apr 2011, russia&india business report

4
WEDNESDAY, APRIL 13, 2011 ...Marching towards a common future BUSINESS REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA SERGEI PTICHKIN RIBR Cooperation between the Russian and Indian navies has been developing successfully for more than half a century now. The Indian Navy was origi- nally established and devel- oped according to the Brit- ish model. During the 1960s, India started purchasing combat vessels and navy ar- maments from the Soviet Union, gaining access to what was then cutting-edge military technology. Many of the vessels India is build- ing have been designed with Russian input and are fitted with Russian-made equip- ment and armaments. According to Ruslan Puk- hov, the director of promi- nent Russian think tank AST, it was only thanks to Russia that India has been able to gain access to unique technologies and opportuni- ties such as building nuclear submarines and supersonic anti-ship missiles. Pukhov believes that no other coun- try would have granted India anything similar. The high point of its coop- eration with Moscow was Nuclear sub for India soon Plan Russia to participate in Indian Navy's tender for new-generation Project 17A frigates Space Sharma pitches for a collaborative approach as it is economical and will help dissolve national identities 'Earthlings, let's now tap Moon & Mars' Half a century ago, the 27-year-old Soviet cosmo- naut Yuri Gagarin created history by becoming the first man to journey into space. As Russia and the world cel- ebrate the 50th anniversary of the first manned space- ight by Gagarin, it’s impor- tant to remember that it was not only a giant leap for man- kind, but also marked an all- time high for the Soviet pa- triotic pride in the Cold War period. In essence, April 12 was not only the day when mankind achieved what was previously thought impossi- ble, but also the culmination of decades of Soviet space research that had already launched the first satellite in October 1957, the first ani- mal to orbit the Earth (Laika, the dog) in November 1957, and numerous other mile- stone flights and satellites. Gagarin’s flight was, impor- tantly, one of the biggest‘vic- tories’for the Soviet Union in the Cold War Soviet-U.S. Space Race – a fierce contest for supremacy in outer space exploration. In other words, this was a battle of giant egos and both countries burned millions of dollars in research to be the first to conquer some tiny part of the final frontier. So frenzied was this race that ethics were often ignored. For instance, to do something grand for the 40th anniversa- AANCHAL ANAND RIBR Rakesh Sharma, India's first cosmonaut, remembers his time in space and his training in Russia on the 50th anniversary of Yuri Gagarin's maiden space voyage. ry of the Communist Revolu- tion, the Soviets hurriedly launched Laika into orbit on a spacecraft that was never designed to return, thus leav- ing her to die. Neil Armstrong’s 1969 moon landing was yet another spec- tacular moment and this time, the Americans had scored. The Race with the capital R,however,soon start- ed to calm down and came to an end in 1975 with the joint Apollo-Soyuz Test Project that helped ease relations be- tween the two then super- powers and ushered in the era of collaborative projects. India’s moment of space glory came in April 1984 on one such collaborative mis- sion. SoyuzT-11 took the first (and only) Indian cosmo- naut, Air Force pilot and 1971 India-Pakistan War veteran, Wing Commander Rakesh Sharma, on an eight- day mission to the space sta- tion, Salyut-7. While all of us remember his famous citation of Muham- mad Iqbal’s poem, “Saare jahan se accha Hindustan hamara” , this historic mo- ment, too, crowned months of training that the Indian astronaut had to undergo. “We got there on 28th Octo- ber 1982 and the training went on for 18 months – more importantly two Russian winters,” Sharma recalled. The training was in Russian so he had to learn the lan- guage as well.“My Russian teacher said that I should find it easy because Russian is very similar to Sanskrit but that didn’t necessarily help because I don’t speak any Sanskrit,”he chuckled. Sharma, who had moved cluding $650m for the Nerpa contract. The Nerpa has been under- going running tests since 2008, and is expected to be delivered to the Indian side in the spring of 2011. It will get the same name, Chakra, once commissioned by the Indian Navy. Russia is assisting India in its ATV programme to de- sign and build its own nu- clear submarine. The first Indian nuclear submarine, the Arihant, was launched in 2009, and India’s Prime Minister Manmohan Singh at the time directly thanked “the Russian friends” for their assistance.The subma- rine is now undergoing com- pletion and testing. Experts firmly believe that there is a huge potential for the development and deep- ening of bilateral naval co- operation in many areas. For example, Russia is taking part in the Indian Navy’s tender for the building of seven new-generation Proj- ect 17A frigates (one vessel is supposed to be built at a foreign shipyard, with the remaining six to be built by Indian companies under li- cense). Russia has offered six Project 677 (Amur-1650) diesel-powered submarines armed with the BrahMos missile complex for the new Indian tender (to be build under license in India). It looks like joint Russian-In- dian navy-related projects will also gain momentum. NEWS IN BRIEF Russia plans to create a $10 billion direct investment fund with foreign participation to invest in hi-tech and mod- ernisation projects. Economic Development Minister El- vira Nabiullina said that the government would contrib- ute $1 billion to the fund in 2011 and its capitalisation would increase to $10 billion in 2015-2016. The fund will be managed by state-ownedVnesheconombank. RIA Novosti Russia plans $10 bn investment fund to modernise economy Government officials including Deputy Prime Minister Igor Sechin, a close ally of Prime MinisterVladimir Putin, will have to leave their posts as board chairmen of state companies, Presidential Economic Aide Arkady Dvork- ovich said last week, echoing an earlier announcement by President Dmitry Medvedev. "The issue is that in many cases, board chairmen are first of all government chiefs, deputy prime ministers and ministers who are responsible for regulating such activities," Dvorkovich told at a news conference. RIA Novosti Russia will allocate about RUR5tn ($176.5bn/€124.5bn) to modernise its Navy, Deputy Prime Minister Sergei Ivanov has said. He could not say, though, whether the sum in- cludes the purchase of weapons and military equipment or not.The federal target programme for development of the Russian defence industry envisages the allocation of RU- R3tn for this purpose, out of which RUR1.8tn, or 60%, will be provided from the budget. Funds provided by compa- nies will amount to RUR1.2tn, or 40%. FC Novosti Officials told to quit double posts $176 bn to be allocated for modernisation of Russian Navy ing in Russia of three frig- ates custom-designed for India, code-named Project 11356. Remarkably, Russia was exporting more ad- vanced vessels than it was building for its own navy. Three Talwar-type frigates were built by Baltiysky Zavod in St Petersburg and delivered to the Indian Navy in 2003–2004. According to Moscow Defense Brief Edi- tor Mikhail Barabanov, the expert community has rec- ognised those frigates as some of the world’s most ad- vanced. In 2006, India signed yet another contract for $1.56 billion to build three more modified 11356М frigates to be delivered in 2011¬2012. These vessels will be equipped, among other things, with the Brah- Mos missile complex. A fu- ture Indian order for three more 11356М vessels has not been ruled out. The history of cooperation with India on nuclear sub- marines, begun with the Chakra lease, lived on with a 2000 agreement for a long- term lease of the K-152 Nerpa third-generation multi-purpose nuclear sub- marine (order 518, devel- oped by SPMBM Malakhit). At the time the agreement was being signed, the Nerpa was 86.5% technically ready. It was envisaged that a sec- ond submarine of the same type, built by the same com- pany (order 519, around 60% ready), would be com- pleted and leased to India subsequently.The final con- tract was signed in 2005. The total value of the agree- ment with India for the completion and lease of the two nuclear submarines is estimated at $1.8 billion, in- India’s lease in January of 1988 of a Soviet nuclear submarine code-named Project 670 (to be more exact, of its “export” version, Project 06709). The subma- rine, renamed Chakra, was armed with the powerful Ametist anti-ship missiles. Although the submarine had to be returned to the USSR for political reasons just three years later, its op- eration has given Indian Navy commanders a first- hand idea of the important combat role nuclear subma- rines get to play. It has been reported that India is carry- ing out, with assistance from Russian experts, a pro- gramme to create a nuclear submarine fleet of its own. A $1 billion contract was signed in 1997 for the build- with his family to Moscow Region’s Star City for the du- ration of the mission, re- members his time in the So- viet Union fondly. He found Russians to be “simple, emo- tional and affectionate”like Indians but noted that the times were different as the iron curtain was still up, so it was mostly work and“sanc- tioned social contact” . Shar- ma felt the Russians would have liked more interaction, if it would have indeed been possible. Sharma described his time up in orbit as “emotional” and “full of wonderment” , but underlined that he un- derstood his responsibilities towards the success of the mission, and did not let his curiosity get in the way of his professionalism. Speaking of the future of space exploration, he advo- cated a collaborative ap- proach, not only because it is “economical” , but also be- cause it would help dissolve “narrow national interests and identities” to focus on the future of the planet as earthlings. Concerned about energy security and unsus- tainable development, Shar- ma said there is a need to de- velop the Moon, and later possibly Mars and other planets to ensure a steady supply of resources. He also praised the Indian Space Re- search Organisation’s ap- proach of focusing on shar- ing the benefits of space exploration with the com- mon man. $7 bn for space research in 2011 Russia has earmarked about $7 billion for space pro- grammes in 2011, Prime Min- ister Vladimir Putin said on April 8 during a conference on the future of Russian space exploration. Russia would de- velop a whole range of new capabilities over the next five years, he said. "We need new-generation space equipment, featuring greater reliability and service life," he said. This requires a ‘deep modernisation’ of space industry enterprises, as well as significant investment in research and development programmes, he said. Pu- tin directed the space agen- cy Roscosmos, in conjunction with the Russian Academy of Sciences, to draw up long- term space research plans by August this year. "We need to expand our presence on the global space market, which, has grown 150% since 2003 and is now worth around $200 billion. That's big business," Putin said. Roscosmos recently said Rus- sia would build a base near the Moon's pole by 2030. Gagarin's flight was one of the biggest victories for Soviet Union in the Cold War space race. India is carrying out, with assistance from Russia, a programme to create a nuclear submarine fleet. Andrei Volodin SPECIALLY FOR RIR conditions, it is incumbent upon the“new influentials” to seek to accelerate the for- mation of a new global model of relations between societ- ies and national economies. That end will be furthered by broader cooperation within BRIC, above all in econom- ics, science and technology, which may have a multiplier effect beyond the boundaries of the Five. BRIC today has a combined population of 3 billion, which means a huge market and an inexhaustible source of manpower. Fourthly, it is fair to assume that BRIC may become a lo- comotive of post-crisis reha- bilitation for the world. The effectiveness of our common policy in this area hinges on the combined efforts in two main “theatres” of diplomat- ic activity. One is creating a world monetary system that meets the interests of the ma- jority of humankind and the other is strengthening the legal regime of international security, which has recently come under severe strain, and not only on Earth, but also in the near Earth space (preventing the arms race in outer space).The BRIC coun- tries are also likely to discuss two specific problems that have recently become partic- ularly worrisome due to the turbulent events in the Arab East, especially the Libyan crisis: they are a possible ex- pansion of radical Islam and counteracting the prolifera- tion of nuclear weapons. In my opinion, Russia’s be- haviour at the coming sum- mit will be determined by the events in the Middle East and North Africa. It is no secret that some influential forces would still like a new world to be organised without Rus- sia and against Russia. T he BRIC summit commencing tomor- row, 14 April, in Sanya, China will for the first time be held in a five-party format and promises to be intriguing for many reasons. First, the turbulent devel- opments in the Middle East and North Africa, specially the Libyan crisis, call for vigorous measures to strengthen international security, especially since the five states that will be taking part — Brazil, Rus- sia, India, China and South Africa —– are members of the UN Security Council. The need for action in this area takes on an added rel- evance in the light of Chi- na’s committed efforts to bring an end to Libya’s civil war, which has been aggra- vated by foreign interfer- ence in its internal affairs. The commitment to resolve the Libyan crisis was reit- erated at recent talks be- tween the Chinese and Ger- man foreign ministers as part of the China—Germa- ny “strategic dialogue” . Chi- nese diplomacy is actively using the potential of the African Union countries, which are staunch support- ers of Libya’s unity and ter- ritorial integrity (Africa’s position is understandable: a break-up of Libya is sure to trigger a domino effect throughout the continent. Second, the summit is ex- pected to pass decisions that can spur the transfor- mation of the world mone- tary system that no longer meets modern require- ments.BRIC countries,each for its own reasons,are stra- tegically interested in democratisation,i.e.greater transparency in the system, and intend to come up with proposals for changing the layout of the morally and physically worn“building” at the G20 summit in Paris at the end of this year. Third, although BRIC is not a formal organisation and is still a partnership struc- ture similar to the G8 and the G20, under the current EXPERT VIEW Bricks of new order Nuclear-powered submarine Karelia during a military exercise by Russia's Northern Fleet. The Soyuz spaceship named after Gagrin (upper left inset) approaches the International Space Station for docking on April 7. India's first astronaut Rakesh Sharma (right Inset). It is fair to assume BRIC may become a locomotive of post- crisis rehabilitation for the world. AndreiVolodin is Senior Re- searcher with the Institute of World Economy and In- ternational Relations (Mos- cow). in THE TIMES OF INDIA Every last Wednesday Russia India REPORT www.indrus.in April 27 ITAR-TASS ITAR-TASS NASA GETTY IMAGES/FOTOBANK

