Page 1

Business Report



DIPLOMACY: BRICS countries show solidarity, set up $100 billion Currency Reserve Fund


G20: Syria eclipses progress on curbing tax evasion, reforms

Ruble/Rupee dollar rates

The Syrian crisis divided G20 leaders in St. Petersburg last week, but a host of economic issues like combating offshore tax havens united them. Public debt and structural reforms, however, did not get due attention. ARTEM ZAGORODNOV RIBR

Stock Market Index



he G20 summit is not typically a war conference. It is, in fact, usually about finance. So while the unresolved crisis in Syria overshadowed all other business at the St. Petersburg conference last week, many observers watched closely for the G20 to carry out its core function as a staging ground for concerted action on the international financial system. Indeed, in recent years, the group has played a vital role in calming the waters during the worst of the financial crisis. So, Syria aside, how did it do this time? In short, the scorecard was mixed. Member countries made progress on tightening up cooperation on tax enforcement across borders, but big differences persisted between developed and developing countries over national debt levels. Russia, as the host country, also made a series of proposals, including a new $100 billion fund to be maintained by emerging economies that would act as an alternative to the International Monetary Fund. “One of the key items on this summit’s agenda was structural reform,” explained Evsey Gurvich of the Group of 20 Expert Council. “Each country adopted an individualised plan for doing this, including plans for lowering the tax burden on entrepreneurs and improving infrastructure.” Syria aside, one of the most attentiongrabbing announcements came from Vladimir Putin, who signaled that the BRICS (Brazil, Russia, India, China and South Africa) group of developing nations had agreed

Leaders of G20 economies hold their meeting at the Konstantinovsky Palace in St. Peterbsburg, Russia.

upon creating a $100 billion reserve fund to steady currency markets, a de-facto alternative to the IMF and Bretton Woods-based global financial system. “Developing countries like China and Russia are demanding a larger say in how organisations like the IMF spend their money as they are now the creditors,” said Martin Gilman, former director of the IMF in Russia. On paper, debt topped the summit’s agenda. G20 countries had earlier examined targets for debt reduction, an idea that made little headway.Host country Russia has a record low debt-to-GDP ratio of 11%, compared to the Eurozone’s 92.2%

at the end of March and America’s 103% (at $16.7 trillion) and over $500 billion in reserves. While austerity and debt reduction have indicated a growing rift between developed and developing countries, tax evasion and offshore havens were surprising points of mutual understanding.“In order to fund the other initiatives of the summit like job creation and infrastructure, you have to find ways to optimise finances. First – a new automatic system of exchanging information on where international companies pay taxes will be in place by 2015. This is direct-

ed at minimising both legal and illegal ways companies use to reduce their tax burden. Second – tax legislation across different countries will be standardised within oneand-a-half to two years to minimize loopholes. Finally – rules governing companies’ abilities to change tax residences in various jurisdictions will be optimized.” Much of the above-mentioned initiatives were overshadowed by the looming threat of a US attack on Syria. “The G20 agenda was hijacked by the Syrian issue,” said Gilman. “Debt reduction and structural reforms did not get the attention they deserved.”

BRICS Currency Fund

Falling ruble: Rising stars for chosen few A weakening currency is not uniformly bad news. The depreciating ruble will boost exports, with food retailers and auto industry likely to be biggest winners. ARTEM ZAGORODNOV RIBR


conomists predict the falling ruble will boost exports and tax revenues and provide a boost to car-makers and other local vendors. Some economists predict that the ruble, now trading around 33 to the dollar (down from 30 at the start of 2013), may sink to 37 by year’s end. This calculation has been fuelled by many factors that range from concerns about the end of quantitative easing in the US to statements by Russian

Finance Minister Anton Siluanov that a weaker ruble would have benefits for Russia. Sluggish performance in the European Union, Russia’s largest trading partner, and less-than-rosy forecasts for domestic GDP growth are other additional reasons. The slide is not as dramatic as that of 1998, however, when the ruble went from six to the dollar to nearly 30, and when Russia’s oil companies made windfall profits by selling crude in dollars while booking profits in rubles. Oil companies will not benefit to the same degree this time, because new tax


rules mean the state will collect most of the surplus oil profits. “The real beneficiary [this time] is the state budget,” says Chris Weafer, founding partner of Moscow-based Macro Advisory. Other beneficiaries should include domestic producers as the costs of imported goods increase. “One of the biggest winners will be Russia’s burgeoning auto industry,” says Weafer. A recent World Bank study ranked Russia as Europe’s largest economy, and the world’s fifth-largest in terms of purchasing power. Local winners could include Russian food re-

tailers like Dixie, Russia’s only publicly listed meat-producer; Cherkizovo; and Magnit, the firm some call “Russia’s Walmart.” Exports should also benefit from a cheaper ruble. “A Russian company called VSMPO-AVISMO is Boeing and Airbus’s largest supplier of titanium,” says Weafer. “The aircraft manufacturers are now getting that input cheaper.” The weaker ruble also means Russia’s food exports to the U.S. – like caviar and crab legs (valued at $175 million in 2012, according to the U.S. Census Bureau) – will be less expensive. And this could be a great time to buy a diamond for that special someone. “Russia’s Alrosa is the world’s second-largest diamond exporter after South Africa’s De Beers,” says Weafer.

Russians on Syria strike

ANALYSIS In an effort to withstand a future shakeup of their currency markets, the BRICS countries — agreed to create a $100 billion currency reserve fund.

