rbw: winter 2007/08

Russia Business Watch

15th annual meeting“SucceSS in RuSSia: moving

Beyond SteReotypeS”

Vol. 15, No. 3 wiNter 2007-2008 washiNgtoN, DC the Quarterly report of the u.s.-russia BusiNess CouNCil

ANNUAL MEETING:

KEyNoTE AddrEss: WILLIAM J. BUrNs, U.s. AMBAssAdor To ThE rUssIAN FEdErATIoNPAGE 5

KEyNoTE AddrEss: ALExANdEr ZhUKov, dEPUTy PrIME MINIsTEr oF ThE rUssIAN FEdErATIoNPAGE 9

KEyNoTE AddrEss:ELvIrA NABIULLINA, MINIsTEr oF EcoNoMIc dEvELoPMENT ANd TrAdE oF ThE rUssIAN FEdErATIoNPAGE 11

KEyNoTE AddrEss: IGor shUvALov, AIdE To ThE PrEsIdENT oF ThE rUssIAN FEdErATIoNPAGE 15

contentS Annual Meeting 3 nn Introductory Remarks: E. Neville Isdell 4 nn Corporate Comment: Vadim Balashov 5 nn Keynote Address: William J. Burns, 33 U.S. Ambassador to the Russian Federation 9 nn Keynote Address: Alexander Zhukov,

Deputy Prime Minister of the Russian Federation11 nn Keynote Address: Elvira Nabiullina,

Minister of Economic Development and Trade of the Russian Federation

15 nn Keynote Address: Igor Shuvalov, Aide to the President of the Russian Federation

18 nn Keynote Address: Ambassador John K. Veroneau, Deputy United States Trade Representative

20 nn Panel: The 2008 Political Cycle 23 nn Panel: Russia in the Global Supply Chain25 nn Panel: New Products for a Consumer Society 28 nn Panel: Projecting Russia’s Image Abroad30 nn Panel: A New Era in Russian Energy33 nn Panel: Russian Companies in the World Market36 nn Panel: Russia’s Human Capital Challenge38 nn Panel: Russia’s Regions — The Next Big Opportunity40 nn Panel: Views of the U.S.-Russia Relationship 42 nn Основной Доклад: Александр Жуков45 nn Основной Доклад: Эльвира Набиуллина49 nn Основной Доклад: Игорь Шувалов

RuSSia BuSineSS Watchthe quarterly report of the u.S.-Russia Business council

1701 Pennsylvania Avenue, NW, Suite 520, Washington, DC 20006Tel: (202) 739-9180 • Fax: (202) 659-5920 • www.usrbc.org

Moscow Tel: 7-495-291-2105

Editor: Svetlana Minjack • Assistant Editor: Jeff BarnettResearch Assistants: Elizaveta Arkhangelskaya, Kellen Moriarty, Anna WallacePhotography: Olga Muzio, Serge Semenov, Andrei ZubetsDesign: Svetlana Winslow

For additional information or copies of Russia Business Watch, please contact the Council at (202) 739-9180 or email [email protected].

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Board of directorsE. Neville Isdell, Chairman of the BoardRobert S. Strauss, Chairman EmeritusEugene K. Lawson, President

Theodore Austell, III, The Boeing CompanyF. Guillaume Bastiaens, Cargill, IncorporatedWarren P. Browne, General Motors CorporationMartin A. Cannon, New Health Sciences, Inc.Stephen Chase, Intel CorporationPatricia M. Cloherty, Delta Private Equity PartnersJames F. Collins, Akin, Gump, Strauss, Hauer & Feld, LLPRichard A. Conn, Jr., Conn International Group LLCIvan M. Dezelic, Delta Air Lines, Inc.Robert Droogleever, Caterpillar Inc.Robert W. Dudley, TNK-BPTerrence J. English, Baring Vostok Capital Partners Augie K. Fabela, II, VimpelComMark B. Fuller, Monitor Group Drew J. Guff , Siguler Guff & Company, LLCJay M. Haft, Renova GroupShannon S. Herzfeld, Archer Daniels Midland CompanyD. Jeffrey Hirschberg, Kalorama Partners, LLCE. Neville Isdel, The Coca-Cola CompanyKarl Johansson, Ernst & Young L.L.P.Sergi Kaminsky, Washington Group InternationalLisi P. Kaufman, United Technologies CorporationOwen-Christopher Kemp, Hewlett-Packard CompanyDavid S. King, Halliburton CompanyLamar McKay, BP AmericaPaul Mountford, Cisco Systems, Inc.James J. Mulva, ConocoPhillips Roger Munnings, KPMGPeter B. Necarsulmer, The PBN CompanyRichard D. Paterson, PricewaterhouseCoopers Peter J. Pettibone, Hogan & Hartson LLPThomas R. Pickering, The Eurasia FoundationWilliam R. Rhodes, CitigroupDaniel W. Riordan, Zurich-American Insurance CompanyPeter J. Robertson, Chevron CorporationPaul Rodzianko, Access Industries, Inc. Charles Ryan, Deutsche Bank Ltd.Claudi Santiago, General Electric CompanyGregory Stoupnitzky, Morgan StanleyBernard Sucher, Merrill Lynch InternationalMaurice Tempelsman, Lazare Kaplan International Inc.Rex W. Tillerson, Exxon Mobil CorporationKevin Tomlinson, JT International Inc.Michael D. White, PepsiCo, Inc.Frank G. Wisner, American International Group, Inc.Daniel H. Yergin, Cambridge Energy Research Associates

In this issue, you will find a full reporting of the Council’s 15th Annual Meeting, held in Moscow on October 23-24, 2007. The meeting, held in conjunction with celebrations of the 200th Anniversary of U.S.-Russia diplomatic relations, was by far our most successful to date. As always, the Council worked hard to bring its members and those involved in U.S.-Russia relations a top-notch program that would generate discussion and provoke new thinking on the bilateral relationship. I think we succeeded.

We were fortunate enough to have had not only a great program for attendees, but also an impressive line-up of key-note speakers from both the U.S. and Russian governments and the private sec-tor. U.S. Ambassador to Russia William J. Burns provided the opening keynote address, while Deputy Prime Minister Alexander Zhukov addressed attendees at

our Gala Dinner. Russia’s new Minister of Economic Development and Trade Elvira Nabiullina presented remarks, as did Igor Shuvalov, Aide to President Vladimir Putin. The text of their remarks can be found in this issue.

The Annual Meeting program featured a broad range of topics, from a discussion of the challenges faced by Russian com-panies in their efforts to expand outside of Russia to the growing labor shortage in the country and Russia’s efforts to cre-ate a more positive image of the country abroad. Reports on these and other panel discussions can also be found in this issue.

This year promises to be a significant one for the U.S.-Russia Business Council. Not only will the year usher in new leadership in both the U.S. and Russia, but we at the Council are celebrating our 15th Anniversary. Our celebration plans include a 15th Anniversary Dinner on April 10 at the Willard Hotel in Washington, DC, where we will be recog-nizing General Brent Scowcroft and U.S. Under Secretary of State Nicholas Burns for their contributions to U.S.-Russia relations.

As you may know, I will be stepping down as President of the Council this spring. It was a difficult decision to make, but I am confident that I leave at a time when U.S.-Russia commercial rela-tions are truly beginning to prosper. It

is my sincerest hope that the hard work that I have enjoyed being a part of over the past 15 years has created an environ-ment where both sides can see the clear benefit of forging close ties in all areas. We are nearing a period of great oppor-tunity in the U.S.-Russia relationship, and I hope that those of us who support the flowering of this relationship can work to take advantage of this potential.

Already in 2008, we have seen the U.S. and Russia come to terms on an agree-ment on nuclear fuels, and it is our hope that more progress can be made in Russia’s WTO accession talks so that, finally, the country can join the world trade body under a commercially meaningful agreement. We also look forward to the lifting of the Jackson-Vanik amendment and the granting of permanent normal trade relations status to Russia — a move that is long overdue.

Finally, I would invite all of you to mark your calendars for our 2008 Annual Meeting, which will be held on October 6-7, 2008 at the Four Seasons Hotel in Washington, DC. We look forward to seeing you at a Council event this year.

With best wished,

Eugene K. Lawson

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ОБРАЩЕНИЕ ПРЕЗИДЕНТА

В этом номере вы найдете полный отчет о 15-м Ежегодном Заседании Совета, прошедшем в Москве 23-24 октября 2007 года. Заседание совпа-ло с празднованием 200-летия амери-кано-российских дипломатических отношений и стало самым успешным из всех Ежегодных Заседаний Совета за всю историю нашего существо-вания. Как всегда, Совет приложил максимальные усилия для того, чтобы представить вниманию своих членов и участников американо-российских отношений интереснейшую про-грамму, в рамках которой состоялись горячие дискуссии и были озвучены новые взгляды на на двусторонние отношения. Я считаю, что мы пре-успели.

Нам удалось не только подобрать интересный темы для пленарных заседаний, но и привлечь выдаю-щихся основных докладчиков, среди которых — ведущие государственные деятели РФ и США, а также лиде-ры бизнеса из обеих стран. Посол США в России Уильям Бернс высту-пил с основным докладом на обеде, открывающем Заседание, а замес-титель Председателя Правительства РФ Александр Жуков выступил с приветственным докладом на тор-жественном ужине, завершающем первый день программы. Эльвира Набиуллина, новый Министр эко-номического развития и торговли России, а также Игорь Шувалов, Помощник Президента Путина, выступили с докладами во второй день Заседания. Тексты докладов можно найти в этом выпуске журна-ла.

Программа Заседания включала широкий спектр вопросов — от проблем, с которыми сталкиваются российские компании, стремящиеся расширить сферу своей деятельнос-ти за пределами России, до вопроса повышенного спроса на квалифици-рованные кадры в России и работы по созданию более позитивного имиджа страны за рубежом. Отчеты об этих и других пленарных дискус-сиях вы также сможете найти в этом номере.

Этот год — очень важный в истории Американо-Российского Делового Совета. В этом году и в России, и в США пройдут президентские выборы. В свою очередь, Совет в этом году отметмечает свое 15-летие. Праздничная программа включит юбилейный ужин 10 апреля в гос-тинице “Willard” в Вашингтоне, во время которого генералу Бренту Скоукрофту и Заместителю Госсекретаря США Николасу Бернсу будут вручены награды Совета за их вклад в американо-российские отно-шения.

Как вы вероятно знаете, этой весной я ухожу с поста Президента Совета. Это решение было нелегким, но я убеждён, что ухожу в то время, когда российско-американское коммер-ческое сотрудничество начинает активно расширяться. Я искренне надеюсь, что напряженная работа, в которой мне посчастливилось при-нимать участие на протяжении 15 лет, способствовала созданию атмос-феры, где обе стороны ясно видят преимущества тесного многогранно-

го сотрудничества. Мы находимся в преддверие открытия величайших возможностей в сфере российско-американских отношений, и я наде-юсь, что те из нас, кто верит в рас-цвет этих отношений, приложат все усилия для того, чтобы использовать этот потенциал.

Уже в этом году мы стали свидетеля-ми разрешения разногласий между Россией и США по договору о ядер-ном топливе. Мы надеемся, что даль-нейший прогресс будет достигнут и в переговорах по присоединению России к ВТО; и Россия, наконец, сможет включиться в мировую торговлю на основе коммерчески значимого соглашения. Мы также с нетерпением ожидаем вывода России из-под действия поправки Джексона-Вэника и предоставления статуса постоянных нормальных торговых отношений, чему уже давно следует случиться.

В заключение, я приглашаю Вас отметить в своем рабочем кален-даре даты проведения Ежегодного Заседания в этом году — 6-7 октября 2008 года в Вашингтоне, в гостинице “Four Seasons”.

Мы надеемся увидеть вас на мероп-риятиях Совета в этом году.

С наилучшими пожеланиями,

Юджин К. Лоусон

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The following is an excerpt of Mr. Isdell’s remarks on October 23, 2007.

“…It is good to be back in Moscow, and it is a very significant year. I think Ambassador Burns will refer to this, but I would like to note that this year marks 200 years of U.S.-Russian diplomatic relations.

To start, I have one announcement to make, and it is something that comes from the Board meeting today. It is sort of sweet and sad, as it were, but Gene Lawson has decided that, after 15 years of building this organization, it is time for him to step back and, as it were, smell the roses. This is some-thing that is going to be very difficult for the organization, because the heart and soul of the organization has clearly been Gene, and what we have today is of his creation. [USRBC General Counsel] Peter Pettibone and I were actually part of the original search com-mittee, so we have spent these 15 years with Gene.

We have set up a search commit-tee, which will be led by Maurice Templesman, Chairman of Lazare Kaplan. Gene will be a part of that search committee, and over the next six months or so we will go ahead with that search.