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Russia&India Business Report is a monthly publication brought out by Rossiyskaya Gazeta, that is published in association with The Economic Times. RIBR is a unique publication that highlights the growing synergy between businesses in India and Russia and highlights the sheer vibrancy of two of the biggest emerging markets. Please send all comments and queries to: [email protected]

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Page 1: Apr 2011, Russia&India Business Report

WEDNESDAY, APRIL 13, 2011

...Marching towards a common future

BUSINESS REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

SERGEI PTICHKINRIBR

Cooperation between the

Russian and Indian navies

has been developing

successfully for more than

half a century now.

The Indian Navy was origi-nally established and devel-oped according to the Brit-ish model. During the 1960s, India started purchasing combat vessels and navy ar-maments from the Soviet Union, gaining access to what was then cutting-edge military technology. Many of the vessels India is build-ing have been designed with Russian input and are fi tted with Russian-made equip-ment and armaments. According to Ruslan Puk-hov, the director of promi-nent Russian think tank AST, it was only thanks to Russia that India has been able to gain access to unique technologies and opportuni-ties such as building nuclear submarines and supersonic anti-ship missiles. Pukhov believes that no other coun-try would have granted India anything similar.The high point of its coop-eration with Moscow was

Nuclear sub for India soonPlan Russia to participate in Indian Navy's tender for new-generation Project 17A frigates

Space Sharma pitches for a collaborative approach as it is economical and will help dissolve national identities

'Earthlings, let's now tap Moon & Mars'

Half a century ago, the 27-year-old Soviet cosmo-naut Yuri Gagarin created history by becoming the fi rst man to journey into space. As Russia and the world cel-ebrate the 50th anniversary of the first manned space-fl ight by Gagarin, it’s impor-tant to remember that it was not only a giant leap for man-kind, but also marked an all-time high for the Soviet pa-triotic pride in the Cold War period. In essence, April 12 was not only the day when mankind achieved what was previously thought impossi-ble, but also the culmination of decades of Soviet space research that had already launched the fi rst satellite in October 1957, the first ani-mal to orbit the Earth (Laika, the dog) in November 1957, and numerous other mile-stone fl ights and satellites.Gagarin’s fl ight was, impor-tantly, one of the biggest ‘vic-tories’ for the Soviet Union in the Cold War Soviet-U.S. Space Race – a fi erce contest for supremacy in outer space exploration. In other words, this was a battle of giant egos and both countries burned millions of dollars in research to be the fi rst to conquer some tiny part of the fi nal frontier. So frenzied was this race that ethics were often ignored. For instance, to do something grand for the 40th anniversa-