Why Syrian question matters for India M. K. BHADRAKUMAR Foreign policy analyst



he Indian diplomacy can look back with satisfaction at the G20 summit in St. Petersburg. The summit’s declaration echoed India’s concerns over the spillover effects of volatile currency withdrawals on the emerging economies. It recognised the principle of levy of taxes on the “multi-national companies” where they make profits - upholding a principle India espouses. Third, the BRICS, which met on the sidelines of G20, decided to create $100 billion fighting fund to steady the currency markets of member states that face the prospect of destabilisation due to an expected pullback of US monetary stimulus. Now, much work needs to be done to make political statements a technical reality, but in multilateral diplomacy too, every journey of a thousand

miles begins with a single step. However, towering above all this has been the Syrian question. The beating of war drums in the Eastern Mediterranean by the US and a clutch of four or five allies could be distinctly heard in the northern Russian city at the Gulf of Finland. A profound sense of disquiet was palpable that something of momentous consequence to regional and global security and the functioning of the international system is unfolding. And India upfront articulated its concerns and found itself on the “right side of history.” Prime Minister Manmohan Singh told the world leaders that any international action in Syria should be within the framework of the United Nations and the world community should wait for the report of the UN inspectors on the alleged use of chemical weapons

in Syria. He stressed that there has to be certainty first as to what really happened in Syria. The prime minister voiced India’s strong opposition to armed interventions aiming at “regime change.” On an issue of supreme importance to the US foreign policy that may well come to define Barack Obama’s presidential legacy, India and the US find themselves poles apart. It needed an extraordinary strength of conviction on the part of the Indian prime minister to say what he said – and Russian President Vladimir Putin took due note of it – since, conceivably, the Indian stance might well cast a shadow on Manmohan Singh’s upcoming meeting with President Obama in Washington some two weeks from now. Uncharitable critics in India who want to throw mud at the government on any and every issue in an election year have leveled accusations that the ruling Congress Party is “appeasing” the Muslim electorate in the country or, are belittling the resonance of the Indian stance on Syria by poohpoohing that what happens in that remote Middle Eastern country on the Mediterranean is not really India’s “business.” Both accusations are churlish. The Syrian question finds the Muslim world curiously divided, with Saudi Arabia enthusiastically supporting a US-led military intervention and even offering to bankroll the operation. So, what is the “Muslim opinion”

one is talking about and how does India’s principled stance become an “appeasement” of the Indian Muslim electorate? It belies logic. India is with Pope Francis rather than King Abdullah the Custodian of the Holy Places. Now, why is it the Syrian question profoundly concerns India – unlike the dozens or hundreds of military interventions the US has made through modern history? Indeed, the spectre of the rise of radical Islamists, inevitable spillover of the conflict to the region as a whole, including the Persian Gulf where around 6 million Indians work and live and contribute to India’s invisible earnings to the tune of $15 billion annually, near-certainty of cascading rise in oil prices that could put additional burdens on the Indian economy – these are “bread-and-butter” issues for the Indian people. Besides, India is deeply concerned over the weakening of a pillar of international law and implications of a possible US attack, which can unravel a secular, multi-ethnic state. It could create a precedent in the Greater Middle East, which tomorrow could come handy for “conflict resolution” in the Hindu Kush. In sum, this is one of those agonising moments when it is prudent not to ask for whom the bell tolls.

Read the author’s blog

B |U |S |I |N |E |S |S |


Business Report WEDNESDAY SEPTEMBER 11, 2013

TRANSPORT: Revamping of Baikal-Amur link to cost $17 bn, can create half a million new jobs


Reviving Asia-Europe rail route OLEG PEROV / SEVMASH PRESS OFFICE

Russia will hand over the INS Vikramaditya to the Indian Navy on November 15 at a formal ceremony in Severodvinsk. The delivery date was confirmed by India’s Defence Secretary R.K. Mathur at talks held in Moscow. The full testing cycle is scheduled for completion by October 15. Indian Navy specialists expressed satisfaction with the Sevmash yard’s employees’ work on the INS Vikramaditya over the last 8 months. RIBR

Russia opens up for Indian rice again On September 1, Russia lifted the temporary ban on the Indian rice imports, which was introduced due to the khapra beetle found in the Indian rice. Experts say although Russia’s rice production has grown three-fold, the consumption of exotic rice flavours like Basmati and Jasmin has grown. And India as the biggest aromatic rice producer stands a good chance to fill this niche on the Russian market. RIBR

India, Russia to hold joint exercise for peace-keeping

Russia mulls a plan to modernise an old rail link, which can boost industry in Far East and Siberia ILYA DASHKOVSKY RIBR


n ambitious programme of railway expansion in Russia’s Far East promises to create new trade routes between Asia and Europe. At least $17 billion is to be invested in modernising the ageing Baikal-Amur Mainline (BAM) and Trans-Siberian railways. Supporters of the plan say that it will create half a million jobs and boost industry in Siberia and the Far East region. Described by former Soviet leader Leonid Brezhnev as “the construction project of the century”, critics recall the building of BAM 50 years ago. When the Soviet Union was dissolved, many mining and industrial projects in the region were cancelled and the line was greatly underused. Besides upgrading tracks to increase freight capacity, the BAM-2, as the modernisation plan is called, could greatly shorten the route for delivering goods from Asia to Europe. This may be a good reason to extend it from the present terminus at Sovetskaya Gavan to Sakhalin Island off the Far East coast. The government is not deterred by the project’s lengthy repayment period; it could be 50 years or more before the railway pays for itself. Andrew Chan Yik Hong, managing director of capital projects and infrastructure for PricewaterhouseCoopers in Malaysia, believes Russian Railways could offer a credible alternative route to sea transportation between countries of the Asia-Pacific Economic Cooperation (APEC) region and Europe. “To do that, first the infrastructure

87 cities lie along the route of the TransSiberian Railway, five of them with more than one million people.

