisan war.” Gennady Gudkov, a member of parliament and deputy head of the security committee, said leg-
islators need new political power to oversee counter-terrorism efforts by the country’s security services. Gudkov complains that parliament has no control over the National Antiterrorism Committee, the main agency charged with leading the campaign against terrorism, and can’t even get basic information. “We deputies are not allowed to investigate the committee’s work,” he said.“So it is a big secret what methods they are using to fight terrorism. We have no idea.” And the case of Zaira suggests that some of those methods may be counter-productive. Since her first husband was killed in the mountains six years ago, Zaira said she has tried everything to move on and build a new life. She remarried, had another baby and got a job. All of that collapsed with the newspaper list. Zaira lost her job as a cleaner at a store. She said she took her 8-year-old son out of a secular school, and enrolled him in a private religious school, after a teacher beat him for being a Wahhabi. The police, she said, frequently question her. “We wish we could fit in,” she said. “But we are being pushed out.”
IN THEIR OWN WORDS
On the Caucasus
Brutal methods and the lack of free space for alternative opinion or religious views push youth into the underground."
TATYANA LOKSHINA, MOSCOW OFFICE OF HUMAN RIGHTS WATCH
If I wanted to commit a terrorist attack, I would have not lived openly in Dagestan’s capital. I would not have enrolled my son in school."
The headline read: “1,000 widows and sisters of Dagestan guerrillas help terrorists.” Zaira’s picture was among the 22, an unmistakable accusation that she was a potential suicide bomber, someone to be feared and watched. “How reckless of them to put me on that list!” said Zaira, in a recent interview.“If I wanted to commit a terrorist attack, I would have not lived openly in Dagestan’s capital. I would not have enrolled my son in school.” In the last decade, Russia’s security agencies have tended to label all fundamentalist Muslims — called Wahhabis by the police, even though they do not always accept that term — as terrorist suspects. And the police have engaged in sometimes brutal tactics in an attempt to suppress a violent insurgency, acc o rd i n g t o h u m a n r i g h t s activists. “Your house gets burned, and you and your family may ‘disappear’ or be murdered,” said Tatyana Lokshina, Russia re-
searcher for the Moscow office of Human Rights Watch.“Brutal methods and the lack of free space for alternative opinion or religious views push youth into the underground.” Lokshina said that when the list of the so-called Wahhabi widows was released to the newspaper by police officials, nobody cared much about the women’s rights, or the effect such a branding might have on their lives. It was just another tactic in a dirty conflict, she said. But police insist they are fighting a deadly enemy across the Caucasus. In March, they arrested another young woman and alleged “black widow” in the Russian republic of Ingushetia. Fatima Yevloyeva, 22, was a sister of MagomedYevloyev, the suspected suicide bomber who recently struck at Domodedovo airport, killing 36 people in the arrivals area. Investigators say Fatima had traces of explosives on her hands; allegedly she helped her brother to build the bomb. Fatima’s husband, a suspected insurgent, was killed last summer.
According to Mr. Karsanov, the Sochi Olympic Winter Games in 2014 will help.“Not only will they show southern Russia in a more positive light, but more Russians will become interested in skiing, as happened in other countries,” he said.“And this will bring more tourists here.”
INTERVIEW WITH TAYMURAZ MAMSUROV
Shunned by a Community, Marked as a Terrorist CONTINUED FROM PAGE 1
knowledged the challenges. “When people look at a map and see we’re only ‘millimeters’ away from places like Chechnya, they are discouraged,” he said. “But when we had Western experts examine the location from a helicopter, they said that the potential was there.”
World-class ski slopes
CONTINUED FROM PAGE 1
ZAIRA, WIDOW OF SLAIN INSURGENT
Zaira walks the streets of her native Dagestan.
Anna Nemtsova is a Moscowbased correspondent for Newsweek magazine.
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Employment & Immigration Moscow has the highest percentage of well-paid expats in the world, but the good wages come at a price
RACHEL MORARJEE SPECIAL TO RBTH
Is your career going nowhere in NewYork? Perhaps you can move to Moscow and make a mint: A survey by HSBC Bank International has found that expatriates living in Russia are collectively the wealthiest in the world, with 36 percent earning more than a quarter of a million dollars per year. But trying to join their ranks may be harder than you might think. Fifteen years ago, young expats with a good head on their shoulders who landed in Moscow speaking reasonable Russian could take their pick of jobs. With the Russian economy growing much faster than those in the West, they could find themselves managing a company at a time when they might still be making coffee and photocopies in an office back home.Things have changed: Companies in Russia are increasingly hiring Russian managers to run their businesses, only recruiting expats for specialist roles. The opportunity at the junior and middle levels of management has been all but eliminated, and foreigners are now largely hired for these jobs only if they know how to live and work in Russia and speak the language, according to businessmen in Moscow. “I am a skeptic about hiring expats in Russia,” said Bernard Sucher, a senior banker and until recently C.E.O. of Merrill Lynch. “It used to be that you could more reliably depend on expats to understand what the end experience was supposed to be like.” That is no longer the case. A growing and sophisticated cadre of Russian managers who have worked abroad, or for foreign companies operating in Russia, are increasingly attractive to headhunters, thus vying for positions once held exclusively by expatriates. Igor Klimov, general director of executive search firm Acuris,
which finds managers for international companies in the consumer goods sector, said that it is much easier for Russians to build trust with both of expats in other employees and other Russia earn companies. “Expats are still needed in the investment field,” over $250 000 he noted, “but in the real econa year. omy we get almost no requests for expat managers.” Sucher said that the most sought-after employees are those Russians who have work in the worked abroad; they unfinance sector. derstand the demands of are male. the international market but are also adept at negoSOURCE: HSBC EXPAT tiating the cultural tides of EXPLORER SURVEY business. However, companies have to pay a sizeable premium to attract such Russians back to the country, and there are not enough of them to meet the demand for experienced The Russian capital retained its top managers across the economy.This ranking in HSBC’s “The Expat Exleaves openings for expats in key plorer Survey 2010,” which meaareas.“For instance,”said Sucher, sures living conditions of more than “a small company wanting to 4,000 expats around the world. transition to a medium-sized business will often find value in an expat manager who has walked IN FIGURES that walk before and has the skills to make it happen again.” For Russian firms looking for the stamp of respectability in international markets, expat hires are still key to reassuring foreign immigrants live in Russia permanentinvestors that the company is not ly, a total second only to the total in mired in corruption. the U.S. Most are low-skilled workers Before 2008, Russian compa- from nearby countries. nies looking to raise money through an I.P.O. or a bond deal needed lawyers trained in English law, said Nikita Prokofiev, a partner at Odgers Berndtson. Though such deals have slowed to a trickle, any company in Rus- of newcomers to Russia lack highsia wanting to meet internation- er education, which often prevents al compliance standards still them from successfully competing needs to hire foreign lawyers — in the labor market. although with fewer Russian companies raising money overseas, it is less important right now than it used to be. Said Prokofiev, “The real demand now is for Russian lawyers with international experience.” of Russians favor limiting immigraAs capital markets bounce tion, while only 26 percent favor back, the demand for foreign- easing rules for foreign workers. trained lawyers will pick back up, The main reason is fear of crime. and for those lawyers who do find work in Moscow, promotion can SOURCES: LEVADA CENTER; UNITED NATIONS
Moscow: No. 1 Wealth Hot Spot
Kremlin Throws Open Doors to Foreigners TIM GOSLING BUSINESS NEW EUROPE
Over the last year, legislation has been passed easing Russia’s immigration rules for highly skilled workers. President Dmitry Medvedev has said that Russia must modernize or die, and importing experience will help in this mission. Medvedev also hopes to help attract more foreign investment by making it easier to bring over managers and specialists. The development of high-tech industries has grabbed most of the business headlines in the last few months. While Russia deserves its good reputation for educating scientists, it lags behind in offering them commercial opportunities — and therefore loses many scientists to other countries. Reversing that trend is the driving principle behind attracting companies such as Nokia and Intel to Skolkovo,“Russia’s SiliconValley” just outside Moscow. The country also needs to attract experienced managers across its corporate sector to improve efficiency, productivity and
EDventure Holdings and an active investor in Information Technology start-ups in the United States and Europe. Companies in Russia wanting to attract such staff from abroad have to pay more, offer interesting projects and have a good reputation, she added. There is another reason that expats working in Russia, and especially in Moscow, receive higher salaries on average than anywhere else in the world. Bill Finn, chief financial officer at one of Russia’s largest vodka companies, pointed out that lots of money is spent on rent, international schooling for children and other expenses: “Moscow is one of the
be much faster than at home. “Many lawyers I know have told me [that] at home I would be one of a hundred people, and all the top seats would be occupied,”Prokofiev added.“But here, I am a star.” Another area where expatriate professionals can command good salaries and attractive packages is project management in the software sector. Russia has a wealth of highly trained software programmers, but project and business managers with more than 10 years experience are few and far between. “The Russians that exist in those arenas can have their pick of jobs anywhere,” said Esther Dyson, chairman of
most expensive cities in the world, and naturally this is why expats here get the most money. While they receive the biggest financial packages in the world, it doesn’t mean they walk away with the most disposable income.” So, while Russia may indeed have the best-paid expat jobs, those filling those posts tend to know the country well, speak the language or offer some unusual skill. Once Russian companies start to expand more overseas, there will be more demand for foreign managers, Klimov, from Acuris, said. Until then, however, Russia will not offer an easy opportunity for professionals looking for an escape.