AANCHAL ANANDRIBR

Rakesh Sharma, India's first

cosmonaut, remembers his

time in space and his

training in Russia on the

50th anniversary of Yuri

Gagarin's maiden space

voyage.

ry of the Communist Revolu-tion, the Soviets hurriedly launched Laika into orbit on a spacecraft that was never designed to return, thus leav-ing her to die.Neil Armstrong’s 1969 moon landing was yet another spec-tacular moment and this time, the Americans had scored. The Race with the capital R, however, soon start-ed to calm down and came to an end in 1975 with the joint Apollo-Soyuz Test Project that helped ease relations be-tween the two then super-powers and ushered in the era of collaborative projects.India’s moment of space glory came in April 1984 on one such collaborative mis-sion. Soyuz T-11 took the fi rst (and only) Indian cosmo-naut, Air Force pilot and 1971 India-Pakistan War veteran, Wing Commander Rakesh Sharma, on an eight-day mission to the space sta-tion, Salyut-7. While all of us remember his famous citation of Muham-mad Iqbal’s poem, “Saare jahan se accha Hindustan hamara”, this historic mo-ment, too, crowned months of training that the Indian astronaut had to undergo.“We got there on 28th Octo-ber 1982 and the training went on for 18 months – more importantly two Russian winters,” Sharma recalled. The training was in Russian so he had to learn the lan-guage as well. “My Russian teacher said that I should fi nd it easy because Russian is very similar to Sanskrit but that didn’t necessarily help because I don’t speak any Sanskrit,” he chuckled.Sharma, who had moved

cluding $650m for the Nerpa contract. The Nerpa has been under-going running tests since 2008, and is expected to be delivered to the Indian side in the spring of 2011. It will get the same name, Chakra, once commissioned by the Indian Navy. Russia is assisting India in its ATV programme to de-sign and build its own nu-clear submarine. The first Indian nuclear submarine, the Arihant, was launched in 2009, and India’s Prime Minister Manmohan Singh at the time directly thanked “the Russian friends” for their assistance. The subma-rine is now undergoing com-pletion and testing.Experts fi rmly believe that there is a huge potential for the development and deep-ening of bilateral naval co-operation in many areas. For example, Russia is taking part in the Indian Navy’s tender for the building of seven new-generation Proj-ect 17A frigates (one vessel is supposed to be built at a foreign shipyard, with the remaining six to be built by Indian companies under li-cense). Russia has offered six Project 677 (Amur-1650) diesel-powered submarines armed with the BrahMos missile complex for the new Indian tender (to be build under license in India). It looks like joint Russian-In-dian navy-related projects will also gain momentum.

NEWS IN BRIEF

Russia plans to create a $10 billion direct investment fund with foreign participation to invest in hi-tech and mod-ernisation projects. Economic Development Minister El-vira Nabiullina said that the government would contrib-ute $1 billion to the fund in 2011 and its capitalisation would increase to $10 billion in 2015-2016. The fund will be managed by state-owned Vnesheconombank. RIA Novosti

Russia plans $10 bn investment

fund to modernise economy

Government officials including Deputy Prime Minister Igor Sechin, a close ally of Prime Minister Vladimir Putin, will have to leave their posts as board chairmen of state companies, Presidential Economic Aide Arkady Dvork-ovich said last week, echoing an earlier announcement by President Dmitry Medvedev. "The issue is that in many cases, board chairmen are fi rst of all government chiefs, deputy prime ministers and ministers who are responsible for regulating such activities," Dvorkovich told at a news conference. RIA Novosti

Russia will allocate about RUR5tn ($176.5bn/€124.5bn) to modernise its Navy, Deputy Prime Minister Sergei Ivanov has said. He could not say, though, whether the sum in-cludes the purchase of weapons and military equipment or not. The federal target programme for development of the Russian defence industry envisages the allocation of RU-R3tn for this purpose, out of which RUR1.8tn, or 60%, will be provided from the budget. Funds provided by compa-nies will amount to RUR1.2tn, or 40%. FC Novosti

Offi cials told to quit double posts

$176 bn to be allocated for

modernisation of Russian Navy

ing in Russia of three frig-ates custom-designed for India, code-named Project 11356. Remarkably, Russia was exporting more ad-vanced vessels than it was building for its own navy. Three Talwar-type frigates were built by Baltiysky Zavod in St Petersburg and delivered to the Indian Navy in 2003–2004. According to Moscow Defense Brief Edi-tor Mikhail Barabanov, the expert community has rec-ognised those frigates as some of the world’s most ad-

vanced. In 2006, India signed yet another contract for $1.56 billion to build three more modifi ed 11356М frigates to be delivered in 2011¬2012. These vessels will be equipped, among other things, with the Brah-Mos missile complex. A fu-ture Indian order for three more 11356М vessels has not been ruled out.The history of cooperation with India on nuclear sub-marines, begun with the Chakra lease, lived on with a 2000 agreement for a long-term lease of the K-152 Nerpa third-generation multi-purpose nuclear sub-marine (order 518, devel-oped by SPMBM Malakhit). At the time the agreement was being signed, the Nerpa was 86.5% technically ready. It was envisaged that a sec-ond submarine of the same type, built by the same com-pany (order 519, around 60% ready), would be com-pleted and leased to India subsequently. The fi nal con-tract was signed in 2005. The total value of the agree-ment with India for the completion and lease of the two nuclear submarines is estimated at $1.8 billion, in-

India’s lease in January of 1988 of a Soviet nuclear submarine code-named Project 670 (to be more exact, of its “export” version, Project 06709). The subma-rine, renamed Chakra, was armed with the powerful

Ametist anti-ship missiles. Although the submarine had to be returned to the USSR for political reasons just three years later, its op-eration has given Indian Navy commanders a first-hand idea of the important combat role nuclear subma-rines get to play. It has been reported that India is carry-ing out, with assistance from Russian experts, a pro-gramme to create a nuclear submarine fl eet of its own.A $1 billion contract was signed in 1997 for the build-

with his family to Moscow Region’s Star City for the du-ration of the mission, re-members his time in the So-viet Union fondly. He found Russians to be “simple, emo-tional and affectionate” like Indians but noted that the times were different as the iron curtain was still up, so it was mostly work and “sanc-tioned social contact”. Shar-ma felt the Russians would have liked more interaction, if it would have indeed been possible.

Sharma described his time up in orbit as “emotional” and “full of wonderment”, but underlined that he un-derstood his responsibilities towards the success of the mission, and did not let his curiosity get in the way of his professionalism.Speaking of the future of space exploration, he advo-cated a collaborative ap-proach, not only because it is “economical”, but also be-cause it would help dissolve “narrow national interests

and identities” to focus on the future of the planet as earthlings. Concerned about energy security and unsus-tainable development, Shar-ma said there is a need to de-velop the Moon, and later possibly Mars and other planets to ensure a steady supply of resources. He also praised the Indian Space Re-search Organisation’s ap-proach of focusing on shar-ing the benefits of space exploration with the com-mon man.

$7 bn for space

research in 2011

Russia has earmarked about $7 billion for space pro-grammes in 2011, Prime Min-ister Vladimir Putin said on April 8 during a conference on the future of Russian space exploration. Russia would de-velop a whole range of new capabilities over the next five years, he said."We need new-generation space equipment, featuring greater reliability and service life," he said. This requires a ‘deep modernisation’ of space industry enterprises, as well as significant investment in research and development programmes, he said. Pu-tin directed the space agen-cy Roscosmos, in conjunction with the Russian Academy of Sciences, to draw up long-term space research plans by August this year."We need to expand our presence on the global space market, which, has grown 150% since 2003 and is now worth around $200 billion. That's big business," Putin said. Roscosmos recently said Rus-sia would build a base near the Moon's pole by 2030.

