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Tuesday, November 27, 2012




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


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Chow Tai Fook aims to be regional player in rough diamond sector PAGE 8 Cross-border attraction

Festive spirit

Plans to sell stakes in state-owned firms

Emigration from Siberia to China on the rise

Winter wonders to enjoy in Moscow

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Privatisation drive



2 Tuesday, November 27, 2012



New minister is on a mission R ussia’s new defence minister, Sergei Shoigu, named to the post on November 6 after former chief Anatoly Serdyukov was fired amid a corruption scandal, is now forming his own team and cancelling many of the decisions made by his predecessor. Experts are unanimous the reforms launched under Serdyukov are under threat. Shoigu has also started to familiarise himself with military and technical cooperation with foreign partners, and his first trip was to China earlier this month. Analysts say Shoigu’s visit carried special significance because of the leadership change in China. The two nations have completed arms deals worth US$16 billion since 2001. The level of co-operation had decreased in recent years. However, last year it picked up, with more than US$1 billion worth of deals being completed. China accounts for up to 15 per cent of Russian arms sales. Although last week’s visit to China was Shoigu’s first since becoming defence minister, he has a long and well-established relationship with the central government, dating from his tenure as emergency situations minister for much of the past 15 years. He worked in the Krasnoyarsk region in Siberia in the 1970s and 1980s.

Crackdown set to continue A series of corruption scandals have erupted in Russia. Soon after a one-time ally of President Vladimir Putin, Anatoly Serdyukov, was ousted as defence minister, after being implicated in a multimillion dollar corruption scandal, a number of new scandals surfaced. Among them is the misuse of billions of roubles connected to the Glonass navigation system and the ambitious Asia-Pacific Economic Co-operation summit. Several officials were fired or arrested on corruption charges. This is the biggest anticorruption crackdown since the collapse of the Soviet Union, and the implications are far reaching. While it remains to be seen how far the Kremlin will go in its anticorruption campaign against members of the political elite, some government officials and pro-Kremlin politicians say the signs are ominous of a widespread crackdown.

ROUND-UP “Investigators understand that they are allowed to act. Putin understands that he needs to act, and those who oversee the budget have understood that they can’t do this any more,” says Mikhail Barshchevsky, the liberal-leaning federal courts representative for the government.


Sci-fi author was inf luential thrived behind the iron curtain beginning in the 1960s. The duo published 27 novels and novellas between 1958 and 1988.



Newly appointed defence chief Sergei Shoigu during his China visit.

Read more at RBTH.ASIA

Boris Strugatsky, the last remaining member of the legendary science fiction duo best known internationally for telling the story behind Arseny Tarkovsky’s classic film Stalker, died on November 19 due to heart problems. He was 79. Strugatsky, a native of St Petersburg, and an astronomer, rose to literary prominence through science fiction novels co-written with his elder brother Arkady, who died in 1991 at the age of 66. The two were influential on Soviet-era science fiction, a genre that

Boris Strugatsky




Book to dedicated to Raisa

Angelic message


Mikhail Gorbachev is still writing books at the ripe old age of 81. The former Soviet president’s latest offering is




Alone with Myself, which he worked on for more than five years. “The hardest thing is to write about your life in a frank manner,” Gorbachev acknowledged at a book signing in Moscow. “I dedicate the book to my wife. She used to say, ‘if you have the strength, it would be great if you wrote this book”. Gorbachev said that his wife, Raisa, had also been planning to write a book “about their life together”. But a grave illness prevented her from completing the book. She died in 1999. Police in Kaliningrad use an angel look-alike to tell drivers to slow down.

Mikhail Gorbachev with his book

Last year Andrei Kostin, chairman of the board of state-controlled VTB Group, earned US$30 million. He was ranked the highest paid executive in the country, according to a list published by Forbes. State company executives occupied the top five positions in the ranking, with Kostin being closely followed by his peers from Gazprom and Rosneft. Gazprom chief executive Alexei Miller earned US$25 million last year.


In Mainichi Shimbun (Japan)


in Joongang Ilbo (South Korea)

In The Economic Times (India)





Tuesday, November 27, 2012 3


Skater’s golden mission One of the most gifted athletes in the world eyes Olympic triumph, writes Timur Ganeyev


Evgeni Plushenko hopes to be one of the world’s alltime best figure skaters.

Looking at my career, I’d give myself top marks I need adrenaline, drive, and to stop thinking about whether or not I’ll win today ... I really don’t want my son to become a figure skater ... This season, we’re rolling out a completely new Plushenko ... After the 2014 Olympics, I’ll be moving on to golf ... EVGENI PLUSHENKO

as next month during two qualifying events. One is the Russian championships. If he’s in good form, he will go through to the European championships in Zagreb in January. “I’ve watched him training. There’s nothing he can’t do. He’s become something completely different. His whole body is different; he’s completely immersed in his work,” says Tatiana Tarasova, a famous trainer who has worked with 11 Olympic champions. Plushenko’s trainer, Alexei Mishin, is confident. “We’re getting ready to take it all home in Sochi. It will be a daunting task to win a medal in his fourth Olympics. There is so much pressure, but he’s not giving in to it. There is absolutely no difference between the 30-year-old and, let’s say, the 20-yearold Plushenko. He is just as youthful and energetic as he has always been.” In the early 2000s, Plushenko was the first to execute jumps such as the fourtoe loop, three-toe loop and two-loop jump, also known as the 4-3-2, followed by a 4-3-3, where these figures indicate the number of turns. These days, the four-toe loop, three-toe loop, two-loop jump and quadruple Salchow are in the repertoire of many skaters. These spins have been Plushenko’s forte from his earliest years, when he was among the very few men who could perform the Bilman spin, complete with a tough stretch. These days, his spins are the same as those of many others. The main reason why Plushenko is still at the top of his game at 30, and why he is always among the favourites at competitions, is his astounding confidence in his own abilities. Training is one thing, but many skaters choke in competition. Plushenko knows how to transform his nerves into the joy of realising where he is and what he has to do. “What is most captivating about Plushenko is his almost fanatical approach to his sport, which is something I don’t see in others,” Zakarian says. “He’s a sportsman to the bone. This is his calling – to be an outstanding sportsman. It’s in his blood.” This might give Plushenko a real chance of gold in 2014. There is no doubt that he will give it his all in Sochi. But will his all be enough? This season, Plushenko and Mishin have undertaken a daring experiment. The skater put on programmes under the supervision of international choreographers. Italian Pasquale Camerlengo and Japan’s Kenji Miyamoto have been given the task of creating the perfect sporting specimen out of Plushenko.

SPORT Overcoming enormous odds



eteran figure skater Evgeni Plushenko will be a man on a mission at the 2014 Winter Olympics in Sochi, Russia. The 30-year-old from St Petersburg has had one of the most successful careers of any athlete. He has won the Russian championships eight times and the European championships six times. He is a three-time world champion. In 2002, he won the silver medal at the Salt Lake City Winter Olympics and, in 2006, finally won Olympic gold in Turin. Having won every title possible, Plushenko decided to hang up his skates, but he returned to the sport in 2009, with his sights set on winning gold in Vancouver in 2010. He came back with silver, a performance he considers a failure. That “defeat” was a colossal setback for the skater and one of the biggest stories of those Olympics. Aficionados of the sport considered a Plushenko victory a sure thing, but the jury gave the title to American Evan Lysacek. Nevertheless, Plushenko’s return to the sport after a three-year absence was nothing short of incredible. During his time away, the skater reinvented himself as a politician and TV presenter. After a two-year absence since Vancouver, Plushenko made his second comeback at the European championships and is in great form once again, preparing for his fourth Olympics, this time on home soil. A medal in Sochi would be his fourth at the Olympics and cement his position as one of the alltime greats of the sport. A century ago, in the days of Ulrich Salchow, when figure skaters used to draw patterns on the ice with their skates, it wasn’t unusual for a skater to dominate the sport for a decade or more. These days, with figure skating just as physically demanding as athletics, skaters hit their peak at 23 or 24. The amount of time Plushenko has spent at the top is simply amazing. “Vancouver was just a stage he went through – he is over it now. If he had won in those Olympics, it’s unlikely he would be preparing for Sochi now,” says his manager and agent Ari Zakarian. The last skater to become an Olympic medallist after the age of 30 was Sweden’s Gillis Grafström, and that was back in 1932. Plushenko could not only duplicate the legendary Scandinavian’s feat, but may also go on to become the world’s greatest skater. Victory in Russia in the Olympics is the ultimate goal. He will be competing again as early

Yana Rudkovskaya is a wellknown producer and wife of Evgeni Plushenko “It’s impossible to believe that a poor kid from such a disadvantaged family was able to hit such heights. He has won three Olympics, and taken part in four. After the Sports School in Volgograd was closed down, he and his mother arrived in Leningrad, where they lived in poverty. They rented a room in a communal apartment, which had just one bathroom for the whole floor. But that wasn’t a problem, because they had nothing to eat anyway. His mother couldn’t get a job without a residency permit and little Evgeni was going around in broken trainers. Of course, they were really hungry days for him back then. They used to collect empty bottles to exchange for money. His dad had to stay behind in Volgograd with their elder daughter, and he sent whatever he could earn to help feed them. The other kids hated Evgeni’s talent. He was bullied at the sports school. It’s not surprising – he could do a triple jump when he was still just 11.”