Gene’s greatest wish is that the legacy he leaves behind is of an organization that continues to grow and continues to get better. We are going to have lots of opportunities to thank Gene for everything that he has done, but at this moment I would like all of us just to give him one great round of applause.

…This 200th anniversary does present

a real challenge for all of us. The challenge is how we in the private sector can be more effective ambassa-dors, both here and back in the United States, for these two great countries to ben-efit — both on the macro and micro scale — overall global human develop-ment. You have heard me say in the past that I believe that companies have a major role to play in the development of communi-ties. I know that many of you here are very involved in the local communities in which you operate in Russia, and I think that that is a very significant part of the commer-cial partnership that we have with our partners and with the Russian people — that we continue to demonstrate that we are a functioning part of this society. Not only do we provide jobs, not only do we pay our taxes, but we add back to the fabric of the society as well.

This is a good time for all of us as well. I think most of us here are experiencing extremely good growth on the back of a growing economy. If you think back 15 years ago when we started, or even if we think back 10 years ago, certainly the spirit was very different. So we are here against a really strong background in terms of how we are all doing economi-cally in Russia.

Now, the big issue on the table, as you know, is WTO accession, and it is something that has been on the agenda for quite a long period of time. The negotiations are now certainly advanc-ing again, and we in the U.S. business

community are eager to welcome Russia into the WTO. We hope it will hap-pen soon, but we also know that it will only happen once Russia brings its trade regime into compliance with the global standards that are prescribed in the WTO. That is what the WTO is — a rules-based system.

As those negotiations progress, we need to continue to make the case for accession and make the case for all of the other enabling legislation that will eventually come before Congress. Of course, I am referring here to the removal of the Jackson-Vanik amend-ment and granting Permanent Normal Trade Relations as well.

We have to be the ambassadors of information to Capitol Hill, because clearly there is not a balanced view of what is happening in Russia today, and we should be the ones that are helping to provide that. It should not just be done by the people in our Washington offices, by our public affairs and com-

E. NEvILLE ISDELL

ANNUAL MEETING 2007Moscow,Russia nn October23-24,2007

INTrodUcTory rEMArKs nnChairmanandCEO,TheCoca-ColaCompanyandChairmanoftheBoard,U.S.-RussiaBusinessCouncil

E. Neville Isdell, The Coca-Cola Company

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munications people. It needs to be by all of us, the leaders of the busi-nesses, as well. There is a great deal of work underway, work that, as Gene mentioned, is taking place with the AmCham, but also in Washington with a very broad group, including the likes of the U.S. Chamber of Commerce, in terms of really bringing a coordinated business voice to this overall discussion.

As part of that effort, earlier this sum-mer, Gene took Federation Council Senator Mikhail Margelov around the United States to visit some local busi-ness communities and local media. I know that he made a major impact. From the comments that he has made, Senator Margelov also felt that just those contacts created a whole new level of openness and understanding with regard to the truth of the relation-

ship, particularly the economic rela-tionship, and the importance of that economic relationship between the two countries. We look forward to facilitat-ing some similar trips in the future in order to encourage more of that one-to-one dialogue, because the more that we have that interchange, the rhetoric — which tends to be recitation of old issues — will become a more logical discussion of real issues….” n


The following is an excerpt of Mr. Balashov’s remarks on October 23, 2007.

“…The 21st session of the Foreign Investment Advisory Council (FIAC) was held here last week, the first one in which Prime Minister Alexander Zubkov has participated. It was an open and constructive conversation, which helped enhance the dialogue between the Russian government and investors. This ongoing dialogue helped demonstrate that the Russian government has a continued commit-ment to reform, and it was stressed again and again that the government wants to create favorable and stable conditions for entrepreneurial activ-ity and for attracting foreign capital to Russia.

FIAC interacts with the Russian gov-ernment on multiple levels. A standing committee, chaired by the Minister of Economic Development and Trade, meets more regularly. There are work-ing groups headed by representatives of FIAC members and deputy ministers, which work on a regular basis as well. These working groups focus on tax,

accounting, financial and capital markets, and vari-ous aspects of regulation. Together, they address the decisions and the recom-mendations that are then made and accepted at FIAC plenary sessions.

In the session held this month, participants addressed and made con-structive suggestions on: the overall level of state regulation of the Russian economy, improvements in tax and currency policy, specific improvements in customs policy, and accounting and financial reporting. There was a lively debate about public-private partnership and the development of high technology companies.

To conclude, I would like to say this: it is clear beyond doubt today that the business-to-business and business-to-government dialogues are extremely helpful to the development of the

investment climate in Russia. From a corporate view, the economic relation-ship between Russia and the United States is stronger than it is perceived to be, and is stronger than the politi-cal relationship today. The business community needs to continue to work together to get beyond the stereotypes and work productively to prosper and to meet the challenges of the 21st cen-tury.” n

vADIM BALASHOvcorPorATE coMMENT nnPartner,Ernst&Young

Vadim Balashov, Ernst & Young

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The following is an excerpt of Ambassador Burns’s keynote address on October 23, 2007.

“…Thank you for this opportunity to speak to a group for which I have enormous respect, about a subject which matters enormously to the future of Russia and relations between our two countries. This year marks the 200th anniversary of our formal diplomatic ties, and it is a natural moment to take a step back, and reflect on where we have been and where we are going.

That is not exactly an easy thing to do these days. In our broader relation-ship, mutual frustration often obscures mutual interest. Russians think that Americans tend to take Russia for granted, and are too quick to lecture, and too prone to double standards. Americans think that Russians tend to assume the worst about American motives, and are too consumed with the centralization of power, and too quick to see enemies at the gate.

In our thinking about today’s Russia, both Russians and those of us who care about Russia and recognize its

importance in the world, tend naturally to focus on the ‘who’ questions: Who is going to succeed President Putin? Who is going to occupy what position after the Duma and Presidential elections? Who is going to prevail over whom?

While the answers to those questions obviously matter greatly, for all sorts of reasons, it seems to me that it is the answers to the ‘what’ questions that will shape Russia’s future beyond the 2008 transition, and determine whether Russia will grow and prosper, or whether its current excesses will eat up its successes. What is Russia going to do with its hard-won stability? What is Russia going to do with the moment of energy-driven economic opportunity that lies before it? What is it going to do with the chance to diversify beyond oil and gas? What is it going to do to anchor its eco-nomic progress in the rule of law and the modern institutions needed to sustain it? What is it going to do with its reborn role in the world? Only Russians can answer those questions, but how they do so will have profound implications for the rest of us.

In considering those questions, in look-ing at Russia’s economic future and the prospects for our trade and invest-

ment relationship, I am very mindful of my own limitations, and of the value of a little humility in trying to under-stand a society as big and complicated as Russia…. We do not have all the answers, but we do have a powerful interest in Russia’s continued economic

resurgence; in its integration into the global economy; in its diversification; and in the investments in its physical, human and institutional infrastructure that will both ensure its long-term prosperity and create opportunities for foreign partners.

…If Russia takes advantage of the moment of opportunity opened up by high energy prices and recent economic success, if it translates that into sound long-term decisions and solid institu-tions, a great deal is possible, and all of us will benefit. If it does not — if hard choices are avoided, power is hoarded and time and money are wasted — the missed opportunities will be a great loss for Russia and its remarkably talented people, as well as for the rest of us. History has a very unsentimental way of opening up moments of opportunity and then bringing down the curtain, and wise leaders and wise societies understand that.

Let me highlight very briefly five of those ‘what’ questions, and how the

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“ThE roLE oF AMErIcAN BUsINEss Is crUcIAL IN MAKING ThE cAsE For WTo ANd For rEMovAL oF ThE JAcKsoN-vANIK AMENdMENT, WhosE coNTINUEd APPLIcATIoN WoULd PrEvENT ALL oF yoU FroM TAKING AdvANTAGE oF ThE NEW ANd MorE FAvorABLE TErMs oF TrAdE ThAT WILL coME WITh rUssIAN ENTry INTo ThE WTo.”

Ambassador William J. Burns

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growth of American business and eco-nomic ties can help in answering each of them successfully.

First, what is Russia going to do to inte-grate more fully into the global econo-my? As all of you know far better than I do, this is not an academic question. The faster Russia enters the World

Trade Organization and other key insti-tutions, on the same terms and accord-ing to the same standards that apply to everyone else, the faster its industries will become more competitive, and the faster its economy will diversify. Russia is now on the last leg of what has been a very long journey with the WTO, and completion of multilateral accession talks is finally in sight. Following con-clusion of our bilateral WTO agreement last year — which was in many ways the biggest single achievement in our eco-nomic relationship in the past decade — the United States has been working

very hard with Russia to accelerate mul-tilateral talks and complete accession. Russia has more work to do, in its own self-interest, to bring domestic laws and regulations into compliance with WTO requirements on protection of intel-lectual property and other issues. For our part, the United States will spare no effort to support Russian accession.

The role of American business is crucial in making the case for WTO and for removal of the Jackson-Vanik amend-ment, whose continued application would prevent all of you from taking advantage of the new and more favor-able terms of trade that will come with Russian entry into the WTO.

Another dimension of integration is making U.S.-Russian trade and invest-ment a genuine two-way street. I know there are questions on both sides about the accessibility of the other’s market, with Russia in the midst of complet-

ing strategic sectors legislation and defining its rules of the road, and the United States updating its Committee on Foreign Investment in the United States (CFIUS) procedures on certain foreign investments. The truth is that it is in both of our interests to clarify these measures quickly. The further truth is that the American market remains one of the most open in the world. We have never turned down a Russian investment under CFIUS, and the revised procedures are meant to facilitate and streamline the process, not complicate it. Ours is an economy that thrives on its openness and connections to the rest of the world; in 2006 alone, new foreign direct investment into the United States totaled $161 billion — the highest single-year figure since 2000. Russia’s share of that is growing, with the $2 billion acquisition of Oregon Steel last year an especially impres-sive example. Much more is possible, downstream in the energy sector, as well as in other areas.

In the meantime, American investment in Russia is expanding rapidly, up more than 50 percent last year alone. It is a phenomenon that is spreading well beyond Moscow and St. Petersburg, and that I have seen vividly on some 40 trips around the country over the last couple years, from Kaliningrad in the west to Chukotka, 11 time zones to the east and 30 miles across the Bering Strait from Alaska. The more American investment and business activity spreads, the more it helps Russia in the huge, historic task of developing Siberia and the Far East, as well as other parts of the country, and the more Russian business benefits from cutting edge business practices and technology.

A second, related question is: what is Russia going to do to diversify its economy beyond oil and gas? While it is true that high energy prices have been the main driver of Russian economic growth in recent years, the potential


“WhEN PEoPLE ThINK ABoUT rUssIA’s EcoNoMIc FUTUrE, ThEy TENd To ThINK oF WhAT Is IN ThE GroUNd, BUT ThE TrUTh Is IT Is WhAT Is UP hErE, IT Is ThE TrEMENdoUs PoTENTIAL oF rUssIA’s rEsoUrcEFUL, crEATIvE ANd WELL-EdUcATEd PEoPLE ThAT sETs ThIs socIETy APArT FroM oThEr coUNTrIEs ThAT hAPPEN To BE rIch IN NATUrAL rEsoUrcEs.”

Ambassador Burns (l.) talks with Neville Isdell during the Annual Meeting Opening Luncheon.

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to diversify beyond hydrocarbons is substantial — if the current moment of possibility is approached with vision and urgency. Even today, oil and gas exports amount to less than 20 percent of Russian GDP, compared to about 35 percent for Saudi Arabia, 30 percent for Venezuela and 20 percent for Norway. When people think about Russia’s economic future, they tend to think of what is in the ground, but the truth is it is what is up here, it is the tremen-dous potential of Russia’s resourceful, creative and well-educated people that sets this society apart from other coun-tries that happen to be rich in natural resources.

Tapping that potential and building an innovative, knowledge-based economy will require great and sustained effort, in which the roles of the private sector and foreign partnerships will be crucial. Boeing’s success in Russia is one pow-erful example. Impressive as the sale of more than three dozen 787 Dreamliners to Russia last year was, it is only part of a long-term, mutually-beneficial

partnership. Boeing’s Moscow design center, with its 1,400 highly-skilled Russian engineers, is a vivid reminder of what Russia has to offer at the high end of the technology sector. And so is Sukhoi’s development of its very prom-ising Superjet, a regional jet project in which Boeing and other partners play a valuable supporting role.

There are many other examples, across a range of sectors. International Paper’s new joint venture will help Russia diver-sify beyond timber exports, a natural strength in a country which has on its

territory 25 percent of the world’s for-ests, and develop its wood and paper product exports. Dow Chemical’s expanding operations in Russia will add value in petro-chemicals and other related sectors, an obvious opportunity for a country which today is the world’s largest producer of oil and gas, but which has significant untapped potential in the processing industries that flow from that natural strength.