Metropolis Russia’s capital a magnet for foreigners
12 million Moscow Is Now
Law Easing up on the paperwork
Immigration rules are relaxed for highly skilled workers as the Kremlin aims to attract scientists and managers from Europe and beyond.
View from a restaurant in Moscow City’s Federation Tower, a hub of the capital’s financial district.
innovation. A report from I.B.M. points out that while the quality of Russia’s scientific research institutions is among the best in the world, management schools rate poorly.This means that“skills are an obstacle for many Russian companies, with 59 percent reporting labor resources as a significant obstacle to development,” the report concluded. Foreign managers will be key then, as Lilit Geovorgyan of consultancy IHS Global Insight put it, because they “bring relevant
“Companies are looking for senior people with specific skills,” said headhunter Nikita Prokofiev. skills, since most of the companies envisaged to be the backbone of modernization are likely to be designed after Western prototypes specializing in cuttingedge high technologies.” The Russian government has imported immigration programs for qualified people from countries such as the United Kingdom, Canada and Australia. The new legislation transforms a Byzantine immigration procedure
into one of the easiest — for many skilled people, at least. Employees and their families who qualify receive a three-year visa rather than enduring a yearly trek home to reapply. They also gain the additional benefit of bypassing emergency income tax (30 percent for the first six months) and go straight onto Russia’s flat 13 percent rate. Perhaps the biggest bonus for companies is that highly skilled employees are now exempt from the Federal Migration Service’s annual quota on foreign employees. To contract foreigners who don’t qualify as highly skilled, companies must still apply for permission to employ from abroad in January. Headhunters such as Nikita Prokofiev of Odgers Berndtson said that Russian companies are now focused on importing only the most valuable professionals while filling most of their positions locally. “The market has evolved,” he said. “Now, companies are only looking for senior people with very specific skills.” And what is the definition of a highly qualified employee? It is simply someone who makes more than $67,000 a year. In contrast, salaries in the local market are still recovering from the economic crisis.
Europe’s Biggest City On top of that, about 1.5 million commuters pour into the city daily from the Moscow region, with an unknown but probably high percentage staying in the city for at least a couple days a week, Zubarevich said. Migrating and commuting pay off, even though traffic is a nightmare and affordable housing is in short supply. According to the State Statistics Service, the average monthly salary in Moscow stood at 38,200 rubles ($1,350) last year, almost double the nationwide figure of 20,300 rubles. Moscow will continue to attract migrants as long as living standards here remain far higher than in the rest of the country. Most state bodies, including the government, the State Duma and the Supreme Court, are situated in Moscow, as are headquarters of leading businesses, which seek proximity to the authorities. “Everything happens in Moscow, first and foremost in economic life,”independent scientific researcher Oleg Pachenkov said in e-mailed comments. “We need to change the situation in other regions to move the flow of migrants away from the capital.” He said authorities also need to improve Moscow infrastructure in order to prevent current suburbs from becoming slums and ghettos devoid of social life:“We must prevent neighborhoods from existing only for sleep or consumption, ensuring that they produce something — services, culture, social services — to make a living.”
Moscow’s population has swelled by 1.1 million people over the past eight years, mostly due to an influx of migrants attracted by higher wages. HERBERT MOSMULLER THE MOSCOW TIMES
The population of Moscow has grown from 10.4 million to 11.5 million since 2002, as provincial Russians and natives of other former Soviet republics have flocked to the country’s sprawling and chaotic capital, according to early census data. Moscow now boasts more than twice as many inhabitants as St. Petersburg, the country’s secondlargest city with 4.7 million, and almost eight times more than Novosibirsk, which ranks third with 1.4 million. Moscow is also Europe’s biggest city, well ahead of London, which ranks No. 2 with 7.7 million residents as of 2010. The population growth in Moscow was the biggest among all 83 regions of the country in both relative and absolute figures, said Irina Sherbakova, who heads the demography department at Moscow’s statistics service. The growth is not due to birthrates, which have remained lower than death rates for years — although births finally outnumbered deaths by a modest 4,000 last year. Said Sherbakova,“This is something that has not occurred since the 1990s.” The lion’s share of the population increase is credited to migrants. In 2010 alone, 126,000 newcomers were officially registered in the city. The actual number of people living in Moscow may stand at 13 million to 17 million if unregistered migrants are taken into account, experts said. Respondents were not asked about their legal status during the census, but many illegal immigrants likely refused to participate anyway, said Gavkhar Dzhurayeva, head of the Migration and Law Center, by telephone. There is no hard data on illegal immigrants in Moscow, but they are estimated to number several million. Natalya Zubarevich, a social policy expert with Moscow State University, put their number at 2 million to 3 million, while Dzhurayeva said they might be as many as 5 million.
There were more married men than women in Moscow in 2010, something that was the other way around eight years ago, according to census data. The odd situation may be due to the fact that many male migrants are married, but their wives and families reside in their home countries, said Sherbakova of the city’s statistics service. But she added that the migration of single female workers has increased recently. On the whole, female Muscovites outnumbered the males by 800,000 last year, up from 470,000 in 2002.This means that men only make up 46.3 percent of Moscow’s population. This is a general trend for Russia, however, and the disparity is more pronounced in many other regions. Male life expectancy in Russia is drastically lower than female — 62.9 years compared with 75 years. The figures are usually ascribed to rampant alcoholism among the male population, lowquality health care and poor workplace safety standards. Moscow actually fares somewhat better on this score than the rest of the country, with male Muscovites on average living for 68.5 years versus 77.2 years for females. Zubarevich credited this discrepancy to the fact that Moscow men are better educated and have access to better health care than their counterparts in other areas. Census data show that the capital boasts 2 million singles — which are, interestingly, evenly split between the two sexes.
While Moscow offers some of the best benefits for highly qualified foreign managers, finding a job has become more difficult in recent years.
For Skilled Foreigners, Nice Work if You Can Get It
Most migration to Russia consists of low-skilled labor.
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ECONOMY IN BRIEF
Agriculture State food security program attracts some eager investors from abroad
U.S. Cowboys Bring True Grit to Russian Ranch IN THEIR OWN WORDS
Some of the most fertile soil in the world is in this region... We’re talking about organic matter in excess of 12 percent. That’s unheard of where I’m from. We fight rocks, these people fight mud." DARRELL STEVENSON, U.S. RANCHER
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Cattle like we have cost from three to four thousand dollars for cows, and for bulls, six to eight thousand. At those prices, we can comfortably pay the bank and even make a profit [after selling the cattle]" SERGEI GONCHAROV, RUSSIAN PARTNER
The cowboys said that Montana cattle found Southern Russia’s climate surprisingly hospitable.
Montana rancher teams up with Russian businessmen to set up the Stevenson-Sputnik Ranch, a new agro-business, in southern Russia. PETER VAN DYK SPECIAL TO RBTH
Half a dozen cowboys sit around a long table in a newly built bunkhouse, waiting for lunch.They spent the morning in their usual routine — tending to a herd of 1,500 cattle — but the arriving food is a stark reminder they are not at home in Montana. “We eat a lot of beef,” said Darrell Stevenson, the U.S. rancher who teamed up with two Russian businessmen to set up the StevensonSputnik Ranch in theVoronezh Region of southern Russia. “One of the most difficult transitions for these cowboys has been the change in diet.” “Challenging is the best word,” Dan Conn said, halfway through a two-month stay. “Everything has been different — from the food to the culture to the facilities.” The land, about a two-hour drive south of the city ofVoronezh, is also different.“Some of the most fertile soil in the world is in this region,” Stevenson said. “We’re talking about organic matter in excess of 12 percent.That’s unheard of where I’m from.We fight rocks, these people fight mud.”
Now, the quality of the cows matches the quality of the land. Stevenson says his partners’ ambitions included importing “one of the top sets of Angus cattle in the world,” with full pedigrees going back several generations. The imported cattle cost roughly $7 million, and total investment in the ranch has been about $19 million, with around $15 million coming from a state-subsidized loan from Sberbank, Russia’s national savings bank.
“What Russia demands is live cattle,”Stevenson said.“Moving forward, this will be the nucleus for establishing a commercial beef cowherd in this region of Russia, and hopefully to extend further.” Russia imports 40,000-50,000 live cattle per year, according to U.S. statistics. The government wants to bring that figure down, and a Food Security Doctrine signed by President Dmitry Medvedev a year ago demands Russia produce 85 percent of its meat by 2020.