4 Tuesday, November 27, 2012


Moscow to arm Central Asia Kyrgyzstan and Tajikistan are expected to get US$1.5 billion for military spending, writes Kabai Karabekov



Russia is expected to modernise two former Soviet states in order to counter the strategic ambitions of the United States and China.


ussia is strengthening the military capabilities of two former Soviet states in order to bolster its own position amid the rising influence of the United States and China in Central Asia. The country plans to spend US$1.1 billion modernising Kyrgyzstan’s army and is giving Tajikistan US$200 million for its armed forces and US$200 million in petroleum products. With Bishkek and Dushanbe having previously expressed interest in securing American weapons after their withdrawal next year from Afghanistan, Russia is swiftly moving to prevent the US from gaining leverage in the region. “Along with weapons, American instructors and technicians would have come,” says a Russian government source. “That would inevitably have increased America’s influence in the region. Now that avenue is blocked.” According to the source, by investing in the modernisation of the armed forces of Kyrgyzstan and Tajikistan, Moscow hopes to strengthen the ability of the Collective Security Treaty Organisation (CSTO) to deal with new threats

Russia is simply reverting to the course it has followed over the past two centuries after US troops withdraw from Afghanistan in 2014 while keeping its own defence industry busy. Sources close to the Russian-Kyrgyz Intergovernmental Commission say Moscow and Bishkek reached agreements that could see the first shipment of weapons arrive in Kyrgyzstan as early as next summer. Kyrgyzstan’s army is weaker than those of its neighbours. Only the Natotrained 25th Special Forces Brigade Scorpio meets modern requirements. Most artillerymen use weapons from the 1930s and 1940s. Bishkek needs all types of small arms, new armoured personnel carriers, re-

Russia’s consumer and credit markets boom

connaissance vehicles, helicopters, field and stationary hospitals. The programme for Tajikistan is more modest, with Russia prepared to shell out US$200 million to modernise air defences and repair military hardware. Tajikistan would also like Moscow to pay US$250 million to lease a military base but an agreement was reached to extend the lease for 30 years without new payments. Instead, Moscow has agreed to help with giving access to Russia for Tajikistan citizens and consider investing in hydroelectric power stations. An agreement has also been reached on easy terms for Tajikistan in the supply of Russian petroleum products, including forgiving some US$200 million in duties. Vadim Kozyulin, of the PIR Centre, the key institute for policy studies, says arms may not be enough to exert influence over the neighbouring states. “Russia is simply reverting to the course it has followed over the past two centuries – under the tsars and under the communists,” says Kozyulin. “Moscow’s plans may only succeed if its arsenal, in addition to weapons, includes ‘soft power’.” Alexei Malashenko, of the Carnegie Moscow Centre, warns that by investing unprecedented amounts in the military in Kyrgyzstan and Tajikistan, Russia is taking a gamble. “This is a risky step, with consequences that are hard to predict,” he says. “Russia is not only signing up to support the wobbly regimes in Kyrgyzstan and Tajikistan, it is also making a gesture that will further complicate its already strained relations with Uzbekistan.”


Medvedev’s Hanoi talks signal regional ambitions Moscow did not waste time after announcing its return to the region in September’s Asia-Pacific Economic Co-operation (Apec) summit in Vladivostok. Prime Minister Dmitry Medvedev attended the Asia-Europe summit in Laos and visited Vietnam. President Vladimir Putin said in his election manifesto that Russia would call on Europe to move towards creating a common economic bloc from the Atlantic to the Pacific. “Then we will have a common continental market worth trillions of euros. Are there any people who doubt that this would be great, and would meet the interests of Russians and Europeans?” Putin wrote in his article on foreign policy. This appears to lay down policy for the decade ahead. In the near future, Russia intends to move its external economic ties towards Asia, and away from the “tilt towards the European Union”. The EU accounts for half of Russia’s foreign trade. Russian Vice-Premier Igor Shuvalov said on the eve of the Apec summit that, “if we seek to be less dependent on commodities and be stronger, then the balance must be shifted: at least 50 per cent of our foreign trade should be with AsiaPacific countries”. As Apec host, Russia presented concrete plans to integrate with Asia-Pacific countries. Proposals to use shortcut transit routes from Asia to Europe, via Russian territory, and the Northern Sea Route looked tempting, as did those to strengthen ties in the energy sector. Finally, Moscow is ready to form partnerships in the nuclear energy, space, communications and other industries. All this was discussed during Medvedev’s talks with Vietnam’s leaders on November 7 and 8. Vietnam was once Russia’s key ally, but the scale of economic co-operation in recent years has dwindled to US$3 billion a year, which is much less than trade with the United States and China. However, Moscow and Hanoi have agreed to start negotiations to create a free-trade zone, which is expected to double the volume of trade by 2015. Furthermore, Vietnam may be a possible gateway for Russia to Southeast Asia. “This is good for us, because Vietnam has a huge number of free-trade zones with other countries and is actively promoting its trade links,” Medvedev said. As for technology, both sides reaffirmed

December 18

their agreement to build the US$10 billion Nin Thuan 1 nuclear power plant by 2021. An inter-government agreement on co-operation in space exploration was also signed during the visit. Vietnam and Russia have been working together in offshore oil extraction in the South China Sea since the Soviet era. The Vietsovpetro joint venture employs about 1,000 Russians. “We are discussing offshore co-operation, both in the South China Sea and in Russia,” the prime minister said, announcing that a decision had been taken in October 2012 to allow the Vietnamese to “one of the biggest fields in the Yamalo-Nenets Area”.

There is more than just an economic dimension to Russia’s return to Asia There is more than just an economic dimension to Russia’s return to Asia. The US has strengthened its presence in the region, especially in Japan, Australia and the Philippines. China is also positioning itself as a regional power. So the news that Moscow and Hanoi are in talks about restoring the Russian Cam Ranh Bay base did not come as a surprise. “The issue is on the agenda and the negotiations are still in progress, we are establishing positions with our partners and the Vietnamese will themselves decide how to formulate these relations,” Medvedev said in Hanoi. US Defence Secretary Leon Panetta visited Cam Ranh Bay last summer, just as a US Navy ship called for refuelling and maintenance under an AmericanVietnamese pact. He said: “This is an historic visit. The very fact that the ship is here and is being served by Vietnamese contractors is massive proof of how far we have advanced.” US naval access to this facility is a key component of America’s strategy, Panetta stressed. Rivalry over Cam Ranh Bay benefits Vietnam, but Russia’s return to Asia enables other states in the region to balance their relations with such powerful neighbours, such as China and the US.

Tuesday, November 27, 2012 5


Privatisation in full swing Kremlin has ambitious plans to sell stakes in state-owned enterprises, writes Tim Wall



Tough challenges ahead for nation Global economic uncertainty affects Russia in two ways. First, export prices for gas, oil and other exchange com-



he US$5.3 billion Sberbank offering, reducing the state’s share to 50 per cent plus one share, has set the scene for a raft of privatisation exercises planned for the next few years. President Vladimir Putin’s ambitious plans for selling stakes in state companies, set out in his pre-election programme earlier this year, are now likely to be modified, experts say – with a smaller list of assets in banking and transport infrastructure receiving a quick green light, while sell-offs of energy stakes will likely end up on the backburner. “What has actually happened over the past two months is that the privatisation plan appears to have been split into two categories – stocks in the fasttrack programme and a second programme with a much longer and vague time-line for sale,” says Chris Weafer, chief strategist at Sberbank Investment Research. The change comes after an extended discussion within government circles, as conservatives around Igor Sechin, the influential chairman of state energy giant Rosneft, appeared to win the argument that strategic energy assets should remain under strong state control. Liberals in the cabinet of Prime Minister Dmitry Medvedev, led by Deputy Prime Minister Arkady Dvorkovich, had called for energy assets to also be put on the fast track to privatisation. The Rosneftegaz holding, under Sechin’s leadership, controls the state’s stake in Rosneft, and 11 per cent of the equity in Gazprom. It now seems increasingly likely that Rosneftegaz will extend its energy empire to include majority control over Gazprom, more than 75 per cent of Rosneft and the Federal Grid Company, a majority interest in Rus Hydro, and more control over oil pipeline monopoly Transneft, among others. In the strategic energy sector, the government looks likely to take a step back

Moscow is keen to privatise as many state enterprises as possible. towards “greater state control and some sector consolidation before then proceeding with privatisation at a later date”, Weafer says. But the liberals could yet manage to turn the tables and speed up the programme. “There remains a tension at the heart of government about the speed and nature of privatisation, so the plans are always subject to change,” says Kingsmill Bond, chief strategist for Citibank in Moscow. Next up after Sberbank is likely to be

modities are jeopardised because of falling demand amid uncertainty in the global economy. This not only affects the largest Russian companies – Gazprom, Rosneft, Evraz and others – but also the government, because royalties from oil and gas are important for the budget. Second, financial markets remain highly volatile – with investors ready to flee at the faintest sign of trouble. While multinationals, such as Siemens and General Electric, with substantial investments cannot leave the country overnight, investors in financial markets can always retreat to their domestic markets. Making things worse for Russia is its lack of large national institutional investors. Since the collapse of communism, it has not had the time to estab-

