Russia Now by Russia Beyond

Economy

Opinion

If you ask an oil driller, Russia’s economy is in the pink. But manufacturing is limping along at pre-crisis levels

Has the Ukrainian leadership blundered by trying to shift the economic blame on to Yulia Tymoshenko?

PAGE 5

PAGE 6 getty images/fotobank

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

Distributed with European Voice

THURSDAY, 27 october 2011

viktor bogorad

Politics From customs union to continental bloc: How serious is the Putin plan for a united states of Eurasia?

Big idea launches Putin campaign Soon after announcing his plan to return to the presidency, Vladimir Putin dropped what many observers see as a large hint about a major focus of his term in office. vladimir frolov

reuters

russia profile

In an op-ed for the daily Izvestia Russian Prime Minister Vladimir Putin called for a Eurasian Union of post-Soviet states. Putin’s idea is geared towards building a viable common market of some 180 million people, starting with the three member states of the new customs union – Russia, Belarus and Kazakhstan

The once and probable future president surveys his sphere of influence.

– and gradually expanding into a common economic space including Tajikistan and Kyrgyzstan. Putin looked further ahead to eventual monetary and political union modelled on the EU. Many analysts pointed to the timing of Putin’s article as a hint that gathering together the former Soviet lands under Russia’s leadership would feature in the presidential campaign next spring he is strongly favoured to win. And while the notion of a ‘Soviet Union lite’ remains popular among ordinary Russians, many have also questioned Putin’s priorities, arguing that Russia has

much more pressing problems at home. In many post-Soviet states and the West, meanwhile, Putin’s ambitious plan has been taken as evidence of Russia’s neo-imperial ambitions. In Russia, some analysts cited the move as a sign of Moscow’s increasing pragmatism in dealing with the former Soviet states. Putin argued that the Eurasian Union would be a bridge between the EU and the dynamic economies of East Asia, but gave no details of how this could be achieved. see viewpoints, PAGE 7

Profile Putin’s original tandem partner

Foreign affairs Economic diplomacy inside

Kudrin: The last reformer

Putin & Co. all smiles after talks in Beijing

The long-serving finance minister returns to private life with a sense of a job well done – and one very powerful enemy. Grigoriy Naberezhnov RUSSkiY reporter

“A while ago someone put the question to me: ‘So what is your official title now?’ My answer was simple: head of the Faculty of Liberal Arts and Sciences at St. Petersburg State University,” Alexei Kudrin says, smiling widely.

Many were surprised when Kudrin joined the university in June: why was the minister of finance taking on all this extra work for himself? In the wake of what happened later, it looks as though Kudrin had planned his departure from the government. And why become a university administrator? “The country is badly lacking in people who know how to think outside the box and how to come up with new ideas,” he says.

It goes without saying that Kudrin is one of these people himself. Twenty years after the fall of the USSR, the last reformer has quit government. His resignation a month ago represents the end of an era for the liberal camp, and although his solutions were often inconvenient and a bitter pill for the people and the ruling elite to swallow, no one can deny his dedication. continued on PAGE 3

Russia is increasingly looking eastward for partners in economic and modernisation projects. Tai Adelaja

russia profile

Russian Prime Minister Vladimir Putin led a powerful delegation of corporate executives to China on 11-12 October. Experts saw the trip as a sign that Russia is trying to reduce its dependency

on sluggish European energy markets and is looking for opportunities in Asia to hedge its bets. Putin’s visit came amid a flurry of pre-election preparations at home, prompting experts to suggest that the Russian premier is set to place more emphasis on trading relations with the Asian giant in the near future. continued on PAGE 4

Arms sales All over for the Kalashnikov? eCONOMY

page 5

Heritage Moscow’s Seven Sisters

Features

alamy/legion media

page 8

Politics

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Elections A report on the mood in Russia as the parliamentary and presidential election season begins

Voters content with one-party rule After four years of economic turbulence and international confrontation, Russians are showing scant interest in voting for change.

The Russian way of politics

heidi beha

russia now

After a flurry of activity over the summer, culminating in the rapid rise and meteoric flameout of magnate Mikhail Prokhorov’s political prospects, public interest in the campaign for December’s elections to the State Duma has dimmed. The entrance into the political arena of Prokhorov, one of the country’s richest men, cast an unusually glamorous tinge on the l ack lu s t re ca mpaign. Prokhorov took charge of the small, liberal-minded Right Cause party in June with big promises: He wanted not only to be elected to the Duma, but to join the next government. He said Russia should join the European Union and promised huge increases in the average wage. Less than two months later, he had lost the party leadership after a dispute with the presidential administration, which had previously supported the party. Once tipped to gain 15% of the vote in December, Right Cause is now polling at 3%, far under the 7% threshold required to enter the Duma. The high threshold is one reason why the political party landscape in Russia changes at a glacial pace. Eight parties are expected to compete for seats in the Duma, but an August survey by the respected poll-

The head of state holds most of the reins of power in Russia’s presidential-parliamentary system, and the next president will enjoy a longer term in office, six years rather than four as previously. A person may only be elected president for two successive periods of office. Renewed candidacy is possible after

a break. To participate in the next State Duma, a party must win at least 7% of the vote, compared with 5% in the last general election in 2007. The second chamber of the Russian parliament, the Federation Council, consists of two members from each federal subject. Half of the

members are representatives of regional governments appointed by the president, and half are elected by regional legislatures. The formation of the government is not dependent on the distribution of seats in the Duma. The president nominates the ministers, except for the prime minister,

ster Levada Centre indicates that only two have a strong chance of joining the ruling United Russia in the next parliament: the Communist Party (18% support) and the nationalist Liberal Democrats (13%). The fourth party represented in the current parliament, Just Russia, was slightly under the threshold at 6% support.

Another reason the Duma fails to capture the public’s imagination is that responsibility for forming the government rests primarily with the president, not the parliament. Voters also know that United Russia is a near certainty to command a majority in the next Duma similar to the 70% of seats it has in the outgoing one. That is sufficient

for the party headed by Vladimir Putin to pass constitutional changes.

A rubber-stamp house?

Critics see an analogy between United Russia and the Communist Party in the Soviet period, because the ruling party does not face any real opposition. The periodic alternations of power typical of many

who is chosen by the Duma. The president must work with the Duma in order to pass legislation. Bills approved by the Duma must go through a second reading in the Federation Council. If the Federation Council rejects a bill the Duma can override the second chamber with a two-thirds majority.