Sergei Goncharov, one of the Russian partners in the venture, said cutting imports is so important to the government that it subsidizes the project for one dollar to every three dollars the partners put into the project. They believe the prices the cattle will command mean the project will make money quickly. “Cattle like we have cost from three to four thousand dollars for cows, and for bulls, six to eight thousand,” he said — in part because the animals have to be flown or shipped in from Europe, Australia or the Americas. “At those prices, we can comfortably pay the bank and even make a profit [after selling the cattle].” Goncharov’s company, Sputnik, which is based in the Leningrad region around St. Petersburg, is already involved in cattle embryo transfer and in vitro fertilization. The company, it turned out, needed some management expertise as well.“They wanted the best of technology and resources,” Stevenson said.“But what I felt they needed was management, maybe more than the live cattle. The short-term goal is for full American support for two years, with the anticipation that we can then hand this off to the Russians.” Some of the farmhands have never worked with cattle before.
Russian Beef Consumption, Imports
But they aren’t letting that hold them back: After just a month on the job, a Russian named Leonid is calling himself a cowboy. “It’s the first time I’ve done this work,” he said. “I’ve only done it for a month, but it’s not bad work; it’s a good team.” The head vet, Alexander Naritsyn, admits that taking care of 1,500 cattle on the half-finished ranch would have been impossible without the imported help. After all, at the start of December there was almost nothing there. Now, more than 900 calves have been born on the ranch. “A big ‘thank you’ to the Americans, who brought us their horsemanship and lasso skills,” he said. “If not for them, we’d be chasing one cow for half a day; they can get them back in 10 minutes.” Stevenson recalled that the handlers at Sheremetyevo Airport could have done with that kind of expertise when one shipment of cattle was flown in from Chicago. One cow got free when they were being transferred from the 747 to the truck for the drive to the ranch. The airport was closed to planes for almost an hour until the runaway was corralled into a truck. Some of the Stevenson-Sputnik rancher may have started with little more knowledge of cattle herding than the Sheremetyevo cargo handlers, but Stevenson said they were keen to learn.“There were two or three of them on horses within minutes,”he explained.“I’m not sure if any had actually rode before.” Teaching their Russian colleagues how to take care of the cattle is the hardest part of the job for the cowboys.“All of us here are generational cattlemen, and to teach somebody who’s relatively new, who’s never been around more than a milk cow or a few pigs or sheep, is a big challenge,” he said. “The few that do work in will be very good, because they’ve had to overcome great boundaries.” Said Stevenson,“This has become about more than cowboys and cattle; this has become about two countries, two cultures. It’s an opportunity to educate, to stimulate a local economy, to expand a cowherd in order to feed a region, a nation, a part of the world that has the natural resources, that is completely capable of it.”
Banking A power play involving the Kremlin, Moscow city government and private banks unfolds
VTB Group Takes Over Bank of Moscow, Raising Its Standing DMITRY DOVLATOV SPECIAL TO RBTH
Bank of Moscow was set up in the mid-1990s as the pocket bank for Moscow’s City government. Following Moscow MayorYuri Luzhkov’s departure at the end of September, however, the bank’s future had been uncertain. The Kremlin made a move, and Deputy Prime Minister and Finance Minister Alexei Kudrin announced in November that VTB Group was interested in buying the bank. The state bank’sVTB-24 retail operation is already a leader in providing consumer credit and mortgages, but adding Bank of Moscow’s 500-plus branches would putVTB into a league of its own behind its sister, Sberbank, which has the lion’s share of Russia’s retail banking business. However, the deal didn’t go smoothly. At first the Bank of Moscow’s management said they were willing to sell their 20.3 percent interest toVTB. But things got ugly
after they brought a legal case in March to block VTB’s purchase of a small stake in the bank from Goldman Sachs and announced a rival bid for the City of Moscow’s stake in the bank. Bank of Moscow president Andrei Borodin found himself implicated in a $440 million corruption probe into the dodgy loans made to a property company controlled by
“Taking over banks that are clearly not run on commercial lines ... is, all said and done, a good thing,” said Roland Nash. Elena Baturina, Luzhkov’s wife and the richest woman in Russia.When he was called in for questioning in April, he fled to London and checked into a hospital for treatment. A week later, he agreed to sell his stake at what analysts report was belowmarket rates. The VTB takeover significantly increases the state’s share of the banking sector and follows closely on Sberbank’s takeover of Russia’s leading investment bank,Troika Dialog, in February. Both banks
have become noticeably more aggressive in building up their business following the 2008 crisis. Several foreign banks have already pulled out because of the growing competition; the latest was HSBC, which announced on April 26 that it was abandoning a two-year-old drive to build up a retail operation in Russia. “On the one hand, the state is making it more difficult for private banks to operate,” said Roland Nash, C.I.O. of Verno Capital.“But on the other, we are starting to see the beginning of badly needed consolidation in the banking sector. Taking over banks that are clearly not run on commercial lines but for the benefit of their owners is, all said and done, a good thing.” According to OlegVyugin, C.E.O. of the private MDM Bank and former head of the Federal Financial Markets Service, state banks are preventing the growth of private banks, which thanks to their quango (quasi-autonomous nongovernmental organization) status enjoy access to significantly lower borrowing costs than privately owned banks. According to Seija Lainela, an analyst with the Bank of Finland,
Bank of Moscow has been swallowed by state-backed VTB Group.
the recession was tougher for foreign banks that have only operated on the Russian market for a few years than for foreign banks that had established themselves in the early 2000s, during the period of rapid economic growth. Said Lainela, “Latecomer banks were hit hardest by the recession, as they failed to sufficiently increase market share to weather the crisis.” The Kremlin said that the increase in its share of the bank sector is temporary and that it is powerless to prevent it. “Technically, this deal has increased the state’s share in the banking sector, but the plan is to sell the state’s shares in [VTB and Sberbank] and increase the competition in the sector,”said Arkady Dvorkovich, economics aide to President Dmitry
LEV Y KORO NIKOLA
Chinese Investment in Russia’s Far East Find more multimedia
After a recently signed $370 million deal with the United States to supply 21 Russian-made helicopters to Afghanistan, stateowned Russian Helicopters has decided to float a $500 million initial public offering on the Moscow and London stock exchanges. The company was formed last year from 11 regional helicopter manufacturers in an effort to streamline production and development.The company produces a broad range of helicopters that serve as the backbone of both Russia’s military aviation and oil and gas industries. One of its models, the Mi-26, is one of the largest and heaviest helicopters in the world currently in service. It weighs an estimated 50 tons. With the Russian armed forces expected to replace around 1,000 Mil-family helicopters in the next decade, Russian Helicopters hopes demand for its I.P.O. will be high. The company plans to use the money to pay off debt and purchase smaller manufacturers, Chief Executive Dmitry Petrov said in a statement.
PayPal Strategically Enters Market American online bank PayPal has shrugged off fears of corruption and will enter the burgeoning Russian online payments market. Russia has one of the fastestgrowing Internet markets in the world, and the number of subscribers has been exploding over the last three years. The number of people connected to the Internet is doubling about every 18 months, and experts say it will reach about 50 million people by the end of 2011. However, the growth of online shopping is proceeding much more slowly, as it remains very difficult to pay for goods. In 2009, the leading online payment systems, Yandex Dengi and WebMoney, accounted for more than 90 percent of the Russian market of e-payments, according to the Electronic Money Association — so PayPal has some catching up to do.
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As the hunger for raw materials grows, so does impetus for growth in some of the country’s most remote territories
Russians Slowly Turning to Whiskey
A recent takeover has some analysts worried about increasing state involvement in banking sector, while others suggest it will reduce corruption in the sector.
Russian Helicopters Launches I.P.O.
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Medvedev.“ The other side of the coin is that the state can’t restrict Sberbank’s place in the market — as how can we say to the minority shareholders there is a cap on the bank’s ability to compete?” And the state has been busily selling shares in both banks.VTB group raised $8 billion with an I.P.O. in May 2007 by selling a 22.5 percent stake, and the bank sold another 10 percent in February raising another $3 billion.The state has said that it wants to sell another 10 percent as soon as possible. Likewise, the government owns 60.25 percent of Sberbank, and shortly after the purchase of Troika Dialog, Russia’s National Banking Council signed off on a decision to sell another 7.58 percent to the public — probably later this year.
After being ranked among the heaviest drinkers in the world, largely thanks to a palate for vodka, new data suggests Russians may be gradually shifting their loyalty in favor of whiskey. “Gin is down, tequila is down, cognac is static, but whiskey imports are growing,” Erkin Tuzmukhamedov, a leading sommelier and whiskey lover, told The Moscow Times. “It was the only spirit to continue to grow during the crisis, and it accounts for about two-thirds of all spirit imports.”Whiskey imports steadily increased in recent years, while vodka sales have dropped. However, Russia remains the world’s largest spirits market, consuming 275 million nine-liter cases in 2009, according to the Scotch Whisky Association. Domestically produced vodka accounted for 229 million of those cases.