8 time zones are crossed by the railway between Moscow and Vladivostok.

backwardness has to be overcome, long-term and costly investments need to be made in the railways and customs services must be improved,” he says. This overland route, he notes, would go a long way towards eliminating the risks from piracy, unstable regimes and natural disasters that bedevil the sea route. The idea has support among some Russian businessmen. Ziyavudin Magomedov, owner of the Summa Group, which manages ports in the Far East, the Baltic and Black Sea, is vigorously promoting the project. He blames slow processing of goods at customs and port services for making the Russian route to Europe less competitive than other options. A container is held at customs in the Far East port of Vladivostok for 13 days, and takes another four to five days to be processed through the port. In Singapore, by contrast, a container is held at customs for only about two days and moved through port on the same day it


INS Vikramaditya to be handed over to India on Nov 15

The Trans-Siberian rail dream is back on track. is released. Russia is also losing out to its closest rivals, Shanghai in China and the port city of Pusan in South Korea. Magomedov believes that less than 1 per cent of all Asian freight goes to Europe via Russia at present. His company argues that the traffic could go up fivefold, with each additional percentage point yielding an extra $1 billion for the Russian economy. More than 90 per cent of freight is moved around the world by sea. Argues a skeptical Mikhail Burmistrov, general director of market research firm InfolineAnalitika: “Under other economic conditions, the TransSiberian Railway made economic

BUSINESS: HC products can be used in T-50 5thGen fighter jet


Indian and Russian soldiers are set to conduct a 1-day joint exercise of mechanized forces called Indra in October-November at the Mahajan ranges in Rajasthan. The aim is to practice “employment of mechanized forces as part of peace-keeping/ enforcing operations in a semi-urban terrain under the UN charter.” Despite close defence ties, the two armed forces have not exercised much together. RIBR

sense: in the late Eighties, it carried huge amounts of freight and paid its way. Now everything has changed and it is utopian to talk about railway competing with the sea,” he says. It’s not that the idea of railways challenging waterways is new, but these proposals have more to do with politics than economics. When a similar project was announced in Colombia, observers noted that the country was thus trying to attract more American investments by scaring investors with the bogey of Chinese expansion.

This is not the first attempt by Russian Railways to take business away from the Suez Canal. As early as 2008, the company announced it was building a railway from the Russian Far East to the North Korean port of Rajin. The project was billed as part of the project to create a transport route from Asia to Europe via Siberia.


One year on, WTO, a work in progress

Eyeing India’s carbon fibre market Russian Composite HC plans to set up R&D facility in India and focus on defence sector. ALEXANDRA KATZ


ith India’s carbon fibre composites market poised for dramatic growth, Russian Composite Holding Company (Composite HC) is now honing its strategy to establish its presence in this niche market. The company is planning to establish cooperation with Indian companies in the R&D sphere and later shift to product supplies. Finally, after five years, Composites will seek to create a JV for production of ready-made composite components in India, and is initially eyeing the defence sector. One of the first projects where Composite HC products can be used is the much awaited fifth-generation T-50 PAK FA jet fighter, the export version of which is jointly developed by Russia and India. Up to 70 per cent in the body skin of the fighter and 40 percent of the entire structure are made

Investment forum in St. Petersburg to boost business The 7th Russian-Indian trade and investment forum will be held in Saint Petersburg on September 20. The forum will involve holding discussions on many areas, including energy, oil and gas, medical and pharma industry, agriculture and tourism. Alexei Ulyukaev, Russia’s Minister of Economic Development, and his Indian counterpart Anand Sharma, will head the Russian and Indian delegations respectively. RIBR

of composites. It allows the T-50 to not only carry more weapons but be virtually invisible to radars. The export version of the T-50 fighter for which New Delhi has allocated almost $25 billion is expected to be ready in five years. “India and Russia are quite similar in terms of composites market development patterns. India’s market has huge potential considering the cooperation between our countries in many areas,” says Evgeny Minaev, adviser to CEO, Composite HC. According to research company Composite Insights, India’s carbon fibre composites market is expected to grow to $53 million by 2018. Lucintel experts believe that the Indian market will grow 12-15 per cent in the next five years with increasing demand from automotive and wind energy markets apart from the current demand from aerospace and defence industries. Russia is a late comer to India as all

Compsoite HC has ambitious plans for expansion in India. the global leaders, including US companies Zoltek, Hexcel and Cytec and Japan’s Toray Group, have already been present in its market for decades. Since 2011 Composite HC has been actively participating in industry exhibitions in India and have signed non-disclosure agreements with leading composites consumers including HAL, Larsen & Toubro, Mahindra & Mahindra. Minaev says the challenge for his company in India is to create a market demand for better quality products as Indian customers traditionally buy the lowest quality and cheapest composites.

Debate erupts over anti-piracy law The new law establishes responsibility for uploading pirated films and gives copyright holders the right to file lawsuits against offenders.