Critics say United Russia resembles the pliant Communist Party of the Soviet era. Western democracies are almost out of the question. Some observers argue that the close links between business and the state also

act to freeze out political newcomers.“Anybody who is successful in Russia is as a rule also a party member,” political scientist Alexandra Gluchova says. This year the dominance of United Russia could be even greater. Twenty-five percent of slots on the party’s electoral list are reserved for members of the All-Russia People’s Front, an initiative of Putin’s to bring like-minded civic organisations and individuals into the party’s orbit. “The biggest problem of the political system is that there is no communication between members of the Duma and the electorate,” comments Natalia Zviagina from the election-monitoring organisation Golos. There is a lot of coverage o f P r e s i d e n t D m i t ry Medvedev and Putin, but people are not informed about the work of the legislature, Zviagina says. Turn-out is predicted to be 61%, which would be slightly lower than in 2007. “People are afraid to lose what they have. That is why they will vote for United Russia again,”Gluchova says. Since the economic hardships of the 1990s, Russians have seen a period of stability and increasing welfare under Putin and Medvedev. Many are thus disinclined to take political risks.“The consequence is a petrification of political culture and debate,” Gluchova adds. The voters are less interested in debates and party programmes than in image and quick decisions.“People don’t put their faith in institutions, but in personalities,” Gluchova says.

Main contenders in the December parliamentary elections

Discover a whole new world

recommends...

Find out the frequencies in your area

http://english.ruvr.ru

Don't miss our "Photo of the day" on Facebook!

www.facebook.com/russianow

C O N TA C T U S : F o r p a r t n e r s h i p o r a d v e r t i s i n g c o n t a c t s a l e s @ r b t h . r u

ribe c s Sub

EU-Russia december summit: A trinity of the relations www.rbth.ru/russianow

to our weekly newsletter www.rbth.ru/subscribe

ph. +7 (495) 775 31 14

November 24

Politics

Kudrin: The last of the reformers steps down continued from page 1

Kudrin came into politics riding the coattails of reformer Anatoly Chubais and of Vladimir Putin. Before Putin came to power, Kudrin followed Chubais first to the St. Petersburg city administration, then on to the presidential administration and the Finance Ministry. The young economist rose quickly.“At this time no one had any practical experience. To rule a new country it was better to have no experience of the old regime,” says Kudrin’s former classmate and close friend, economist Dmitry Travin. It was at St. Petersburg city hall that Kudrin got to know Putin. And when Kudrin and Putin moved from St. Petersburg to Moscow in 1996, their relationship was not one of master and slave. It was more a case of two people united in misfortune, and they were helped by Chubais. There is even a rumour that Putin briefly lived in Kudrin’s kitchen. And the future prime minister and president at times followed in his friend’s footsteps – as in March 1997, when he succeeded Kudrin as head of the control directorate in Boris Yeltsin’s administration after Kudrin’s promotion to the Finance Ministry. WhenYevgeny Primakov became prime minister in 1998,

Kudrin left his post as first deputy minister of finance to work under Chubais at United Energy Systems. In the meantime, Putin managed to overtake his friend on the career ladder and was in position to bring Kudrin back into government when Yeltsin nominated him to be prime minister in 1999. The next year, President Putin named Kudrin to be finance minister. Throughout, Kudrin has remained one of Putin’s genuinely devoted allies. In a lecture in Washington two years ago, Kudrin again stressed that Russia’s economic success over the last few years can mainly be attributed to the “political consolidation that happened under Putin’s leadership”.

Mr. No

In government Kudrin was known as ‘Mr. No’ because of his firmness in refusing the demands for money from all the lobbyists who came knocking on the door of the ‘country’s chief accountant’. Kudrin earned this nickname back in his St. Petersburg days in the 1990s, when the entire Russian economy collapsed and people would do anything to survive. However, it seems that he was only Mr. No to claimants who came to him out of the blue. He has been more accommodating to friends,

kommersant

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Former Finance Minister Alexei Kudrin (centre) and President Dmitry Medvedev.

and this is perhaps why he enjoyed limitless trust from a lot of people.Thus, in 2000 the Finance Ministry made moves towards withdrawing a grant of 342 million rubles (now €8 million) for reconstruction in war-torn Chechnya, suggesting, not without reason, that the funds could be embezzled. But when officials complained to Putin, the money was transferred immediately. The same year,

sis. Kudrin himself regards the creation of the fund as his crowning achievement. For a long time, Kudrin was convinced that policy was only of secondary importance to the economy. This view holds that neither ideology nor the principles of a political regime are of any significance until the country is able to manage its finances competently. It was too late by the time he realised that a full ballot-box (functioning democracy) is a prerequisite to a full fridge (economic prosperity). We first got a sense of a change in Kudrin’s thinking from a speech he gave in

Putin chose his friend to be finance minister, launching an 11-year partnership.

Kudrin could not believe he would be asked to step down so soon, or so suddenly.

Kudrin tried to cut back the extremely generous prizes that the Russian Olympic Committee was handing out to Russian athletes for victories at the Sydney Games. When the complaints of sports officials eventually reached Putin, once again the money was signed over straight away. However, it wouldn’t be fair to paint Kudrin as some sort of purse in the pocket of a strong leader. Financial journalists named him finance minister of the year three times between 2003 and 2010; thanks to his efforts, the stabilisation fund came into being and helped ease the pain of the 2008 debt cri-

February. He was adamant that Russia cannot expect to have a fully-fledged market economy before there is real political competition in the country – a position that reflected“certain stages in my own personal development”, he told the New York Times. His general principles, at least where the economy is concerned, have remained unchanged for the past 20 years or so. And apart from his professionalism and diligence, attributes even his fiercest critics cannot fail to recognise, the characteristic he will be remembered for is one that is unusual in Russian politics: he was always

completely open and transparent. This summer Putin joked with staff at the Russian Academy of Sciences, “You shouldn’t listen to Kudrin so much, he’ll teach you something bad.” The quip indicates another aspect of Kudrin’s career: no matter which government he was working for, he has always played the role of whistleblower and scapegoat. Examples of this are many, but the one that stands out happened in May 2009, when Kudrin warned that the Russian economy might not be so buoyant 50 years down the line. This was when he got his first sharp rebuke from President Dmitry Medvedev: “Someone who cannot refrain from relentless pessimism should find another job.”