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Money & Markets
INTERVIEW ARKADY DVORKOVICH
All Bets Off as Black Swans Come Home to Roost
The Rocky Road to Economic Health
Ben Aris SPECIAL TO RBTH
et us take an esoteric look at how quantum mechanics and math puzzles relate to investment, now that the abstruse has just invaded our daily lives — in the form of the earthquake and tsunami in Japan. These occurrences constitute a Black Swan event, or something that has an extremely small chance of happening, and so governments and investment bankers spend very little time thinking about or planning for them.
WITH WTO MEMBERSHIP BECKONING, RUSSIA IS STEADILY GEARING UP TO MEET INTERNATIONAL ECONOMIC COMPETITORS HEAD-ON
One of the main complaints of foreign investors is that the Russian state plays too big a role in the economy. What is being done to reduce its share? We have already agreed to sell off state-owned stakes, but it is a question of timing. However, it is clear that eventually we won’t need state participation in most sectors. [State-owned retail banking giant] Sberbank is a special case, and we need to be careful as it has a big social component. Gazprom, too, and [the state-owned rail monopoly, the federal power grid company and the oil pipeline monopoly] are also all special cases — but everything else, like VTB Bank, does not need state participation. Still, the market will only bear so much, and we can’t sell all these things at once. A year ago there was a string of opinion pieces calling for the ‘R’ to be removed from the acronym BRIC. Certainly Russia is the least loved of the four emerging market powerhouses. Do you think that is fair? China and India are a lot bigger than Russia, and that is important to investors. They have a
total of 2.5 billion people compared to Russia’s 142 million. Russia is better compared to Brazil, where the size of the population and the technological level are similar. But the expectations for Russia are much higher [than for Brazil], as we are treated like a European country and we need to reach the same level of comfort for foreign investors. So, yes, that is fair. We are a European country and we should have the same standards. There is a lot of talk about reforms, but why are they going so slowly? The reform drive has slowed as there is a lack of focus. This is such a big system that, if people know there is a political focus on an issue, they follow up on it. But if not, then they go back to doing the same things they did before the reform. There are some regions that are already very active and have been very successful — Kaluga [home to one of Russia’s main car production clusters] and [the autonomous region of] Tatarstan are good examples of active and progressive regions. A huge responsibility rests on the governors and mayors of regions. We need to introduce best practices across Russia, but we cannot impose this top down. We could do more to make this work, but we are not like [such progressive former Soviet republics as] Georgia or Estonia – both those countries are smaller than most Russian regions.
We are very poor at assessing how likely the very unlikely is — and it happens more often than we expect.
Arkady Dvorkovich AGE: 39 HOMETOWN: MOSCOW
Arkady Dvorkovich graduated from Moscow State University with a degree in economic cybernetics, received a Master of Economics degree from the Russian School of Economics and an M.A. in economics from Duke University in North Carolina. From 2001–2004, he was a deputy minister for economic development and trade, and, after serving in Vladimir Putin’s administration, was in 2008 appointed as presidential aide and Russia’s G8 sherpa by Dmitry Medvedev.
One of the biggest complaints about Russia is the high level of corruption. Has any progress been made in the anti-corruption drive? The anti-corruption drive works, and the trend [towards improvement] is there. There has been a positive change, but it will not be finished in a year. Bribes are going up, but that is partly because people who take bribes can see it is not going to last too long. They want to catch the “last train.” But this is a systemic issue. This is not just a bunch of criminals: corruption exists at all levels and comes back to the state’s involvement in the economy. If we can
Arkady Dvorkovich is one of the faces of Russia’s liberal reform program and, as an aide to President Dmitry Medvedev, is in a position to make a difference. Here, he discusses the economy, the crisis and how corruption has affected Russia’s progress.
reduce this, then the potential for corruption will also fall. Corruption is connected to the preferential treatment that state-owned companies receive. The government just signed off on a round of big investment deals with many of the world’s leading automotive producers, who have agreed to significantly boost production. Is Russia ready to compete head-tohead in the global car market, assuming Russia joins the W.T.O. and import tariffs are lowered? We hope to attract new investment to Russia, and this is not just assembling [cars]. I am not sure that this can be achieved just by raising tariffs, because it is about increasing the quality of the investment climate. We are not quite ready to compete head-to-head with international producers, but the WTO includes a seven-year transition period, and that is enough to be ready. Big companies like [Lada maker] Avtovaz and GAZ are still not competitive, so we need these seven years. We also need good strategic investors. With more than $600 billion in hard currency reserves going into the crisis, it seemed the government thought it could bail out the whole economy.However,Russiawasbadly
mauled. As the crisis recedes, what will be the biggest effects? If this had been a local crisis, we would have had enough money to deal with it. But it was a global crisis, and we couldn’t deal with that. The conclusion is that we need to change the structure of the economy and not repeat the same mistakes. One of the main problems we face is that people don’t realize we are already competing globally. But now, after the crisis, people are starting to understand this. They realize that we can’t rely on our own market. The share swap deal between BP and Russian oil major Rosneft ran aground when the Swedish Arbitration board froze it amid a dispute over BP’s shareholder agreement with its Russian joint-venture partner in TNK-BP. Will the government lean on this partner, the AAR consortium, to resolve the matter? Clearly this deal began with a legal risk, and everyone knew before the deal was done [that there was an issue with the shareholder’s agreement]. But we hope the parties will find a compromise and the partnership will not be entirely broken. Prepared by Ben Aris (Russia Beyond the Headlines)
Investment “Hot cash” flowing into emerging markets could derail growth
E.T.F.s Offer Russia Quick Money, New Investors and Volatility While E.T.F.s offer a quick in-andout for investors interested in emerging markets, they also make those countries more susceptible to sudden shock. CLARE NUTTALL BUSINESS NEW EUROPE
Emerging markets are hot — partially because they have rebounded strongly from the global stock market meltdown of 2008. After ignoring the rise of fast economies for much of the 1990s, mainstream investors have woken up to the huge gains that can be earned in a relatively short time from these markets, and have turned to the exchange-traded fund (E.T.F.) as their vehicle of choice.But long-term investors in the biggest emerging markets warn that these funds are effectively“hot money”and can destabilize the fastest-growing stock markets. Russia’s stock market has been the star performer this year, but as the economy is highly dependent on oil, analysts worry that the increased importance of E.T.F.s means any correction could be sudden and sharp. The appeal of E.T.F.s is that, unlike a mutual fund, these funds are traded on an exchange and can be traded like a stock. That means investors can get in and out of a fund instantly. But, like a mutual fund, the underlying fund is based on a basket of stocks that give the diversity that is the cornerstone of any long-term investment into a risky asset class.They also have low costs and a beneficial tax status.
“In many ways, the parallel development of exchange-traded funds and the investment case for emerging markets has been a happy coincidence,” said Chris Weafer, head of strategy at UralSib in Moscow. “E.T.F.s have enjoyed a huge wave of interest from investors wanting to tap into high-growth markets, as they can offer broad exposure or drill down into specific areas.” Few would have thought that emerging markets would be beneficiaries of the flight to safety trade, but that is what has happened as developed markets bury themselves in a deep debt hole. Emerging market investments have done very well over the last two years, and Russia’s market has been one of the best performing in the world, up about 150 percent in 2009 and 22 percent in 2010. Most 2010 gains were made in other emerging markets, but Russia is the best performing BRIC market this year, up 15 percent over the first three months of 2011. The leading RTS index passed the psychologically important 2,000 mark in March, as the valuation of Russian stocks overtook their precrisis highs for the first time in two years; the RTS is expected to pass its all-time high of 2,487.92 later this year. “E.T.F. investors continue to increase exposure to Russia. Notably, almost all inflows into Russia funds came from country E.T.F.s, a continuation of the trend of large inflows into country E.T.F.s that began late last year,” said Weafer.