5.3 BILLION US$ Sberbank’s offering

Within five years, Moscow may become a financial centre for the CIS - Ukraine and other ex-Soviet states lish major pension funds or insurance companies. The government is trying to fight the weaknesses of these institutions, but so far this task has proved too hard. A similar story is unfolding with the declared strategy to turn Moscow into an international finance centre. Many initiatives have been launched, and

Russia’s second-biggest bank, VTB, which aims to raise US$2 billion in the spring of 2013, according to bank chairman Andrei Kostin. Also in the fast-track programme are likely to be stakes in the publicly listed companies Sovcomflot, the state shipping company, national airline Aeroflot, diamond monopoly Alrosa and Federal Grid Company, Weafer says. Initial public offerings in Apatit, RosAgroLeasing, Russian Agriculture Bank, Russian Railways, Sheremetyevo Airport, United Grain Company, and the

some, such as the setting up of the joint MICEX-RTS exchange and the Central Securities Depository, have been completed. As a result, within five years, Moscow may become a financial centre for the Commonwealth of Independent States – Ukraine, Kazakhstan and other ex-Soviet states. But talk of turning Moscow into another London or New York remains fanciful. Prospects look better for Russian banks. With loan portfolios growing on average 10 per cent to 20 per cent annually, asset growth is strong and yields are high. Their position, however, needs further strengthening, particularly in areas such as risk, finance and budget management, and capital planning.

ports of Murmansk, Arkhangelsk and Vanino are also planned. Analysts say the non-extractive industries were the best privatisation prospects, with VTB a proxy for the domestic economy, and Rusnano, representing new technology. “The most attractive companies will be those which offer exposure to consumer or infrastructure growth in new sectors,” Bond says. “Sovcomflot therefore is especially interesting.” The big question remaining is whether or not the Kremlin can find the right windows of opportunity to get good prices for its stakes. Speaking at VTB’s “Russia Calling” investment forum in Moscow last month, Putin said that sell-offs would continue, “taking into account market prices and the market situation”. Analysts reinforce this view, emphasising that the timing mainly depended on external factors. “The bottom line is that the government will only be able to sell when there is investor appetite for risk assets,” Weafer says. “It’s a case of waiting for likely short windows of opportunity in which to sell. But the handle to open or close those windows is in the hands of Europe’s politicians, the European Central Bank and the US Fed, rather than with the Kremlin.”

High yields for banks, however, mean that loans are expensive for companies because banks remain apprehensive about lending in today’s uncertain market conditions. Nonetheless, expanding corporate credit and diversifying lending to larger, small and private businesses will be crucial for long-term development. Two other challenges for banks are the dangers of currency risk for those that use dollar loans to lend in roubles and how best to lower the interest rates paid on deposits opened when inflation was high. Offsetting both these problems is the fast rate of rouble-deposit growth – 22 per cent to 23 per cent annually for the past three years. Geoffrey Nicholson is a partner at PwC

6 Tuesday, November 27, 2012



Sukhoi Civil Aircraft’s Sukhoi Superjet 100 aims to fill demand for aircraft with 60 to 120 seats in Asia, a market where it has virtually no competition.

Superjet ready for take-off Asia is expected to become key market for civil aircraft manufacturer, writes Dmitry Litovkin


ukhoi Civil Aircraft (SCA) is gearing up to meet growing demand for its planes in Asia. At the moment, the company has contracts for the delivery of 45 Sukhoi Superjet 100 (SSJ100) aircraft in Southeast Asia. Indonesia’s Sky Aviation has ordered 12 for delivery this year, while other airlines in the region will receive about 30 next year, SCA senior vice-president Igor Syrtsov said at a recent aerospace show in China. Mikhail Pogosyan, president of SCA’s parent company, United Aircraft Corporation, says the company is counting on Chinese orders. “I think we will sign preliminary documents on potential deliveries to China in the first half of next year. We will then announce the companies we are in talks with now,” he says. Pogosyan says its assembly plant at Komsomolsk-on-Amur will help with deliveries to China. Analysts believe the SSJ-100 is perfectly positioned to win orders in the Southeast Asia market, where it has no rivals. Its closest competitor, the Chinesemade medium-haul ARJ, won’t appear before 2013, while Japan’s Mitsubishi MRJ is more expensive. The SSJ-100 is the most ambitious project of the Russian aerospace industry in recent years. It is the first passenger plane aimed at domestic and foreign markets to be

Analysts say the Sukhoi SSJ-100 is perfectly positioned to win orders in Southeast Asia, where it has no rivals


manufactured after the collapse of the Soviet Union. In Russia, the SSJ-100 could replace a fleet of the obsolete Tu-134s and Tu154s, while globally it is hoped the aircraft will compete with offerings in the same class. The company is working on the assumption that the aircraft will take a 15 per cent share of the market in the segment of jets with 60 to 120 seats, for which demand should reach 5,750 units by 2032. SCA started the development of the SSJ-100 in early 2000, inviting more than 30 system and component suppliers to

take part in the project, including Liebherr Aerospace, Thales, Â/Å Aerospace, Honeywell, Parker, Messier-Dowty, Goodrich, Artus, SAFT, Leach International, SNECMA and Boeing. This collaboration was a first for Russia’s aerospace industry. A totally new market-based management and technology structure was established. SCA assumed full responsibility for the product’s life cycle, from design and development to marketing and sales to certification, manufacturing and servicing. In addition, as a joint-stock company, SCA can take out loans or enter part-

AVIATION nership alliances. The SSJ-100’s key competitive advantages are its fuel economy, achieved thanks to its Russian-French SaM-146 engine, and its environmental standards, far exceeding all International Civil Aviation Organisation-mandated noise and emission requirements. The SSJ-100 has also received a European Aviation Safety Agency certificate, confirming compliance with stringent safety requirements. Eleven SSJ-100s were in operation as of the start of November. They had performed about 8,000 commercial flights for a total of 15,580 flight hours, earning praise from pilots and airlines alike. Experts point out that the SSJ-100 is one of the most promising manufactured planes in the market. The order book for the plane has already reached 170 units and keeps growing.

Tuesday, November 27, 2012 7


Deal to spark boom Agreement between Rosneft and BP to boost sector, writes Ben Aris


The deal is wrong


I think the deal is wrong. When a state company increases its huge reserves and resources, the country stands to gain nothing. Look at Gazprom. At one time, it was one of the world’s leading companies in terms of capitalisation. The high profits have remained, but capitalisation has dropped several fold. Global investment companies envisage about US$100 billion in future losses in the medium term. It is clear that state management is less effective than private management. Of course, by buying TNK-BP, Rosneft becomes one of the biggest and most influential companies. The deal seems to put Rosneft on a par with Exxon Mobil. If the price of oil falls below US$80 per barrel, it will be in trouble, as its capitalisation will plummet.


BP needs access to Russia’s oil reserves, while Rosneft wants BP’s management and technical expertise

Share in Russian production volumes

Country’s undiscovered reserves

Alexei Kudrin is Russia’s former minister of finance


ndustry analysts welcomed what has been described as the “deal of the century”. Last month, British oil giant BP swapped partners in Russia, from the Anglo-Russian joint venture, TNKBP, for the state-owned Rosneft in a deal worth about US$60 billion, creating the biggest listed oil company in the world and transforming the Russian oil sector into the bargain. BP sold its 50 per cent stake in TNKBP to Rosneft in a stock-and-cash deal that saw the British company become the biggest single shareholder in Rosneft after the government. At the same time, Rosneft bought out the Russian AAR consortium that owned the other half of TNK-BP for US$28 billion. The merged entity will produce 4 million barrels of oil a day, making Rosneft responsible for near half of Russia’s entire oil production. However, the deal will significantly boost the state’s role in the sector. Even President Vladimir Putin was squeamish about increasing the government’s influence in Russia’s most important sector. “Both the government and I had mixed feelings when the idea of this project appeared,” Putin said at a meeting with members of the international Valdai Discussion Club. “This is not in line with our trend to reduce the growth of the state sector.” However, the logic of the deal was compelling: a good deal is one where the interests of the two parties are aligned and BP needs access to Russia’s oil reserves, while Rosneft is in desperate need of BP’s management and technical expertise. Russia is one of the world’s biggest


SERGEI ANDREYEV President Vladimir Putin (right) is not keen on government influence. oil exporters, but the fields that were developed for the most part in the Soviet-era are past their peak and production is beginning to decline. Furthermore, before the end of the year, the government intends to auction off its last three big unexploited oil fields. “If we complete the auctions on Imilor field in the Khanty-Mansiysk autonomous district, the Severo-Rogozhnikovskoye field in the Shpilman region and Lodochnoye field in East Siberia in 2012, we will thus draw the line under the era of the mineral reserve base on oil discovered in Soviet days,” says Igor Plesovskikh, head of the Federal Agency for Subsoil Use, adding that two of the three fields are due to be sold next month. Russia needs to find new fields and almost certainly has large oil deposits in its unexplored Arctic and eastern Siberia territories that were largely ignored by the Soviet-era leaders. Russia is thought to have more undiscovered oil fields than anywhere else on earth (see chart). Russia needs to spend 500 billion roubles (HK$123.3 billion) a year on geological exploration in order to maintain its production levels, says Plesovskikh, but is only spending 180 billion roubles. No new reserves will be discovered in the short-to-medium term, according to the Federal Minerals agency. That’s why the deal with BP is so important to Rosneft, which will lean heavily on its new partner to help with the prospecting work it is not technically capable of performing.