Parallels

Parallels are now being drawn between Kudrin and the first minister of finance in Russia, Count Alexei Vasiliev, who fiercely opposed the rise in military expenditure on the eve of war against Britain in 1807. Had Vasiliev not died before war broke out, he could have taken grim satisfaction from observing its consequences, for the campaign made an irreparable dent in the state finances and the effects were still being felt decades later. For his part, Kudrin released a 15-year budget strategy in 2008 that proposed gradually cutting back defence spending to 1.8% of GDP. Kudrin’s definitive break

with Medvedev last month came over the president’s announcement of steep increases in military spending. Kudrin held the view that if defence expenses kept spending on economic development, education and health-care to just 3.6% of GDP, Russia might as well forget about modernisation. But the government did not agree. It is largely thanks to Kudrin that the Russian economy came back to life after the shocks of the 1990s, even if the only large-scale reform has been in the way Russians are taxed: the number of taxes has been cut from 53 to 15. The so-called cushion of stability that came with Putin’s regime was in fact largely owed to the finance minister. This is what kept the country and its finances relatively unharmed and intact during the global crisis. Putin and Kudrin were a genuine political tandem for the last 11 years. Now this partnership has fallen apart because Kudrin could not believe he would be asked to step down so soon, or so suddenly. Kudrin once said,“I get inexpressible satisfaction when I teach my little son how to ride a bike and am able to think that this process will have no impact whatsoever on the Russian financial system.”He’ll have time now to enjoy many more such joys. Originally published in Russkiy Reporter

timeline

An overview of Kudrin-inspired policies widely credited with pulling Russia out of the doldrums and staving off the global crisis 2000 • Named finance minister, launches tax reform. Over the next few years introduces a flat 13% income tax, abolishes sales tax and cuts VAT from 20% to 18%.

2003 • Emerging Markets magazine names Kudrin best finance minister in Central and Eastern Europe, lauding stability brought by his conservative fiscal policy.

2004 • Launches a financial stabilisation fund using oil export revenues. Resists many calls to draw on the fund for domestic spending.

2006 • Presents the first ‘non-oil-and-gas budget’ in several years, limiting oil export revenues to 2.8% of GDP. Russia settles all its debts to the Paris Club.

2008 • Government taps the €100 billion stabilisation fund to stave off collapse of the ruble at the peak of the global recession.

2010 • Euromoney magazine names Kudrin best finance minister of the year, highlights stabilisation fund’s role in cushioning damage from the crisis.

Economy

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Putin & Co. in fruitful China junket Putin hopes the visit, his first trip abroad since announcing he was ready to reclaim the Russian presidency, will help broaden trade with China, which he expects to grow to €144 billion in 2020, up from €42 bn last year. “To gain more room in the international market, we need to make joint efforts to push our co-operation to a new level,”Putin told Chinese journalists after talks with his Chinese counterpart Wen Jiabao in Beijing. Thanks in part to his political clout as Russia’s president-in-waiting, seemingly irresolvable problems in bilateral ties are now proving to be more manageable. “As far as the economy and trade are concerned, issues of a practical nature are being resolved, and this is good,” Putin told reporters at the start of the talks. One such issue is the decade-long negotiation to supply China with up to 68 billion cubic metres of Russian gas annually over a 30year period, which has been held up over pricing disagreements.“We are nearing the final stage of work on gas supplies,” Putin finally announced during his visit. A breakthrough on a gas accord with the world’s biggest energy consumer would boost Moscow’s efforts to reduce its export dependency on the European mar-

ket. Russia, which supplies 25% of the European Union’s gas, is under mounting pressure to cut its European pricing formulas. Analysts said clinching a deal with China could provide Russia with a bargaining chip and a credible alternative to ease such pressure.

Gas deal in the offing

Russian officials had tried to lower expectations of a gas-supply deal ahead of Putin’s visit, suggesting that bilateral talks would focus on the expansion of mutual investment and co-operation in high-tech industry, and the implementation of long-term energy projects. “The signing of official documents on the deliveries of Russian natural gas to China is not on the agenda China’s chief legislator Wu Bangguo and Vladimir Putin hold talks at the Great Hall of the People in Beijing. of this visit,” Putin’s deputy chief of staff Yuri Ushanese relationship has a sta- June, also received a much- count on the support of Ruskov said on 10 October. bilising impact.” needed cash boost after ink- sian voters because his govTHE numbers In addition to energy, which ing an agreement with the ernment has been able to accounts for more than half China Investment Corpora- steer the country out of the Putin reassures China of Russia’s exports to China, One of the agreements tion. The deal will see the worst economic crisis in a Russia also hopes that exsigned between China and Chinese sovereign wealth decade.The Russian governpanding economic ties with Russia on 12 October is for fund injecting up to three- ment, he said, managed to the Asian nation will help billion cubic metres: Annual the construction of a quarters of a billion euros halve the number of people it to diversify its economy. Russian gas deliveries to Chi- 750,000-tonne aluminium into various projects in Rus- living below the poverty line Russia has lately tried to talk na over a 30-year period, ac- smelter in Russia’s Irkutsk sia and the CIS. Kirill even as the global recession China into partaking in in- cording to Putin region. According to the Dmitriyev, who heads the sent the economies of rich novative projects as diverse terms of the agreement, the Russian Direct Investment countries into a tailspin. as energy efficiency, inforChina Development Bank Fund, described the Chinese “We understand what needs mation technology and space will open a $1.5-billion line commitment as“a resound- to be done in order to achieve exploration.“Our goal is to of credit for the Russian ing vote of confidence for the maximum impact on sodiversify our economic ties,” state bank VEB to finance Russia from one of the pre- cial development and economic growth,” Putin said. Putin told reporters in Beithe first stage of the project, mier investors globally”. jing. “I think that everyone billion: Line of credit from part of the aluminium giant Perhaps more resounding is will agree that compared China Development Bank Putin’s disclosure to Chinese Rusal. Originally published on with the known difficulties for the state-owned Russian The state-backed Russian media that he is reclaiming RussiaProfile.org in the global economy, this bank VEB Direct Investment Fund, the presidency next year. aspect of the Russian-Chiwhich was established in Putin said his party could reuters

continued from page 1

$1.5

Real estate Moscow prices are climbing and vacancy rates tumbling as empty buildings fill up fast

Russian home mortgages are on track to nearly triple by 2020. In some parts of Moscow office vacancy rates are close to zero. What’s happening? tim gosling

Business New Europe

The cranes atop the 47storey Dom na Mosfilmovskoi office and residential skyscraper have started to move again after a twoyear hiatus. The towering silver and glass building overlooking Moscow near the iconic Moscow State University has already become a landmark, but the last five storeys had remained exposed to the elements since its developer Donstroy ran out of money and suspended work in 2008. However, since the summer Russia’s economy has started to pick up momentum again and workers are back on the site.