But thanks to the stock-like nature of E.T.F.s, fund managers say, they add to the volatility by acting like“hot money”— highly speculative investments looking for a shortterm gain. The point was brought home in mid-March, when all stock markets in all emerging markets experienced a sell-off as developed markets started to showed signs of revival. “The Russian market is currently standing apart from this trend. As a difficult emerging market, Russia received a disproportionately low share of the portfolio investment that fled the West following the credit crunch. Having absorbed much
less Western hot money, Russia has been less susceptible to the profittaking and the more general sentiment shift away from EM and back towards the developed world,”said Liam Halligan, chief economist of Prosperity Capital Management, a dedicated Russia fund. The silver lining in the rise of E.T.F.s is that as a mainstream investment vehicle, the word“Russia” has entered the lexicon of the financial advisors who sell funds to the small investor and the more conservative institutional investor. “E.T.F. inflows [to Russia] reflect the fact that Russia is now being increasingly cited among main-
Global equity market performance: Feb-March 2011
stream professional investors as a market with good prospects during 2011 and beyond,” said Halligan. It is an education process that will ultimately benefit everyone, but in the meantime, investors are expecting a choppy ride as worries over turmoil in the Arab world and, subsequently, international oil prices dog fund managers. If the E.T.F.s take fright at falling oil prices, their collective exit could cause a sharp correction in Russian share prices. Said Weafer, “These fund flows are very sensitive to oil and other commodity price trends. That sustains a positive backdrop for Russia and Brazil for now, but increases the risk of greater market volatility when commodity prices stabilize or fall.” In a worrying early sign, Market Vectors Russia exchange-traded fund, the biggest U.S.-listed Russian E.T.F., sharply increased its short selling of Russian funds at the end of February, according to Bloomberg. Short sellers sell borrowed shares, hoping to buy them later at a lower price and return them to the lender. Other investors point to the stillcheap valuations: Russian stock valuations on a price-to-earnings base are the lowest among 21 major emerging markets, according to Bloomberg.“Russia is in pretty good shape at the moment,” said Julian Mayo, a London-based money manager who helps oversee about $3.5 billion in developing nations at Charlemagne Capital Ltd. and has “overweight” holdings. “I think it will continue to outperform.”
The Japanese authorities had contingency plans — but none anticipated an earthquake and tsunami, a nuclear plant’s cooling system being washed away and its reactors approaching meltdown all at the same time. It’s an understandable mistake: Our lives are, for the most part, a succession of ordinary days. Summers are hot, and the train to work comes at 8:17. The term“Black Swan”speaks to the danger of assuming that everything stays the same. The swan was used in a famous inductive reasoning example: “All swans are white” was a universal truth, as each swan ever seen was white — until a Victorian explorer found a black swan in Australia. We are very poor at assessing just how likely the very unlikely is, and the unlikely happens a lot more often than one might expect.This is neatly illustrated by the birthday problem in mathematics: “How many people do you need in a room so there is a 50:50 chance two were born on the same day?”The intuitive answer is 183 (i.e. half of 366, which covers every day of the year plus one). The actual answer is only 23 people. Without getting into detail, the reason is that you have to calculate the chances of an identical birthday for each person individually and sum all the probabilities up, rather than dividing the chance for the group as a whole by half. It is the interconnection between each and every variable that is important — and hard to see. These add up rapidly in complicated systems, and what should be extremely rare events happen surprisingly often. Investors know this as “tailend risk,” which you can price and sell. Nassim Taleb, the author of the bestseller The Black Swan, has made a fortune sell-
It is the interconnection between each and every variable that is important — and hard to see. ing options on tail-end risks. His point is that the straight-line inferences most traders make — based on the news of A leads to B leads to “buy” — is meaningless, so he sells bets on very unlikely events. These do not come up often, but they do come up more often than most people expect, making Mr. Taleb a very rich man indeed. There remains a conviction that, given enough information, an analyst can say for sure what will happen next. The trouble is that the world doesn’t work like this. Quantum mechanics show that the universe is intrinsically unpredictable, as enshrined in the Heisenberg uncertainty principle. You cannot know anything precisely. Emerging-market investors are a good deal better at dealing with black swan events, as they are used to this unpredictability. They focus less on risk and more on growth and opportunity because, unlike their peers in the West, emergingmarket investors are not surprised when something goes wrong. Ben Aris is the editor-in-chief of Business New Europe magazine.
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A Word about RBTH from the Editor born in Russia, and my first words were Russian. But having grown up in Alaska, and then Ohio, I had never really experienced the place. My colleagues in the United States worried about me.They still saw Moscow in black and white. They were afraid that the Moscow editors would want to publish stories about “Russia As We
Artem Zagorodnov EDITOR
hen I was asked to move to Russia from the United States to edit Russia Beyond the Headlines (RBTH), I threw myself into this tremendous opportunity. I was
Like To See It”as opposed to“Russia As It Is,”the tumultuous country that absorbs and intrigues. The typical reporting on Russia tends to focus on a few celebrities and major geopolitical forces. But the job of RBTH is to report the human side of a country in the middle of a massive and historically unprecedented transformation. The real story is the
think of as an advertorial — that chronicles political and social changes, the rise and fall of civil society, as well as talented personalities and everyday heroes. Four years ago, RBTH began its American journey with The Washington Post. During my tenure as U.S. editor, we have commissioned reports on the resurgence of drugs pouring out of Afghanistan and the strange saga of secret cities. We have featured Russia’s best literary lions, such as Dmitry Bykov and Ludmila
daily lives of people as they work to build a future out of what they inherited from the old system. In my conversations with the publisher, Eugene Abov, it became clear that he had great ambitions for this publication: to make it a scintillating conversation, a salon for intellectuals and opinion makers and a venue for great reporting from the field. Our goal is to realize an ambitious package of aggressive reporting and diverse opinion — the opposite of what most people
MOVING BEYOND THE RESET Eugene Ivanov SPECIAL TO RBTH
As long as there is little economic foundation to U.S.-Russia relations, a “bad” event could throw them back to “pre-reset.”
way for significant improvements in its relations with NATO and some of its member states, Poland in particular. Equally important, the “reset” has changed the very tone of U.S.-
Russia dialogue and created conditions for its further advancement. It is time now to view the “reset”not as an end in itself, but, rather, as a mean to advance an agenda in U.S.-Russia relations.
THE START OF A NEW WORLD ORDER? Fyodor Lukyanov SPECIAL TO RBTH
he West’s response to every BRICS summit scarcely varies. The first reaction is to dismiss it as an artificial organization with no future, because its member countries have practically nothing in common. The second reaction is anxiety, because the policies of its members are in opposition to those of the United States. These two reactions contradict each other, because if BRICS is a phantom organization, what does the West fear? What has particularly raised eyebrows among Western commentators in the wake of the world financial crisis is Russia’s presence in the BRICS: What can a com-
modity-oriented state with uncertain prospects for modernization contribute to a group of “future leaders?”Indeed, Russia is a bit of an odd man out: Its rate of growth is far below that of China and India. More important, Russia faces problems that are totally different from those in other BRICS countries. In spite of the others’ impressive growth rates, they remain developing countries; Russia is a developed country that has lived through an unprecedented period of decline and degradation and is now trying to bounce back. The challenges the BRICS members face are therefore similar in some ways and different in others. Any arguments against Russia would be more legitimate if the discussion was exclusively about economics. But obviously the member countries see the BRICS
structure above all in political terms. This reflects the objective need for a more diverse and less Western-oriented world order.The institutions that have been functioning since the Cold War are unable to provide answers to the multiplying problems of the 21st century. New arrangements have not taken shape, and the countries that are unhappy about the situation are not trying so much to find a replacement for them as to find ways around them. A multipolar world needs formats other than those that catered to a bipolar world. It is no accident that BRICS declarations occasionally question the legitimacy of the existing system. Don’t keep your fingers crossed, however, for any reform of the United Nations Security Council; the current permanent members are
To create such an agenda won’t be easy. The Cold War might be officially over, but fighting its ghosts is still a popular business on both sides. Although the emotional disdain many folks in Moscow harbor towards the notorious Jackson-Vanik amendment is understandable, focusing too much attention on its repeal is a distraction: A relic of the past that long outlived its usefulness, the amendment, as it legally stands, is completely irrelevant. Moreover, some analysts even argue that the emphasis on arms control — the principal
not going to share their privileges with anyone — and this applies to Russia and China, which are BRICS members. All five BRICS countries feel that the West has virtually monopolized global discourse. That is not only at odds with the economic and even political alignment of forces, but prevents new decisions from being made. All five members are aware that their attempts to increase their international weight and influence exclusively within the existing structures are doomed. Brazil, Russia, India, China and South Africa are seeking to bolster their negotiating position during the time when a future world system is being created. The fact that they represent parts of the world that are becoming more and more significant lends more weight to their aspirations. For Russia, which has been searching for a foreign policy identity since 1991, the BRICS idea has come in very handy. It would be hard to find another format that would encourage a non-Western orientation in foreign policy, remind the world of Russia’s global ambitions, and stress the country’s similarity to states that are world leaders in
BLACK AND FOREIGN Jonathan Fianu SPECIAL TO RBTH