Gagarin's flight was one of the biggest victories for Soviet Union in the Cold War space race.

India is carrying out, with assistance from Russia, a programme to create a nuclear submarine fleet.

Andrei

VolodinSPECIALLY FOR RIR

conditions, it is incumbent upon the “new infl uentials” to seek to accelerate the for-mation of a new global model of relations between societ-ies and national economies. That end will be furthered by broader cooperation within BRIC, above all in econom-ics, science and technology, which may have a multiplier effect beyond the boundaries of the Five. BRIC today has a combined population of 3 billion, which means a huge market and an inexhaustible source of manpower. Fourthly, it is fair to assume that BRIC may become a lo-comotive of post-crisis reha-bilitation for the world. The effectiveness of our common policy in this area hinges on

the combined efforts in two main “theatres” of diplomat-ic activity. One is creating a world monetary system that meets the interests of the ma-jority of humankind and the other is strengthening the legal regime of international security, which has recently come under severe strain, and not only on Earth, but also in the near Earth space (preventing the arms race in outer space). The BRIC coun-tries are also likely to discuss two specific problems that have recently become partic-ularly worrisome due to the turbulent events in the Arab East, especially the Libyan crisis: they are a possible ex-pansion of radical Islam and counteracting the prolifera-tion of nuclear weapons. In my opinion, Russia’s be-haviour at the coming sum-mit will be determined by the events in the Middle East and North Africa. It is no secret that some infl uential forces would still like a new world to be organised without Rus-sia and against Russia.

The BRIC summit commencing tomor-row, 14 April, in Sanya, China will

for the fi rst time be held in a five-party format and promises to be intriguing for many reasons. First, the turbulent devel-opments in the Middle East and North Africa, specially the Libyan crisis, call for vigorous measures to strengthen international security, especially since the fi ve states that will be taking part — Brazil, Rus-sia, India, China and South Africa —– are members of the UN Security Council. The need for action in this area takes on an added rel-evance in the light of Chi-na’s committed efforts to bring an end to Libya’s civil war, which has been aggra-vated by foreign interfer-ence in its internal affairs. The commitment to resolve the Libyan crisis was reit-erated at recent talks be-tween the Chinese and Ger-man foreign ministers as part of the China—Germa-ny “strategic dialogue”. Chi-nese diplomacy is actively using the potential of the African Union countries, which are staunch support-ers of Libya’s unity and ter-ritorial integrity (Africa’s position is understandable: a break-up of Libya is sure to trigger a domino effect throughout the continent.Second, the summit is ex-pected to pass decisions that can spur the transfor-mation of the world mone-tary system that no longer meets modern require-ments. BRIC countries, each for its own reasons, are stra-tegically interested in democratisation, i.e. greater transparency in the system, and intend to come up with proposals for changing the layout of the morally and physically worn “building” at the G20 summit in Paris at the end of this year. Third, although BRIC is not a formal organisation and is still a partnership struc-ture similar to the G8 and the G20, under the current

EXPERT VIEW

Bricks of new order

Nuclear-powered submarine Karelia during a military exercise by Russia's Northern Fleet.

The Soyuz spaceship named after Gagrin (upper left inset) approaches the International

Space Station for docking on April 7. India's first astronaut Rakesh Sharma (right Inset).

It is fair to assume BRIC may become a locomotive of post-crisis rehabilitation for the world.

Andrei Volodin is Senior Re-searcher with the Institute of World Economy and In-ternational Relations (Mos-cow).

in THE TIMES OF INDIA Every last Wednesday Russia

IndiaREPORT

www.indrus.in

April 27

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Page 2: Apr 2011, Russia&India Business Report

Energy BUSINESS REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

WEDNESDAY, APRIL 13, 2011

Special Report Nuclear safety issues are once again in the global spotlight, as new plants continue to be built despite the Japanese nuclear tragedy

Rossiyskaya Gazeta recently

took its readers to a nuclear

facility to interact with

scientists about the safety

of Russian atomic plants.

For the last month, the Novo-voronezh AES has been oper-ating under heightened con-trol. The day we visited, they simulated the nightmare of all atomic scientists, the Fu-kushima scenario: the loss of all electricity to the plant, in-cluding systems meant to cool the reactor. “All Russian stations owned by Rosener-goatom are now undergoing trainings like these,” said Vladimir Povarov, director of the Novovoronezh AES. The day before, Povarov added, similar trainings took place at the Balakov and Ka-linin atomic energy stations. The next level of training will simulate a scenario involving the “complete loss of cooling water”. The Novovoronezh AES, lo-cated around 600 km to the south of Moscow, is the same age as the Fukushima plant. Their fi rst power-generating units were built in the 1960s and 70s. At the time, it was cutting-edge science and state-of-the-art technology. According to Sergei Novikov, press secretary for Rosatom, the state corporation that controls Russia’s nuclear complex, all types of water-to-water energy reactors (VVER) were perfected at the Novovoronezh AES. They were then mass-produced and are now in operation not only in Russia, but also other countries as well. Meanwhile, the new ones are being built, including in India. Of the fi ve power-generating units orig-inally built at Novovoronezh, only two are now operating. The first two units have served their time and are being taken out of operation. The fi fth and most powerful unit was stopped last Sep-tember for scheduled repairs and serious modernisation. One often hears atomic scien-tists from different countries say: Fukushima is just an old plant. Its reactors are more than 30 years old; the fi rst one is over 40. Why is Novov-oronezh any better? Could a

KONSTANTIN GEGALOVRIBR

Can a Fukushima-like tragedy hit Russia? No

That tragic night at Chernobyl plant 25 years ago

quent fire emitted enormous amounts of radioactive sub-stances into the atmosphere, including long-enduring iso-topes of uranium, plutonium, strontium-90, caesium-137 and other hazardous elements with a half-decay period from 2 to 24,000 years. Official statistics put the death toll at 31 people three months after the disaster, while 134 people suffered from radiation sick-ness; 115,000 local residents

were evacuated from a 30-ki-lometre zone surrounding the nuclear plant. Extinguishing the fire at reactor four and the ensuing clean-up process would last for months on end, as more than 600,000 spe-cialists and military men from across the Soviet Union were brought into the contaminat-ed zone. Ukraine, Belarus and Russia continue to deal with the consequences of Cher-nobyl to this very day.

Three accidents – at Three Mile Island Nuclear Plant, (USA, 1979), the Chernobyl Nuclear Plant (USSR, 1986) and, more recently, the Fuku-shima nuclear plant in Japan were the consequences of a combination of events that were not envisioned when the plants were designed, say top experts. Besides, the per-sonnel did not have the nec-essary training and equip-ment to handle the aftermath. All these accidents could have been prevented by rela-tively cheap improvements. “We are aware that man’s in-nate penchant to be compla-cent may lead to the erosion of nuclear safety operations. We should strengthen our commitment to be critical of nuclear power plant safety not only in words, but also in deed, thus constantly en-hancing it,” says a statement entitled 'Never Again: An Essential Goal for Nuclear Safety'. The statement has been prepared by world ex-perts on nuclear safety, in-cluding Anil Kakodkar, for-mer chairman of India’s

Can nuclear energy be

spared tragedies such as

Chernobyl? Leading world

experts on nuclear safety

provide their suggestions.

Atomic Energy Commis-sion. Scientists suggested that the countries that build nuclear plants must create centres for training specialists for countries that are recipients of nuclear technologies. The regulatory agencies must make analysis and inspec-tions more effective, guaran-tee an open and honest pub-lic disclosure of the results of such inspections.Scientists believe it is ex-tremely important to make an in-depth analysis of how vulnerable every nuclear power plant is to serious ac-cidents, and to develop mea-

Never again: Making world safe for nuclear energy

Workers try to contain the damage at the Fukushima plant.