Raghavan likely to be India’s next envoy to Russia



P S Raghavan, Special Secretary in India’s Ministry of External Affairs, will be India’s new ambassador to Russia, key sources in the Indian government said. Raghavan will succeed Ajai Malhotra who retires on November 30. RIBR

n the same day (August 1) when the new anti-piracy law came into effect, the Russian court received its first lawsuit from a copyright holder: head of ‘Kino Bez Granitz’ (Films Without Borders) Sam Klebanov complained that the VKontakte social network was illegally distributing movies. Although the lawsuit was rejected as being incorrect, experts anticipate an easier time for film distributors on the Russian market. Under the new law, once the court accepts a claim of copyright infringement, it can block the website in question temporarily, even before court proceedings begin. In such cases, the court notifies the Federal Service for Supervision of Telecommunications,

Information Technology and Mass Media, which, in turn, informs the service provider. The service provider has three days to demand that the owner of the website containing illegal content shut it down. If the owner refuses to comply, the service provider will be duty-bound to block the website. Internet companies have been highly critical of the new law, including search engines Yandex and Google, the Mail. Ru holding, major torrent trackers and a host of other smaller sites. Internet majors fear that the law’s loose terminology could harm honest users. “The fact is that in its current version, it may involve significant risks for the industry stemming from resources being blocked by mistake or illegally (for instance, when blocking specific IP addresses, completely unrelated websites are likely to be blocked too),”

VLADISLAV INOZEMTSEV Professor of economics



says Anton Malginov,head of the legal service at Mail.Ru. Conversely, lawyer Pavel Katkov, who was involved in drawing up the anti-piracy law as part of the working group at the Ministry of Culture, believes that responsible internet companies will incur “zero losses.” “Russia is the only country where a complaint goes through two government filters: the courts and an executive body, the Federal Service for Supervision of Telecommunications, Information Technology and Mass Media.” Copyright holders are, however, hoping that the new law will boost their business. “Reducing piracy will help monetise certain software products, create conditions for fair competition, and open up new opportunities to develop different media segments,” says Sergei Petrov of STS Media.


t has been a year since Russia formally joined the WTO. The country waited 18 years to join the world’s biggest trade club, but a year later, the milestone seemed to have been noted only by those journalists with nothing else to report. Why? First, by the time Russia acceded to the WTO, the average import customs duty had dropped from 20-22 percent in the early 2000s to 10.4 percent. Under the terms of Russia’s accession to the WTO, it will eventually drop to 7.8 percent – a much less dramatic change. In addition, the cut in tariffs for the most overvalued goods, such as alcohol, has been postponed until 2016-2018, so consumers do not notice any differences as of yet. Secondly, the Russian authorities are already doing all they can to prevent imported goods from competing with domestic ones. The cut in duties on imported cars has already been offset by the “disposal charge” and the cut in alcohol duties will be balanced by a rise in excise taxes. And a reason to limit imports of foodstuffs can always be found. Third, consumer demand in Russia today is very high, so there is no serious reason to cut retail prices. In spite of the growth of imports in the first half of 2013 (by 5-9 percent for food and 12 percent for clothing and footwear), prices are not going down and will not do so in the near future. Today, it can be said that the only beneficiary of W.T.O. accession among economic sectors is retail trade. As of Sept 1, import tariffs will be cut by a further 1-3 percent on more than 5,000 goods, a move which will bring extra profits of between $300 and $400 million to traders. But even that move is unlikely to

make a difference to the majority of consumers. The other sectors of the economy have not yet gained much. Commodity exports are not regulated by its rules and the 100 or so restrictive measures with regard to Russian goods will not be lifted until 2015-2017. Likewise, there is no visible breakthrough in agriculture. To be sure, an undoubted benefit of WTO membership is that it will increase competition in the Russian domestic market and, should the windfall oil profits diminish ever so little, the process might drive prices down (to compensate for some negative effects of the possible crisis). Yet, as long as economic growth continues, that is virtually unnoticeable. One important and positive change, however, is that under the new conditions, Russia will have to reckon with rules set in some place other than the Kremlin. The first test is already looming: the EU has filed a lawsuit against Russia, challenging the legality of the 5 percent disposal charge on imported cars. Russia will almost certainly lose the case and then consumers will feel for the first time that the government can no longer get away with everything. This is the only real benefit from the WTO: it will teach Russia’s bureaucracy to play by rules different from those it sets itself. After all, the WTO has long ceased to be the leader in promoting the ideals of free trade. Its place has been taken by the numerous regional integration organisations. Russia’s first year within the World Trade Organisation is only the first step on a long journey. So far, it has made little difference to the majority of the population and even most companies, but it may induce the Russian elite to take a serious look at the limits of its own power. And that in itself is worth the price accession.