At the same time, American involve-ment in the energy, auto, consumer products, and services sectors of the Russian economy is growing in ways that benefit both of us. The partnership between Lukoil and ConocoPhillips is a quiet but extremely impressive success story, paying divi-dends not only in terms of Russia’s domestic energy development, but also in opening up new downstream opportunities and investments around the world. Russia has become one of the world’s fastest-growing markets for automobiles and consumer prod-ucts. Companies ranging from General

Motors and Ford to Coca Cola and Proctor & Gamble are helping to fuel Russia’s economic resurgence and creating jobs across this huge country — with more than 100,000 jobs in Russia today connected to American businesses and investments.

…Let me turn to a third critical ques-tion: what is Russia going to do to improve its physical infrastructure? The Russian government’s ambitious new spending plans reflect an awareness of the obvious importance of this issue, because the fact is that without such

massive infrastructure investment, with-out rapid expansion and upgrading of Russia’s roads, railroads, airports, and seaports, modernization and diversifica-tion of the economy of this sprawling country will simply not happen. The same is true in power generation sec-tors. Here, too, the Russian leadership is taking significant steps forward, with reforms needed to improve electricity generation and distribution in place, and plans underway to rationalize rates, pro-mote privatization and attract private capital.

Affordable housing is another large infrastructure challenge, especially as the middle class expands. There is much to be learned from the American experi-ence over the last half-century or more — both from our successes, as well as our mistakes — in promoting afford-able housing, developing efficient con-struction techniques and building mort-gage markets. American experts look forward to participating, along with other specialists from around the world, in a seminar on affordable housing that the Russian government is planning to host in the coming months.

A fourth question revolves upon a different kind of infrastructure chal-lenge, the most important part of any society’s infrastructure: what is Russia going to do to protect and develop its human capital? Anyone who has spent any time in Russia, or who has studied Russia’s history, cannot fail to be impressed — not only by what the remarkable people of this country have endured over the years, but what they have contributed to human civilization. In the last century alone — whether it’s Pasternak in literature, or Shostakovich in music, or Chumakov helping to conquer polio, or Gagarin and the scientists behind him who launched Sputnik almost exactly 50 years ago and pioneered the exploration of space — Russians have demonstrated creativ-ity and scientific potential as impressive as those of any other human beings


“coMPANIEs rANGING FroM GENErAL MoTors ANd Ford To cocA coLA ANd ProcTor & GAMBLE ArE hELPING To FUEL rUssIA’s EcoNoMIc rEsUrGENcE ANd crEATING JoBs Across ThIs hUGE coUNTry — WITh MorE ThAN 100,000 JoBs IN rUssIA TodAy coNNEcTEd To AMErIcAN BUsINEssEs ANd INvEsTMENTs.”

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on the Earth. However, how do you develop that potential, how do you protect Russia’s greatest resource — its talented people — without investing aggressively in the education and health care systems?

In large part, such far-sighted invest-ment is the responsibility of the Russian government, which for the first time in two decades has the resources to devote to it. That is especially true in health care, where demographic decline could cripple sustained economic growth, and cause a stark drop in Russia’s labor force. It is also true in education, where a proud tradition, especially in science and mathematics, needs urgently to be preserved. The private sector has a crucial role to play as well, and for-eign partners can do a lot. ALCOA’s scholarship program in Samara is just one example, and the new MGIMO-University of Texas partnership, as well as the other U.S.-Russian university partnerships that our two Ministers of Education announced yesterday, show what governments can do to encour-age this process. The efforts to combat HIV-AIDS and other infectious dis-eases of the Global Business Coalition are another important example of what business can do to help deal with one of Russia’s — and the world’s — most urgent health crises.

It’s becoming more and more obvious, in today’s knowledge-driven world, that the measure of economic potential and the wealth of nations is more and more about human resources. As a recent World Bank study puts it, ‘Human capital and the value of institutions (as measured by the rule of law) constitute the largest share of wealth in virtually all countries.’

That leads me to a fifth and final question, about still another kind of infrastructure challenge: what is Russia going to do to build modern economic and political institutions, to create the institutional infrastructure essential to

sustaining its current prosperity and growth? Without such institutions, without the rule of law to protect prop-erty, without checks and balances to hold officials accountable at all levels, without stable and predictable regulato-ry and investment regimes, it is impossi-ble over the long term to attract capital and know-how, or to ensure a healthy economy, or to realize the full potential of Russia’s people and resources. How do you fight mounting problems like corruption without an independent media and an independent judiciary to shine a light on abuses and deter them? How do you lessen the weight of a bloated bureaucracy without sus-tained administrative reform and greater transparency? These are not abstract questions of political or economic val-ues, nor are they about ‘preachiness’ or lecturing from Americans, for which I know Russians manage to contain their enthusiasm these days. They are ques-tions for Russians themselves, first and

foremost, and they cut right to the heart of whether or not Russia is going to realize its full potential as an economy and a society.

…It seems to me that it is the answers to those five ‘what’ questions, as much as anything else, that will shape Russia’s economic future, and the future of our economic relationship, over the next generation. Each of them is intercon-nected: integration into the global economy will spur diversification; diver-sification will not succeed without urgent attention to physical, human and institutional infrastructure; and today’s problems, like corruption and bureaucratism, will eat away at Russia’s potential without a sustained and seri-ous effort against them.

None of those challenges are easy, but Russia has before it a moment when it can deal successfully with all of them. It is entirely possible that Russia could become, as some predict, the fifth larg-est economy in the world within the next couple of decades. It is entirely possible that Russia could diversify beyond hydrocarbons, and make its mark in other sectors, especially high technology. It is also possible to miss the moment, or fail to take full advan-tage of it. The choice is Russia’s.

For our part, for the United States and for American business, it remains pro-foundly in our interest for Russia to succeed economically, and I expect that trade and investment between Russia and the United States is going to con-tinue to grow rapidly.

I mentioned at the outset that this year marks the 200th anniversary of U.S.-Russian diplomatic relations. Our

relationship certainly began on a very high note two centuries ago. The first American ambassador to Russia was John Quincy Adams, who later became Secretary of State and eventually the sixth President of the United States. So I stand before you today as a liv-ing example of how far standards have slipped since then. But one thing that has not changed over the first 200 years of our history together is the reality that we matter to one another, and to the future of global order, in a way that few other relationships do. As we begin our third century together, what also seems clear is that our economic ties are becoming a more and more important part of our relationship. Their growth will benefit both of us, for generations to come.” n


“IT Is ENTIrELy PossIBLE ThAT rUssIA coULd dIvErsIFy BEyoNd hydrocArBoNs, ANd MAKE ITs MArK IN oThEr sEcTors, EsPEcIALLy hIGh TEchNoLoGy. IT Is ALso PossIBLE To MIss ThE MoMENT, or FAIL To TAKE FULL AdvANTAGE oF IT. ThE choIcE Is rUssIA’s.”

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The following is an excerpt of Deputy Prime Minister Zhukov remarks at the USRBC Gala Dinner on October 23, 2007.

“…On behalf of the government of the Russian Federation, I would like to welcome all participants of the U.S.-Russia Business Council’s 15th Annual Meeting. I also would like to congratulate us all on another important occasion — the 200-year anniversary of U.S.-Russia diplomatic relations. I think that the Council’s Annual Meetings serve as an important tool of strengthening the understanding between our two countries, as they give an opportunity to exchange experiences and opinions.

This year has been very successful for the Russian economy and its develop-ment. The GDP grew by 7.5 percent during the first nine months of the year, which is the highest rate achieved in recent years. However, even more importantly, the components of this growth, the main factors contributing to it, have changed. Many still believe that the Russian economy is developing mainly due to global commodity prices.

In reality, this is no longer true. We clearly do still get high dividends and profits from oil prices, but two-thirds of Russian economic growth is attributed to the growth of domestic demand. Russian earnings are grow-ing, and they are growing considerably faster then the economy overall. In the last nine months, real wages grew by 14 percent.

Finally, an even more encouraging development is the record high volume of foreign investment into Russia this year. This for-eign capital inflow started last year with approximately $40 billion in invest-ments, and over $60 billion came to

Russia in the first half of this year. I have to admit that, due to the financial crisis that hit the United States and other countries around the world, we have noticed some outflow of capital from Russia. However, the volume of capital outflow in the last two months has only reached about $10 million. Therefore, it is safe to say that Russia has successfully overcome the finan-cial crisis that affected many countries around the world this summer.

This is probably not surprising. In the last several years, we have created a durable basis for economic stability. First of all, we have paid off almost all of Russia’s foreign debt. Moreover, our currency reserves today exceed $430 billion, which makes Russia the third largest reserve holder in the world after Japan and China. In addition to that,

due to consistent budget surpluses, we have been able to accumulate significant budged reserves, which today allow us

to finance all necessary public expenses for a period of three years, even if oil prices fall three times today’s margin.

It is fair to say that we have created the necessary macroeconomic conditions to make investors coming to Russia completely confident and secure that the default situation of the late 1990s will not occur again. This confidence is a significant factor contributing to the improvement in the investment climate in the country, which is confirmed by the increasing volume of foreign invest-ments.

Having said that, I would note that we do not treat foreign capital purely as a financial resource. Russia today has enough money. First and foremost, foreign capital means the influx of high technology and modern equipment into

“I ThINK ThAT IN 10-15 yEArs, rUssIA shoULd BE AMoNG ThE ToP FIvE MosT dEvELoPEd coUNTrIEs IN ThE WorLd.”

ALExANDER ZHUKOv


KEyNoTE AddrEss nnDeputyPrimeMinisteroftheRussianFederation

Kent McNeley of VimpelCom gives a toast at the Gala Dinner.

Alexander Zhukov, Deputy Prime Minister of the Russian Federation

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the country. Note that over the last year, the volume of Russian imports has grown by 30 percent and imports of vehicles and equipment comprised almost half of the total volume. This means that Russian industry is undergo-ing a very rapid modernization.

We have set a goal to eliminate Russia’s oil dependency, to make the economy more differentiated and to develop our high technology sectors. I think that

gradually we will achieve this goal. I think that in 10-15 years, Russia should be among the top five most developed countries in the world. The mid-term economic development program up to the year 2020, which is aimed at achiev-ing this goal, should be confirmed in the next six months.

Currently, we are trying simultaneously to implement several investment mech-anisms. I am talking about such things as the creation of special economic zones and the investment fund. The latter, through budgetary investments, is aimed at attracting foreign capital to Russia, primarily for infrastructure proj-ects. We have now resumed the devel-opment of concession mechanisms, and with their help plan to finance the constructions of highways, railroads and airports. In the next 15 years, vast capital investments will be allocated to Russian transport, energy, electricity, port, and airport infrastructure.

According to our calculations, Russian infrastructure needs approximately $1 trillion worth of investment before 2020; otherwise it will jeopardize the high rate of economic growth. This is a

lot of money. Naturally, we expect for-eign capital participation and are trying to create all the necessary mechanisms for this to happen.

The question of lifting all restrictions on capital movement in and out of the country has been long debated in Russia. Those of you who have worked in Russia for some time know that we have had very stringent currency regulations. Today, though, foreign

capital can freely come into and leave the country. The fears of those who opposed this move on the grounds that lifting the restriction will result in capital flight have not been realized. In fact, we are observing quite the oppo-site — a considerable increase in capital inflows into Russia.

We are currently working on securing maximum property rights protection in Russia. We are changing our corporate legislation. Today, I think, this is still

our weak spot, but I hope that in the coming years we will be able to firmly and completely secure investors’ rights and private property rights in Russia, as well as to create the corporate proce-dures necessary to support them.

Russia’s regions today present a great number of interesting investment proj-ects. Those of you who participated in the Investment Forum in St. Petersburg this year saw a number of Russian regions presenting their investment opportunities, which was very fruit-ful. A similar forum also took place in Sochi. Both events produced tens of billions of dollars worth of contracts.

…The projects presented during the Sochi Investment Forum totaled $20 billion and were not exclusively Olympic Games-related. Olympic-relat-ed projects of course are very secure, due to partial government financing and government guarantees. However, there were also entirely private projects presented at the forum, including the project for creating a man-made island in the Black sea with hotels and resorts, similar to the one that now exists in the United Arab Emirates.