The nature of Russia’s oil and gas business was changing even before the Rosneft-BP deal. For most of the past two decades, Russian oil companies have only had to upgrade Soviet facilities and improve efficiency. Nevertheless, as these wells run dry, analysts believe the Rosneft-BP deal is likely to be the catalyst for consolidation in the sector. More international companies are also expected to be invited into Russia’s closed hydrocarbon sector. “The Rosneft and BP deal will be followed by more deals in the Russian oil sector as it enters the next phase of development,” says Ildar Davletshin, an oil and gas analyst at Renaissance Capital. “Russia urgently needs to replace its depleting wells with new ones from much more challenging reservoirs in terms of their geology and geography. “The most likely partners to co-operate with global majors will be state and state-backed companies. “At the same time it is anticipated that, while the state has increased its hold on the oil and gas sector, it will start to withdraw again in a few years time after Rosneft is added to the privatisation programme.” The Russian government plans to privatise Rosneft in 2013/2014, depending on market conditions, First Deputy Prime Minister Igor Shuvalov told the media last month. “We have considered the sale of Rosneft’s shares, among others, for the coming year and 2014. We believe that it will be sold when the right time and opportunity arises,” Shuvalov said.

Two sides to story I see positive and negative sides to the Rosneft deal. The pluses are that, in order to compete successfully in the world market and invest successfully in major new projects, a business should be of adequate size. A company becomes successful when it grows to a certain size. The minuses are that it will definitely diminish competition on the retail petroleum product market, which is a bad sign. In general, a company’s integration is good for expanding its opportunities, but it does not spell any benefits for consumers. Sergei Andreyev is general director, ABBYY Group


The deal is ‘healthy’ for Rosneft It is healthier for Rosneft and it’s better from BP’s perspective. It’s not like Rosneft is taking over private assets and it’s only going to be governed by the state – I think the state control will be reducing over time ... Rosneft will become . . . number one in terms of reserves and production, and it’s better for us because state control will be reduced. Igor Shuvalov, First Deputy Prime Minister

8 Tuesday, November 27, 2012


Sparkling deal for Chow Tai Fook HK-listed jewellery company aims to buy rough diamonds from country’s top producer after signing two-year agreement, writes Elena Kiselyova year in terms of weight, and just about the entire volume of so-called “Indian goods” (smaller diamonds weighing from 0.1ct to 0.15ct) that account for a quarter of Alrosa’s production. Alrosa sold US$500 million worth of rough diamonds to Indian cutters – half of its export sales – in 2009. In March 2010, it signed three-year contracts worth US$490 million with Indian diamond companies Rosy Blue, Diamond India and Ratilal Becharlal and Sons. Last year, Alrosa reported diamond output at 34.6 million carats worth about US$4 billion. Chow Tai Fook is the largest jewellery maker on the mainland, Hong Kong and Macau, with 13,000 staff. It was founded in 1929 by the Cheng family, who, until recently, owned the company outright. An initial public offering in Hong Kong late last year raised US$2 billion for 10.5 per cent of the company’s shares. The company became a De Beers sightholder in 1993 and a Rio Tinto Select Diamantaire in 2009. Chow Tai Fook buys rough diamonds in the open market, including in Belgium, Hong Kong and Russia, and is active in all diamond market segments – from the purchase of rough diamonds to design, production and marketing of jewellery. The company operates three

MINING ket has great potential for growth.” Alrosa has a number of contracts with 24 long-term clients, according to the company’s website. A source familiar with the situation says almost half of these contracts are due to expire next year. “One of Alrosa’s priorities when negotiating new long-term contracts will be geographical diversification of sales, as well as the practice of sales it developed during the ‘heavy market’ period,” the source says. He believes Chow Tai Fook is capable of processing as many rough diamonds as Alrosa supplies to Indian customers. Sergey Goryainov, an expert with diamond industry news agency Rough & Polished, says Alrosa’s deal is part of an effort to build a stable sales policy. “Competition is quite strong now from Israeli and Indian diamond diamantaires. Indian companies are trying to monopolise the diamond-making market by exerting political leverage on diamond miners, including Alrosa,” he says. Indian companies process up to half the diamonds mined in Russia every

The Alrosa group is Russia’s major company dealing with exploration, mining, cutting and sales of diamonds. It is one of the largest diamond producers in the world, with 25 per cent share of global production. The group expects rough diamond production this year to be 34.4 million carats. It produced 34.6 million carats last year. Net profits for this year are expected to be 34.3 billion roubles (HK$8.34 billion). Alrosa’s main shareholders are the Property Ministry of Russia, and the State Property Ministry of the Republic of Yakutia. Surveys indicate that it has diamond reserves to maintain production for the next 50 years. diamond-cutting and nine jewellery factories and its largest production facility, with 5,000 staff, is in Guangdong. The company has two other diamond-cutting facilities in South Africa that employ 300 people. It produces enough diamonds to meet 40 per cent of ts needs.


Siberia looks forward to glittering future A. Vedeneyeva Kommersant


A diamond arrangement forms the Russian imperial double-headed eagle.

Alrosa meets global demand



ong Kong-listed Chow Tai Fook Jewellery Group is poised to become a regional power in the supply of rough diamonds after the largest jewellery brand and distributor on the mainland, Hong Kong and Macau signed a two-year deal with Russian diamond giant Alrosa. Chow Tai Fook plans to buy at least US$100 million worth of rough diamonds in Russia annually, eventually rivalling Indian diamond cutters that account for half the diamonds mined in Russia. “The greatest challenge for all diamond industry players is the scarcity of authentic natural diamonds,” said Conroy Cheng, Chow Tai Fook’s executive director, after signing the deal in Moscow earlier this month. “The agreement with Alrosa enables us to secure more reliable supplies of rough diamonds, particularly those specifications that are in greatest demand from our customers.” A source close to Alrosa said that, “Chow Tai Fook is ready to buy more than US$100 million worth of uncut diamonds a year, while Alrosa would prefer to work on a ‘test mode’ during the initial phase. Nevertheless ... co-operation with the largest Chinese diamond and jewellery maker has begun [and] is extremely significant.” The Russian company’s president Fyodor Andreev said: “Alrosa’s priority is signing long-term agreements with large companies, since such agreements guarantee stable sales volume to us, as a producer, and guarantee stable rough diamond supplies to a customer. It is the first long-term agreement with a company from China. We believe this mar-

Knowledge of a massive deposit of superhard diamonds in Russia has finally been declassified, with experts excited about its potential for heavy industries, hi-tech optics and electronics. The deposit is located in an asteroid crater between the Krasnoyarsk Territory in eastern Siberia and the Republic of Sakha (Yakutia) in the far east of Russia. Known as the Popigai Astroblem, it was discovered in the 1970s, although Soviet scientists decided to keep the find secret because they did not know how best to use the diamonds, according to geologist Alexander Portnov. “Research into impact diamonds had been classified for a very long time, because the reserves are immense, but [Soviet] scientists did not believe they could be used in industry,” Portnov says.

“The very possibility of their application in the manufacturing sector is a sensation.” Naturally occurring diamonds are not typically suitable for industrial use because of their unpredictable and nonstandard characteristics. However, experts agree that the unique properties of these diamonds make them suitable for use in hi-tech optics and electronics. Impact diamonds are created when an object such as a meteor hits an existing diamond deposit. They are known for their large grain size. Industrial use of diamonds amounts to approximately 5 billion carats, but most of these are produced artificially, says Sergei Goryainov, an analyst at the Rough & Polished information and analysis agency. “Industrial diamonds have multiple applications, but the thing is that successful crystal synthesis experiments result in the appearance of nu-

merous synthetic diamonds with tailormade properties,” Goryainov says. “When you extract natural diamonds, you can never be sure about the exact properties. The share of natural diamonds on the market for industrial crystals is currently quite insignificant.” Despite the overall industry preference for synthetic diamonds, a few big corporations have expressed an interest in the rediscovered deposit, says Nikolai Pokhilenko, director of the Novosibirsk Institute of Geology and Mineralogy. “They have peculiar properties. They are harder, much harder than the ordinary diamonds we all know,” Pokhilenko says. “They can revolutionise tool-making, drilling, processing, because they are the hardest natural material known. They can be used in hi-tech industries: electronics, optics and production of high-precision lenses.

Tuesday, November 27, 2012 9


Moscow hopes to grab share of rare earths market Olga Samofalova Vzglyad

The Udachny mine in Yakutia region, where diamond mines produce massive profits in a tightly controlled market. Russia has been the world’s largest diamond producer for the past three years.