T |E |C |H |N |O |L |O |G |Y |

Business Report WEDNESDAY SEPTEMBER 11, 2013

DEFENCE: BrahMos flaunted aerial version of supersonic cruise missile for Sukhoi

India raises profile at MAKS-2013

The first launch is planned for December 2013, says Praveen Pathak of BrahMos Aerospace BORIS EGOROV RIBR

Moscow air show revealed the new growth phase in Indo-Russian defence joint ventures Specialy for RIBR

New JV set up


One of the key deals at MAKS 2013 was a memorandum signed by the state-owned corporation Rostec and aircraft manufacturer Bombardier to establish a JV to assemble the shorthaul Q400 aircraft in Russia. Experts expect the demand for the plane in Russia and the CIS to reach 250 units by 2030. Rostec is planning to launch assembly in eighteen months. Rostec and Bombardier will contribute to the joint venture on a parity basis. Investment in the project is estimated at around $100 million. Rostec will build a manufacturing plant at the Ulyanovsk Port SEZ in 2014, while Bombardier will contribute the requisite intangible assets, including production technology, design documentation, intellectual property rights, and knowhow. Localisation of assembly in Russia is scheduled to begin in 2015. The plant’s design capacity will reach 24 aircrafts a year.

olstered by growing defence cooperation with Russia, India has rapidly expanded its footprint at the 11th International Aerospace Show, better known as MAKS-2013, which was held from August 27 to September 1 in Zhukovsky, a satellite town of Moscow. This year, Indian aerospace giant Hindustan Aeronautics Limited (HAL) and New Delhi-based Indo-Russian joint venture, BrahMos Aerospace Limited, had set up impressive stalls in the prestigious front row pavilions next to the main Russian pavilion of the United Aircraft Corporation – an umbrella organisation for the entire spectrum of military and civilian aircraft industry of the former Soviet Union. Over 900 Russian and foreign aerospace companies from 43 countries participated in the MAKS-2013, which also saw the signing of a clutch of deals worth $12 billion. The Russian aerospace salon, which is becoming grander with every passing year, began in the summer of 1992 as Moscow Air Show. Since 1993, it is being held at alternate years at the Ramenskoe airfield of the Gromov Flight Research Institute, which boasts of Europe’s longest runway of 5403 metres. At the MAKS show, BrahMos Aerospace Limited, a joint venture between India’s Defence Research and Development Organisation (DRDO) and Moscow-based NPO Mashinostroyenie, had for the first time displayed the aerial version of the ‘world’s best’ supersonic cruise missile for Sukhoi Su-30MKI multi-role fighter with a catchy slogan: Many Missions, Many Targets – One Missile System. It also displayed a model of submarine with a battery of underwater launched BrahMos cruise missiles, giving it the capability of precision strikes at the land targets of the enemy. The joint

venture has transformed the IndiaRussia defence cooperation from a ‘buyer-seller’ relationship to joint research, development and manufacture of new cutting-edge platforms. The HAL is the key player in this mutually empowering cooperation with Russia. The development of Sukhoi Su30MKI multi-role fighter in mid-1990s on the basis of Su-27UB trainer aircraft is the first success story spawned by joint efforts of Russian designers and engineers and experts of HAL and Indian Air Force. “This aircraft was tailor-made to meet the requirements of the Indian Air Force,” S. Subrahmanyan, Managing Director of HAL’s Nasik (MiG) Complex, told this writer at MAKS-2013. Under the Sukhoi transfer-of-technology, the HAL is now assembling these state-of-theart fighters at its Nasik Complex, along



‘BrahMos missiles to bolster strike power of India’s armed forces’

India enhances its presence at MAKS-2013 international air show and aims high as Indo-Russian defence ties step up from buyer-seller to joint research stage.

Top 5 Russian innovations on display 4. The first prototype of the new multi-role Ka-62 helicopter, fitted with the latest avionics, more than half the blades and the airframe are made from polymer composites. 5. The new generation ‘Vityaz’ (Knight) S-350E medium range air defence missile system works in conjunction with all-aspects radar and a command post based in a BAZ vehicle. Read more

1. The new NO25E radar system has no equivalent in Russia and will be installed in the Mi-28N ‘Night Hunter’ helicopter. 2. The Tu-214R radio-electronic and optical-electronic intelligence aircraft, one of the most secret aircraft in Russia, is based on the Tu-214 passenger aircraft. 3. New mobile aerostat systems 60m2 and 80m2 in volume intended to monitor given geographical areas.

with the production of AL-31FP aircraft engines at its Sukhoi Engine Division in Koraput. This multi-role fighter is now Russian defence industry’s ‘hottest’ export item. The HAL is currently working with Russia on two joint projects for the development and production of futuristic fifth generation fighter (FGFA) and Multi-role Transport Aircraft (MTA) for the armed forces. A joint venture company has already been set up to implement the MTA project. The FGFA project is based on Sukhoi’s T-50 PAK-FA project. Subrahamnyan, who looks after the joint projects with Russia, said that a team of 25 Indian experts was based in Moscow and the two sides have almost completed ‘Deep Design Phase’ (DDP) for the Indian variant of the FGFA, which would be lighter because

of massive use of composite materials than the all metal T-50 prototypes. At MAKS-2013 air show, three T-50 aircrafts gave an impressive demonstration of its aerobatics skills. Subrahmanyan expressed confidence that the first jointly designed prototype will take to skies in 2015 and the induction of FGFA could begin as early as 2017. The air show also saw the sealing of big business contracts. Under the Indian government’s offset requirements, Russia’s MiG fighter jet maker has signed two additional contracts with an Indian private company worth $55 million.The biggest surprise of the MAKS-2013 for Indian visitors was the mobile integrated TOR-1 ME air defence surface-to-air missile system mounted on TATA cross-country 6x6 and 8x8 truck chassis.