Two days ago, I was on a trip to Penza. The city does not have any natural resources, there are old, Soviet-style

From left: Jeffrey Hirschberg, Kalorama Partners; Terrence English, Baring Vostok Capital Partners; Deputy Prime Minister Alexander Zhukov; Neville Isdell, The Coca-Cola Company

“WE ArE cUrrENTLy WorKING oN sEcUrING MAxIMUM ProPErTy rIGhT ProTEcTIoN IN rUssIA…. I hoPE ThAT IN ThE coMING yEArs WE WILL BE ABLE To FIrMLy ANd coMPLETELy sEcUrE INvEsTors’ rIGhTs ANd PrIvATE ProPErTy rIGhTs IN rUssIA, As WELL As To crEATE ThE corPorATE ProcEdUrEs NEcEssAry To sUPPorT ThEM.”

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The following is an excerpt of Minister Nabiullina’s keynote address on October 24, 2007.

“First of all, let me thank the lead-ership of the U.S.-Russia Business Council for the opportunity to speak at an Annual Meeting of such an authori-tative and influential organization. We value highly the contribution that the Council is making to the development of mutually advantageous cooperation between Russia and the United States.

Also, my greetings to the heads of American companies present in this room, those that have been operating successfully on the Russian market for many years, as well as those considering entering our market. During recent years, the Russian economy has been growing at a high rate. Its annual growth rate is in the vicinity of 6-7 percent, which is signifi-cantly higher than in the world overall. Russia’s nominal GDP has grown from $260 billion in 2000 to $985 billion in

2006. This year, we will reach a nominal GDP level of $1.2 tril-lion.

Based on prelim-inary estimates, in January-September 2007, GDP grew 7.4 percent com-pared to 6.3 per-cent in the first nine months of 2006. Our GDP exceeded the 1991 level and is now a qualitative-ly different GDP created in a market economy. In 2003, our per capita GDP in current dollars was about $3,000. In 2006, it reached $7,000, and in purchasing power parity (PPP) terms, our GDP amounted to approximately $12,000.

Our industrial growth rate in January-September 2007 was 6.6 percent, with the highest contribution from the pro-cessing industry.

Russian economic achievements are being noticed by foreign investors. In


ELvIRA NABIULLINAKEyNoTE AddrEss nnMinisterofEconomicDevelopmentandTradeoftheRussianFederation

Elvira Nabiullina, Minister of Economic Development and Trade

enterprises that once were part of the Russia defense industry and went bank-rupt in the 1990s. Penza also hosted an investment forum. To my surprise, Penza and Penza region — with a pop-ulation totaling only 1.5 million — were able to sign investment contracts and agreements worth more than $2 billion, which included a large cement plant, an oil refining plant and a large number of hothouses for rose cultivation. Those are examples of some of the projects that are available all over the county today.

…Here is another interesting fact that I

have come across. When asked wheth-er or not they liked Russia’s investment climate, twice as many foreign business-men who worked in Russia answered ‘yes’ than those who did not work in the country. That is why one of the problems that we have to address today is the improvement of Russia’s image abroad. Those who work in Russia understand that the conditions here are better, but those who judge Russia from newspapers and television have a differ-ent view.

That is why the USRBC Annual Meeting makes a huge contribution to

the improvement of Russia’s investment image, and I would like to personally thank you for that.

…In conclusion, I would like to say that we hope that our work and our relationship with foreign investors and businessmen will continue dynamically to develop, as they have in recent years.

I would like to wish you success-ful work in Russia. I hope that more American companies will follow you to Russia. I am sure it will be a mutually beneficial partnership.” n

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the first six months of 2007, net foreign investment in Russia exceeded $60 bil-lion. This is two and a half times more than in the first six months of last year. Foreign direct investment grew almost 1.5 times to about $25 billion in the first half of 2007.

The stock market shows equally spec-tacular results. The market capital-ization of the Russian stock market increased almost 12-fold between 2000 and 2006 and reached the annual GDP volume for that year. In the last one and a half years, the market capi-talization grew more than three-fold. Russia’s stock market capitalization is the world’s 18th largest and is the 8th largest in Europe. The IPO volumes of Russian companies have also grown sig-nificantly, or 2.5 times compared with the first six months of 2006. Thus, the Russian stock market has become an instrument of attracting long-term investment in the real sector of the Russian economy.

Over the last several years, measured economic, fiscal and monetary poli-cies have created a ‘safety net’ for the Russian economy. Large gold and foreign currency reserves (over $400

billion), Stabilization Fund savings (over $140 billion as of October 1), a low external debt, and a budget surplus (7.4 percent of GDP in 2006, 0.2 percent in 2008) create a cushion that ensures the stable development of the Russian economy regardless of external shocks, whether a decline in oil prices or a currently observed global decrease in liquidity. Of course, Russian economic achieve-ments are not just a consequence of

a favorable external economic situa-tion but, first of all, a result of recent economic policies that have ensured political and economic stability and strengthened market institutions…. I would like to note, once again, the preservation of continuity in economic policy with an emphasis on institutional change, market reforms and the forma-

tion of a system of development insti-tutions that is a catalyst for attracting long-term private investment into the real sector of the Russian economy.

As a more tangible argument for the continuity of the course, it is necessary to note our recent signing of several strategic documents with a long-term focus. In particular, this year — for the first time — we have a federal budget that defined expenses and income for a three year period (until the end of

2010). Before the end of this year, the government will consider the ‘Concept of the Long-term Socio-Economic Development of the Russian Federation until 2020.’ In December, the govern-ment will review the ‘Joint Report on the Results and Main Directions of Government Activity for 2008-10,’ which will establish overall government activity indicators as well as the indica-tors for separate ministries and depart-ments. Thus, strategic documents already passed or to be passed in the near future set the precise direction of economic policy for the future.

So, what is this direction? Of course, the Russian government retains an unconditional orientation toward mar-ket reform. An improvement in the investment climate and the removal of barriers to entrepreneurial development remain the strategic directions of our work.

At the same time, it is important to note that reforms on such a scale as conducted in the 1990s and in the early 2000s will, of course, no longer occur.


“I WoULd LIKE, oNcE AGAIN, To EMPhAsIZE ThAT A FAvorABLE ENTrEPrENEUrIAL cLIMATE, IN oUr oPINIoN, Is A NEcEssAry PrEcoNdITIoN To sTABLE socIoEco-NoMIc dEvELoPMENT. For ThIs rEAsoN, EsPEcIALLy, ThE ENhANcEMENT oF EcoNoMIc INsTITUTIoNs hAs BEEN, Is ANd WILL BE oUr MosT IMPorTANT GoAL.”

Neville Isdell (l.) moderates audience questions with Minister Nabiullina.

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Nevertheless, the spot reforms in the fields of corporate law, taxation and the judicial system that are currently under way are no less important because they are directed toward qualitative changes in the institutional environment.

In our opinion, the most important issues that require serious institutional reform are concentrated, first of all, in the field of government management

and regulatory effectiveness, as well as in the social policy field. The creation of clear and transparent mechanisms of government and business interac-tion, effective mechanisms of govern-ment service provision, a transparent government procurement mechanism, and understandable administrative rules — these are very important institutions that ultimately define a favorable entre-preneurial environment, including an environment for small business devel-opment.

It is also important to create a trans-parent and clear mechanism of private equity investment, including foreign investment, in strategic sectors of the Russian economy. Another important direction of insti-tutional reform is the fight against cor-ruption. The identification of most corrupt government activities as well as an analysis of statutory acts to uncover corruption are the basis for programs planned to be passed and implemented in each organ of state power and in each subject of the Russian Federation.

Another large area in which serious

institutional reform is needed is the social sphere. In addition, reforms are needed throughout the entire spectrum of issues including education, health care and social protection of the popu-lation. Finally, pension reform remains an incompletely resolved task. Our ori-entation toward the stimulation of the development of savings mechanisms

remains valid. Today, we need to give an additional push to this process — to create stimuli for the citizens investing their pension savings. Moreover, an influx of future pensioners’ funds into the financial market will have a positive influence on the development of the entire economy.

…I would like, once again, to empha-size that a favorable entrepreneurial climate, in our opinion, is a necessary precondition to stable socioeconomic development. For this reason, espe-cially, the enhancement of economic institutions has been, is and will be our most important goal.

At the same time, the gradual formation of the general economic institutions that create a favorable business environ-ment prevents us from achieving the goal of accelerated development set before our country. To achieve this goal, we must create special instruments that stimulate the development of infra-structure and high technology sectors and that will not cause significant dis-tortions of market signals.

We have created a variety of such

instruments — the so-called develop-ment institutions — in Russia in recent years. The first is the Investment Fund that supports projects in the field of infrastructure development as well as projects of general statewide signifi-cance. We intend to allocate more than 450 billion rubles from the state budget to this purpose before 2010. At the same time, the Investment Fund is a major catalyst of private investment inflows. Based on the projects already approved, one ruble in state investment attracts 3-5 rubles in private investment by way of public-private partnerships.The second is the Special Economic Zone (SEZ). We are creating four types of SEZs: • Technological Development Zones in Zelenograd, Dubna (Moscow Region), St. Petersburg, and Tomsk;• Industrial/Manufacturing Zones in the Lipetsk Region and Tatarstan (the city of Yelabuga);• Tourism and Recreation Zones in the Kaliningrad Region, Stavropol Territory, Krasnodar Territory, Altai Territory, the Republic of Altai, the Irkutsk Region, and the Republic of Buryatia;• SEZ for ports.

…Last year, we created the Russian Venture Company (RVC) that functions based on the ‘fund of funds’ principle. The RVC’s authorized capital is 5 bil-lion rubles ($200 million). In 2007, the RVC’s funds were used to create three venture funds with cumulative capital of over 8 billion rubles (over $300 million). By 2008, further capitalization of the RVC is planned that will enable the cre-ation of seven new venture funds with cumulative capital of 30 billion rubles (about $900 million). In addition, the Development Bank was created on the basis of Vneshekonombank. By 2010, the Development Bank will provide over 700 billion rubles ($28 billion) in long-term investment resources.

State financial development institutions are subject to risks related to possible


“…IT Is cLEAr ThAT U.s. coMPANIEs UNdErUTILIZE oUr MArKET’s INvEsTMENT PoTENTIAL. oNE oF ThE coNsTrAINTs Is ThE ABsENcE oF A BILATErAL AGrEEMENT oN ThE ProTEcTIoN ANd ENcoUrAGEMENT oF INvEsTMENT. ThE UNITEd sTATEs Is ThE oNLy MAJor EcoNoMy WITh WhIch rUssIA doEs NoT hAvE sUch AN AGrEEMENT.”

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inefficiencies in their work. These risks may be decreased through mechanisms of transparency and control over those organizations. The latter means both the preparation of those institutions’ development strategies and the forma-tion of a system of target indicators of their efficiency, as well as the mecha-nisms of disclosure and public control. The creation of these mechanisms is our priority goal today.

It is also worth mentioning that state financial development institutions are important not as instruments that ensure state investment inflow in the economy, but rather as institutions that create an environment for private investment. Whether this is infrastruc-ture development that creates an oppor-tunity for private sector investment or the development of mechanisms of venture financing, the efficiency and effectiveness of those institutions, ulti-mately, must be measured not in terms of the money spent, but in terms of the growth in the volume of investment activity of the private sector. In conclusion, I would like to say a few words about Russian-American trade and economic relations. The last sev-eral years have seen positive trends in our bilateral trade. In 2006, the volume of trade between Russia and the United States, according to Russian statistics, increased by 41 percent compared to 2005 and reached $15.3 billion. The United States is 8th by trade volume among Russia’s trading partners and accounts for about three percent of the total Russian trade volume. These indicators clearly demonstrate the enor-mous potential to increase U.S.-Russia bilateral cooperation.

The United States is among the lead-ing investors in the Russian economy by volume of foreign investment and is the sixth largest investor in Russia by volume of accumulated investment, according to the 2006 data. In contrast to most other countries, direct invest-

ment comprises over 60 percent of overall U.S. investment. Importantly, American direct investment in Russia is directed mainly to its industrial sector, which accounts for 75 percent of the total volume of U.S. investment.

However, it is clear that U.S. companies underutilize our market’s investment potential. One of the constraints is the absence of a bilateral agreement on the protection and encouragement of investment. The United States is the only major economy with which Russia does not have such an agreement.

We believe that further development will take place in the Russian-American trade and economic relationship over the next several years. Russia’s expect-ed accession to the WTO will contrib-ute to this. The failure to complete this step is an obvious and significant

obstacle for the growth of U.S. exports and investments in Russia. Russia’s WTO membership will become one of the most effective instruments in strengthening the position of American exporters in the Russian market. Along with easing market access for American goods and services, this instrument, owing to Russia’s international obliga-tions within the WTO framework, will guarantee to American companies a transparent and predictable legal envi-ronment that meets international stan-dards. The very prospect of Russia’s WTO access is improving the situation in the Russian market. The negotiation process has given a powerful push to the fight against intellectual property

violations. Illegal production facilities are being closed down, control is get-ting stronger and our legislation is being improved. In the first half of this year, we have uncovered over 5,000 crimes against intellectual property. Seven unlicensed producers and 17 counterfeit disk warehouses have been forced to suspend their work. At the same time, everybody understands that radically changing the situation in such a short time frame is impossible. The most important thing is to ensure constant forward movement in the right direc-tion. The institutionalization of Russia’s obligations within the WTO will serve to further strengthen and accelerate this movement.