The world of diamonds

Russia plans to step up efforts to produce and sell rare earths, a market China dominates. Under a new plan, Russia will move to acquire a greater share of the global market for rare earths. A production plan could be unveiled as early as next February, Interfax reports. Rare earths are a group of 17 elements, including lanthanum, scandium, yttrium and lanthanide used in radio electronics, mobile phones, batteries, nuclear energy and chemical industries. They are abundant, but extraction is expensive at about US$40,000 per tonne, according to Roskill Information Services. Rare earths are also used by the defence sector. Samarium, for example, is a component of magnets used in highprecision weapons. The global market for rare earths is valued at US$15 billion per year and China is the largest producer and exporter, supplying 95 per cent of total demand. China owns one-third of global reserves. Russia has 20 per cent of global reserves but only 2 per cent of the global market and produces only 1 per cent of goods that use rare earths. “In Russia, the actual metal, the final production, is virtually not produced. We extract the raw materials which are then processed abroad — in Estonia, in Kazakhstan and Kirghizia. These are the costs of a system built in Soviet times: the factories able to process the rare-earth metals mined in Russia are now, after the collapse of the Soviet Union, outside the country,” says Dinnur Galikhanov, a senior analyst at Aton Capital Investment. At the same time, a number of Russian companies with access to rare earths are not doing anything with them. One company, Apatit, owns large deposits in the Murmansk region, but the company produces fertilisers and the rare earths go untapped and unused. Akron, another fertiliser producer, also owns large deposits, but it is still un-

Main producers 100 80 60 40 20 0

clear what the company plans to do with them. According to one specialist, rare earths are indispensable to Russia’s innovative development. “If Russia actively wants to pursue the path of innovation, the path that Prime Minister Dmitry Medvedev is fighting for, then without access to metals of this sort achieving success in this [sphere] will be very difficult and expensive,” Galikhanov says. “Russia will have to buy these metals on the world market at high prices.” China has been gradually lowering its export volumes since 2003. After a 30 per cent reduction in exports in 2010, prices shot up by 20 to 30 per cent. China based its reduction in exports on the fact that, at present rates of production, its deposits would last only 15 to 20 years. The United States and the European Union accused China of violating World Trade Organisation norms, but to no avail. “Russia also needs to produce its own rare-earth metals so as to safeguard its military and nuclear industries,” say analysts at Aton. “The current volumes of extracted metals are insufficient. Russia has to import rare-earth metals for its needs.” Information about the movement of rare earths on the market is classified, but Dmitry Barabanov, an expert at Finam Management, says Russia most likely covers its needs for these metals with imports, which is a threat to its security. “In order to preserve our national sovereignty, Russia must produce more rare-earth metals inside the country, and not import them,” Barabanov says. “The government is ready to invest means in solving this problem and support private business in this industry.” The production of rare earths has enormous export potential. “Even if Russia, America, Europe and Africa all get involved in this, in the near future they still won’t be able to satisfy the overall demand,” Barabanov says. Consumption of these metals this year is estimated at 140,000 tonnes, which should increase to 200,000 tonnes by 2015.

10 Tuesday, November 27, 2012


Walking on a tightrope Fedor Lukyanov



hina has earned a reputation as a country where everything always follows a plan that has been worked out years ahead. Since 1989, there have been fluctuations in the party line and periods of unrest, but they have not influenced the general perception of the Celestial Empire as a monolith moving purposefully in its chosen direction. The deepening of global instability in the first decade of the 21st century only accentuated this characteristic of China – the more others flailed around and stumbled, the more impressive Beijing’s gradual forward progress seemed. The latest Communist Party of China congress took place in a difficult context. First, the Chinese authorities are worried by everything that is happening in the world. Although China has very little in common with the countries that have been hit by the Arab Spring awakening, Beijing is afraid that it too might be touched by unrest. Second, despite the fact that China survived the 2008 financial crisis better than others, people are still talking about the growth model and the need to review the very basis of development. Finally, the high-profile punishment of Bo Xilai demonstrated that a fierce political struggle is also under in the Chinese leadership. The fifth generation of leaders in China will have to function in a situation where China can

OPINION no longer keep itself hidden away. The arguments about how far the country should follow Deng Xiaoping’s ruling to “maintain a low profile” are finished. Whether Beijing likes it or not, the whole world’s attention is already focused on it. Any move it makes will be examined through a microscope and subjected to numerous interpretations, most of them biased according to how scared people are of China’s growth and size. Repeated statements that China is not thinking in expansionist terms, and is not seeking world domination, will change nothing. No one will believe them, since Europe and the United States are inclined to project their own way of thinking on to others and, besides, it is always easier to believe the worst – then you won’t be caught off guard if it happens. This means that China will continue to face

opposition. The grace period of development, when the country was able to take advantage of the US-centric global system, while almost entirely avoiding its negative effects, has ended, and now everything is the other way round. True, the system itself has problems, but that doesn’t make it any easier for China. The US is too dependent on China to take pleasure in its decline and it doesn’t have enough ideological and military/political resources to try and prt forward an alternative. To be fair, it has to be said that the present wave of predictions of the disasters threatening China is probably the fourth in the past 20 years. Up to now, the Chinese leadership has managed to defuse any problems and find middle ground that has led to new success. In the past, of course, crises in China didn’t coincide with the erosion of the entire international institutional structure, when people literally did not know what to rely on. The difficulties – real or somewhat exaggerated – of its giant neighbour threaten Russia

with a multitude of consequences, most of them laden with risk. A recession in China, if one were to start, would drag down the whole international economy, particularly the raw materials market. Moreover, it’s not entirely clear what policy Chinese leaders would use to try and compensate for the lack of growth, which they need for internal stability. Chauvinism is a tried and tested anaesthetic for society. If China continues to grow as it has up to now, the tension around it will start to increase (its neighbours and America will be nervous) and, along with that, the pressure on Moscow to adopt one stance or another will grow. But any final choice for Russia will be a losing choice, so we wish the fifth generation of leaders that they will be able to walk successfully along the edge of the razor blade. Fedor Lukyanov is editor-in-chief for Russia at Global Affairs magazine

Moscow considers withdrawing from treaty Yevgeny Shestakov Russia may withdraw from the Strategic Arms Reductions Treaty (START) it signed with the United States in Prague two years ago. This is not a hypothetical threat, but a very real scenario about which Russian Deputy Foreign Minister Sergei Ryabkov warned last month. Moscow signed START with a proviso that it could withdraw from the treaty if the US missile defence system posed a threat to Russia’s national interests. Why does Moscow feel that disarmament initiatives are unacceptable? The most obvious reason is the continuing build-up of America’s global missile defence system. According to the Russian military, there is no guarantee this ballistic missile defence will not be targeted against Russian strategic arms.

Unlike other joint initiatives with the West, the US is only prepared to have verbal agreements on missile defence, even though the issue is clearly one that affects Russia’s defence capabilities and calls for very detailed and specific guarantees. Addressing a recent conference in Moscow on nuclear weapons and international security, an American expert argued that continuing to disarm Russia would set a positive example to its nuclear neighbours, particularly China, but also India and Pakistan. Moscow is convinced that a new strand of the global arms race is about to start, if it has not started already. Western armies possess highprecision systems and missiles capable of moving at hyper-speeds, making them almost as effective as nuclear weapons. First Vice-Premier Dmitry Rogozin, who is in charge of the military-industrial complex, said


Moscow would spend US$638 billion on the procurement of new military hardware and a further US$96 billion to replenish its arsenal by 2020. The development of the military-industrial complex is not only economic, but also an important infrastructural and innovation project called upon to give a boost to the regions east of the Urals. During a recent visit to Novosibirsk, Rogozin proposed that the city be made the “centre of a defence cluster”. The draft Russian budget for the coming years earmarks hefty sums for defence. Spending on education, science and health care has been slashed. The Russian leadership considers defence spending so vital that it is ready to sacrifice social spending. Rogozin suggested that corruption in the military-industrial complex be equated to high treason. While not renouncing further nuclear arms reduction talks, Russia thinks it should only be


conducted on a multilateral basis and should involve all countries with nuclear programmes, and only after nuclear missile defence guarantees are received from the Americans, and all the START provisions are implemented. For now, the Kremlin is expected to disarm even as the US missile defence system is being strengthened and new nuclear countries are emerging and building up their arsenals. All these factors are not conducive to Moscow’s participation in the struggle for zero nuclear weapons. Unless the West convinces Russia by signing concrete agreements that the building of its ballistic missile defence system does not threaten its security, Moscow will start making adjustments to the START agreement.

Yevgeny Shestakov is editor of the international politics desk of Rossiyskaya Gazeta.