t the MAKS-2013 international air and space show, RIBR caught up with Praveen Pathak, General Manager (Market Promotion & Export) at the premises of BrahMos Aerospace. Speaking in flawless Russian, Pathak shared his insights about the supersonic missiles that derive their name from the two great rivers of India and Russia: Brahmaputra and Moskva. Replying to a question about when the Indian Air Force would get its first BrahMos-missile armed Su30MKI, Pathak said the first launch is planned for December, and the commissioning will take place in July 2015. He was convinced that the BrahMos missile will substantially increase the strike capabilities of India’s armed forces, Navy and Air Force. The missile, he stressed, can hit strategic targets: warships, aircraft carriers or nuclear power plants. Hitting such a target would essentially put an end to a conflict by inflicting very serious losses on the enemy. He added that time is of essence in winning a modern war. Pathak gave an example of the Iraq war when a strike with 1,000 Tomahawks destroyed Iraq’s military capacity. According to Pathak, the BrahMos missile is ready to fire. “We need four minutes at the most to prepare for a launch. It takes the missile five minutes to cover 300 kilometres. In nine minutes, we can fire hundreds of BrahMos missiles at the enemy and destroy their capabilities,” he explains. Speaking about prospects of BrahMos purchases by Russia’s Armed Forces, Pathak said: “They are legally prohibited from buying foreign-made arms and must only use domestically made ones. This approach has been changing lately, particularly as far as joint products are concerned.” The Indian representatives raised that issue during Russian Prime Minister Dmitry Medvedev’s visit to MAKS on August 27. “Six warships have been built for the Indian Navy

and there is an outstanding order for six more for Russia’s Navy,” he said. “Adoption of the BrahMos by the Russian Armed Forces is a matter of cooperation,” he explained. “Both partners should have this product. The Russian-Indian agreement dating back to 1998 required Russia to purchase and use BrahMos missiles. We hope this will be the case before long.” Pathak said that a joint supervisory committee consisting of Russian and Indian representatives had identified 14 countries for the Brahmos marketing promotion. “We are working closely with those countries, taking part in shows and promoting our products. But it is too early to talk about any specifics.” Pathak struck an upbeat tone for the trajectory of Russia-India cooperation in the defence sector. “We kicked off the joint project with a budget of $350

In nine minutes, we can fire hundreds of Brahmos missiles at the enemy and destroy their capabilities, says Pathak million, including $50 million that was added for our airborne variants. Today, our orders exceed $6 billion.” “Over the past 15 years, we have achieved a level no other company has been able to achieve throughout the history of Russian-Indian relations. In addition, we are expecting an increase in orders over the next ten years,” he said. Asked if there were any plans to jointly develop a hypersonic missile, Pathak replied that earlier an agreement was signed with Moscow Aviation Institute. He said: “Figuratively speaking, we are ‘pushing’ Russia towards developing a hypersonic missile. We are also working with many Indian companies and testing various options.” But he also singled out the main challenge of finding materials resistant to very high temperatures. “We already have engines of a new design. It is fair to say that a hypersonic missile is only held back by the lack of the requisite materials for the hull,” Pathak stressed.

IT POWER: Vendors intensify marketing spend for bigger share; Kaspersky signs up Sachin Tendulkar as brand ambassador

Russian firms ready for India’s antivirus battle ALEXANDRA KATZ RIBR


ussian antivirus vendors entered the Indian market quite late compared to global industry leaders, which had entrenched their presence in India for the past 10-15 years. That did not, however, prevent some of them from gaining leading positions. Recently Kaspersky Lab, the leader of the Russian antivirus market, announced its plans to scale up its market share from 15 to 25 percent in India. “Traditionally, our growth has been a result of our strong channel network. In the last three years, we have consolidated our channel presence and we are further increasing our reach in tier 2 and tier 3 cities,” says Maxim Mitrokhin, director of operations, Kaspersky Lab, Asia-Pacific. “During this period, we have also invested heavily in building the brand through effective marketing campaigns and consistent PR efforts.” Kaspersky started operations in India in 2010 with Hyderabad-based Zoom Technologies as a national distributor. The company is understood to have invested $2 million within the first

year of operations. Later, Kaspersky appointed Pune-based SAKRI IT Solutions as its national distributor that carried all major marketing and sales activities in the consumer segment. In 2012, Kaspersky Lab expanded its direct presence in India, shifting main operations to a new Mumbai office. Kaspersky’s late arrival in India was made up by massive spending on marketing and advertising. Having had actor Jackie Chan as its global brand ambassador since 2009, Kaspersky signed up a multi-million dollar deal with Indian cricket idol Sachin Tendulkar. “Cricket is religion in India. The youth of this nation look up to Sachin Tendulkar as a huge inspiration. We are naturally excited to be associated with the cricketing maestro,” Mitrokhin says. The company’s earnings in India stood at about $8-10 million in 2012 with $6.7 million in the consumer segment, according to Gartner. Kaspersky Lab said its global turnover topped $612 million in 2011. The potential of the growing IT security industry, especially in small and medium enterprise segments, attracted another security company associated with the Kaspersky brand, EgoSecure. The company is led by the

$240 11 million was the worth of Indian IT security market in 2012, according to Gartner.

per cent is the share of Kaspersky Lab in the security segment in the Indian market.