According to our estimates, more than 90 percent of the work on accession negotiations is completed. The final steps, as is usually the case, require a lot

of effort. On our side, we are doing our best to complete the negotiations in the nearest future. The support of the U.S. business community, which suffers financial losses from missing profits and unrealized projects due to the delay, is very important for us.

We are well aware of the U.S.-Russia Business Council’s active position on this and other issues with regard to bilateral cooperation between our coun-tries. I would like to express certainty that the Council and its members will continue their intensive work directed towards further development of our trade and economic relations and the creation of more favorable conditions for mutually advantageous coopera-tion.” n

IGOR SHUvALOvKEyNoTE AddrEss nnAidetothePresidentoftheRussianFederation

“ThE UNITEd sTATEs Is 8Th By TrAdE voLUME AMoNG rUssIA’s TrAdING PArTNErs ANd AccoUNTs For ABoUT ThrEE PErcENT oF ThE ToTAL rUssIAN TrAdE voLUME. ThEsE INdIcATors cLEArLy dEMoNsTrATE ThE ENorMoUs PoTENTIAL To INcrEAsE U.s.-rUssIA BILATErAL cooPErATIoN.”

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The following is an excerpt of Igor Shuvalov’s keynote address on October 24, 2007. “…Let me tell you about our current economic situation from the political point of view, our attempts to draw conclusions for the present moment and our plans for the future. I would like to tell you today how we see this interesting moment in which we live, how we view the results achieved up until this point, what we intend to do in the future, and how we see Russian-American business relations.

…This is an important time for draw-ing conclusions about the state of our economy. Several months remain until the end of President Putin’s second term. As you know, his approval rating is high, and thus political parties build their platforms based on how close or far they stand from President Putin and whether they have helped or hindered his policies. There are various subjec-tive measures of our economic achieve-ments and failures, but those of us who work close to the President and attempt to formulate policies for the future or judge current policies try to measure the

economic outcomes objectively. Thus I can objectively say — not as an aide to the President, but as a Russian citizen — that we have achieved a measure of success in our work. There have been large and small achievements, but, over-all, we view the last seven to eight years as successful.

If you look at real wages, you will notice that real wages have grown more than three-fold over the last seven years. Nominal wages grew more than six-fold. This is notable because our labor force — well educated, albeit with certain shortcomings in the area of labor productiv-ity — has had an opportunity to receive sufficient remuneration for their work in recent years.

Next, let us dis-cuss foreign direct investment. There has been significant growth between 2006 and 2007. In 2006, for-eign direct investment was in the range

of $30 billion. In the first nine months of 2007, foreign investment exceeded $40 billion.

In recent years, we have witnessed the intensive development of the Russian energy sector. Metallurgy and energy have been growing at a rapid rate with

high gains in export income. Along with those sectors, chemicals, petro-chemicals, construction, and retail have also been developing successfully, pro-viding high gains for investors. In addi-tion, other sectors such as forestry and fisheries have begun to emerge from the shadows and demonstrate results.

Moreover, we have made some regula-tory changes that affect Russia’s invest-ment climate. At 24 percent, Russia’s corporate profit tax rate is the second-lowest in the G8 (after Canada, who has a 22.1 percent rate). We have managed to lower the value-added tax (VAT), and have started a widespread discus-sion on replacing the VAT with a sales tax in the near term. If replacing the VAT with a sales tax proves impossible, our experts are seriously considering unifying the VAT rates and making them considerably lower.


“WhEN PrEsIdENT PUTIN sPEAKs oF ThE coNTINUITy oF PoWEr ANd ThE NEEd To coNTINUE oN ThE sAME coUrsE, hE IMPLIEs ThE coNTINUITy oF EcoNoMIc PoLIcy ToWArd ModErNIZING ThE EcoNoMy ANd PLAcING A hUMAN BEING AT ThE cENTEr oF IT, ToWArd PUTTING oUr rEsoUrcE-BAsEd EcoNoMy oN ThE PLATForM oF INNovATIoN ANd MAKING oUr EcoNoMy KNoWLEdGE-BAsEd.”

IGOR SHUvALOvKEyNoTE AddrEss nnAidetothePresidentoftheRussianFederation

Igor Shuvalov, Aide to the President of the Russian Federation

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As you know, in 2000, we converted the Russian individual income tax to a flat-rate tax instead of the progres-sive tax system that is prevalent in many countries. Now, we have a flat tax rate of 13 percent, although some political forces, particularly those on the left, criticize this decision and sug-gest a return to a progressive income tax. We also managed to repeal the estate tax. As a result, we now have a completely new, modernized tax system that is qualitatively different from the one we had in 2000, and this system will continue to evolve. Eventually, we will have a tax system that is simpler for investors to work with — particularly from a reporting point of view — and more transparent.

…At the same time, we are experienc-ing certain difficulties — inflation is one. I do not know whether Minister Nabiullina explained this to you, but we consider our inflation problem to be short-term, and our monetary authori-ties have means to remedy it. Although they may not be able to resolve the issue immediately, in about a year or a year and a half inflation will return to the limits set earlier. We will make an effort to achieve President Putin’s goal of lowering inflation to a level com-

parable to the one experienced by the economies of Europe and the United States.

To summarize, here is what we have achieved to date. We have a stable and growing economy. We have enor-mous reserves of hard currency. We have a large amount of savings in the Stabilization Fund. The population’s standards of living are increasing. Citizens’ education level is increasing

because the system of professional edu-cation is being modernized. We intend to continue our progress in this direc-tion.

As you know, two years ago we began the active development of nationwide projects in education, health care and housing. In all these projects, the people are the main measure of our success. Human capital is and will

remain our main element of economic development. Looking back at these achievements on the eve of the elec-tion, President Putin has been speaking about the need to provide stability and continuity.

All that has been achieved until now required hard work and a degree of compromise. All of it has been accom-plished with an understanding that our policies must continue after the elec-

tions of 2007-08. Our strategic, long-term program of actions cannot fit into two presidential terms or eight years but has to be fulfilled over a decade or even longer.

When President Putin speaks of the continuity of power and the need to continue on the same course, he implies the continuity of economic policy toward modernizing the economy and placing a human being at the center of it, toward putting our resource-based economy on the platform of innovation and making our economy knowledge-based.

To achieve all this, our political sys-tem has undergone some changes over recent years. President Putin has done much to encourage the development of political parties and the appear-ance of a multiparty political system in Russia. He has done much to ensure that the parties are represented in the national and regional parliaments so an authentic political agenda could be set and authentic debates could take place within those parties.

“As sooN As WE AchIEvE PoLITIcAL sTABILIZATIoN ANd sEcUrE ThE coNTINUATIoN oF ThE PrEsENT PoLITIcAL coUrsE, WE ExPEcT A sIGNIFIcANT INcrEAsE IN ForEIGN dIrEcT INvEsTMENT ANd A qUALITATIvE chANGE To INvEsTMENT FLoWs, WhIch WILL BE INNovATIvE, KNoWLEdGE orIENTEd.”

Council President Gene Lawson (l.) talks with Mr. Shuvalov after his keynote address.

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My colleagues and I have a view of how our economy should continue to develop, but we disagree about priori-ties. Overall, our experts believe that the Russian economy may develop along three different paths: the ‘inertia’ path (that is, with no significant changes to the trajectory of development), the innovation path, and the so-called ener-gy path. However, in accordance with a goal set by President Putin, we need to achieve convergence so that energy is linked to innovation. In this way, our economy will become innovative in the next 10-15 years, so to say, on the ‘shoulders’ of energy and commodities. We are standing on the threshold of major change. Experts consider the current economic situation an invest-ment boom. However, we think that Russia is standing on a threshold of such a boom that will begin in the near future. As soon as we achieve political stabilization and secure the continua-tion of the present political course, we expect a significant increase in foreign direct investment and a qualitative change to investment flows, which will be innovative, knowledge oriented.

Now let us discuss our overall attitude toward the interaction between Russian and U.S. businesses and our view of the U.S. investment in Russia in general. Political decision-makers in Russia have never had any prejudices with respect to American business. That said, we do intend to protect certain sectors of the Russian economy, and the State Duma is currently considering a draft law con-cerning foreign investment in certain strategic industries. The new law will codify the procedure of investing in these industries. This law will change over time as necessary, increasing quo-tas and removing limitations. However, all these actions should have a mutual, reciprocal character. Reciprocity is the magical word often spoken in the West that I like very much. I championed the concept of reciprocity when we

were preparing for the G8 meeting.

In essence, I support liberal, open foundations for any economic system. However, Russia is currently undergo-ing a transitional period and no-one is waiting for Russian business abroad, even with the amount of money it has available. Western investors, particu-larly those living in the United States and the European Union, think that Russian business is governed by the Kremlin, that the Russian people are absolutely unpredictable, etc. I think

this principle of reciprocity is necessary for a short period of time until the West understands that Russian businesspeo-ple are the same as American, British and others. Until this happens, invest-ments should take place on a mutual basis only. It should not be limited, but reciprocity should be on our mind when making decisions. It is impossible for Russia to open its doors, as foreign businesspeople request, and say, ‘Please invest in our energy sector or in our mining sector or in some other sector that you like,’ while at the same time they strictly limit Russian investment in those sectors in their own countries. I think it is wrong to require this, or if it is right, it needs thorough discussion and proof.

I understand how we Russians are per-ceived in the West — like children who outgrew their short pants after 15 years. Our economy has demonstrated such a success, and we have many billionaires on the Forbes magazine list. We under-stand how much of their capital was accumulated, but is this a basis for your condescending attitude to Russian capi-

tal? Of course not. Given a chance, this capital will quickly adapt to inter-national realities and civilized rules of behavior, and then it will become just like yours. Only through interactions with you can our capital become trans-parent and civilized.

Not everyone in the West supports my position, believing that the fewer things depend on Russia, the better it is. I think this is a superficial position of those who do not understand the realities of the role Russia will play in

the global economy. Our economy is the eighth-largest in the world. In the near future, Russia will become a very important player. Perhaps, we will not be able to match the Chinese or U.S. economies, but we will become an important counterbalancing element without which it will be impossible to make any important decisions. Please do not look at this as just ambitious talk. Behind my every word are plans drafted by my colleagues. I am certain that we will be able to realize these plans.

In the near future, the character of the Russian economy will change. I hope that by 2025 we will be able to say that the Russian economy is knowledge-based and makes available its ample endowment of natural resources to the world economy for the sake of global development. Most importantly, the GDP growth necessary for the state to fulfill its social duties will be created by the innovation economy and not natural resource exploitation.

American capital has done a lot for

“IN ThE NEAr FUTUrE, rUssIA WILL BEcoME A vEry IMPor-TANT PLAyEr. PErhAPs, WE WILL NoT BE ABLE To MATch ThE chINEsE or U.s. EcoNoMIEs, BUT WE WILL BEcoME AN IM-PorTANT coUNTErBALANcING ELEMENT WIThoUT WhIch IT WILL BE IMPossIBLE To MAKE ANy IMPorTANT dEcIsIoNs.”

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The following is an excerpt of Ambassador Veroneau’s keynote address on October 24, 2007. “…Without a strong rule of law, the height of any country’s development will be limited. Each country will build institutions supporting the rule of law consistent with its own history and poli-tics. Respect is owed each country as it works to build these institutions.

For sustainability and political legiti-macy, institutions supporting rule of law and transparency must be built from within. They cannot be imposed from the outside. But institution-building can be aided through participation in international rules-based agreements and organizations. In recent years, the United States has negotiated a series of bilateral trade agreements. Beyond tar-iff reduction, these agreements embody the principles of rule of law and trans-parency.

A number of our trading partners have sought these trade agreements as a way

to help lock-in domestic economic reforms, calling for greater openness, rule of law and transparency. Similarly, China’s interest in joining the World Trade Organization stemmed in part from a belief that domestic reforms would be easier to implement in the context of a WTO accession agreement.

The United States strongly supports Russia’s accession to the WTO. We would like this process to move as quickly as possible, but the WTO accession process is not easy — China’s acces-sion process took more than 14 years.

President Putin and his Administration deserve great credit for addressing the many issues raised by WTO members during the accession process. Some critical issues

remain in areas such as intellectual property and agriculture.