SVETLANA KUSNETSOVARIBR

sures for managing such ac-cidents at all the existing reactors. It is necessary to clarify the safety require-ments for future nuclear plants in order to ensure that standby cooling systems are workable over a prolonged period after a total power outage, says the statement. Future nuclear power plants must have the capacity to quickly restore or compen-sate for lost power supply. For new nuclear plants, passive safety systems must be used along with modern technol-ogy for system design, includ-ing those based on new mate-rials, suggest the experts.

The Fukushima experience has highlighted the fact that new nuclear plants must be located away from the plac-es exposed to extreme natu-ral and human-induced hazards. Enhancing the accountabil-ity and qualifications of government and corporate officials who make deci-sions on nuclear safety must be an important measure. It is necessary to ensure that the national nuclear regula-tory bodies in all countries be fully independent in making decisions on nucle-ar safety, have the necessary competence, resources and authority. Nuclear energy safety goes beyond national borders, say experts. They stressed on additional measure for nuclear security, including the creation of an Interna-tional Regulatory Agency authorised to introduce mandatory international safety standards and man-datory inspections. “One should expect that the in-ternational conference to be held by the IAEA in Vienna in June of this year will ini-tiate discussions on these measures,” they say.

THE QUOTES

" Fukushima for us is like science fiction. In our region, earthquakes

measuring over 4 on the Rich-ter scale can't happen, though the station can sustain one upto 5 magnitude. And we are in no danger from tsunamis.

" Several years ago, when a giant wave covered Thailand and

rolled all the way to India, the Kudankulam station withstood it. Local residents, knowing that the AES at Ku-dankulam was equipped with means of defence against tsunamis, came running to the construction site, hid there and survived.

V. Povarov

Sergei Novikov

DIRECTOR OF NOVOVORONEZH AES

ROSATOM REPRESENTATIVE

Vladimir Povarov, director of the Novovoronezh AES, is

confident about his nuclear plant safety.

The control-room of the Novovoronezh nuclear power plant

The meltdown at the Cher-nobyl nuclear plant's reactor at four in the middle of the night on 26 April 1986 was the most tragic event in the history of atomic energy. The International Atomic Energy Agency (IAEA) would take five years before it would of-ficially acknowledge that the accident was engedered by personnel errors and the re-actor four's design flaws. The reactor's explosion and subse-

Website of the Embassy

of the Russian Federation in India

www.rusembassy.inSee our new design

Subscribe to the e-paper www.indrus.in

More multimedia

Full version atwww.indrus.in

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Fukushima-like scenario happen here? “The Japanese scenario could not happen here. Our reactor is of a fundamentally different construction: un-like Fukushima’s; our instal-lations are double-con-toured. Plus our large reserves of water allow us to remove the remaining heat released in an active zone. For around six hours we may, without interfering, without managing the accident, acti-vate additional power-sup-ply systems. In critical situ-ations, this may be of decisive importance,” said Povarov. Currently, there are two main types of reactors: the BWR (boiling water reactor) and PWR (pressure water reac-tor). The Russian equivalent of the PWR is the water-to-water energy reactor (VVER). In pressure reactors like the VVER-1000, the water tem-perature reaches 330 de-grees, but the water never boils because it’s under great pressure. This is why it is a safer technology. The Fuku-shima reactors are called “boiling” reactors because the water in them boils, heat-ing up under pressure to about 280 degrees. The trainings were success-fully completed. The “acci-dent” was handled in 1 hour and 10 minutes. We were shown how even when the station’s whole power supply is cut, the troubled unit is quickly reached by a power-ful mobile diesel generator capable of pumping huge masses of water to cool the reactor. In other words, our atomic scientists displayed

their reserve systems and back-up safety systems in all their glory. These are systems to which Fukushima did not have access at the critical moment and which, we were told, are ready to go at Novo-voronezh. But would things run so smoothly in a real cri-sis situation? “We have simulated all sorts of accidents at AES right down to the breakage of an ordinary screw. Even if someone wanted to bungle something, they wouldn’t be able to: every one of our de-cisions, every button pushed is watched by people and video cameras. Here, we are constantly upgrading our qualifications and crisis management skills,” said Dmitry, who works with the AES.According to those who vis-ited the AES, their acquain-tance with the atomic energy station — the reactor, the machine room and the work of the emergency brigade in a crisis situation — made a positive impression. “I was pleasantly surprised by the certainty among employees at the station that nothing like Fukushima could ever happen here. The moral as-pect, it seem to me, is also im-portant,” said the 55-year-old Alexander Pylev. Sergei Novikov, the Rosatom representative, reminded us that there is a Russian-de-signed AES now being built near the city of Kudanku-lam, in southern India, that is made to sustain a strong tsunami. Readers of Rossiyskaya Gazeta were also shown the

new atomic energy station, Novovoronezh AES-2, which is being built according to the same design as the Ku-dankulam station. It is equipped with ultra-modern and even more powerful de-fence systems. One of them is a meltdown trap. If such a “trap” had existed at Fukushima, meltdown products would not have wound up in the atmo-sphere. The new station will also have passive safety sys-tems that work even when

all power has been cut. There is a reserve of water for cool-ing over 72 hours and drain-ing heat from the reactor zone. As the energy special-ists themselves say, such safety requirements, which are there in Russia do not exist anywhere else in the world.VVER reactors will remain for a long time to come the basic ones for the produc-tion of electricity the world over, including in Japan, stresses Povarov.

“Russia is the only country now equipping such a reac-tor (the VN 800 at the Belo-yarsk AES), next to an oper-ating VVER reactor. We, in Russia, are the purveyors of this unique technology. The idea is to realise a closed fuel cycle: to use in a reactor running on rapid neutrons the fuel already used in a thermal reactor (uranium 238),” said Povarov.

Page 3: Apr 2011, Russia&India Business Report

BUSINESS REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

Yo-mobile is a new Russian car platform with a hybrid en-

gine promoted by Russian businessman Mikhail Prokhorov.

TechnologyWEDNESDAY, APRIL 13, 2011

IN BRIEF

German auto giant Volk-swagen plans to launch the production of a low-cost car based on the Volkswa-gen Polo at its assembly plant in Kaluga in central Russia in late 2012, Marcus Osegowitsch, Volkswagen Group Rus Chief Executive has said. The world pre-miere of the new model, will take place in summer 2012, Osegowitsch said, adding that the Volkswagen Polo Sedan will not be re-moved from production. He declined to say whether the new car would be assem-bled under the Volkswagen or the Skoda brand. RIANovosti

Volkswagen to

launch low cost

car by 2012

In March, Russia registered a net infl ow of capital after a major outfl ow in late 2010 and the fi rst two months of 2011, Deputy Finance Min-ister Andrei Klepach said. Net outflow was $11bn in January and approximate-ly $6bn in February 2011. Replying to a question about what encouraged capital inflow in March, Klepach said the reasons could be the growth of oil prices and Russia’s prestige as a reliable hydrocarbon supplier against the back-ground of public unrest across the Middle East and North Africa. The Finance and Economic Develop-ment Ministries forecast a zero or very small capital outfl ow in 2011. FCNovosti

Capital returns

to Russia

Russia wants to have a 5% share in the global biotech market by 2020, a senior of-ficial said after a govern-ment meeting chaired by PM Vladimir Putin.Russian firms currently hold only 0.2% share of the global biotech market, and officials fear the oil-rich country will lag behind in developing the technolo-gies expected to be used to produce up to 80% of all medicines in 2030.Experts forecasts that by 2030 about a half of all ag-ricultural output will be produced with the use of biotechnologies. The mar-ket is currently estimated at $2 trillion. "The new wave of global technologi-cal development will be linked to biotechnologies and new materials unlike the previous wave linked to information and computer technology," Deputy Eco-nomic Development Minis-ter Andrei Klepach said.Vedomosti

Russia wants

5% share in

global biotech

The alliance between Rus-sia's largest automaker OJSC AvtoVAZ and Re-nault-Nissan plans to wrap up a deal with Sberbank Capital concerning United Automobile Group LLC (UAG) - which operates the Izh-Auto plant - for a con-trolling share interest in UAG. The Izhevsk plant can build 220,000 automobiles per year. "We think that the market in Russia has enor-mous growth potential, upto 4 million cars a year in 2020," Renault's general di-rector in Russia, Bruno An-celin said. 'Automobilisa-tion' in Russia is 50% lower than in Western Europe, he said. "In order to get for the alliance a 40% share of the automotive market in Rus-sia, we have to turn out 1.6 million automobiles per year. Right now, we have the capacity for 1.1 million automobiles per year. We want to maximally stan-dardise platforms, and and we are working on addi-tional capacity in Izhevsk and the Far East," he said. Interfax

Auto giant set

to seal deal

with Sberbank

Arkady Dvorkovich is one of the faces of Russia’s liberal reform programme and, as special economic advisor to President Dmitry Medvedev, is in a position to make a dif-ference. He met Ben Aris to discuss the economy, the cri-sis and how corruption has impacted Russia’s progress.