ex-wife of Eugene Kaspersky, Natalya Kaspersky, who was a co-founder of the Kaspersky lab and its chairperson till 2011 when the couple finally split. Natalya took over InfoWatch, a subsidiary of Kaspersky Lab formed in 2003 that specialises in enterprise DLP (Data Loss Protection) solutions. In 2012, InfoWatch separated from Kaspersky Lab while the former bought back all the shares in the company belonging to Natalya Kaspersky. In 2011, InfoWatch acquired Cynapspro GmbH, a German company specialising in enterprise endpoint protection. The company was then transformed into EgoSecure. Later Mrs. Kaspersky invested in another German company, antivirus provider G Data, acquiring a 16.3 per cent stake in it in 2012. Recently, EgoSecure launched its India operations by appointing the Zoom Technologies as its distributor and announced investing around $1 million in setting up an R&D facility next year. The company is eyeing a 1015 per cent share of endpoint security market targeting mostly banks, government agencies and the corporate sector. Dr. Web, one of the pioneers of Russian antivirus industry, started operations in India in January through Chennai-based Netflix Technologies. It is quite difficult to define the price for retail consumer products in India, Eugenia Hamrakulova, the head of international partner relations department at Dr. Web in Moscow, told RIBR. While every product in India has its MRP, dealers and resellers purchasing from larger distributors at discounted prices can set up their own price for the


Late, but ready to conquer, leading Russian antivirus vendors are crafting ambitious strategies to up their share in India’s burgeoning IT market.

The value of the Russian antivirus market was around $300-334 million in 2011-2012.

Kaspersky Lab shifts to new office in Mumbai, plans to up its market share from 15 to 25 per cent in India EgoSecure, a Russian firm, is targeting banks, government agencies and the corporate sector

end-user. There are about 30 antivirus brands in India, half of which are very active in the market. In 2012, Gartner estimated the Indian IT security market to be about $240 million, with consumer segment accounting for $61.7 million. The industry players estimate consumer segment value in the range of $110$160 million. The value of the Russian antivirus market is around $300-334 million in 2011-2012. According to Gartner, Symantec is leading in India, with 48.7 per cent share, followed by

Quick Heal, a Pune-based company with almost $35 million in turnover in 2012. In the enterprise segment, their positions shift: Quick Heal leads with 29.6 per cent share and Symantec follows it closely. Kaspersky has 11 per cent in the consumer segment and 9.4 per cent in the enterprise segment. But industry players put QuickHeal and Kaspersky at the leading positions in the consumer segment, followed by Symantec while in the enterprise segment Symantec is leading followed by TrendMicro and McAfee.


F |E |A |T |U |R |E

Business Report WEDNESDAY SEPTEMBER 11, 2013

MUSIC: Singer acts as a cultural ambassador to promote ties

Sonu Nigam weaves a musical spell in Moscow ELENA KROVVIDI RIBR


onu Nigam’s maiden visit to Russia proved to be a memorable occasion for the Indian singing sensation as well as his countless fans in the country. Performing in Moscow was like a dream come true. “Since my childhood, my siblings and I were told by our parents that Russia is our friend, and we have a great love for Russia,” Nigam told RIBR in an interview. There was a touch of magic in the air as a large audience of fans, both Russians and Indians, turned up at the prestigious Crocus City Hall on a warm summer afternoon. Sonu Nigam sang blockbuster Bollywood film songs, including “Dil Mangta Hai Dildar Soniye” (from Mujhse Shaadi Karoge), “Kal ho na ho” and “Kiska Hai Yeh tumko”. Many Russians in the crowd were dressed in traditional Indian clothes, with some fans making the long trip from St Petersburg just to get a glimpse of their singing hero. The high point of the concert was singing the song “Abhi Mujh Mein Kahi” from Agneepath. He said this song is like a prayer to him and he only performs it for very a special audience.

If Nigam wove a spell in Russia with his electrifying renditions of popular Bollywood numbers, he, too, was charmed by the beauty of the place and its people. “The greatness, warmth of the people, history, and its rich legacy is what I liked about this country, ” he says. The 40—year-old singer’s visit to Moscow was arranged by the Overseas Bihar Association (OBA), a socio-cultural organisation of Indians established in May, 2012 in Moscow to promote Indian culture. The adulation Sonu Nigam got in Moscow was truly overwhelming. In keeping with Russian concert traditions, fans went up to the stage to hand over bouquets and other gifts. A teary-eyed admirer gave the star a Matryoshka and tried to teach him how to pronounce the Russian word for doll (kukla), which Sonu repeated almost without an accent. “I was truly overwhelmed. For me, music is not just profession; it’s a state of mind. So when you see your art and your work appreciated by people from so far, who don’t understand your language, it is truly moving.” “I have become more of a fan of Russian people than they will ever be of me,” he adds. “My doors are open for any composer and any producer from Russia,” said

Nigam, touched by the love showered on him in Russia. Sonu Nigam’s visit and impressions may just be what is needed to boost cultural ties between the two countries and bring Bollywood film crews to Russia. “You know, two days ago, I was using whatsapp and I told my friend who is a very big director in India (Mani Ratnam) that he must come to Moscow and make a film here,” Nigam said. “This place should be more explored by Indians! I am already making Moscow popular on Twitter. Everybody who follows my tweets knows: he is in Moscow and he’s enjoying it there. So hopefully, many more Indians will come to Russia after reading that.” At the August 10 concert, the singer also paid an emotional tribute to his mother who passed away recently and appealed to the audience to spend as much time as possible with their parents. “10th is a very special date for me because it is my mother’s birthday and I lost my mother just a couple of months back. I am taking a lot of “Ms” with me now. “M” for mother, “M” for music, “M” for Moscow, “M” for memories. I hope this “M” for Moscow is not the last for me.”

IN HIS OWN WORDS “I explored many countries but it’s the first time when I bought two extra bags to fit all the gifts from my Russian fans. I will make a special Russian corner in my house in Mumbai now.