…While WTO accession remains our

Russia…. In the first row I see a rep-resentative from Boeing…. I am glad that the Boeing 787 has some Russian labor in it, and this labor is ‘know-how.’ I am not thinking about the titanium that is in it, I am thinking about those young people who were sitting in the engineering office creating this product. Yes, this is a source of pride for us. Therefore, I think that we have a future in this respect and we need to cooper-ate.

Russian and American companies also have a future in the energy sector, and not necessarily only on Russian ter-

ritory. There may be investments in the United States, Russia or even third countries. Everybody who works in our economic department agrees that this new value that we create together constitutes the possible strength of Russian-U.S. business interactions, and we intend to support this process.

There are currently no limitations directed specifically at U.S. capital, there was not and there never will be. Any limitations concerning foreign capital will be mandated by law.

In conclusion, I would like to first

thank you for the opportunity to speak before you, and, second, to reiterate that I consider the results of economic development during President Putin’s period in office as wholly positive. I think in the coming months, we will prepare a detailed analysis of our accomplishments and shortcomings. We will formulate a concrete plan of action to be offered to those who assume power after us. If there is polit-ical continuity, those plans will be uti-lized and then, I assure you, the Russian economy will achieve a completely dif-ferent level of development during the next decade. Thank you.” n

AMBASSADOR JOHN K. vERONEAUKEyNoTE AddrEssnnDeputyUnitedStatesTradeRepresentative

Ambassador John K. Veroneau, Deputy U.S. Trade Representative

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AMBASSADOR JOHN K. vERONEAU

highest priority, the United States and Russia should also consider negotiating a Bilateral Investment Agreement (BIT). Such agreements are useful in attract-ing foreign investment because, among other things, they provide a framework for protecting legal rights and assuring the rule of law. To the benefit of both countries, bilateral investment flows are at historic levels and Russia is enjoying huge capital inflows. This may suggest that an investment treaty is not really needed at this time.

However, over the long term, foreign direct investment will be greater and

more diversified if investments are rein-forced through an investment treaty. For this reason, we are exploring with the Russian government the possibility of negotiating such an agreement.

Russia is a great and important coun-try. Its recent economic growth is truly impressive. Historic prices for oil and other commodities in strong supply in Russia have certainly contributed to this growth. After a very difficult decade of the 1990s, the economic stability and growth of today is no doubt welcomed by the Russian people.

Today’s growth provides an opportu-nity to secure broad-based and long-term economic growth for the future by investing in intangible capital assets such as rule of law and transparency.

One of the great lessons of recent his-tory has been the realization that the global economic pie is not fixed. One country does not gain at the expense of another. On the contrary, we share

in each others’ economic growth and development. After too many years of seeing our bilateral relationship through a zero-sum prism, we must view our relationship through the win-win prism of economic growth and opportunity.

Russia’s vast natural resources make it a great country, but its greatest resource is its people. Russia has produced some of the world’s greatest thinkers, artists and inventors. In the 21st century, the countries that will enjoy the strongest economic growth will be those that are best able to unlock the potential of its people.

For decades, the relationship between the Russian and American people was defined by and through governments. There were limited exchanges between our business and other communities. That has all changed. The U.S.-Russia Business Council and its members rep-resent an important link between the people of two great countries. Please continue your important work of strengthening the bonds of commerce and friendship between our countries.” n

“rUssIA’s vAsT NATUrAL rEsoUrcEs MAKE IT A GrEAT coUNTry, BUT ITs GrEATEsT rEsoUrcE Is ITs PEoPLE…. IN ThE 21sT cENTUry, ThE coUNTrIEs ThAT WILL ENJoy ThE sTroNGEsT EcoNoMIc GroWTh WILL BE ThosE ThAT ArE BEsT ABLE To UNLocK ThE PoTENTIAL oF ITs PEoPLE.”

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THE 2008 POLITICAL CYCLEPANEL Moderator: Mark Medish VicePresidentandDirectorofRussianStudies CarnegieEndowmentforInternationalPeace

Panelists: Thomas Mann Mikhail Margelov W.AverellHarrimanChairandSeniorFellow Chairman,InternationalAffairsCommittee TheBrookingsInstitution FederationCounciloftheRussianFederation

Respondent: Ed Rogers Chairman BarbourGriffith&Rogers,LLC

Mark Medish opened the panel with the observation that anti-American rhetoric is yielding political dividends in Russia, reinforcing notions that U.S.-Russia relations may be characterized as rapidly deteriorating. However, he pointed out that Presidents Bush and Putin have tried to avoid unnecessary friction between the two countries and that the business sector in particu-lar mitigates risks in the U.S.-Russia relationship. With both positive and negative trends at work in U.S.-Russia relations, Mr. Medish raised the ques-tion of how domestic politics during the

2007-08 election season will affect the U.S.-Russia bilateral relationship, both at the state and private sector levels.

Thomas Mann described the United States as having a “toxic” politi-cal environment featuring ideologi-cal polarization between Republicans and Democrats. He labeled President George W. Bush as a politically weak lame duck who governs in a partisan fashion, and noted his low approval rating. At the same time, the new Democratic majority in Congress also receives low approval ratings, engages in

conflicts over bud-getary issues, cannot steer policy in Iraq, and is frustrated by obstacles to the deci-sion making process.

According to Mr. Mann, the American people are troubled by the unpopular war in Iraq, a sense of economic insecu-rity despite extended economic growth, concerns over access to afford-able healthcare, and dissatisfaction with the sustainability of

employment opportunities for future generations. He noted that the past four to six years have seen a funda-mental shift in American politics, as the Democratic Party has attracted young voters, Hispanics and well-educated, married women to its coalitional base and has found opportunities for politi-cal advancement in Virginia, Colorado, New Mexico, Ohio, New Hampshire, and Iowa. Whereas the U.S. popu-lation used to be evenly split, with roughly half of the population sup-porting Democrats and half supporting Republicans, Mann emphasized that the U.S. population is now 50 per-cent Democrat versus only 35 percent Republican.

Mr. Mann continued that foreign policy will be an important topic during the 2008 election, but that the U.S.-Russia relationship is not likely to be a central issue. If the question of U.S.-Russia relations is raised, Hillary Clinton will attempt to demonstrate her toughness, Barak Obama will try to prove that he is not naive about foreign policy and the Republican candidates will voice harsh criticisms of Russia’s human rights and democracy record.

As the general election approaches, Mr. Mann emphasized that the Republicans will need to make a transition away Mark Medish, Carnegie Endowment for International Peace

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from their current support for President George W. Bush, whose unpopularity might endanger Republican chances of winning the presidency. However, he questioned whether the Republican nominee will be able to break away from President Bush without demoraliz-ing the Republican base constituencies. Meanwhile, the Democrats will focus on problems with the war in Iraq, the U.S. economy and government compe-tence and integrity. Stating his belief that the conservative philosophy of tax cuts, moral traditionalism and aggressive nationalism no longer connects with the real problems of the United States, Mr. Mann predicted that the Democrats will win the presidency, as well as an increased majority in both the House of Representatives and the Senate, thereby ending a period of conservative domi-nance in American politics.

Ed Rogers explained that the Republican brand is in free fall and has been tarnished by scandals, fatigue, war, and Hurricane Katrina. Moreover, tra-ditional Republican voters (those who have a conservative ideological point of view and care about effective gov-ernance, taxation, spending, and strong

national defense) are discouraged and have been fractured into a number of sub-groups: Business Republicans, Ideological Republicans and Evangelical Christian Republicans.

Mr. Rogers predicted that Republican candidate John McCain will not drop out of the race, and that there is an outside possibility that Mike Huckabee will exceed expectations by winning an early state primary despite limited resources. Although Fred Thompson consistently holds a healthy position in the polls, he does not have a healthy campaign.

Ultimately, Mr. Rogers predicted that the race among the Republicans will devolve into a contest between Rudy Giuliani and Mitt Romney. Giuliani

leads in the national polls, but Romney consistently leads in states with early pri-maries, a fac-tor that will probably be an advantage for Romney. Furthermore, Giuliani’s failure to receive much more than 30 percent of the Republican vote is endanger-ing Giuliani’s frontrunner

status. In light of a Giuliani-Romney showdown, Mr. Rogers said that the Republican Party may need to redefine its standard conception of a conserva-tive leader.

Mr. Rogers noted that the Democratic frontrunners, Hillary Clinton and Barak Obama, are the weakest Democratic candidates in the race. Mr. Rogers predicted that Senator Clinton will have difficulty receiving more than 51 percent of the national vote. Mr. Rogers dismissed John Edwards, Michael Bloomberg and Al Gore as significant competitors in the presiden-tial race, although he pointed out that Gore might be able to influence the party nomination by endorsing Hillary Clinton.

Mr. Rogers noted that, after each party has declared its nominee, the race between the Democrats and Republicans will focus on the themes of prosperity, peace and change. The states with weaker economic condi-tions will present difficulties for the Republicans, and the Republicans will need to offer a clear change candi-date who is stylistically different from President George W. Bush. He also said that the issue of immigration is


Ed Rogers, Barbour Griffith & Rogers, LLC

Thomas E. Mann, The Brookings Institution

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more likely to drive Republican votes than proximity to the traditional evan-gelical agenda. As for the role of U.S.-Russia relations in the election, Mr. Rogers noted that foreign policy issues are not typically a driving force in vot-ing trends, and campaign mangers are therefore likely to avoid foreign policy topics with the exception of the war in Iraq. If questioned on U.S.-Russia relations, Republicans will be on the defensive and will probably suggest an aggressive approach toward Vladimir Putin.

Mr. Rogers pointed out that, historically speaking, elections in the U.S. follow predictable patterns: in the history of U.S. presidential elections, only two elections have resulted in a two-term president being succeeded by a member of his own party. As a result, he agreed with Mr. Mann that the Democrats will most likely win the 2008 presidential election.

Mikhail Margelov began his overview of Russia’s pre-election political envi-ronment by saying that Russia faces the task of building a democratic sovereign nation state instead of an empire — a task that is difficult for Russia given its history of empire building under the Tsars and then the Bolsheviks. Looking first at the Duma elections, Mr. Margelov noted that the United Russia party has built itself up as a conservative party, which he likened to the Tories in the United Kingdom. Meanwhile, the Fair Russia party had been position-ing itself as a possible party of power, similar to the Labor Party in the UK. He criticized the Communist Party as

being spoiled by capi-talism, and said that other parties, such as the Union of Right Forces and Yabloko, want to be visible but lack charismatic leaders.

Mr. Margelov said that the outcome of the 2007 parliamen-tary campaign season was a “puzzle” prior to the October 1 announcement that President Vladimir Putin will lead the ticket for United Russia in December. In contrast to the U.S. elections, in which many candidates can affect the outcome of the race, Mr. Margelov said that Russia’s elections will focus on Putin. According to Mr. Margelov, Putin’s participation will help United Russia win the election, but the party will then be responsible for maintain-ing Putin’s high level of popularity. [Editor’s Note: United Russia received 64 percent of the vote in the Duma election, gar-nering 315 out of 450 seats.]

With regards to the March 2008 presi-dential election, Mr. Margelov said that Putin will not seek reelection, despite reports that foreign investors have voiced support for Putin retaining the presidency. Mr. Margelov predicted that debates leading up to the presiden-tial election will feature some discussion of foreign policy issues with particular focus on Russia’s relations with the

Baltic States and the European Union. He also predicted that no candidate will contest Putin’s foreign policy achieve-ments in repositioning Russia as a major international power. While foreign policy may be debated, Mr. Margelov expressed hope that election rhetoric will not harm Russia’s relationship with the EU or the United States, and he affirmed that a solid basis for economic relations will still exist after the election.

According to Mr. Margelov, the next President of Russia will not be as popu-lar as Putin and will have to fight cor-ruption, improve the taxation system and undertake unpopular measures in the economic and financial spheres. Mr. Margelov noted that, although Russia is facing an interesting period in its political history, no revolutionary developments should be expected on the economic front. n

Mikhail Margelov, Federation Council of the Russian Federation

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RUSSIA IN THE GLOBAL SUPPLY CHAINPANELModerator: Boris Jordan PresidentandCEO SputnikGroup

Panelists: Owen-Christopher Kemp Mary Laschinger VicePresidentandManagingDirector President HPRussia InternationalPaperEurope Clyde C. Tuggle President,Russia,Ukraine&BelarusDivision, TheCoca-ColaCompany

Boris Jordan opened the session by remarking that, over the past decade, Russia has been active in the global supply chain as a destination for out-sourcing and research and development. The last 15 years have seen the number of foreign corporate representatives grow from 1 to 50. This includes seven global auto producers and an additional three more who are building plant oper-ations; five of these are building cars for export to Europe. The fast growing Russian economy has domestic firms primed for expansion, making Russia an integral part of U.S. companies’ global operations.