As in most of Europe, Russia’s real-estate sector was booming before the start of the global debt crisis. Prices soared and Russian developers and banks were i nve s t i n g b i l l i o n s o f euros. “The crisis arrived at absolutely the worst possible time for the Russian realestate market,”said Darrell

The debt crisis arrived at the worst possible time for the Russian realestate market. Stanaford, managing director at the commercial property agents CBRE Russia. “In the spring of 2008 over a million square metres of new office space arrived on the [Moscow] market – the biggest ever addition to the city, so when prices began

to fall they collapsed completely.” Today, the new supply of office space in Moscow is being steadily eaten up since despite the slowerthan-expected growth, Russia’s economy will still grow by at least 3.5% this year. Stanaford says there will probably be no new office space coming on to the market until at least 2013. That will also push prices up. Prices for prime locations have already passed their pre-bubble peaks. Office vacancy rates in Moscow have fallen by half to 12.5% since the end of 2009, and are near zero in the prime retail and logistics sectors, according to Renaissance Capital. A similar story is playing out in the residential market, where the volume of new construction accelerated unexpectedly in July, rising by 17.6% year-onyear, according to analysts

itar-tass

Waking from the long property nightmare

The Dom na Mosfilmovskoi skyscraper rises again.

with Alfa Bank. The uptick was primarily driven by new residential housing coming on the market and companies restarting work on half-finished buildings. Dozens of projects were frozen in 2008-2009 as heavily indebted developers

struggled to survive after their credits were cut off completely in the worst of the meltdown. The prospects for more growth are good. Banks have reported an increase in mortgages all year as Russians are once again in-

vesting their spare cash in bricks and mortar. Sales rose in August, said Pavel Kocheryozhkin, deputy chief executive of YIT Moskovia, a subsidiary of Finnish developer YIT.“It’s both direct sales of new homes and mortgage deals,” he said. At the same time Russia’s Mortgage Agency (AIZhK) said in August that the number of mortgage and housing loans will nearly triple to 741,000 loans by 2015 from the current 30 0,0 0 0 and continue climbing to 868,000 by 2020. While many American and European mortgage holders are still under water, prices for residential property in Moscow have held up well; as the market is so small the owners of the better apartments simply took them off the market during the crisis, prepared to wait until the worst was past. The average price of Moscow residential real estate has soared from around €650 per square metre in 2003 when mortgages first became available, to €3,600 by this June, according to the website Irn.ru.

Economy

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Economy Russian GDP remains lower than before the crisis although natural resources are helping it rebound the numbers

4.8

%: expected GDP growth for 2011, according to International Monetyar Fund estimates

% of Russia’s budget revenues come from sales of oil and gas

%: share of Russian GDP contributed by the hightech and intellectual services industries

Economic growth by sector (%) life/vostock-photo

Economy rebounds on oil and gas as manufacturers keep struggling Russia’s economy is well on the road to recovery, if you ask an oil driller. But investment in many sectors has yet to return to pre-crisis levels. Nadezhda Petrova Kommersant Dengi

Three years after the financial crisis hit Russia, the gross domestic product is still short of pre-crisis levels. But results from the first half of 2011 show that there is not far to go. GDP grew by 4.1% in the first quarter and by 3.4% in the second. Other macroeconomic indicators also seem encouraging, a trend which has prompted policy-makers to declare that the country’s recovery is complete – or will be by early 2012.

Manufacturing slump

On paper, the situation in Russia looks better than in many other countries. And yet to declare the economic crisis in Russia over is

premature: The economy remains dependent on raw materials, and foreign investment has been slow to return. Available statistics indicate that industrial production from January to July 2011 was only fractionally lower than before the crisis. Raw materials extraction grew by 4% and oil extraction by 4.2% compared to precrisis levels. The situation in the mining industry has led to positive general industrial production indicators, the Centre for Macroeconomic Analysis and Short-Term Forecasting, a Moscow think-tank, reported. The Russian economy owes its resurgence to the extractive industries, which have returned to pre-crisis levels, and investment, which is only slightly less then before the crisis. The situation is far less rosy in manufacturing, which is down 10% compared with

2008 levels, although there are exceptions. Consumer production, hydrocarbon processing and the automotive industry are relatively healthy, for varying reasons – because producers are focused on the local market, because of increased production, or thanks to government support programs. Manufacturing industries that are lagging include equipment, building materials and metallurgy.

Investing in the future

Although investment into the Russian economy has been growing, it has yet to return to pre-crisis levels, partially because there has been little positive movement in fixed capital investment. This is particularly troubling, according to Vladimir Salnikov, deputy general director of the forecasting centre, because fixed capital investment is “an important indicator that de-

economic slowdown – the growth forecast for the Chinese economy was recently lowered, although it still remains high, at 9.3% – a correction in commodity prices is not out of the question. This will hurt the Russian economy, which emerged from the crisis with an even greater dependence on hydrocarbon prices.“We have absolutely no control over such potential problems, as they can come from outside,” Salnikov said. Nevertheless, the analyst remains optimistic:“Potential growth in developed Western countries is much less than in developing countries. Investors will eventually go where the potential is. In this sense, Russia ultimately is in a good position. In a deep world crisis, all we want is some assurance of stability in these developing countries so that investors can understand that their investment is protected.”

termines the quality and dynamics of future development.” According to the centre’s estimates, fixed capital investment in the manufacturing industries is 7.5% below 2008 levels, profitability is down by a quarter, and the number of companies that are solvent is down by a third.The flow of investment into the Russian economy overall has dropped significantly. Despite a nominal increase from €75 billion in the first half of 2008 to €82 bn in the first half of 2011, investment has fallen 14% in terms of GDP. “This reversal has become rather fixed,” Salnikov said. “It is unclear how long it will be before we see investment growth again.” Russia, like many other countries, has now become “a hostage to the situation in Europe and the United States,”Salnikov said. With growing economic problems in these regions and China’s

Defence As the Russian armed forces seek a new-era assault rifle, AKs in the millions gather dust in arsenals

The AK is manufactured around the world, but discerning military buyers prefer the Russian original. Victor litovkin russia now