ecently, a reader of my blog, “Brave New Russia,”wrote me an e-mail asking what life was like on the ground for a black person in Russia, and if there was any truth to some of the stories about rampant racism she had heard in the United States. Her son had studied Russian and was very interested in visiting Russia, but she was concerned about this issue. I knew that the issue was important; after all, it is normally the first question that pops into people’s heads when they hear that I work in Russia. But usually they ask something else. This particular question is generally left unspoken, or rather unasked. I know people are thinking about it, and I know people want to ask me, but they rarely do so. It might be the reserved nature of my English friends and colleagues, but I think it goes beyond that. It is viewed as bad form to come out and ask it directly. Fortunately, I
am generally upfront about such things and usually address the topic myself; once this Pandora’s box has been opened, a whole host of other topics comes up. One of these is the story of Jean Gregoire Sagbo, the African councilman in Novozavidovo who became the first elected black politician in Russia last summer. His story echoes another that recently came to my attention — that of Peter Bossman, a Ghanian doctor who became the mayor of the small seaside town of Piran, Slovenia. Bossman has been called the “Obama of Piran,” and Sagbo also acquired the nickname “Obama”, but these sobriquets are only relevant in the sense that these men also represent a changing reality. Sagbo has lived in Russia for more than 20 years. He is married to a local woman, he is wellliked, he is a naturalized citizen and he has done a lot for the community with his own money. He is Russian. Why does the color of his skin make his election so strange? Because old stereotypes about Russia are not in line with
the current reality. I feel honored that I am able to dispel these views with stories from my own experience. In my experience, Russians are some of the most welcoming and accepting people around. As a black person in Russia, I have not only gone about my business unaffected; I have been embraced, welcomed and treated exceptionally well — even on par with being a celebrity in the smaller towns. Many people do
As a black person in Russia, I have not only gone about my business unaffected; I have been embraced. not know this, but African students have been coming to study in Russia for decades. In fact, there is one in Chistopol, near Kazan, where I live. One day, I was speaking to one of the directors in the local Vostok watch factory and he affectionately told me how he sold watches to this
gentleman, who was training to be a doctor, and how he has been accepted. Of course there are incidents of racism in Russia. I can say with certainty that they do occur, although I have not experienced any myself. I have experienced only one racist encounter, and that was when I was at university in York, in the north of England. There are pockets of racism everywhere, and I believe that Russia should be given the chance to be viewed on an equal plane. U.S. Secretary of State Hillary Clinton and Russian Foreign Minister Sergei Lavrov pressed the reset button between the United States and Russia some time ago, and this was a brilliant gesture. People outside of Russia should also press the reset button in their minds when they think of Russia in terms of cultural acceptance. Russia is doing its part. With the Sochi Winter Olympics, the recent Formula One deal and now the 2018 World Cup, Russia is making sure it takes advantage of as many opportunities as possible to show
didate for such a “bad” event is a collapse of Russia-NATO negotiations over European missile defense. True, the disagreements between the two sides are fundamental in nature.Yet, it is also true that today no one expects the negotiating parties to agree on every minute, technical aspect of the future ABM system. What is really needed is a political decision to cooperate, a decision that can be formulated in language that would be palatable to domestic hawks on both sides of the Atlantic. The difficulties in formulating an agenda for long-term cooperation between Russia and the United States are also exacerbated by the uncertainty caused by the approaching election season in both countries. This highlights yet another shortcoming in the current structure of U.S.-Russia relations: its heavy reliance on governmentto-government contacts. In order to ensure long-term stability in the relationship, the RussianAmerican dialogue must be spread in all directions, starting at the very top and extending to business-to-business, civil society-to-civil society and personto-person levels. Eugene Ivanov is a Massachusetts-based political commentator who blogs at The Ivanov Report.
ometimes political projects are like children.You anxiously watch them; you worry about their future; you try to protect them from failure. And then, boom: You realize that they are grown up and you have to figure out what is next in your life. The much-discussed “reset” in U.S.-Russia relations appears to be one such project. Announced by the Obama administration two years ago, the “reset” was carefully scrutinized by supporters and opponents alike. And then, all of sudden, the consensus is that we are already beyond“reset,”and a new, “post-reset” agenda for U.S.-Russia relations is needed. It is the “reset” that has to be credited with two major bilateral agreements: the new strategic nuclear arms reduction treaty (New Start) and the civil nuclear cooperation agreement (the“123 Agreement). For the United States, the “reset” also ensured Russia’s cooperation on Iran’s nuclear program and Afghanistan, whereas for Russia, the “reset” paved the
topic of the Moscow-Washington dialogue in the Cold War era and since — distorts and, ultimately, slows down U.S.-Russia relations by shifting attention and energy from other critical issues. While, again, Moscow’s frustration over the seemingly endless process of its W.T.O. negotiations with Washington is understandable, the issue of W.T.O. accession, completely tactical in nature, should not deflect attention from a much more serious problem: the anemic state of U.S.-Russia economic and trade cooperation. Any future strategic discussion must focus on what prevents both countries from investing in each other’s economies (beyond the current meager $7-8 billion per year) or diversifying their trade (beyond energy and metal industry sectors). The importance of the economic component of U.S.-Russia relations is impossible to overestimate. In fact, until and unless the relations are based on a solid economic foundation, there will always be a chance that a “bad” event could throw them back to a “pre-reset” misery. At the moment, the best can-
Ulitskaya, on our pages. We report from St. Petersburg, Dagestan and Abkhazia, the republic that broke from Georgia. Two years ago, there were three editions; now there are twelve more. We celebrate our new relationship with the New York Times and our debut in the national print edition. This honor renews our commitment to tell great stories. We hope you come away from this first edition with a clearer sense of the Russia beyond the headlines.
terms of economic growth. An additional benefit is the group’s principle of nonconfrontation; all the BRICS members strongly deny that their organization is directed against anyone. But whatever the talk — and even the thinking — in the BRICS capitals, it stands to reason that increasing the influence of one group of countries can only happen at the expense of diminishing Western influence. Certainly that is not necessarily bad if it happens in an evolutionary way. The objective reality is that the
the outside world its level of modernity and open-mindedness. Whatever your color or creed, I believe Russia holds as much promise as any other country. I believe there will be more people like Sagbo to come, and in case you think this is not possible, consider how many people of color are in the British parliament. Prime MinisterVladimir Putin touched on stereotypes about Russia in his speech in Zurich after his country won the right to host the 2018 World Cup. He said something to the effect that there are still a large number of Soviet-era stereotypes prevalent in the minds of people in the West, and once these people have the opportunity to visit Russia, they will see Russia for what it is: a welcoming country that is continually modernizing. I have worked with Russian companies since 2006 and I have lived in Chistopol since 2008. All I can do is speak for myself and comment on what I see from a cultural perspective, and I not only see change, but I realize that it was there long before I arrived. Jonathan Fianu is director of the C.I.S. division of Blue Sky Laboratories Ltd., a U.K.-based startup incubator.
world needs a new balance, and this calls for encouraging the rise of new centers. If one group seeks to retain its privileges and other groups quietly work to erode them, the world will definitely experience a new upheaval. The world order that would emerge from it would depend on the outcome of that upheaval. The criteria would be clearer, but the price would be dear. Fyodor Lukyanov is chief editor of the magazine Russia in Global Affairs.
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Arts Film and literature focus on fallen oligarch Mikhail Khodorkovsky’s fate
From Oil Tycoon to Imprisoned Muse
The new film “Khodorkovsky” traces the oligarch’s transition from a young communist to Russia’s richest man.
Directors and writers have turned their attention to Mikhail Khodorkovsky as a subject, an inspiration and, more recently, a colleague. ANNA NEMTSOVA SPECIAL TO RBTH
During the first few moments of the movie “Khodorkovsky,” the screen remains black. Then, a narrow blue band widens, revealing two oil pumps in the middle of a snowy desert in Siberia, arms swinging like those of a huge clock, ticking off the minutes. The film, a sleeper hit that was warmly received at last month’s Berlin International Film Festival, got much bigger play after it was stolen from its director’s office before a small screening.
It has been seven years since oil tycoon Mikhail Khodorkovsky, at the time the richest man in Russia, was arrested in Novosibirsk Airport on charges of fraud. Since then, his fate has intrigued creative minds and intellectuals around the world. Long-term imprisonment has turned Khodorkovsky from a Russian businessman into an iconic subject. While many of Russia’s oligarchs ignored or broke poorly enforced laws to amass their riches in the 1990s, only Khodorkovsky was arrested, his advocates said, because of his growing interest in the political opposition. Fate has also transformed this one-time oligarch into a philosopher and writer; he has been ac-
In Russia — whose history is saturated with stories of political repressions, exiles and arrests — many writers have personal associations with and motivations for getting involved in or staying out of politics. For acclaimed Russian novelist Lyudmila Ulitskaya, Khodorkovsky’s fate has become entwined with her own. The two jointly received a literary prize for their letters to each other, which were published in independent newspaper Novaya Gazeta. Ulitskaya’s grandfathers spent more than 20 years in jail between them; her friends from the ’60s were imprisoned, as well. She approached Khodorkovsky as a subject emblematic of the throes of life in Russian society and as an archetype of its literature.
cepted by Russian artists not only as a subject but as a colleague. His prose, published in magazines and a few opposition newspapers, explores the meaning of justice, the decay caused by corruption, and endurance during what seem to be hopeless moments. In creating the film, director Cyril Tuschi spent five years traveling and speaking to Russians, and he said he is “overwhelmed by the aura of a martyr” surrounding Khodorkovsky. The German documentary was released soon after a Russian court sentenced Khodorkovsky and his business partner, Platon Lebedev, to six more years in prison. The trial added to the relevance of the recent proliferation of Khodorkovsky-themed literature and art.