Music Connects: Bollywood singing star Sonu Nigam charmed his Russian fans at a concert in Moscow and fell in love with the country and its people.

Some of the greatest composers are from Russia. I want to take this soulful Russian music to India and share it with Indians. There should be more interaction between our countries in the sphere of music.


Showered with affection and gifts, the popular singer wants more Indians to explore Russia and invites Bollywood directors to shoot their films here

SPORTS: ‘I feel this connection between India and Russia’

Keshavan high on winning Sochi gold glory I am getting better and better, and now it’s time for me to give my best, says veteran luger ALEKSANDER TOMAS Specially for RIBR


hiva Keshavan has the unique distinction of being the first Indian to compete in luge at the Winter Olympic Games. The 32-yearold now seems headed for bigger glory as he prepares to win a medal at the 2014 Sochi Olympics. Keshavan, who has set numerous records, says that his fascination with winter sports stems from his childhood in the snowy Himalayas. He recalls: “We used to make our own skies and sledges out of wood. Then, I took part in various competitions like National Winter Games that have been taking place since 1996.” It seems hardly believable, but for a long time in his career, the Indian luge legend didn’t have a personal sled. Keshavan told RIBR in an interview: “At my first Winter Olympics in Nagano (Japan) in 1998, I wanted a better sled, so I bought an old sled from the Korean team. Then I started making my own sled with the help of other competitors. My first ten years in sport I didn’t have any equipment

of my own.“ This time round, preparing for the 2014 Winter Olympics in Sochi, Keshavan visited the host city last year. The sportsman says that it was an amazing experience for him but it was very different from what he had expected. First of all, he braced himself for severe Russian climate but weather in Sochi turned out to be a nice surprise. “There are palm trees close to the airport,” Keshavan says. Then on

It will help a great deal if the Indian government can provide us with an international coach the way to the venue he didn’t know how Russian people would be. “From my experience, I`ve never met many Russians speaking English, so I thought it would be difficult to interact with them. I also heard that Russians are more reserved than us and it`s difficult to make friends,” he says. But he was glad to discover that people were re-



The best place for a summer break at the waterside is Serebryanny Bor woods. You can see rare flowers here. You can ride a bike or take a swim in the beautifully clean water or in winter, you can go skiing and skating.

There are more than a hundred parks and garden estates in and around Moscow, which the public can visit. Even the choosiest visitor will find something to tickle their fancy here. Russia and India Business Report suggests some of the best ways of spending time in Moscow’s open air. ( visit/parks/)

2. ENJOY A STROLL IN COMFORT Moscow’s most famous park is Gorky Park, in the very centre of the city, on the banks of Moskva River. Visitors can enjoy free park-wide wi-fi, chic cafes with waterside views, an open-air movie-theatre – and the famous winter ice-rink.

The Arkhangelskoye estate – now to the north-west of Moscow – was first laid out in the 1780s. The landscape is adorned with palatial buildings, and structures in the style of Roman villas or terraced French chateaux – paths and lawns line the grounds, along with many antique marble statues.


Another of the city-centre parks, the Hermitage Garden, has pleasant outdoor restaurants, ping-pong tables, and an array of concerts – which you can enjoy by buying a ticket.

The Kuzminki-Lublino Park is in the south-east of town. A river runs through the estate, which has two manor houses, five museums, horse stables with a music pavilion, and twentysix children’s play areas.



Two parks in the southeast of Moscow are within just a few metro stops – the MuseumPark of Kolomenskoye, and the Open-Air Historical Park of Tsaritsyno. Kolomenskoye was a royal summer residence. In the 17th century, Tsar Alexei Mikhailovich built a unique wooden palace there. Today, it’s the only park in Russia to retain its original layout as an English park.


ally friendly. “They used to come to us and tried to get to know us, and even if somebody spoke very little English, he still tried to say something,” Keshavan reminisces fondly. The sportsman also adds that he really enjoyed it and also was quite amazed to see all the infrastructure already created for the Olympics. So he immediately liked the place and believes that these good feelings about the place helped him to perform. The sportsman speaks about his upcoming participation in the Games with enthusiasm. “I am looking forward to going back again. I felt this connection between us, I mean the connection between our two countries that has been there for a long time. Despite the fact that we are very different in culture and language, we can be good friends,” Keshavan says. He is planning his next visit to Sochi in November. There will be seven days of training and a certain amount of runs that every athlete has to do before the Olympics. Keshavan speaks with confidence about his chances of performing well in the Sochi Olympics. He points out that his best result was in Turin 2006 Winter Olympics, and in his best run he was 24th. “I am getting better and better. Last year, it was my best season and I had my personal best runs on most of the tracks,” he says. But the luger points out that it will be very important for his success if the government can provide an international coach. He says he has given an application for this. “Now it`s very important to improve on my previous performance. Already, we came so far. I hadn’t imagined this before. I will try to give my best.”

The Losiny Ostrov, or Elk Island Park, is the largest of all of Moscow’s parks, covering forty-four thousand square miles, of which woodland makes up 80%. It was a favoured hunting park with the Russian Tsars. The park has picnic spots, marked walking trails, and sports facilities.

3 8 1

4 2 5

6 7









NEXT Issue

9 October

Profile for Russia Beyond The Headlines

Russia and India Business Report  

September 2013

Russia and India Business Report  

September 2013

Profile for rbth