Reports of the Kalashnikov’s death may prove to be exaggerated. When the chief of the Russian general staff, General Nikolai Makarov, admitted recently, “We are no longer happy with the assault rifles we have now,” it seemed to confirm rumours that production of the ubiquitous AK, prob-

ably the most famous assault rifle ever made, would soon end. In fact, the armed forces stopped buying Kalashnikovs in the 1990s because military arsenals were overflowing with various versions of the weapon that has been manufactured since 1947. “The country’s mobilisation stockpiles, including those of this assault rifle, are dozens of times bigger than we need,” Makarov said. But military experts say that despite the Kalashnikov’s age and problems with

its accuracy, more modern weapons are not that much better. The Kalashnikov, in all its variants, has long since become a Russian brand along the lines of vodka, Yuri Gagarin and the Kremlin. The current version, the AK-74, replaced the venerable AK-47, which is still manufactured in Russia at the Izhmash factory and in knock-off versions in many other countries.The ‘Kalash’ is the most popular assault rifle in the world thanks to its reliability, durability and simplicity. It’s very easy to

grab, attach a loaded magazine and start firing. The AK is not without its flaws, chiefly its low accuracy compared to rival models. It is considered very effective for a short urban skirmish or a massive infantry assault supported by armour and artillery. For one-on-one combat and other situations where accuracy is paramount, experts say other Russian rifles such as the AN-94 or AEK-971 make better choices. The Russian military procures small quantities of these weapons

photoxpress

Venerable Kalashnikov holds its own against rival rifles

His grandfather may also have carried a Kalashnikov.

mainly for special forces and intelligence units. However, experts say putting them into mass production would be very expensive, and meanwhile, millions of the reliable AK74s are available and more can be produced cheaply on demand. Mikhail Kalashnikov himself has heard the rumours. The 91-year-old father of the AK, commenting on reports that superior weapons had emerged, “I know, but let them gain the authority of my rifle first, and we’ll talk then.”

Opinion

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Yanukovych Is Burning His Bridges Lilit Gevorgyan

analyst

ulia Tymoshenko is no stranger to controversy, court cases and detention, but even by her own standards the guilty verdict handed down on 11 October and seven-year prison sentence for abuse of office were shocking. In addition, she will face a five-year ban from standing in elections and a €135 million fine for her poor judgement in concluding a 10-year natural gas supply deal with Gazprom in 2009 – an agreement that was heavily in Russia’s favour at the expense of Ukrainian consumers. Given the high stakes involved in this verdict and the well-documented political dependency of Ukraine’s judiciary, it is hard to imagine that the inexperienced judge, Rodion Kireyev, took the decision to back the prosecution independently, as Ukrainian President Viktor Yanukovych claimed. After all, it was the deputies fromYanukovych’s Party of Regions who pressed for a criminal case against Tymoshenko and formulated the charges. A closer look at the converging factors behind the ruling suggests that Ty-

moshenko has become a scapegoat for Ukrainian authorities who wanted to achieve a number of goals with one guilty verdict. First, by blaming Tymoshenko for agreeing to high gas prices, the authorities hope to shift the blame for the current state of the economy onto her. Currently, the Ukrainian government is under pressure from the International Monetary Fund to liberalise its domestic gas prices. In August 2010, Yanukovych ordered a 50% increase in otherwise heavily subsidised domestic gas prices. This has proven to be a very unpopular measure with voters. But the IMF has strongly recommended another 50% hike this year. In fact, it was due in August but Ukraine has been dragging its feet, fearing a political backlash from ordinary Ukrainians ahead of the 2012 parliamentary elections. The IMF has frozen its co-operation with Ukraine over the noncompliance with its recommendations, which is not a good sign for a teetering economy in dire need of attracting foreign investors. One of the key contributors of these economic woes is the 2009 gas contract that then-Prime Minister Tymoshenko signed with Rus-

sian Prime MinisterVladimir Putin. The agreement sets an exorbitantly high price for Russian gas imports and disadvantageous terms for import and transit volumes. The current Ukrainian leaders believe that it is only fair that Tymoshenko shares part of the blame for her poor decisions, which have cost the state and its citizens dearly. Second, the verdict goes a step further to ensure that Tymoshenko is isolated from the political scene for the next five years.This conveniently takes Tymoshenko, a controversial yet influential opposition leader, out of parliamentary elections in 2012 and presidential elections in 2015. It is hard to say whether the authorities will be able to succeed with their plan. Perhaps this will work for the parliamentary elections, but banning her from the presidential race in 2015 might be difficult because the West will clearly oppose this and might threaten Ukraine with sanctions if Tymoshenko were excluded from the race. In addition, the effectiveness of this strategy is dubious. Tymoshenko had already lost popularity in recent years because of the failings of the Orange Revolution government. As a

result, she lost the presidential election toYanukovych in 2010. But her jail sentence may give her an opportunity to redeem herself as a politician. Often opposition leaders are more effective at leading their followers from behind bars than from parliament. Third, the verdict is an attempt to undermine the legality of the 2009 gas deal with Russia. Ukraine is desperately trying to gain a price concession from Gazprom. But these attempts have only led to the deterioration of otherwise close ties between Moscow and Kiev – so much so that the Ukrainian government has threatened to seek international arbitration to have the agreement reviewed. In his witness statement against Tymoshenko, former PresidentViktorYushchenko said he was not aware of the details of the agreement that Tymoshenko, who served as his prime minis-

Tymoshenko may now face new charges of corruption while in office. ter during his presidency, was concluding with Gazprom at the time. And the verdict clearly states that Tymoshenko criminally exceeded her powers.This ruling effectively creates grounds for the Ukrainian delegation currently in talks with Gazprom to question the legality of the agreement and even try to annul it. So it comes as no surprise that Putin criticised the verdict. Tymoshenko’s guilty verdict appears to be a tactical move by the Ukrainian authorities to shift the blame for the country’s economic hardships away from themselves and to exercise pressure on Russia. In the

meantime,Yanukovych and his cabinet are likely to seek a face-saving measure that could result in Tymoshenko being released early, but still having to pay the gigantic fine. Yanukovych’s statement that the court verdict is not final suggests that he is aware of the high political costs attached to the ruling for Ukraine’s relations with the West. The Ukrainian political and business elite still view a foreign policy that balances relations with Russia and the European Union as being in their long-term interest. AsYanukovych put it after his victory in the presidential election in 2010, he will seek to turn Ukraine into a bridge between Russia and the EU. So far, however, he has only managed to alienate both. Originally published in The Moscow Times