Clyde Tuggle discussed Coca-Cola’s strategy and the potential of the Russian market for further expansion. He noted that Coca-Cola is one of the most globally recognized brand names in the world, with 80 percent of its revenues coming from outside the United States. With over $1.5 billion invested and plans to double that in the near future, the company symbolizes the Russian market’s potential.

Russia has become an important base for Coca-Cola’s global operations as the company has been able to take advantage of favorable macroeconomic conditions to expand its business. He added that the Russian economy should see continued long-term, sustainable growth that will cause more and more foreign firms to take note of the huge potential that exists here.

Mr. Tuggle noted that a lack of infor-mation about or understanding of Russia among foreign investors has cre-ated an obstacle to investment growth and has prevented many companies from tapping the potential of the mar-ket. He continued that in a recent survey about investing in Russia, partici-pants ranked Russia high for return on investment, but only 18 percent rated that return as higher than average. This lack of understanding about Russia’s

potential is fairly widespread, but the trend is toward increased understand-ing.

Mary Laschinger agreed with Mr. Tuggle’s perspective, and added that the potential returns from investing in Russia are too significant to ignore. While International Paper’s core mar-kets are in North America and Western Europe, these areas are characterized by high energy and raw materials prices. These pressures are driving the compa-ny’s strategy toward investments that have better potential for shareholder value, including manufacturing in coun-tries where IP has a strong cost advan-tage. As a result, International Paper is

Boris Jordan, Sputnik Group

Clyde C. Tuggle, The Coca-Cola Company

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expanding its investment in emerging markets and currently has over $2 bil-lion invested in Brazil, China, India, and Russia.

Russia represents a major growth opportunity for the firm with its abun-dance of wood, low cost of energy and a market of 150 million consumers. The company has grown its paper and packaging segments through acquisi-tions and joint ventures — it acquired 50 percent of Ilim Pulp, Russia’s larg-est pulp and paper producer. The firm has also invested $500 million in its Svetogorsk mill and the surrounding community. The Svetogorsk mill is now one of the largest pulp and paper producing facilities in Russia. The acquisition has allowed the company to increase capacity by more than 50 per-cent, improve profitability six-fold and successfully raise worker safety levels by 70 percent.

Modern Russia offers an excellent opportunity for International Paper to expand its global business strategy. International Paper is looking to use its base in Russia not only to serve the local market, but also to improve its access to China and other emerging markets in the region. While her assess-ment of foreign investment in Russia is generally positive, Ms. Lashcinger does not believe there will ever be a perfect

time to invest in Russia. International Paper, though, hopes to make its joint venture a success and a world class example of investing in Russia.

Owen-Christopher Kemp contin-ued the discussion by noting that the IT industry has been a beneficiary of high economic growth, mergers and acquisitions and initial public offer-ings, and has been growing faster than the markets in China and Brazil. A strong education system continues to be one of Russia’s greatest assets and is being actively tapped by HP for its deep resource of engineers and software developers. He added that the com-pany currently has 30 partnerships with universities thought the country, and that national priorities in areas such as education, healthcare, nuclear, and hi-tech that seek to diversify Russia away from natural resources have also ben-efited HP.

A well-educated workforce combined with government focus has propelled Hewlett-Packard’s business in Russia. The company plans to develop a labo-ratory in St. Petersburg to foster long-term scientific research and informa-tion management while improving its research and development capabilities. Software and services currently employ more than 100 people in Moscow engaged in high-end computer architec-ture and complex mathematical algo-rithms. The company recently opened its first manufacturing site with partner Foxcon in St. Petersburg that will not only produce PCs for the Russian market but also for export. Mr. Kemp hopes this partnership will incubate new companies that can act as suppliers to this plant. HP is aiming at equal value creation in Russia through the balancing of products and services for import and export by 2010.

Mr. Kemp was generally upbeat about doing business in Russia, but noted that the picture is not completely posi-

tive. Market expansion continues to be hampered by the importance of “know who” vs. know how, the spiraling cost of wages in Moscow and St. Petersburg and an underdeveloped supply chain infrastructure that makes it difficult to ship parts across the country. The ris-ing attrition rate of skilled workers in Russia is also a major concern.

Mr. Kemp emphasized a trend towards greater transparency in Russia with many companies in the pre-IPO stage looking to list their shares on the stock market. His company’s approach has been a firm commitment to Sarbanes-Oxley through training partners and company employees to abide by these rules. HP hires close to 200 people per year and, to many young Russians, values are becoming just as important as salaries.

Mr. Jordan concluded the discussion by highlighting two issues that con-tinue to create a drag on Russia’s global competitiveness: corruption and demo-graphics. U.S. companies in Russia are bound to face corruption at some level. He also addressed the human factor as key to Russia’s future success as well. He noted that executives in Russia are commanding similar salaries to many Fortune 100 executives in the United States despite a large gap in manage-ment ability. n

Owen-Christopher Kemp, HP Russia

Mary Laschinger, International Paper

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Alexander Pismenny opened the dis-cussion with an overview of consumer trends in Russia. The country’s con-sumer trends are now comprised of 50 percent modern trade and 50 percent traditional trade, with modern trade developing fastest in St. Petersburg and beginning to spread into other parts of the country. In terms of fast-moving consumer goods (FMCG) consumption, Russia is the fastest growing country that ACNielsen currently monitors.

Whereas vodka, cigarettes and beer were formerly the largest consumer goods categories sold in Russian super-markets, Russian buyers are beginning

to favor other product categories such as dairy, snacks, carbonated soft drinks, and baby food. Local companies maintain a presence in Russia’s market, but Russia is seeing increasing partici-pation by multinational companies. For example, Mr. Pismenny pointed out that Russian companies provide most of Russia’s alcohol products with the exception of beer, which is predominantly produced by international

compa-nies. In the beverage market, multinationals have long dominated the production of carbon-ated soft drinks and have recently surpassed local companies as leaders in juice produc-tion as well.

According to Mr. Pismenny, the increased drive for convenience, value and healthy products are indicative of Russia’s growing middle class.

Moreover, Russian consumers are beginning to purchase more sophisti-cated products, favoring premium qual-ity over value. Mr. Pismenny predicted that FMCG producers and sellers will be successful in Russia if they effec-tively address the consumer needs of middle-aged working mothers, who make up 90 percent of the buyers of FMCG products in Russia.

Julian Salisbury discussed Goldman Sachs’ consumer finance investments in Russia and the country’s appeal as an investment destination. He noted that Russia’s large population and nominal GDP of over $1 trillion made it an attractive target for investment. The

Alexander Pismenny, ACNielsen Russia


NEW PRODUCTS FOR A CONSUMER SOCIETYPANELModerator: Michael White ChairmanandCEO PepsiCoInternational

Panelists: Warren P. Browne Richard Hainsworth Executive-in-Charge,RussiaandtheCIS GeneralDirector GeneralMotorsCorporation RusRating Alexander Pismenny Julian C. Salisbury ManagingDirector ManagingDirector,EuropeanSpecialSituationsGroup ACNielsenRussia OOOGoldmanSachs

Michael White, PepsiCo International

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increased diversification of Russia’s economy has led to the emergence of a new breed of entrepreneurs and an increased number of companies worth more than $500 million. These new entrepreneurs in +have transparent ownership structures, follow proper accounting practices and comply with taxation laws. He added that Russia’s fast-growing economy is in need of companies like Goldman Sachs that can provide capital for future investment and development.

Of the dozen investments that Goldman Sachs has made in Russia in the past year, Mr. Salisbury noted that half have been in the consumer finance sector, describing the sector as a capital hungry industry in the early stages of its development. Mortgage penetration as a percentage of GDP is in the low sin-gle digits in Russia, whereas it is around 75 percent in the United Kingdom. In Russia, the average household debt is only a few hundred dollars, as com-pared to an average $50,000-$60,000 per household in the UK or the United States. He added that Russia’s mort-gage market is growing fast, but none-theless year-to-date mortgage issuance in Russia was equal to one day’s worth of issuance in the UK.

As with mortgages, Mr. Salisbury pointed out that credit card penetration is also low in Russia, with most cards being issued to draw down loans rather than for daily or weekly spend-ing purposes as in some other parts of the world. With cred-it interest rates sky-rocketing in Russia, the question of legal reform was raised to control Russia’s con-sumer credit practices.

However, Mr. Salisbury stressed that legislative restrictions would do more harm than good by limiting the price increases that are necessary to cover high financing costs.

When assessing possible investments in Russia’s consumer finance companies, Mr. Salisbury noted that three fac-tors must be evaluated. First, a bank requires a management team with rel-evant experience in both the sector and the region — a combination that he characterized as rare. Second, a bank must be able to deliver its products and services through distribu-tion structures such as branches, mail delivery or associa-tion with other orga-nizations. Third, a bank must be able to finance itself.

In the long term, Mr. Salisbury predicted tremendous growth in Russia’s consumer finance market that would give Russian consumers increasing

access to financial services over time. In the short term, though, he predicted a possible stall in growth due to short-ages of capital in the aftermath of the U.S. sub-prime mortgage crisis.

Richard Hainsworth discussed bond ratings and retail banking in Russia, not-ing that RusRating recently conducted a study that compared the credit spreads of high risk bonds to relatively risk-free bonds both before and after the bonds were upgraded or downgraded by RusRating. The company was surprised to find that the market followed their rating change, thereby revealing that the local market pays attention not only to the three major global rating agencies, but also to local rating agencies as well. Mr. Hainsworth emphasized that large companies need to consider local rat-ings so as to avoid the risk inherent in trusting only the ratings issued by the three major agencies.

According to Mr. Hainsworth, the majority of retail banks in Russia are not large. Setting aside Sberbank, which manages 50 percent of Russia’s banking business and 60 percent of Russia’s retail deposits, the main play-


Richard Hainsworth, RusRating

Julian Salisbury, OOO Goldman Sachs

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ers in Russia’s retail banking sector are regional banks. He asserted that it is a fallacy that only large banks will exist in the future, noting that, while many companies operate on the belief that larger, more global organizations with wider coverage have lower risk, larger companies require more layers between clients and decision makers. A typical regional bank does not need the same intermediary structural layers, allowing it to work directly with customers in its own region of expertise. Although companies may find it more difficult to do business with a regional bank than with one that has offices in major finan-cial centers, Mr. Hainsworth noted that regional banks are closer to consumers and are therefore able to provide better information and services.

Mr. Hainsworth acknowledged that some Russian banks do not maintain a level of transparency demanded by the international business community, but he said that many banks in Russia do conform to transparency standards. Although the legislative regulation of banks may not be prevalent in Russia, the country’s Prosecutor General has previously taken action against banks

with question-able practices, while allowing more legitimate banks to con-tinue operating. Despite con-cerns that the current rapid growth in Russia’s finan-cial sector may be leading to a sudden drop, Mr. Hainsworth predicted ongo-ing growth in Russia. He

noted that there is insufficient financ-ing to meet the growing demand for credit in Russia and, as a result of this low supply, Russian borrowers are will-ing to pay high interest rates of around 40-50 percent on their loans. The fact that Russian borrowers generally take small, short term loans has also driven up interest rates. Mr. Hainsworth also observed that, whereas banks in typi-cal developed countries issue half of their loans to corporations and half to individuals, banks in Russia issue only a quarter of their loans to individuals.

Regarding the recent global financial fluctuations resulting from the U.S. sub-prime loan crisis, Mr. Hainsworth commented that, although no individual bank in Russia has experienced a liquid-ity problem, Russian banks have none-theless been nervously holding their money rather than lending it, thus lead-ing to higher inter-bank rates.

Warren Browne spoke about the state of the automotive industry in Russia, predicting several waves of change in Russia’s automotive market due to ris-ing demand. Within 18 months the first wave will manifest itself in the form of

a dramatic increase in options available to automobile customers. Mr. Browne attributed this to the presence of 10 serious automotive assembly programs in Russia and the fact that international auto manufacturers will soon success-fully offer cars priced below 280,000 rubles (approximately $11,500), which he identified as the average price tradi-tionally used by domestic Russian car manufacturers.

The impact of the second wave, Mr. Browne said, will be felt two or three years after the first wave. In terms of consumer choices, he said that the current range of 300 products will increase to at least 500 within five years. Pointing out that one new factory job generally leads to the creation of 10 new distribution and logistics jobs, the sec-ond wave will also bring significant new employment options for the Russian work force.

According to Mr. Browne, the third wave will be characterized by the offer-ing of services related to auto sales, such as customer credit, insurance, used car sales, and call centers for fielding customer complaints. Although the selling of used cars may not come into practice in Russia for another five years, the eventual advent of used car sales will have a large impact on Russia’s automotive market.