Drama Moscow theater scene expands beyond Chekhov and Stainslavsky
Theater Comes Up From the Underground Moscow’s theater movement, “New Drama,” challenges Russian audiences with gritty realism and gains a cult following. EMMANUEL GRYNSZPAN SPECIAL TO RBTH
On an intimate black-box stage, actors read their parts from scripts in their hands. Slowly, the reading turns into performance, tension building as they transform into characters — four young and aimless drunkards. The audience appears shocked and amused by the crudeness of “Life Smiled At Me,” which employs language previously unheard in Russian theaters. A cluster of young Russian playwrights armed with razorsharp tongues and a penchant for realism is bringing a new dynamism to the country’s theater with its movement called“New Drama.” Their themes are gritty, and they are attracting daring talents and lively audiences.
Theater.doc, which produced “Life Smiled at Me,”is best known outside Russia for performing a play about the life and death of the lawyer Sergei Magnitsky — who died brutally in a Moscow Detention Center last year — giving a voice to civil discontent. The group also performed a play based on Internet reaction on chats and message boards to the school siege in Beslan. “Life Smiled at Me” has been awarded a Golden Mask Award. The Golden Mask Theater Festival is Moscow’s premier theater event and runs each year from March to April, closing with a showcase for cutting-edge work, called the Case Festival. Some foreign theatergoers are under the impression that the nation that gave the world Chekhov and Gogol may be resting on its laurels. Whatever collapse of creativity may have occurred in the 1990s has been replaced with an emerging theater scene wor-
thy of Konstantin Stanislavsky himself. Contemporary is a word that reappears like a leitmotif in discussions with these playwrights. Ukrainian playwright Natalia Vorozhbit offered this definition of New Drama:“These are people who write about the contemporary world with a contemporary outlook and language. We are not afraid of provoking. Our writing must be emotional.”While Russian actors are often criticized for overacting, there’s nothing like that in the New Drama movement.
The Magnitsky play is more the exception than the rule. In spite of the dissent at the core of the movement, its writers, so far, reject open confrontation with the establishment. “Politics doesn’t interest me; I’m a woman,” Vorozhbit said awkwardly. Then, after a pause, she acknowledged:“Some part of me feels ashamed for not writing on this subject. In fact, without having really discussed it between ourselves, I think we consider the topic too dirty to mention.” The idea seems paradoxical, given New Drama’s fearless treatment of taboos (at least in Moscow’s theaters) such as drugs, prostitution and homosexuality. New Drama has increased its productions at an astonishing rate of one to two new productions per week, carried out with absolutely zero financial backing. New Drama observers believe that the movement is growing at a fevered pitch.
Not About the Politics Don’t go looking for politics in most of these dramas, however.
“Theaters are suffocating under the old plays. But they slam the door,” director Marat Gatsalov said.
A Cult Following
Alexandra Rebebok and Danil Vorobyov in “Life Smiled at Me.”
Every night, roughly 30 theatergoers enter the tiny basement of “Theater.doc,”which already has a cult following in Moscow. There is a bit of a conspiratorial feeling inside, and a chemistry occurs between the actors and the the audience in the spare atmosphere. But the artists would like access to larger venues. Marat Gatsalov is one of the movement’s leading directors. “Theaters [in Moscow] are suffocating under the old plays,”he said.“But they slam the door in our faces.” Mikhail Uganov, another New Drama director, said,“The Golden Mask Festival understands we are the future. We don’t have access to big state theaters in Moscow for one reason: Their directors are old. In the provinces, our plays, my plays, are already on the stage of the big theaters.”
Boris Akunin, one of the most published Russian writers, once compared Khodorkovsky’s imprisonment with Andrei Sakharov’s arrest and exile in Gorky, now Nizhny Novgorod, in 1979. Nobody then would believe in positive changes in the Soviet Union where an academic was kept in exile, the writer recalled. But all it took was one phone call from Mikhail Gorbachev for people to believe in the possibiity of change. “Until Khodorkovsky is out of jail,” said Mr. Akunin, “all the beautiful words about civil society, independent courts and the struggle against corruption will be taken as empty.” Soon after the court’s new guilty verdict, which followed 22
months of hearings. the most famous Russian prisoner had his own literary debut: a collection of his articles, interviews and dialogues. Back in the 1990s, a popular satirist and playwright, Victor Shenderovich, associated Khodorkovsky with a long list of Russia’s richest men.“As soon as he went to jail, his real fate began to lead him,” Shenderovich said. “Today, Khodorkovsky is our barometer of change: The day he is free, the world will know that new, better times have come to Russia.” In Russia, the price for exploring injustice and corruption can be high, according to writers: The journalist Anna Politkovskaya, the human rights activist Natalya Estemirova and the lawyers Stanislav Markelov and Sergei Magnitsky are becoming accepted among writers as symbols of people who lost their lives in the struggle for truth and justice. Perhaps out of respect for Anton Chekhov’s traditional idea that the main character of any play based on a real person has to either leave Russia or die, neither Shenderovich nor any other Russian writers have so far made Khodorkovsky the hero of a play. Nevertheless, his fate continues to bring more activists from Russia’s most prominent cultural elite into a tight community.Writer and internationally recognized artist Yuri Rost said he went to Khodorkovsky’s trial to look at the man in the glass cage and see “real courage.” Tuschi, the German filmmaker, said he was intrigued by the story of Khodorkovsky’s defiance, the courage of a man who could have chosen political asylum in the United States, but instead returned to Russia, on his private jet, knowing he would go to the gulag. The German film looks at how money and prison can transform a personality. In an animated scene from Tuschi’s film, Khodorkovsky swims across a pool full of oil and golden coins. He seems to be sinking. As he approaches the pool’s edge, there are fewer coins and the water begins to clear: Khodorkovsky appears to swim again. Anna Nemtsova is a Moscowbased correspondent for Newsweek magazine.
THE QUEEN OF HORROR Nora FitzGerald SPECIAL TO RBTH
nna Starobinets explores children with disturbances so deeply horrifying that only her elegant prose and stunning talent for suspense can coax a faint-of-heart reader to finish the compelling but revolting lead short story, “An Awkward Age,” in her collection of the same name. Starobinets, doe-eyed and diminutive, has emerged as Russia’s Queen of Horror, though her literary prowess has also elevated her work to the elite category of intellectual fantasy. Born in 1978, she is also a well-known journalist. She is indeed a singular talent, though it is unclear that the translation of her first collection will bring her a foreign audience. The central character in “An Awkward Age” (Hesperus Press), Maxim, metamorphoses into something demented. He is much darker than Frank, the child in Iain Banks’s controversial debut novel,“The Wasp Factory.” Just as mental illness begins to explain Maxim’s evil deeds, the story veers into visceral horror. Still, Maxim’s wretchedness is not utterly unsympathetic. Like other Starobinets characters, he is spawned in an oppressive and unhappy atmosphere; his parents appear to at least enable his metamorphosis. His mother stands by haplessly as he turns inward, except to threaten others. Maxim gets fat and ugly. Insects travel up his nose. He eats other kids’ lunches. He hoards sugar. He tracks
his sister’s menstrual cycle. His mother finds his diary, a revelatory piece of poetry tracking the sickest of minds and the disintegration of a personality. The story“The Rules”starts out simply enough, with a child who has obsessive-compulsive tendencies. Again, Starobinets shows a deft understanding of the plodding, day-to-day strategies and reasoning of the mentally ill. Many kids have times when they have to repeat words or count, believing that if they don’t something awful will happen. But something awful does happen to this little boy, and a voice in his head tells him that“the rules”are about to get much more complicated. It is a voice to chill a reader’s heart. Mental disorders and illnesses are a motif explaining away only some of the misfortune, tragedy or evil of these stories. But there is something else that smells bad in the fridge (in one story, the main character falls in love with bad food from the refrigerator).Yet illness does not explain the depths of the hideousness. There is a theory that a family’s anxiety, helplessness and anger can hide and fester in a vulnerable family member — the one who gets sick, or even becomes a monster. It is in this way that Starobinets looks at society itself. So, is Starobinets more than a horror writer? She has been compared to Stephen King and even Kafka. Her stories communicate something urgent through schizophrenic characters in anti-fairy tales. The reader does not always understand what is real or imagined, only that neglect is never benign, in a family or society, and that all monsters come from some mother’s womb.