Tuesday, November 27, 2012 11


Chinese authors are starting to make inroads Artyom Zhdanov

Imagination that runs wild Mo Yan’s novel is a vivid example of the parallels between Chinese and Soviet censorship, writes Anna Narinskaya


onsidering that one of the aims of literary prizes is to put less well-known authors in the public eye, the Nobel Prize has certainly done its job with Mo Yan, whose real name is Guan Moye. Despite the success of Zhang Yimou’s film Red Sorghum, which was based on Mo Yan’s novel, and despite the fact that a number of his works have appeared in English and French, the Western world is unaware of his work. There was a sense of puzzlement in the remarks of literary critics published on The Guardian website, the day the winner was announced. But now people will find out about Mo Yan and probably even read him, especially since his prize has sparked controversy – dissident Chinese artist Ai Weiwei has condemned the Nobel Committee’s decision as “an insult to humanity and the whole of literature”, which “cannot be separated from the contemporary political situation in China, where free speech does not exist”. Mo Yan is not guilty of praising the regime – Ai doesn’t accuse him of that. But he does abstain from making direct statements against it. In an interview with the British literary journal Granta, Mo Yan expressed the idea that the existence of censorship, prohibiting open condemnation of the regime, actually means the writer’s “imagination starts working, forcing him to travel to other worlds, or to paint reality in bright and

LITERATURE unusual colours. In other words, the restrictions of censorship can have a positive influence on the literary process”. This kind of thinking seems normal for Russians, although it was used more as an argument, in that the virtues of Soviet literature were explained by the existence of censorship. More often than not, the disappointing quality of postSoviet literature has been blamed on the absence of censorship, which makes life easier for writers in a way that is not productive. So there is an astonishing difference. Or rather, it cannot be called a difference. Russian prose similar to Mo Yan’s could not have been published in any form in the Soviet period. And it wasn’t, because if Mo Yan is reminiscent of any Russian writer, it would be Vladimir So-

rokin in his most vivid manifestations. Ding Gou’er, an investigator of especially important cases, is travelling to a mine in the province of Jiuguo, translated as “The Republic of Wine”, to investigate reports of little children being eaten by the mine’s management. But in the course of unearthing the truth, he becomes increasingly entangled in the actions of those he’s investigating, and the story itself becomes increasingly surreal, so that the reader breathes a sigh of relief when he realises that what he is reading is a novel by one of the characters, the well-known writer Mo Yan. The author – and here it’s worth quoting Mo Yan’s merciless description of himself as “a fat middle-aged man with thinning hair, slit eyes and a crooked mouth” – conducts a hilarious correspondence with a young writer from the Republic of Wine and writes a novel, making much use of plot ideas taken from the dreadful tales that his admirer sends him in the hope of protection. The cannibalistic world of the Republic of Wine will of course still bare its teeth when it goes beyond the “novel within the novel”. While Soviet censorship fought – as Russian writer Vassily Aksyonov puts it – against “distortion of the picture” and banned drastic departures in style, in China the only thing the censors don’t allow is open confrontation with the authorities.



Mo Yan, whose real name is Guan Moye, sparked plenty of controversy when he won the Nobel Prize.

Books by Chinese authors are rare and the demand for Chinese literature is limited in Russia, according to Yegor Mikhailov, a sales adviser in a large Novosibirsk bookshop. “[Chinese] books are published in small numbers, usually expensive collections of prose and classic works that are primarily of interest to keen collectors,” he explains. “The four-volume Journey to the West, for example, got rave reviews, but demand was limited,” he says. “There was some interest recently in the novel Girl in Translation by Jean Kwok, who emigrated from Hong Kong to the United States and writes about the difficulties someone from the East has in adapting to the Western world. But most ordinary readers rarely ask for Chinese authors.” Mo Yan’s Nobel Prize has the world talking about Chinese literature, and Russia is no exception. His novel, The Republic of Wine, was published in Russian on the very day the Chinese author received his prize, and it caused quite a stir. The St Petersburg publisher, Amphora, was strikingly accurate in predicting the success of the novel. And now Mo Yan’s best-known work, Big Breasts and Wide Hips, is due to appear in bookshops next month. The publication of two full Chinese novels in Russian, within such a short space of time, really is a big event in terms of introducing the Russian reader to Chinese literature as a whole. “In the 20 years from 1992 to October 2012, 24 separate editions of contemporary Chinese prose were published in Russia, including 182 works by 87 writers. The most translated writers include Wang Meng, Feng Zikai, Jia Pingwa, Can Xue and Wang Anyi. But when one considers that only 114,000 copies of all their works have been printed, it becomes obvious that ordinary Russian readers scarcely know anything

about the literary life of China,” says Aleksei Rodionov, lecturer in the faculty of oriental studies at St Petersburg State University. The main problem in making Chinese literature better known is to do with the publishers themselves. They don’t know the Chinese authors, they can’t predict how Russian readers will react to them, and they’re not willing to take a risk. The few works that are published are mainly translations of Chinese authors from western European languages that have already been tested on other markets. There is also a belief that translating from Chinese is too difficult and expensive, and the effort is not worth the return. Despite this, it would be wrong to claim that nothing positive has happened in this area. A special foundation has been set up in China for Chinese publishers to finance the promotion of their literature abroad. The central government is also providing various subsidies and grants to translators and publishers in Russia. “We are also providing incentives for Chinese publishers at home to invest in Russia, to open their own publishing and printing companies there,” Liu Binjie says. The past five years have seen the publication of a number of books, including erotic novels Candy by Mian Mian and Shanghai Baby, and Marrying Buddha by Wei Hui; the mystical thrillers The Virus and The Curse by Cai Jun and the novels Wolf Totem by Jiang Rong, and My Life as Emperor by Su Tong. In August, a protocol between publishing houses in Russia and China was signed at the Russian Science and Culture Centre in Beijing. “Hopefully, Mo Yan’s Nobel Prize will stir up interest in contemporary Chinese literature, which is distinguished by its variety of genres and styles and could be shared with the world, not only by Mo Yan but also by other literary figures of the same generation,” Rodionov notes.

Chinese literature is beginning to make its presence felt in Russia.

12 Tuesday, November 27, 2012


Residents of the northern city in the Arctic still smile despite the tough conditions, writes Anton Makhrov


ore than 3,000km from Moscow, Nor ilsk is known for its extreme polar climate, the sad state of the local environment and grim Stalin-era gulags. Local airline Nord Star covers the journey in four hours. “Our plane has landed at Alykel airport. The weather outside is pretty average, minus 28 degrees [Celsius],” the pilot announces. For November, in Norilsk, this is average weather. The development of the Taimyr Peninsula, where Norilsk is situated, began in the 17th century, but the city itself is considerably younger. The first house was erected in 1921 by a geological survey team led by Nikolai Urvantsev. It was a simple, four-room, wooden shack that still stands in the middle of the city as a reminder. The citizens of Norilsk are in no rush to forget the city’s grim history. In the 1930s, one of the Stalin-era gulags was located on the outskirts of the northern city. Nobody here tries to pretend it was never there. Quite the opposite. The local museum has a new


Cold comfort in region Norilsk is more than 3,000km northeast of Moscow. The city’s Arctic temperatures can dip to minus 28 degrees Celsius in November. exhibition dedicated to the camp’s victims and its survivors. There is also a memorial to the scores of victims of the “Terror” at the foot of mount Schmidt. Norilsk’s industrial regions affect the ecosystem. The lion’s share of criticism is directed at the Norilsk Nickel Corporation, whose operations surround the city. The head of the company’s polar division, Yevgeny Muravyov, makes no attempt to conceal the problems. “You can’t even imagine the attitude to ecology in the Soviet period. Now we have to rake over that legacy,” he says. The company has launched several initiatives to clean up its act, and the most ambitious one is to reduce sulphur emissions. However, it’s not an easy task as, in other plants, sulphur dioxide is recycled into sulphuric acid and then sold. The process itself is not a problem, but Norilsk is cut off from the main part of Russia for long periods, which makes transporting sulphuric acid from the city impossible. The solution involved the development of completely new technology to eliminate elemental sulphur from flue

LIFE Norilsk Norilsk is the northernmost city in the world, with more than 100,000 inhabitants. It is also the second largest city, after Murmansk, north of the Arctic Circle. Norilsk has an extremely harsh climate. The city is covered with snow for about 250– 270 days a year, with snow storms for about 110–130 days. The polar night lasts from December through mid-January, so that Norilsk citizens can’t see the sun for about six weeks. Temperature may fall in winter as low as −53°C (-63 °F), in summer time it may rise above +25 °C (77 °F) . Much of the surrounding areas are treeless tundra.

The annual ethnic festival The Big Argish is a rare opportunity for Norilsk city-dwellers to see reindeer.

emissions from the metallurgical plants. It will be installed at the company’s two Norilsk facilities by 2019. The cost of installation runs into billions of dollars, but the new technology will reduce sulphur emissions in flue gasses by at least 95 per cent, which will cut sulphur dioxide emissions to less than a quarter of what they are today. Ironically, while air pollution is Norilsk’s greatest problem, the quality of its water is a cause of justifiable pride. “I visit my parents on the Russian mainland at least once a year and, every time I go, I take them a new electric kettle as a present,” says Marina, a resident. “They have to throw their kettle away once a year because of the limescale. I’ve had mine for 10 years and there’s no trace of limescale on it.” Tap water has no hint of chlorine. Medical experts believe that long winters, little sunlight and environmental problems are a sure recipe for depression, but the people in Norilsk smile no less than in any other Russian city. Natalya Fedyanina works for the Northern City media company, a subsidiary of Norilsk Nickel that provides a host of cultural activities - such as exhibitions and festive events for the Norilsk citizens. She says: “It’s weird how nobody asked the Taimyr indigenous people before now what winter means for them, and how they get through it. They all agree that winter is great; it means hunting and fishing. They go argishing every week”. “Argishing” is best described as when indigenous people set off on a winter trip that has some special and interesting purpose – for example, fishing. The annual festival marking the onset of the polar night is called the “Big Argish”.