A year ago, there were a string

of opinion pieces calling for the

“R” to be removed from the ac-

ronym BRIC. It looks like Rus-

sia is the least loved of the four

emerging market powerhous-

es. Do you think that is fair?

China and India are a lot big-ger than Russia and that is important to investors. They have a total of 2.5 billion peo-ple compared to Russia’s 142 million. Russia is better com-pared to Brazil where the size of the population and the technological levels are simi-lar. But the expectations for Russia are much higher [than Brazil] as we are treated like a European country and we need to reach the same level of comfort for the foreign in-

vestors. Yes, that is fair: we are a European country and so we should have the same standards.

There is a lot of talk about re-

form, but why are they going

so slowly?

The reform drive has slowed, as there is a lack of focus. We have made progress in cut-ting red tape and there are less licences than before, but there is not enough focus. A huge responsibility rests on the governors and mayors of regions. We need to introduce best practices across Russia but we can't impose this top down. We could do more to make this work, but we are not like Georgia or Estonia.

One of the biggest complaints

foreign investors have is that

the Russia state plays too big a

role in the economy. What is

being done to reduce the

state’s share?

We have already agreed to sell some of the state-owned stakes, but it is a question of timing. However, it is clear

that eventually we don’t need state participation in most sectors. [State-owned retail banking giant] Sberbank is a special case and we need to be care-ful, as it has a big social com-ponent [as so many Russians keep their money in Sber-bank]. Gazprom too and the state-owned rail monopoly, the federal power grid com-pany and the oil pipeline mo-nopoly are also all special cases – but the rest like VTB Bank don’t need state partic-ipation. Still, the market will only bear so much and we can’t sell all these things at once. However, the president has already ordered an increase in the pace of privatisation. Just this week the National Banking Council board agreed to sell a 7.58% of Sberbank over the next three-year period and we are preparing this now, and will wait for the best time [to sell the stake]. It will happen in 2011 or 2012 de-pending on market condi-

production here without the need to raise tariffs.

With over $600 billion in hard

currency reserves going into

the crisis, it seemed that the

government at first thought

it could simply bail the entire

economy out. However, Rus-

sia was badly mauled. As the

crisis recedes, what will be the

biggest effects?

Look at the results of the cri-sis: there was no run on banks, no major bankruptcies. Some people bought dollars but in a few days, they sold them again and the demand for the rouble went up again. There is a trust in the bank sector and the rouble, that we didn’t have last time round. One of the main problems we face is that people don’t rea-lise that we are already com-peting globally, but now – after the crisis – people are starting to understand this more and more. They realise that we can't rely on our own market.

Prepared by Ben Aris

(Business New Europe)

creasing the quality of the in-v e s t m e n t c l i m a t e . We are not quite ready to compete head to head with international producers, but the WTO includes a seven-year transition period and that is enough to be ready. Big companies like [maker of the Lada] Avtovaz and GAZ are still not competitive, so we need these seven years. We also need good strategic investors.

The government seems to be

following a similar blueprint

to cars with the pharmaceuti-

cal sector: raising import tar-

iffs for companies that don’t

increase their production ca-

pacity in Russia.

The situation with pharma-ceuticals is a bit different. There is a high domestic de-mand from the state; it is a different landscape and we can attract investment sim-ply by the size of the market. If there is some degree of certainty [in the growth of demand], then the interna-tional companies will place

Driven by success: the car market moves into top gear

Auto industry New investment brings in global expertise, tech to drive modernisation

RACHEL MORARJEE RIBR

A string of investment deals

struck in February is poised

to make Russia the number

one car market in Europe by

2015, say experts.

It was a race against time, but global carmakers beat a deadline to sign off on new investment agreements at the end of February that will ex-empt them from new tight-ened limits on imports. The Kremlin will hike duties for any producer that has not promised to enhance produc-tion to 300,000 units and in-crease the proportion of do-mestic inputs to 60% by 2020. Of the eight global manufac-turers already working in Russia, six have submitted proposals and the new in-vestment agreements are ex-pected to be signed by June, says Alexander Rakhmanov, the director of the automo-tive and agricultural machin-ery department at Russia’s Ministry of Industry and Trade. “We didn’t expect such a strong response from the pro-ducers,” says Rakhmanov. “So now, we are sure that Russia will be the number one car producer in Europe in the coming years.” Russia is underinvested with approximately $1400 per capital of foreign direct in-vestment in 2010 compared to between four and eight times as much for the Central European states. Yet the gov-ernment’s investment strate-gy for the automobile sector has turned out to be highly successful. The state negotiated attrac-

widely expected to accede to the WTO this year that comes with a mandatory reduction on import duties for cars. Rakhmanov says the produc-tion of passenger cars is al-ready sophisticated enough to compete with the interna-tional producers head-on. “With cars, we are ready to compete and WTO access will

Innovation New cars will cost

between $12,000 to $15,000

Russian PM Vladimir Putin

took a ride in a prototype of

Russia's first hybrid car,

which billionaire Mikhail

Prokhorov plans to start

mass-producing soon.

With Putin in the driver's seat and Yo-Avto chief exec-utive Andrei Biryukov rid-ing shotgun, the pair drove 10 kilometers on Rublyovo-Uspenskoye Shosse from Putin's out-of-town resi-dence to President Dmitry Medvedev's official home at Gorki for a Security Coun-cil meeting. Prokhorov drove a microvan, another Yo-Mobile.Shortly before the ride, Putin discussed with officials, businessmen and scientists measures to produce more high-tech products, saying Prokhorov's project was one of the attempts in this fi eld.In December, Prokhorov pre-sented three prototypes of the hybrid car, including a hatchback, van and cross-coupe vehicle models. New

production cars will cost 350,000-450,000 rubles ($12,000-$15,000).Biryukov said the complete version of the car would be four-wheel drive and equipped with cruise con-trol, GPS/Glonass naviga-tion and climate control. He said the car was attractively priced because it was based on cheaper new materials.According to Biryukov, the plant being built in St. Pe-tersburg is scheduled to start producing the cars toward the end of the next year. Andrei Ginzburg, chief engi-neer of the car, said separate-ly that they intend to buy some parts from Canadian maker Magna's production facilities in Russia. He spoke at a meeting at the Associa-tion of European Businesses in Moscow.In addition to the St. Peters-burg plant, which will have the capacity to make 10,000 cars per year, Prokhorov's company is considering building more manufactur-ing capacity elsewhere in the country.

Upbeat Putin drives oligarch’s hybrid car

ANATOLY MEDETSKYTHE MOSCOW TIMES

tive tax and import duty breaks for foreign companies willing to build factories in the middle of the last decade and several automotive clus-ters have emerged. The big-gest ones are in St Petersburg and Kaluga region while the production of foreign brands by Russian factories soared to the point where the inter-

national companies were out-producing the leading domestic manufacturers Av-tovaz and Gaz in 2008. The new investment pacts are deigned to follow on from the current agreements that ex-pire in 2020. The Kremlin is in a rush to finish reforming a sector that employs well over a million people as Russia is

The sale of new cars in Russia increased by 77% in the first quarter of 2011 and by 77% in

March 2011. Among the top 10 bestselling models so far, nine are locally produced. A total

of 2.24 million cars are expected to be sold in Russia in 2011.