TRUE INNOVATION CANNOT BE PLANNED Ian Pryde

business Consultant

he death of Steve Jobs was met with sadness by Apple fans around the world, while industry experts rushed to praise Jobs as not just the driving force behind a company which this summer briefly became the most valuable in the world, but also as a visionary in the sector and even the greatest industrialist of the last 20 years – or ever. Are the paeans justified, or is it all just hype? Apple certainly stands out compared to companies such as Microsoft and Google, which are also highly successful, but which have never won people’s hearts and minds. They might be respected, even feared, but never loved. That is the big lesson to be learned from Steve Jobs and Apple, both for other companies, and for countries

such as Russia, which is now trying to jump onto the innovation and high-tech bandwagon. Yet, for all their technical expertise, many electronics wizards are woefully ignorant of history and are far too young to have experienced anything else at first hand. In truth, many modern products are by no means as revolutionary – or as good – as they seem to be. Take the Apple iPod. The big breakthrough in personal music on the move was the Sony Walkman. Before it was introduced in 1979, the choice was between boom boxes, bulky cassette decks and tinny portable radios. The Walkman made a huge leap forward with its astonishing sound quality, and I still prefer the heft and feel of my old clunky Walkman to the sleek and austere design of my two iPods. Of course, the iPod is self-contained – you no longer need to carry around spare bat-

teries and cassettes, and the latest, 160-gigabyte iteration of the iPod Classic can store 40,000 songs. Apple’s real revolutionary product was not the iPod, but iTunes, an innovation

Russia’s leaders do not understand the role of science and technology in the economy. that saved the recording industry from extinction. Still, it is very hard to argue with Apple’s phenomenal success. It makes sexy, highmargin products bought by millions the world over, and ultimately, that is what business is all about. Copying this trick is hardly easy, even for world-class firms, and leadership can pass very quickly from one company – or country – to another.

Russia is now trying to modernise, and is hyping its Skolkovo project just outside Moscow at home and abroad as the country’s answer to Silicon Valley, but there is massive scepticism domestically and internationally. Russia has precious few firms outside oil, gas, metals, mining and banking, and high-tech companies are conspicuous by their absence. Instead of fixing this by proper reforms at national level, as usual, the approach to Skolkovo is Soviet – a government-led approach which pumps in large financial and other resources. The Russian oligarch and TNK-BP shareholder Viktor Vekselberg said Skolkovo had received a promise of €2 billion in government funding over the next three years, according to the Financial Times. The aim is to raise the same amount from private sources, including major multinationals. Sie-

mens, GE and Nokia-Siemens have said they would build R&D centres at Skolkovo and invest up to €35 million each. But Russia’s brightest and best are leaving the country in droves. Some 40,000 Russians work in Silicon Valley alone, and estimates are that something like 300,000 emigrate every year. And outside the tech sector, it’s also worth remembering that developing just one new drug costs half-abillion, so €2 billion or even €4 billion won’t go far. Nor do Russia’s leaders understand science and technology. Dmitry Medvedev and Vladimir Putin have each said, for instance, that money invested in R&D should produce results and not be wasted. But risk is the name of the game.There can never be any guarantee of success, and scientific and technological progress often results from sheer serendipity – it cannot be planned. Russia has wasted years

since the Soviet Union ended in its still unsuccessful search for a national vision. It is just learning to talk the talk, but walking the walk across the board will be much harder. German Gref, a former economy minister and now head of Sberbank, Russia’s biggest financial institution, said on Vladimir Pozner’s late-night talk show that a domestic car industry would take at least 15 years to create. At the end of August, AvtoVAZ, one of Russia’s biggest car makers, made a small step forward by hiring Steve Mattin as chief designer. Mattin has previously worked at MercedesBenz and Volvo. It will be fascinating to see if he can do a Steve Jobs and transform the maker of the Lada into a sexy, high-tech car company. Ian Pryde is CEO of Eurasia Strategy & Communications in Moscow.

Comment

27 October 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

viewpoints continental divide

Putin’s United States of Eurasia How effective could Putin’s plan for the Eurasian Union be? What obstacles will Moscow have to overcome to achieve this objective, and in what time frame? What about Russian efforts to entice or cajole Ukraine into joining? How could domestic upheaval

and political succession issues in future memberstates, such as Belarus or Kazakhstan, impact plans for the new union? How would Western and, perhaps more importantly, Chinese influence in the region affect Putin’s ambitious plan?

a long-overdue and grand idea Alexandre Strokanov

historian

utin’s article is probably only the first in a series of moves that will determine his upcoming presidency. This first step needs to be recognised as positive, and it will find support among people in many corners of the former Soviet Union. It will also likely be supported by a majority of the Russian business community and people in general. The necessity of some form of new integration in the region is quite evident and long expected, and has required only the political will of contemporary leaders of the involved countries. If the project succeeds, Putin will be not only a Russian, but a Eurasian hero.Yet, although this plan is a great one and will enjoy the support of a majority of people in most of the post-Soviet countries, it will nevertheless face many obstacles. Among them are the current leaderships in Tajikistan and Kyrgyzstan, and even more so in Uzbekistan and Turkmenistan (which were not even mentioned in the article). A similar situation persists in the western borderlands. Yet, at the same time, the Eurasian Union could pave the way for a final solution

to the conflict over NagornoKarabakh, and Moldova could also solve its problem regarding Transdniester. However, for the time being, all these conflicts and tensions will present some difficulties on the way to developing such a community of nations in the former Soviet Union. The Chinese factor is also important because China plays an increasingly important role in central Asia, and it even has plans for closer ties with distant Belarus. However, I hope that central Asian leaderships realise that China will never be able to provide them the opportunities that may come from Russia. China is a different civilisation, and any deep integration between Islamic people and the Chinese is very unlikely. The European Union, for its part, should realize the benefits of the Eurasian Union, and what is equally important is for the EU to accept its own limits on expansion. It is quite obvious that, for example, Ukraine will never be a part of it. Brussels must accept this simple fact and give up unjustified hopes. Alexandre Strokanov is a professor of history and director of the Institute of Russian Language, History and Culture at Lyndon State College inVermont.

contradictory and confused Ira Straus

russia-nato analyst

utin gives two mutually contradictory geopolitical definitions of his Eurasian Union: a pole within a multipolar world,

and a part of a united European space. In his words, the Eurasian Union will be “a powerful supranational structure capable of becoming one of the poles of the world as it is and serving as a bridge between Europe and the dynamic Asian-Pa-

Letters from readers, guest columns and cartoons labelled “Comment” or “Viewpoint” or appearing on the “Opinion” and “comment” pages of this supplement are selected to represent a broad range of views and do not necessarily represent those of the editors of Russia Now or Rossiyskaya Gazeta. Please send letters to the editor to ev@rbth.ru

cific region.” At the same time, it is somehow to be an integral part of “the greater Europe with common values of freedom, dem o c r a cy a n d m a r ke t laws”. This is the standard contradiction of Russian foreign policy in the Sergei Lav rov e r a . T h e u n i t e d European space – spoken of sometimes in grandiose language as a unity of Christendom in its three big chunks, America, Europe and Russia – is conceived by Lavrov and Putin in terms of a classical balance of power“unity”with all its intrinsic internal contradictions; that is, conceived apart from and, to a large extent, in opposition to the actual unity built in the Atlantic space since the balance of power destroyed itself in World War I. The real Western unity is integrative and has overcome the centuries-old contradictions of European power politics.