Even with freezing temperatures and little sunlight, the people of the north can still smile.

Norilsk Nickel Corporation is working on a plan to drastically cut emissions by 2019.

Tuesday, November 27, 2012 13


Bordering on happiness Emigrants from Siberia enjoy a comfortable lifestyle in Heihe, writes Anna Nemtsova




More and more Russians are taking the opportunity to cross the border into neighbouring China. China as a threat, nearly 50 per cent thought the region’s problems were because of Moscow’s economic and development policies. Putilov, 26, is a pioneer among Russians who are building lives on the other side of the border with China. Putilov’s mother, a retiree, joined him in Heihe last year. And these migrants trumpet the quality of their new lives: The early morning street markets with fresh vegetables; giant river fish; heaps of mushrooms; affordable child-friendly restaurants; and luxurious 24-hours spas that cost as little as US$5 to use. Last September, Victoria and Konstantin Petrashev strolled along the brightly illuminated riverbank in Heihe with their two sons, aged seven and four. Local pedestrians hugged the blonde boys. This is “the usual expression of warm feelings” of Chinese for foreign children, the Russian parents explain. The Petrashev family moved

Young people in Siberia want to learn Chinese, and many consider the possibility of moving there for employment

Friendly connections


Heihe offers a good life to Russian emigrants, thanks to its friendly inhabitants.

east from Abakhan in search of a better life. They grew tired of trying to find an affordable home and having to bribe officials to get their children into kindergartens. “It can only inspire drinking,” Konstantin says. The father of Russian drama, Anton Chekhov, wrote about independent, brave Russians who lived in the eastern parts of Russia. “The poorest exile breathes more freely on the Amur than the highest general in Russia,” Chekhov wrote from his trip along the Amur River in 1890. But for an increasing number of families, China offers the fresh air Chekhov writes about. At a dinner with journalists, a rock musician, a writer and businessmen, Igor Gorevoi, the Minister for Foreign Economic Relations for the Amur region, speaks openly of his school friends who have moved away recently, “some to central Russian cities, others abroad”. Last year’s statistics are especially

Heihe is the largest border city in China, and is across the Amur River from the Russian city of Blagoveshchensk. About 20 years ago, a kind of iron curtain existed between the two communist countries. Now both cities are reaping the benefits of being close to each other. A free trade zone was established between them in the mid-1990s and now visa-free day trips are allowed for Russians. Russians love to visit Heihe. Ferries cross every day until the river freezes over, leaving buses as the only mode of transport to cross the river. Last month, the countries started hovercraft services over the river. Heihe, a city of about 200,000, depends on Russia for its power supply. This year, a high-voltage 500-kilovolt power transmission line over the Amur River was installed in addition to the existing 110-kilovolt and 220-kilovolt lines.

frustrating for local officials: 6,080 people moved out of the Amur region, twice the migration in 2010. Gorevoi is tasked with building tourist infrastructure to attract Chinese visitors and create local jobs. He says the authorities recognise that affordable housing and quality kindergartens and schools are essential to reverse the population decline. But emigration to China and other Asian countries is rising. Natalya Legotina, who runs a modelling agency in Khabarovsk, ensures her daughter is learning Chinese. Legotina has bought an apartment in the Chinese city of Dalian to look for business opportunities. “Immigration is a solution for me. I want my daughter to speak fluent Chinese and have a good education,” she says. “At this end of Russia, our students are keen on exchange programmes in China, Japan, Korea or Malaysia. Asian languages have grown just as popular as English,” said Vladimir Kuznetsov, the director of the School of Regional and International Research at Far East Federal University in Vladivostok. Kuznetsov, also known for pulling back the iron curtain in the 1990s, when he was the first post-Soviet governor of the Primorye region, believes more reform will come to Russia from the east. Chinese students at Heihe University are studying Russian. “One day I can open my business in Russia,” says a Chinese student.”


few years ago, Igor Putilov, who was studying Chinese at Blagoveshchensk State Teaching University, overslept and missed two of his morning lectures. He said the solution to his malaise came over him like an epiphany: It was time to move to China. “I didn’t see any future for myself in Russia,” he says in an interview in Heihe, in northern Heilongjiang province. On his last day in Russia, Putilov jumped out of bed, packed his backpack and ran to the river port separating his town from China. Twenty minutes later, the ferry took him across the 800-metre-wide stretch of the Amur River to his new home, the modern and vibrant Chinese city of Heihe. Thanks to its status as a free economic zone, there are no visa requirements for Russians travelling across the river border. Cheap rent, affordable restaurants and a chance to earn money sound like heaven to the student. The young linguist perfected his Chinese, started blogging, and became manager of a mail-order business.“I frequently meet happy Russians residing in different parts of China – most of them come here from Siberia and the Far East,” Putilov says. While Russians have often expressed concern that Siberia’s declining population of 19 million will be overwhelmed by the 111 million Chinese who live in the Manchurian provinces alongside the border, the rate of migration has been relatively small. The number of Chinese in Siberia’s Far East peaked at about 500,000 in 2010 and has declined by 20 per cent over the past two years, according to a study by the Russian Academy of Sciences. Thirty to 40,000 Russian professionals have purchased real estate and found jobs in China in the past decade, according to sources. Young people in Siberia want to learn Chinese, and many consider the possibility of moving there for employment. A survey by a Khabarovsk-based Far East Research Group found that while 37 per cent of residents in that city view

Russian migrants find Heihe’s low cost of living and its tranquil lifestyle key attractions.

14 Tuesday, November 27, 2012


Wintery chill warms hearts and minds


The festive season is so much more delightful for Muscovites, thanks to plenty of snow, glorious sunshine and a nipping frost at some memorably fun attractions, writes Maria Bakhareva Stroll around the Christmas bazaars



For the past few years, the city’s most glamorous ice skating has been on the GUM-Katok ice rink, in Red Square. A major new contender appeared last year at Gorky Park, which now has the largest rink in Europe. Its 18,000 square metres of ice are

divided into areas for children, ice hockey and ice dancing. You can also be served refreshments at cafe’s scattered around the rink, and without even taking off your skates. The rinks in Gorky Park and on Red Square stay open until March.



Come skating

Join the maestros of classical music ITAR-TASS

See the finest art From November 23, the Tretyakov Gallery presents a large, new exhibition of Russian graphic print designs from the mid-19th century to the early 20th century, highlighting examples of all the era’s different art movements. It is also worth popping into the Museum of Private Collections of the Pushkin Fine Arts Museum after January 13 for an exhibition of etchings and drawings by Old Dutch Masters.

On November 24, the German embassy will host a Christmas fair with gingerbread houses, musical boxes, nutcrackers and other attractions. On December 1, the first day of Advent, St Andrew’s Anglican Church will hold a Christmas bazaar. A seasonal market will be held every weekend through December, offering Christmas decorations, toys, hot Belgian waffles, mulled wine and all the other goodies associated with the festive season. The pre-holiday shenanigans come to an end on December 22 and 23, when the magazine Seasons holds its traditional Christmas fair with seasonal gifts, Christmas tree decorations, seasonal sweets, enormous swings, ice skating. The event will also stage a re-enactment of the Nativity.

Ski through the city’s boldest snow trails The abundance of snow last year delighted children and riled the city’s street-cleaning services – just as a new mayor took on the job. It also prompted fresh interest in crosscountry skiing. If this year’s snow turns out to be

as good, ski trails will be laid out in all Moscow’s parks. Traditionally, the boldest ski trail is through the Aleshkinsky Woods at Tushino, which has been set up according to professional standards. Such facilities could attract Muscovites in droves.

If summer and early autumn are the seasons for high-decibel pop and rock concert tours, then December and January are the months to enjoy classical music. On December 29 and 31, famous diva Ljuba Kazarnovskaya will be giving concerts in the Great Hall of the Moscow Conservatoire. On December 29, Vladimir Spivakov, Daniel Kramer, the State Chamber Orchestra and the Virtuosos of Moscow Orchestra will present the

“From Mozart to Jazz” programme at the Tchaikovsky Concert Hall, while on December 31 Yuri Bashmet will perform his traditional New Year concert. The Bolshoi Theatre hosts one of the most anticipated premieres of the season, La Traviata, staged by Francesca Zambella, in December. On December 31, the Bolshoi will present Swan Lake. The ballet’s main role will be played by Nikolai Tsiskaridze.

Tuesday, November 27, 2012 15


Hopes and dreams Russians reveal to pollsters what they want most, writes Catherine Dobrynina


Writers define what love is

If one loves, one loves the whole person and not [something specific in a person] ...