INTERVIEW

ARKADY DVORKOVICH

Don’t worry, just give us seven yearsWITH WTO MEMBERSHIP BECKONING, RUSSIA

IS STEADILY GEARING TO MEET INTERNATIONAL

ECONOMIC COMPETITORS HEAD TO HEAD

AGE: 39

HOMETOWN: MOSCOW

Arkady Dvorkovich graduated from Moscow State University with a degree in economic cy-bernetics, received a Master of Economics degree from the Russian School of Economics

BIOGRAPHY

The Russian government

just signed off big invest-

ment deals with many of the

world’s leading automotive

producers who have agreed

to significantly increase their

production. Is Russia ready

to compete in the global car

market, assuming Russia joins

the WTO and import tariffs are

lowered?

We hope to attract new in-vestment to Russia and this is not just assembling cars. I am not sure that this can be achieved just by raising tar-iffs, because it is about in-

and an MA in economics from Duke University in North Caro-lina. From 2001-2004, he was a deputy minister for eco-nomic development and trade, and after serving in Vladimir Putin's administration, was in 2008 appointed adviser and G8 sherpa to President Dmitry Medvedev.

tions – but the decision has already been made to do it.

Has any progress been made in

the anti-corruption drive?

The anti-corruption drive works and the trend [towards improvement] is there. There has been a positive change but it will not be fi nished in a year. Corruption exists at all levels and comes back to the state’s involvement in the economy. If we can reduce this, then the potential for corruption will also fall.

not have a big impact,” says Rakhmanov. “There is a sev-en-year transition period and that is more than enough time to fi nish the ongoing reforms. In buses and trucks, the situ-ation is different, but we are looking at various measures to prepare those sectors for accession.” The investment policy for the automotive sector is starting to look like an unadulterated success that is fulfilling the Kremlin’s key goals of mod-ernising and diversifying the Russian economy. Rakhmanov is confident it will become both an invest-ment node for building the industry and also act as a blueprint for other sectors. “For every one job that we create in the automotive in-dustry, we create another 16 jobs in ancillary sectors,” says Rakhmanov. “And the Rus-sian market is still far from reaching saturation, but the market is already a devel-oped one with some features of an emerging market.” The new investment comes with the badly needed inter-national expertise and tech-nology that will drive Rus-sia’s modernisation. In return, the automakers get easier ac-cess to what could be Eu-rope’s biggest in the next four years. "International car makers are pretty excited, because they forecast signifi cant growth in car sales in the next decade. We expect that car sales will recover to the pre-crisis levels by 2013," says Mikhail Gan-elin, analyst at Troika Dia-log. Already the new investment deal has led to a raft of joint ventures and a big increase in investment commitments. The US' Ford and General Motors, Germany's Volkswa-gen and Japan's Toyota have all announced investments of over $1 billion to boost local production and stake a claim to markets ranging from St.Petersburg to the Pacifi c Rim port of Vladivostock.

10 bestselling car brands in Russia

The absolute leader in sales in the first quarter of 2011 is La-da (121,251).

Renault in second place with 31,031 cars.

Chevrolet and Kia are 3rd and 4th with 31,003 and 30,250 cars sold respectively.

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Page 4: Apr 2011, Russia&India Business Report

BUSINESS REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA Lifestyle

WEDNESDAY, APRIL 13, 2011

Region Asia-Pacific region in focus: Rosatom recently invited its Indian partners to develop the Elkon uranium deposit in South Yakutia in Eastern Siberia

Recent demographic statis-tics for Siberia revealed a disturbing trend. When asked to state their national-ity for the census at the end of 2010, a striking number of residents of large Siberian cities — Tyumen, Omsk, No-vosibirsk, Kemerov, Krasno-yarsk, Irkutsk and Yakutsk — said that they were not Russian, not Ukrainian or even Tatar, but “Siberian”.“I consider myself a Siberi-an,” the Krasnoyarsk blog-ger Alexander Konovalev, creator of the Internet-ac-tion group WE’RE SIBERI-ANS! told Russian Reporter magazine. “ I’ve traveled a lot around Russia and know that we’re different. I actu-ally think that we don’t know who Russians are. Under the Soviet rule, we lost the Rus-sian culture and became “the Soviet people”. “Today, a Russian is a kind of abstraction. A Siberian is more concrete. When I lived in India, people often asked me, ‘Why I didn’t look like the other Russians who were there?’ And it was simpler for me to explain that I was a Si-berian while they were Mus-covites. Then the Indians un-derstood.”Since the beginning of the crisis-ridden 1990s in Sibe-ria, a second generation has grown up that has never been to Moscow, never heard any-thing good about the capital and indeed has only a vague idea of what goes on west of the Urals. Connectivity re-mains a major hurdle: to fl y from the center of Siberia (Krasnoyarsk, Novosibirsk) to Moscow takes about fi ve hours, and tickets range from $400 to $500. In the opinion of Dmitry Petrov, managing partner of the marketing agency B-52 (Novosibirsk), Russia’s “raw-material curse” is twice as bad for Siberia, the richest resource-rich territory on this planet. “Most of our re-gions are connected with the

mining industry. For Siberia, the future depends on mod-ernisation and transition from a mining economy to an economy of innovation. Without this, any develop-ment will be impossible.” “Siberia’s natural resources are perhaps richer than any other regions in the world. We have 80% of Russia’s coal and gas, 70% of the oil, cop-per and nickel, and 99% of all platinic metals (palladi-um, gold, silver),” said aca-demic Alexander Aseyev.Western Siberia, located be-tween the Ural Mountains and the Yenisei River, is home to more than half of all of Russia’s oil and gas spread over two million sq. km of land. The oil fi elds are con-centrated along the Ob River, while the gas fi elds are in the extreme North — in Urengoi and Yamburg.Despite the fact that in West-ern Siberia more than 7 bil-lion tones of oil and 8 trillion cubic meters of gas have al-ready been mined, the re-gion’s reserves are still huge. In early February, scientists reported the discovery in the Tyumen Region of the world’s largest deposit of uranium. Its reserves — 2.5-3 billion tonnes — are a thousand times the size of the world’s previously known reserves. However, this uranium is lo-cated far from the surface of the earth — from 1 to 3.5 km down. No one has ever at-tempted to extract uranium from such depths. Inciden-tally, Siberia’s deposits of uranium may become acces-sible to Indian business. Rosatom recently invited its Indian partners to take part in developing the Elkon ura-nium deposit in South Yaku-tia (Eastern Siberia). Rivers that extend for thousands of kilometers, the boundless taiga, mountain masses and plateaus occupying three quarters of the entire terri-tory, lowlands of tundra — and only 6% of Russia’s pop-ulation: such is Eastern Siberia. Here you have the celebrated diamond region of Yakutia, home of the world’s largest diamond de-posits. Russian Siberia possesses vast resources and signifi cant investment potential, which

will allow it to develop coop-eration with the Asia-Pacifi c region. But despite the fact that Siberia shares a border with China, Russia’s econom-ic relations with the countries of Asia are poorly developed so far. According to Ermolai Solzhenitsyn, managing partner of McKinsey’s Mos-cow office, of the total exports from the Siberian Federal Okrug, 16.7% goes to China and 6% to Japan. Only re-cently, the Russian govern-ment adopted a programme for energy development in Si-beria and the Far East. To a significant degree, this is a part of a strategy to reorient the export of Siberia’s raw materials to the Asia-Pacifi c region. Last year saw the launch of a major project: the Russian-Chinese Skovorodi-no-Daqing oil pipeline, a part of the Eastern Siberia-Pacif-ic Ocean pipeline system. The Russian gas concern Gazprom has developed its own Eastern programme, which will allows it to use the energy potential of the Far East and Eastern Sibe-ria. It involves the formation of new centres for extracting gas in the Krasnoyarsk Krai, the Irkutsk Region, in Yaku-tia, on Sakhalin and Kam-chatka. It will also create a single system for transport-ing gas, while developing gas refi ning and gas-and-chem-ical production, including the capacity to produce he-lium and natural gas. In the summer of 2010, the Russian government con-firmed its wide-ranging strategy for the socio-eco-nomic development of Sibe-ria upto 2020. It identified some 30 priority investment projects. These include in-creasing the population by some 800,000 people. The Russian government thinks that Siberia requires new in-dustrialisation to harness its specifi c advantages.The main priorities for de-veloping Siberia include building roads, houses, com-munity centres, and tourist zones. “Our aim is to create beyond the Urals within the next ten years a higher stan-dard of living and make Si-beria a truly attractive place for people,” said Russia's PM Vladimir Putin.