Meanwhile Dmitry Medvedev has kept the option open of resolving the contradictions by a more substantive and meaningful integration of Russia with the Euro-Atlantic space, making initiatives for this that have been flawed but far from senseless. Putin promises, far more illogically, that his union will somehow help achieve this rather than its obvious role in adding a further obstacle to it. What is new in Putin’s use of these opposite definitions is that he raises the Lavrov contradiction to a higher level. He makes it a contradiction at the core of what is supposed to become the main project of the Russian state, not just a contradiction in its foreign policy rhetoric as it keeps its options open. Ira Straus is US coordinator with the Committee on Russia in NATO.

set hard conditions for eurasian union entry Vladimir Belaeff

analyst

he idea of a free-trade zone in the post-Soviet space is not new. When one considers other associations, like NAFTA or Mercosur (and even the EU), which include countries with dissimilar historical trajectories, a Eurasian free-trade zone for countries that share histories and were recently in the single (albeit very flawed) economy of the defunct USSR is logical. Would a Eurasian freetrade union be the “revival of the Soviet empire” or even of the older Russian empire? This argument makes sense only if one also proposes that NAFTA is an American empire, Mercosur the Brazilian empire writ large and the EU a revived late-Roman empire. Would Russia be willing to surrender her own sovereignty to a revived USSR in mandatory parity with some small, barely functional central Asian republics? Doubtful. Can the Eurasian free-trade zone be built in the 12 years of Putin’s presumable two presidential terms? A foundation can be laid in that

period. However, Putin should carefully study the experiences of Mercosur, NAFTA and the EU, so as not to repeat the same mistakes. There is a huge disparity in economies, cultures, development and human potential between some of the potential Eurasian members. Countries where voices already express great interest in joining a free-trade zone (Kyrgyzstan, for example) are among the poorest and least developed in postSoviet central Asia. They seek to exchange their third-world output for firstworld market access, replicating their position in the defunct USSR. To counteract this complication the Eurasian Union must establish degrees of membership and rigid “Maastricht criteria” for promotion from one grade to another, with mandatory roll-back provisions. There must be no bending of the rules to allow premature accessio. The example of Greece and others in the EU must be a lesson thoroughly learned and always remembered. Vladimir Belaeff works at the Global Society Institute in San Francisco.

This eight-page pull-out is produced and published by Rossiyskaya Gazeta (Russia), which takes sole responsibility for the contents. Internet address www.rbth.ru Email EV@rbth.ru Tel. +7 (495) 775 3114 fax +44 20 3070 0020 ADDRESS 24 Pravdy STR., bldg. 4, Floor 12, Moscow, Russia, 125 993. evgeny abov Editor & publisher alexey knelz editor Ky Krauthamer subeditor Andrey zaitsev head of photo dept. milla domogatskaya head of pre-print dept. Irina Pavlova layout

the beacon in the east beckons to ukraine Anthony T. Salvia

political scientist

ladimir Putin’s proposal of a Eurasian Union may not be wholly original, but it does have lots of merit. If it is to have any hope of succeeding, however, it must not be patterned on the European Union, a body with a penchant for central economic planning and suppressing national autonomy. Moscow, in setting up the envisioned Eurasian Union, cannot go down this route. Instead of central planning, it must aim for growth and economic freedom within the space defined by its tariff walls. The freeing up of the economy is vital to getting rid of corruption, promoting a demographic resurgence, and fostering social peace and stability. What about Ukraine? Will it tap into these benefits that have the potential to transform its economy? Kiev believes its interests are better served by negotiating a free-trade agree-

ment with Brussels. Frankly, I think Ukraine is running a great risk at a time when Europe is mired in a debt crisis so severe that some question whether the EU can even survive in its present form. Moreover, the EU, which views Ukraine as too big, too poor and too corrupt to be easily absorbed, refuses to assure Kiev that the conclusion of a free-trade arrangement would lead to a road-map to eventual membership. In my view, that’s a blessing in disguise. The biggest shortcoming of the freetrade agreement for Kiev is that it precludes joining the Russian-led customs union with its very tangible benefits for the national economy, including paying domestic Russian rates for gas. My fear is that Kiev will realise too late that its most likely alternative to the ruble zone is not the eurozone, but the twilight zone. Anthony T. Salvia is director of the American Institute in Ukraine, Kiev.

has the feudal lord sired a rebellious heir? Vlad Ivanenko

economist

ladimir Lenin wrote, “In Russia, as is common knowledge, capitalist imperialism is weaker than military-feudal imperialism.” It seems that while the military component has dwindled in Russia over the last 20 years, its feudal part remains firmly intact. Lenin’s namesake Putin has demonstrated mastery in navigating treacherous political waters. The problem lies with the same antiquated system of feudal, vertical governance, which he has nurtured during the last decade and whose hostage he has become. By agreeing to form a union, Astana and Minsk will trade their current status of politically independent countries for economic benefits they obtain from access to Russian markets.

e-Paper version of this supplement is available at www.rbth.ru. Vsevolod pulya online editor To advertise in this supplement contact Julia Golikova Advertising & PR director, on golikova@rg.ru. © copyright 2011, ZAO “Rossiyskaya Gazeta”. All rights reserved. www.rg.ru Alexander Gorbenko chairman of the board pavel nEgoitsa general director Vladislav Fronin Chief Editor

This arrangement would mostly benefit a handful of large companies owned by local oligarchs. Yet, I see a silver lining in this mostly cloudy picture for Russia. The union will invariably dilute the political clout wielded by the Putin regime. Soon, because big money wants to control the power and not to be subjected to the feudal lord’s will, would come an uprising under the slogan, ‘Oligarchs of all nations, unite!’ the success of which could lead to democratisation of Russian politics. And Putin might find in the end that he is in desperate need of the same level of public support that he enjoyed at the beginning of his political career. Vlad Ivanenko is an economist based in Ottawa. Full version originally published on RussiaProfile.org

Any copying, redistribution or retransmission of any of the contents of this publication, other than for personal use, without the express written consent of Rossiyskaya Gazeta is expressly prohibited. To obtain permission to reprint or copy an article or photo, please phone +7 (495) 775 3114 or email ev@rbth.ru with your request. Russia Now is not responsible for unsolicited manuscripts and photos.