LIFESTYLE Most people who are happy with their financial standing – as many as 93 per cent – also say their family relations are good. By contrast, among those who describe themselves as poor, only 40 per cent say they have good family relations. Interestingly, few Russians equate a happy family life with a good sex life. Sociologists believe Russians are more likely to focus on mutual wellbeing, child rearing, security and social status over sexual harmony or peace of mind. Views of what makes the ideal partner also differ between men and women, urban and rural residents, rich and poor, but sociologists have ventured a few ideas that cross these lines. At the top of the list is reliability, a feature that 19 per cent of Russian women consider. For many, reliability is more important than physical appearance. Second on the list is the “ family man”, identified by 16 per cent of women. Such a man has good health, is faithful and loves children, manages the household wisely and does not indulge in bad habits. Two other attributes are also much sought after: the “life and soul of the party” who is clever, sexual and has a good sense of humour, and a “sexual partner” that is strong, attractive and fit. Some 13 per cent of women dream of a “macho” male – a strong, self-confident man who does not smoke or drink, but can defend himself and his family. One in 10 women polled see their ideal man as “hard-working”. That is, a healthy man with no bad habits who can provide for a family. For men, the ideal woman is “the life and soul of the party” – an attractive, sexy, smart and confident woman with a good sense of humour. One in five men see the ideal woman as a family type. Housewife qualities tend to have little value in big cities, where they are half as important as anywhere else – 12 per cent compared with between 21 to 25 per cent. For 15 per cent of Russians, the ideal woman is a “contemporary housewife”; attractive, sexual, thrifty, physically healthy and child loving. Men have different expectations of wives, while women look for specific qualities in men they want as husbands.

He felt now that he was not simply close to her, but that he did not know where he ended and she began ... LEO TOLSTOY

Perhaps the feelings that we experience when we are in love [is quite normal]. Being in love shows [that a man] is who he should be. ANTON CHEKHOV

I think it is all a matter of love; the more you love a memory the stronger and stranger it becomes. VLADIMIR NABOKOV

What is hell? I maintain that it is the [torment] of being unable to love.” FYODOR DOSTOYEVSKY


ove in Russia – as elsewhere – is a many splendoured thing. The question for a group of sociologists is: just how splendoured is it? To understand what “Big Russian Love” is like, the Sociology Institute in Moscow set out to study dreams and hopes. When answering a questions about what they want to fulfil their dreams, almost all Russians willing to make a wish said they would seek good health for themselves and their loved ones. They would also ask for money, a new apartment and other material benefits, but only 18 per cent would ask for “happiness in their personal life”. About a quarter of respondents said they would not make any wishes. As it turns out, 99 per cent of Russians place great importance on family, with 90 per cent saying family is “very important”. Some 48 per cent say they already have a happy family and another 42 per cent are certain they will start one eventually. Only 9 per cent said they had no chance of making a happy family. That said, 61 per cent of Russians are convinced they have the happiest families possible and only 4 per cent admit family relations are strained. A quarter of Russians would like to have one child, 59 per cent would like two and the rest, about 16 per cent, would like more. The idea of a big family seems to attract people who think life without children lacks something. The idea that “rich people don’t want children” is a myth. High-income respondents were more likely to want a big family. Fewer than half, 44 per cent, consider their sex life to be “good”, while 12 per cent say it is generally “bad”. Women are twice as likely to be dissatisfied than men – 16 per cent to 8 per cent. Married people in big cities are more often dissatisfied with their intimate life than married people in smaller locations. Being married actually appears to have limited influence on people’s sex life. Some 54 per cent of married couples – 49 per cent for legally married and 62 per cent for those in steady relationships – described their sex life as “good”. Only 37 per cent, 19 per cent and 18 per cent of single, divorced or widowed, respectively, described their sex life as “good”. Rather than a steady relationship, peace and financial stability appear to be the more likely aphrodisiacs. Among those who described their family relations as “good”, 78 per cent said they were happy with their sex life. On the other hand, 80 per cent of those who describe their family relationship as “satisfactory” say their sex life is dull. Similarly, about 71 per cent of those in higher-income families are quite content with their intimate life, but the numbers slide among lower income groups.

Romance in Russia can be a somewhat complicated issue.

Facts of love

Love leaped out in front of us like a murderer in an alley leaping out of nowhere, and struck us both at once like lightning. She, by the way, insisted afterwards that it wasn’t so, that we had, of course, loved each other for a long, long time, without knowing each other, never having seen each other. MIKHAIL BULGAKOV

There are occasions when a woman, no matter how weak in character, may be compared with a man. She may become stronger than any man, and stronger than anything in the world. NIKOLAI GOGOLR

16 Tuesday, November 27, 2012


Champion on top of world Panteleyeva comes back from maternity leave to triumph in Hong Kong, writes Irina Bystrova


CITY She wasn’t expecting that; it deflated her. I was in the final.” Panteleyeva faced Mongolian Otgon Munkhtsetseg in the title fight, relying on her sweeps to take her to victory. “I’ve still got a huge bruise on my leg from that fight,” Svetlana laughs. “But the main thing was that I proved I’m still pretty good at sumo. A lot of the athletes came up to me after the competition and thanked me for the entertaining fights. And when they learned that I was four-time world champion in the individual competition, they all called me a star.” The first people Panteleyeva called after her victory were her four-year-old daughter Arina and husband Ivan. “Her grandma told me that Arina said


vetlana Panteleyeva took a break from sumo wrestling to have a baby, but came back to prove she is the best in the world. The Russian, European and world champion reclaimed the top spot at the 9th Women’s Sumo World Championship in Hong Kong last month. “To be honest, I wasn’t really expecting to win,” Panteleyeva says. “I knew a lot had changed in sumo during the time I spent off on maternity leave. New stars had emerged. I was ready for whatever might happen. More than anything, I went to Hong Kong to kind of reminisce about my younger days.” As soon as she stepped onto the tatami, it became clear that she was still the one to beat. “All four bouts went at such a pace that I didn’t even have time to think about the fact that I had a serious knee injury,” Panteleyeva says. “I was up against some serious competition, all of them champions. But experience helped me deal with them.” Svetlana saw off Marina Prishchepova of Ukraine, Ofelia Barrios of Venezuela and Asana Matsuura of Japan. “The bout with Matsuura was pretty tough,” Panteleyeva says. “She’d beaten me in 2009, so I was looking for revenge. That’s why I switched tactics and went in early with a fast attack – exactly what she does herself.

Svetlana Panteleyeva (back row) says she never expected to win gold at the Sumo World Championship. ‘mum’s coming back, and she’s going to bring me a gold medal’. And that’s exactly what happened. In fact, Arina was especially significant for me in these championships. You could almost say that she trained me for them. She went to the training facility with me almost

every day, and she even wrestled with me.” Hong Kong didn’t just bring her back to the heights of her sport; she fell in love with the city. “They don’t call it the Chinese New York for nothing,” she says. “There aren’t

enough words to describe the waterfront skyscrapers. We visited the Avenue of Stars, the Oceanarium, Mount Victoria; we even went to Disneyland.” The women’s competition in Hong Kong was held alongside the 18th Men’s Sumo World Championship.

Yekaterinburg to present expo bid in HK Mark Zavadskiy


Yekaterinburg is hoping to stage the 2020 World Expo.

Duma drafts tough new amendments on weapons law in Russia

Two years ago, the World Expo in Shanghai became the biggest and most expensive event in history, and very soon the expo committee will have to choose a host city for the 2020 event. One of the candidates is Yekaterinburg, the fourth largest Russian city and administrative centre of the Ural region. Its bid will be presented in Hong Kong during the SME Expo at the Hong Kong Convention and Exhibition Centre in Wan Chai, from December 6 to

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8 (booth 1C-B46). “We will explain why Yekaterinburg deserves it,” says Artyom Vdovin, from the Russian Chamber of Commerce, the organiser of the Russian booth at the SME Expo. “The theme for Yekaterinburg Expo 2020 is ‘The Global Mind, Uniting All Humanity in a Single Conversation’,” explains Eric Bugulov, CEO of the Yekaterinburg Expo 2020 Bid Committee. If the bid is successful, the organisers are planning to create a map of the “Global Mind” by asking, “What are the most important issues of our time”? “Our vision is to capture, for the first

Russia beyond the headlines Asia

time, an historic data point of world opinion by posing six universal questions. “The cumulative response to these questions will create, in effect, the first true portrait of ‘The Global Mind’,” Bugulov says. Yekaterinburg, which has a population of more than 1.4 million as of this year, is two hours away from Moscow by plane. The city was established in the mid18th century as an industrial base and, since then, has become the unofficial capital of the Ural region.

Copies are available at: Russian Consulate in Hong Kong (2106-2123, 21/F, Sun Hung Kai Centre, 30 Harbour Road, Wanchai) Russian Language Center (701, Arion Commercial Centre 2-12 Queen’s Road West Sheung Wan) Sun Studio (Unit3, GF, Westley Square, 48 Hoi Yuen Rd, KwunTong) Red Square Gallery (11 Yuk Sau Street, Happy Valley ) ATC AVIA (Room 3105, 31/F, Tower 1, Lippo Centre, 89 Queensway Please write to if you want to add your company name to this list.

Russia And Greater China  

Russia And Greater China supplement distributed with the South China Morning Post in Hong Kong SAR area

Russia And Greater China  

Russia And Greater China supplement distributed with the South China Morning Post in Hong Kong SAR area