Siberia, the new promised land Siberia, potentially the

richest region in this planet,

is now seeking closer

economic ties with the

dynamic Asia-Pacific region.

VLADISLAV KUZMICHEVKONSTANTIN GEGALOVRIBR

In the very heart

of Siberia is the

Great Vasyugan

Bog — the larg-

est bog on Earth

(left photo).

A Siberian hunt-

er walking in

the deep snow

in taiga (mid-

dle).

Lake Baikal is

the world's larg-

est fresh water

lake (right pho-

to).

Smell the coffee, and taste the successSandeep Garg, director of

the Krasnoyarsk branch of

Force, a wholesale supplier

of foodstuffs, now sees

Siberia as his second home.

How did you end up in Russia?

After leaving school in 1987, I tried to get into the Math department, but fell two points short of the passing mark. I stumbled upon a newspaper advertisement, which invited anyone inter-ested to study Russian. At the time, all my peers were studying Spanish, French and German, but I wanted something different. After two years of studying Rus-sian, I received an offer to study in Moscow to become an engineer. I agreed.

Why did you decide to stay in

Russia?

After I fi nished my education in 1996, I was about to go back to India, but a friend in Moscow invited me to work with him in Krasnoyarsk, Si-beria. We ended up staying there. I tried several compa-nies and occupations. I did medicine and sold Indian goods before going into the tea business.

Is it difficult to find a niche in

the Russian market?

The market is not over-crowded yet. There are a lot of holes that can be patched up. I, for one, do not only sup-ply products, but also do some consulting. I became a member of the European Coffee Association six months ago. Besides selling coffee, I teach people ways to serve tea or coffee. Many new restaurateurs buy good cof-fee, but do not know how to make and serve it properly. I go to them and explain things. Some heed my ad-

vice. There are people in the Russian market who trust professionals.

Most people in Russia think

that that good coffee comes

from Latin America and Af-

rica, while India is associated

with tea.

There is Indian coffee in Rus-sia and it is good coffee; it is mainly sold in the “hotel-res-taurant-cafe” segment. It is part of a mix. It is hard to say how much Indian coffee is sold in Russia, but the bulk of it is sold in Moscow. I hope we will be able to think of ways to deliver coffee to Krasnoyarsk directly from India. The company has bought fi ve hectares of land and is building warehouses. We are planning to open a boutique that will sell Indian coffee, tea and spices.

What would be your five sug-

gestions to a young Indian who

wants to come to Russia and

set up a business here?

First, don’t cheat your part-ners. If he promises a certain quality level, let him deliver it. As an Indian myself, I can say that Indian partners may ship some quality goods in one instance, but then turn around and throw in some shoddy stuff in some other shipments. Second, forget

VLADISLAV KUZMICHEVRIBR

Garg has set up a thriving

food business in Siberia.

Get your facts right

For many people, the word “Siberia” conjures up an aus-tere and remote place where those out of favour with the government were exiled. Per-haps many still think of Si-beria as a desolate land of freezing cold and wild beasts. They can't be more wide off the mark. Contrary to stereo-types, the region is extremely large, representing two-thirds of Russia, though home to less than 20% of its popu-lation. From east to west, it stretches from the Ural Moun-tains to the Pacific Ocean and from the Arctic Ocean in the north to Kazakhstan, Mongo-lia and China in the south. In Siberia, you can find all types of different climates: the Arc-tic wilderness, tundra, forests, mountains and plains. Its riv-ers – the Ob, Yenisey and Le-na – are among the ten larg-est rivers in the world. Lake

Baikal, the deepest lake in the world, holds one-fifth of the world’s fresh water. The climate is harsh and sharply continental, with winter last-ing between 5 to 8 months and temperatures hover-ing around 40-50 below ze-ro Celsius. The Earth’s “cold pole” sits near the village of Tomtor in the Oymyakon re-gion in Yakutia, where the lowest temperature on record in the northern hemisphere is 71.2 degrees below zero Cel-sius and the average winter temperature is minus 60 de-grees. Siberia accounts for 90% of Russia’s natural gas and 70% of its oil and coal. Siberia is home to 20% of manufacturing and 18% of ag-ricultural output in the coun-try. In Russian, a “Siberian” is someone in good health with extraordinary strength and endurance.

From pioneers to settlers

Civilisation came to Siberia almost a hundred years later than to North America. In the 14th-16th centuries, the indig-enous population, nomadic Mongoloid people (Evenki, Nentsy, Dolgans, Kets, Selk-ups, Buryats, Tuvinians and Yakuts), engaged in hunt-ing, fishing and animal hus-bandry. Siberia’s modern his-tory began after it became a part of Russia. In the late 16th century, Russian merchants and industrialists began to develop lands and build for-tresses on the rivers Ob and Irtysh. They hired a Cossack

army led by Yermak to pro-tect their land from the Sibe-rian Khan Kuchum. Yermak’s expeditions culminated in the defeat of the Siberian Khan-ate; the Russians consolidated their newly conquered territo-ries and built cities fashioned around the ancient Russian cities Tyumen and Tobolsk. But the Russians did not stop there, continuing north and east to reach the Sea of Ok-hotsk and the Pacific Ocean by 1639. The pioneers were followed by settlers from all over European Russia, mainly peasants and craftsmen.

INTERVIEW DOING BUSINESS, INDIAN WAY

about the Indian food. All the Indians who come here complain that they cannot get Indian breads, beans, soup and rice. You have to adjust to the culture you live in. Third, forget the soap op-eras you were watching back home. You won’t get them here. Fourth, never be late. When you are late, your part-ner thinks ill of you. There are people in Russia who would think nothing of throwing you out of a meet-ing if you are one minute late. I respect such people.Fifth, if you have cut a deal, stick to it. That is the main thing. I always try to do it.He, who has not managed to make money in Russia, won’t make money anywhere. Not that it is easier here, but you have all the tools at your dis-posal in Russia. In the West, you report to work at 10 am and move out at six in the evening. They pay you your wages.

Are you married?

I am engaged. My fi ancé is a Russian. We have already had an Indian wedding. We are going to have a Russian wedding in April or May.

What are your future plans in

Russia? Are you going to stay

here?

I’ve lived here since 1989 and it is not like, I think, I’ll work here for fi ve more years and leave. I want to buy land and a flat. We recently went to look at a plot of land, but it is too far away, 45 km from Krasnoyarsk.

Do you have the time to study

Russian culture and visit the-

atres?

I have no time for theatres at present. As for music, I like the Russian singer Valery Meladze. I am not just his fan, I live by his music.

Eastern Siberia-Pacific Ocean oil pipeline will be the lon-

gest one in Russia is under construction

THE NUMBERS

99% The num-ber of Russia’s

reserves of platinum metals located in Siberia, along with 80% of coal, 77% of zinc, 82% of molybdenum, 41% of gold and more than 50% of hydro-energy resources and timber.

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