Features

27 october 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

geophoto

Architecture Skyscrapers were signs of renewal in a country struggling with the aftermath of war

Moscow’s Stalinist-Gothic temples Built as symbols of victory and a new post-war era, the Seven Sisters skyscrapers still stand out amid new high-rises.

came famous as monum e n t s o f t h e Stalinist-Gothic style and symbols of Moscow: Moscow State University on Sparrow Hills; the Foreign Ministry; the Ministry of Transportation; two residential buildings; the Hotel Ukraina; and the youngest of the Sisters, the Hotel Leningradskaya. In the post-war period, these symbols of a new, glorious era seemed like something fantastic. ‘We can!’ – that was their architectural slogan, trumpeted from a country that lay in ruins, most of whose residents still had to

tino kuenzel Russia now

From time to time, in the grey days of the Soviet era, working people raised in the spirit of atheism needed inspiration. They had the luxurious Artek pioneer camp in the Crimea, the grand Exhibition of Economic Achievements in Moscow, and the lavishlydecorated Moscow metro to lift their spirits. But the communist paradise on earth was yet to arrive. Soon after the end of World War II, in defiance of all doubters, a grandiose new archit e c t u r a l p ro j e c t wa s launched. Joseph Stalin, “the father and friend of all Soviet architects”as he was called at the All-Union Congress in 1946, undertook a colossal construction project designed to convince the Soviet people and the whole world of the victorious Soviet power’s new selfconfidence. Early in 1947 Stalin’s cabinet adopted a resolution for the construction of eight soaring structures. On 7 September of the same year, during the celebration of Moscow’s 800th anniversary, the foundation stone of each skyscraper was laid in a special ceremony.

Money was no obstacle as the skyscrapers rose, transforming the Moscow skyline. Under Khrushchev, functionality replaced imperial splendor. live in cramped communal apartments. Supervision of the skyscrapers’ construction was initially entrusted to the notorious KGB chief Lavrenty Beria (who was also in charge of creating a Soviet atomic bomb and was executed in 1953). He was rumoured to have installed spying devices in some of the rooms. The actual construction of the Sisters was carried out by thousands of prisoners from the gulag, as well as by German prisoners of war.

A vista of triumph

The first Moscow skyscraper was completed in 1949, and six more were completed within ten years. Later known as the Seven Sisters, these buildings be-

With every building, a different technique was used to stabilise the ground under the foundation. The costs incurred were of secondary importance. Some 2.6 billion rubles were spent on Moscow State University alone – the tallest building in Europe until the Frankfurt Messeturm was completed in 1990. In today’s money that would convert to around €500 million, more than the 2 billion rubles set aside to reb u i l d w a r- r av a g e d Stalingrad over a period of five years. Roughly the same amount was spent in total on the construction of the other six buildings. These monumental skyscrapers surround the centre of the city like a fortress wall, and themselves resemble fortresses. All followed a similar concept: a dominating central tower which, like an Aztec pyramid, narrows step-wise to the top, flanked in a more or less strict order by wings. However, each building has its own stylistic palette and the lavish decorations of towers, statues and bas-reliefs vary from one Sister to another. Stylistic influences range from Renaissance and baroque to Russian church architecture and Gothic. Stalin was said to be fond of the Gothic style and the architects tried to guess what would appeal to his taste. They didn’t always manage to please him though: the Foreign Ministry was not originally designed with a spire, but the dictator insisted on having one. So as not to overload the structure, a special lightweight spire had to be

A hotel reborn as an oasis of post-Soviet luxury

press service

The Hotel Ukraina – now the Radisson Royal – has always been special among the Seven Sisters. Unlike the closed ministries and the residential buildings with their concierges, anyone can wander in and admire its panoramic views. The Ukraina opened in 1957 as Europe’s largest hotel. The observation deck that used to occupy the 29th storey is gone, but the views

can still be enjoyed from the fashionable restaurants at the top. A three-year renovation transformed the hotel into an oasis of elegant luxury. But the old trimmings made of natural and traditional materials – marble, Karelian birch and onyx – remain, as does the bird’s-eye view over Moscow from the main lobby, itself a treasury of 1950s Soviet design.

Palaces for students, tourists and bureaucrats

perched on top with supports descending five floors made in the same colour as the skyscraper. After Stalin’s death in 1953, the architects asked the new general secretary, Nikita Khrushchev, for permission to undo this Stalinist act of despotism. But Khrushchev refused, wanting the spire to remain as a “monument to Stalin’s stupidity”. Contemporaries were immediately struck by the resemblance of these Stalinist-Gothic monuments to certain American precursors, such as the Manhattan Municipal Building built 40 years earlier. This led to confusion over the ideological statement intended to be conveyed. The dialectical explanation was that capitalist temples of trade were studied in detail and used as a foundation, the object being to give them a completely new meaning.

The end of opulence

Stalin’s death put an end to the principle that ‘the eye should delight’ no less quickly than the ‘father and friend of all architects’ had

disposed of the Soviet avant-garde in the 1930s. Khrushchev declared war on Stalinist extremes in city planning. Now everything would be sacrificed to functional understatement. Rapid construction of mass housing began, as a result of which many city dwellers received separate apartments for the first time in their lives. In the Russian mind, however, Stalinist skyscrapers still equal quality, while Khrushchev’s matchbox-size apartments equal quantity. Construction of the seven skyscrapers was completed under Khrushchev. But the eighth, intended to be the most impressive of all, which was supposed to have been located next to Red Square and soar up to 275 metres, never materialised. Instead, Soviet planners erected what was then the largest hotel in Europe, the Rossiya, on the foundations. The hotel was demolished in 2006. Today the Seven Sisters have lost some of their old lustre. The elevators in the two residential towers break down from time to time and

the residents – members of the intelligentsia, pilots and cosmonauts – must accept that their new neighbours are hardly high society anymore. The central building at Moscow State University with its marble staircases and rich interior furnishings and special aura remains very grand, but many of the rooms in the dormitory are in need of repair. Fate has been unkind to the grandest of all Stalin’s architectural visions for Moscow. The Palace of the Soviets, designed in classical ‘Stalinist Empire’ style, was to be crowned with a 100metre statue of Lenin, bringing the total height to nearly 500 metres, but construction was suspended during the war. An enormous outdoor heated swimming pool took the place of the palace. In the 1990s the pool was replaced by a replica of the building that had stood on the site originally – the Cathedral of Christ the Saviour, which had been pulled down on Stalin’s command in 1931 to make room for his temple of progress.