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Advertising Moscow is blanketed in a sea of advertising well beyond the established norm of most cities Audio slide show at www.rbth.ru
walks. Legislation has been proposed in the State Duma, the lower house of parliament, to impose large fines to stop the practice.
Apartment dwellers in the dark
is the value of Russia’s outdoor advertising market, up 18 percent from 2009.
200 acres, or about 100 soccer fields, is the total area of Msocow’s outdoor advertising space.
ALEXEY MAISHEV (3)
Even some marketers feel Moscow’s advertising boom is out of control, as demonstrated by this billboard outside St. Basil’s Cathedral.
Turn left at Toyota, go past L’Oreal, then make a right at Pepsi Twenty years ago, a sign on top of a building would display an exhortation to work harder. But today even advertising executives decry the visual chaos.
ed into visual chaos. Moscow is drowning in advertising — legal, illegal, on roofs, on sidewalks, straddling streets, and down the sides of high-rises.
How to reform visual blight
SPECIAL TO RBTH
The new city government, which took over after long-term mayor
It looks like evening from inside the T.G.I. Friday’s restaurant on Pushkin Square, even though it is daytime. Despite plenty of windows, the sun doesn’t come in. Two sides of the early 20thcentury Constructivist building are covered in an advertisement for a Sochi ski resort. Across the street, a building is shrouded on two sides with an advertisement for Chanel. Huge, pulsing neon ads top buildings around the square. Twenty years ago, a sign atop a building would display a Soviet exhortation to work harder, but today advertising is taken to such an extreme that even business executives say the city has descend-
Mikhailov, an advocate with the architectural preservation group Archnadzor.“It is all because of a desire to get the most money out of every square foot in the city.” In Pushkin Square, Moscow’s equivalent of New York’s Time Square, the senses are bombarded by ubiquitous ads, huge video
screens and rows of banners across streets that create a tunnel of ads above the traffic. “Advertisements have conquered civilization,”Albina Kholina wrote in a Russian literary journal. She compared the banners to“underwear drying on a balcony.” Many of the ads are illegal. Last
January, the city took down 33“pirate”ads, but the lack of concrete action against those who put them up has fueled more suspicion of city corruption. Maxim Tkachev, the head of News Outdoor, one of the biggest players on the market, said he and other companies have the“feeling that the city is not interested in transparency and order” in outdoor advertising. “The flagrant breaking of federal law and Moscow rules, and selective application of them, has created the visual chaos that we see now,”Tkachev wrote in a comment sent to RBTH. He pointed to the fact that one apparently illegal ad was situated directly opposite the Moscow City offices. News Outdoor claims that a crackdown on illegal ads alone would cut advertising by 20 percent. The previous city official in charge of supervising outdoor advertising was arrested and charged with corruption; his case is still pending. But one expert is optimistic about the city’s plans under Sergei Sobyanin, the new mayor. “The first step has already happened around the Kremlin and the Novodevichy cemetery,” said Andrei Beryozkin, head of EsparAnalitik, which analyzes outdoor advertising in the city. Still, it is an ongoing battle. Last summer, even the ground was covered with ads as companies used graffiti-style tactics to cover side-
Officially, two thirds of an apartment building’s residents must give permission before advertising can drape their home, and the money made from renting out a facade is supposed to go to building repairs. Residents of a building on the elite street Kutuzovsky Prospekt who found their light blocked by an Infiniti car ad were not compensated. “Our flats are in semidarkness during the day and a bright electric light flows in the window at night,” they wrote in a letter to President Dmitry Medvedev last year, which claimed that the advertisers were paying $1 million a year. Ultimately, residents in that building — where Soviet leader Leonid Brezhnev lived in the 1970s — succeeded in getting the ad removed. But pity any apartment owners near Smolenskaya Square, where the Golden Ring hotel turns its 23-floor facade into a hyperactive neon light show every night.“It’s tacky, annoying and it can’t be good for the environment,” said Masha, a resident. The city vowed that future funds from ads will go toward repairs and restoration of the buildings they are hung on. “The problem is not just the ads,” Mr. Mikhailov said. “It’s the fact that the city does not have a concept of how the city should look.” He added that there is an official city artist, an official architect and committees responsible for city planning, but there is no visual plan for development. “I would just like to see the city that I live in,” wrote Ms. Kholina, who said the change in the city becomes apparent when residents give directions:“Turn left after Toyota, there you will see L’Oreal, and after Pepsi turn right … for the house where Sony is.”
News Outdoor said that a crackdown on illegal ads would cut advertising by 20 percent on its own. Yuri Luzhkov was fired last year, has vowed to reduce outdoor advertising in Moscow by 20 percent by the start of 2013, and city officials want much of the historical center cleared of ads. “Historical buildings should rule, not ad constructions, in the central postcard area with its panoramic views,” said Konstantin
Tverskaya Street in downtown Moscow has been overrun with a barage of advertising.
Tourism A crash couse in the history of Russian warfare from the Battle of the Neva to Victory in 1945
Military Moscow: From Tank to Tomb PHOEBE TAPLIN SPECIAL TO RBTH
Every May 9, a parade celebrating the end of World War II marches and rolls across Red Square and through the main streets of Moscow.Last year’s parade, marking the 65th anniversary of Victory Day, was the biggest since the Soviet era and included British, American and other foreign troops, as well as a huge array of military hardware. But you don’t have to visit the city in May to see tanks and uniforms: Reminders of the Second World War (or Great Patriotic War, as it is known in Russia) are spread across the city — such as the Tomb of the Unknown Soldier below the Kremlin walls.
Park Pobedy Memorial Complex The extraordinary scale and diversity of buildings spread across
only military-themed subway station: The most spectacular is Komsomolskaya Metro station on the ring line, whose gold-backed mosaics provide a crash course in the history of Russian warfare from the medieval Battle of the Neva to the victory in 1945.
Park Pobedy (Victory Park) are commensurate with the unparalleled Soviet losses during World War II. Symbolism is rife: The soaring 142-meter obelisk in front of the Victory Museum devotes 10 centimeters to each day of war. A bronze statue nearby portrays St. George slicing up a swastikacovered dragon. Inside, the Hall of Sorrow is hung with 26,000 crystal teardrops to symbolize the 26 million Soviets who died in the war. The Hall of Fame at the top of the oak-leaf-bedecked staircase is decorated with plaster reliefs of the “hero cities.” and is used for military graduations. The park contains open-air collections of military vehicles, submarines and tanks, as well as a memorial church, synagogue and mosque.
Subway Stations The shiny Park Pobedy Metro station, designed like much of the complex by sculptor Zurab Tsereteli, boasts Europe’s longest escalators. But it is not the city’s
Central Museum of the Armed Forces This huge museum, near the new Dostoyevskaya Metro station, surveys a dramatic century of history. Its 800,000 exhibits include dioramas of the civil war, the wreckage of an American U-2 spy
plane and the actual Nazi banner captured by the Red Army outside the burning Reichstag. A T-34 tank and missile flank the museum’s entrance, and its courtyard is full of missile launchers, tanks and helicopters. To the delight of visiting children, climb-
Key Attractions MEMORIAL COMPLEX AT PARK POBEDY 3 PLOSHCHAD POBEDY, 142 4185, METRO PARK POBEDY TUE.-SUN. 10 A.M.-6 P.M.
CENTRAL MUSEUM OF THE ARMED FORCES 2 UL. SOVETSKOI ARMY, 681 4877, METRO DOSTOYEVSKAYA WED.-SUN. 10 A.M.-5 P.M. › http://www.cmaf.ru/eng/index_eng.htm LORI/LEGION MEDIA
Reminders of Moscow’s military history make an interesting program for tourists throughout the year, not just on Victory Day.
MUSEUM OF MOSCOW DEFENSE 3 OLYMPIC VILLAGE, MICHURINSKY PROSPEKT, 430 0549 TUE.-SAT. 10 A.M.-6 P.M.
Park Pobedy (Victory Park) is situated atop Poklonnaya Hill.
ing on these machines is allowed. The star-shaped, flag-topped Red Army Theater towers above, while Yekaterininsky Park next door is dedicated to war veterans.
Museum of Moscow Defense This museum is dedicated to the Battle of Moscow, which took place during the harsh winter of 1941. Compared to the gargantuan Park Pobedy, it feels almost intimate, but by any other standard it’s still huge. The larger exhibits include parachutes, train carriages and dirigibles. There is even a German motorbike parked among the familiar propaganda posters (including“The Motherland is calling you”and“We will defend Moscow”). There are also more personal possessions, letters and photographs. In a trunk full of children’s toys and books, a message in pencil reads “Mommy, take me home. It’s bad here.” A hand-painted Christmas postcard is inscribed“To Father at the Front: Daddy, beat the fascists.” Learn more about May 9 at www.rbth.ru/9may
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Published on May 9, 2011