As the automotive industry proceeds through these waves, Mr. Browne predicted that competitive pressures will intensify. Car manufacturers will need to pay attention to the value, technology and size of their products in order to remain competitive in the growing Russian market and attract well-informed Russian car buyers who increasingly prefer to buy larger vehi-cles. n

Warren Browne, General Motors Corporation

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Yevgeny Abov opened the discussion by noting that new channels of commu-nication are needed to improve Russia’s image abroad.

Mr. Abov noted that Rossiyskaya Gazeta’s latest project, “Russia Beyond the Headlines,” is a joint venture with the Russian government to create better opportunities for readers to understand the changes taking place in today’s Russia. The goal of the project is to improve the global image of Russia through inserts in foreign newspapers such as The Washington Post and The Daily Telegraph. The program’s creators hope that the initial successes of the series will lead to articles on business

and foreign investment in Russia by other media outlets. Mr. Abov pointed out that foreign audiences currently receive a one-sided view of develop-ments in Russia — foreign media out-lets have created a stereotypical image of Russia that is misleading.

Mr. Abov emphasized that, in his opin-ion, the best way to access Western media is through paid advertising; the inserts are already reaching a younger generation of Americans. He believes that Russian newspapers need to be more proactive in crafting the nation’s image to the world as earlier approaches received criticism — therefore, by try-ing something new, Mr. Abov hopes his newspaper can be modern Russia’s channel of information to the West.

Noam Gelfond continued the discus-sion by noting that the Ukrainian gas crisis in 2006 may be thought of as a turning point in the way Russian gov-ernment officials seek to manage their image abroad.

In 2006, as the Russian Federation prepared to host the G8 Summit, the country was presented with the chal-lenge of shifting the perceptions of Russia among Western journalists, commentators, thought leaders, and academics around the world. Dmitry Peskov, President Vladimir Putin’s

Press Attaché, realized that the Russian government could not conduct business as usual when it came to communica-tions. Mr. Gelfond’s firm was brought in to assist Russia with Westernizing its

approach and helping to coordinate and manage its outreach for the Summit. Their strategy focused on trying to make Russia more open, accessible, and transparent. During the Summit, Mr. Peskov and other senior Russian offi-cials conducted 24 on-the-record brief-ings and conducted about 50 interviews and daily briefings that have become part of the Kremlin’s new communica-tions strategy.

Mr. Gelfond added that the goal from that point forward has been to main-


Yevgeny Abov, Rossiyskaya Gazeta

Andrew Kuchins, Center for Strategic and International Studies


PROJECTING RUSSIA’S IMAGE ABROADPANEL Moderator: Andrew Kuchins SeniorFellowandDirector,RussiaandEurasiaProgram CenterforStrategicandInternationalStudies

Panelist: Yevgeny Abov Noam Gelfond ManagingDirectorof“RussiaBeyondtheHeadlines” Partner RossiyskayaGazeta Ketchum

Stephen Lock Gregory L. White RegionalDirectorEurasia MoscowBureauChief MMDCorporate,PublicAffairs&PublicRelations TheWallStreetJournal

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tain the transparency and accessibility achieved at the G8 Summit while focus-ing on promoting Russia as an attrac-tive place to invest, as a reliable energy partner and as a rightful member of the G8, WTO and other world governing bodies. A high degree of trust exists between Ketchum and Mr. Peskov’s team, each allowing the other to make the right decisions and use their best judgment.

Stephen Lock continued the discussion by noting that Russia is disadvantaged by not having the vigorous lobby that other countries have in Washington. Despite 2.6 million ethnic Russians

having U.S. citizenship, many are not supporters of the country and current government, so Russia lacks the inter-national support of its ethnic diaspora. While Russia is moving in the right direction, it does not have any so-called “pundits” to give third party endorse-ment to its policies. Western media outlets have not been fair in balancing the disappointments with the successes that Russia is experiencing.

Mr. Lock generally sees a durable and successful system of rule of law, where contracts are largely respected, unlike neighboring Kazakhstan and Ukraine. Russian NGOs in the Unites States do talk about Russian success but lack the political and media supporters to help in this process. The large anti-Russian sentiment abroad is financed by those who disagree with the nation’s policies. Mr. Lock noted that his firm represent-ed Rosneft during its IPO, and added that opposing groups led by George Soros and Boris Berezovsky allegedly pumped millions of dollars into lobby-ing against both Russia and the offering. MMD had to reach out and find third party endorsers to frame the debate as a reconfiguration of third party assets and not necessarily as state domination.

Gregory White commented that he has been watching Russia since the early 1990s and that Russia’s efforts to con-vey its image abroad have been episodic at best. Over time, space has been filled by well-funded organizations who want to portray the Russian story. The 2006 gas crisis with Ukraine showed that Russia had no coherent message to use to counter the message coming from Ukraine and its supporters.

Gazprom’s public relations during the crisis were limited to showing men turning off gas valves. The Ukrainian narrative overcame the Russian side of the story despite the fact that Ukraine was stealing of gas on and off for 15 years and paying below market prices.

Mr. White added that modest improve-ments have been made since the G8 summit, noting that it was quite a revo-lution during the summit to be able to get an official comment, even if it may have been the typical Russian line. This, at least, eliminated a complete vacuum of information about what was happening in the Kremlin. He con-cluded by emphasizing that open chan-nels of communication are an important tool for Russia to convey its side of the story to the media.

What are the public relations challenges sur-rounding the upcoming presidential elections?

Mr. Gelfond stated that there is no lack of interest in Russia. The chal-lenge, though, is to understand where that interest is coming from and how to help Mr. Peskov and his team commu-nicate the appropriate message.

Mr. Lock contrasted the parliamentary elections with the presidential elec-tions by noting that the under-25 and over-55 age groups tend to agree with each other and can be thought of as patriotic, but not militaristic. They are corporatist and think there have been

Gregory White, The Wall Street Journal


Noam Gelfond, Ketchum

Question & Answer Session

Stephen Lock, MMD Corporate, Public Affairs & Public Relations

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A NEW ERA IN RUSSIAN ENERGYPANEL Moderator: Daniel Yergin Chairman CambridgeEnergyResearchAssociates

Panelists: Robert Dudley Peter Robertson PresidentandCEO ViceChairman TNK-BP ChevronCorporation

Daniel Yergin began by noting that Russia is a key player on the world energy markets because of its vast oil and gas resources, high hydrocarbon revenues and its disciplined macroeco-nomic and fiscal policies that include sequestering a part of its energy rev-enues. According to official statistics, oil and gas income generates about 20-25 percent of overall growth today — a smaller share than in the past. Investors in the industry are uncertain about the scale of future investment, the develop-ment of new fields, the rise in costs, the relationship between private and state companies and the changing role of the latter.

Peter Robertson continued the discus-sion by noting that most international

companies are committed in the long-term to Russia, which has the world’s largest oil and gas resourc-es and is the largest energy exporter. Despite the central role that the state occupies in the Russian energy industry, there is plenty of room for pub-lic-private partnership — although one must keep in mind the need for reci-procity, a balance of inter-ests and the importance of competition and private investment. Clearly, the state plays a dominant role in the Russian energy landscape, wheth-er in the sphere of oil and gas pipelines

or through state-owned companies such as Gazprom and Rosneft. However, such a situation is hardly unusual in the

many losers in the way that capitalism has developed in Russia and see a stron-ger state as essential. United Russia has campaigned well to ensure more consumer protection than a more liberal form of capitalism and that seems to scare the West.

Mr. White believes that Putin will continue to play his hand tightly with regards to Kremlin strategy, as when he surprised many by nominating Viktor Zubkov to become Prime Minister.

Is there a danger that these information services could be seen as propaganda?

Mr. Gelfond commented that one per-son’s propaganda is another’s informa-tion service. There are going to be mis-steps in the process of becoming more open, but he believes there is no harm in active engagement between govern-ments and the public and vice versa.

Mr. White noted that the economic impact of Putin’s policies has been seen as stabilizing in Russia, but not overseas. On the issue of image man-agement, he stated that image agencies are not the most productive way to approach the problem and that it should be the job of everyone in government. Journalists should try to differentiate

between what is substance and what is state rhetoric.

Mr. Kuchins closed the discussion by stating that bad news is what makes the news, not good news. There are plenty of positives about Russia’s domestic economy, but for many in the United States who thought democracy would take hold quickly, disappointment seems to pervade the Washington con-sensus. Many think that if a country is more democratic it will naturally follow American interests to a greater extent. Sometimes this is true, but sometimes it is not true; it is contingent on many factors. n

Daniel Yergin, Cambridge Energy Research Associates

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world, where national companies con-trol 80 percent of energy resources.

Mr. Robertson proceeded by express-ing his regrets that the United States’ commercial dialogue with Russia and Europe is not moving forward as swift-ly as it should. If this situation contin-ues, state companies from other parts of the world will fill the vacuum. At this point, there is a clear need in Russia for Western expertise and technology, particularly in developing offshore deposits in the Arctic and the Far East. Foreign investment is also needed to supplement planned multi-billion-ruble investments by domestic companies. The International Energy Agency (IEA) estimates that the Russian oil and gas sector will require up to $1 trillion of investment in the next 15 years, and an increase in the current volume of investment is possible if Russia’s regula-tory and fiscal regimes are improved and stabilized.

Mr. Robertson noted that capital invest-ment in upstream capacity develop-ment in Russia and the Caspian Basin almost tripled between 2002 and 2006, although it is still well below interna-tional standards. He added that, over the last several years, investment in

oil production in the Gulf of Mexico totaled $5,500 per barrel, while in Russia it amounted to only $1,000 per barrel. In addition, minority stakes in joint ventures with Russian companies are not a deterrent to foreign investors, as evidenced by Chevron’s minority share in its joint venture with Gazprom Neft, as well as in its other joint ven-tures around the world.

Mr. Robertson concluded by stating that competition and private invest-ment remain important despite the state’s dominance in the energy sector. Although certain challenges such as a lack of adherence to the rule of law remain, increasing investment access is within Russia’s interests as it is within the interests of the United States and the European Union. Therefore, Mr. Robertson urged the business commu-nity to support strongly Russia’s acces-sion to the WTO and similar initiatives that promote trade and investment. Overall, the focus must be on engaging the state as well in the energy sphere, developing robust commercial and gov-ernment partnerships and strengthening competition and private investment.

Robert Dudley began by noting that the recent oil production increases by

Russian companies pro-vided about 40 percent of global oil production growth between 2001 and 2005, roughly equivalent in volume to China’s demand growth during the same period. There are several challenges to continued output growth, though, beginning with sustaining and expanding the potential of Russia’s brownfields. He noted that, in the foresee-able future, most of Russia’s production will come from the brownfields in West Siberia. Such fields still have many years of produc-

tive life, but increasingly sophisticated production techniques — such as effi-cient reservoir management and water floating — are required to utilize their full potential once their production rates begin to slow down.

Russia’s second challenge is an effec-tive move into new, undeveloped fields located in the remote provinces away from major infrastructure. The devel-opment of these new fields will require world class skills and technology and a transparent regulatory environment. The amount of investment needed for such projects is estimated to exceed $100 billion. The third challenge is the interaction between national champi-ons and private players such as LUKoil and TNK-BP. This situation mirrors the environment in the global industry, where national companies control most of the hydrocarbon resources but have to coexist with large multinationals. The final challenges are the high pro-curement and operations costs, as well as the rising taxes that directly impact the energy sector’s ability to deliver the large hydrocarbon projects that Russia needs.

Question & Answer Session

According to what you said, without a change in taxes or in the cost structure that is unlikely to happen, is it going to be more of a challenge to either increase oil output or keep it at the current level?

Mr. Dudley responded by observ-ing that with mature onshore oilfields, one has to work harder and harder over time just to keep production flat. However, onshore development can be advantageous because there is no need for large one-time investments, thus spending and development can be incrementalized. If a few years ago a company would work on big, more capital-intensive projects, in the near future the company will have to build its infrastructure slowly.


Robert Dudley, TNK-BP

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On a global basis, how did rapidly rising costs affect your business and how do you prioritize your expenses?

Mr. Robertson replied that the oil business remains profitable regard-less of high costs. However, as the price of oil has increased dramatically, the costs have kept up — in certain instances increasing three- to fivefold compared to several years ago. In addi-tion, governments have raised taxes in an attempt to take advantage of higher earnings. The main challenge for ener-gy producers is to maintain the margins and earnings necessary to make suffi-cient investments for future production.

If you were asked by the Russian government what needs to be done to keep Russian oil pro-duction strong, what would you recommend, in terms of regulations, taxes, etc.?

Mr. Dudley responded by observing that it is generally harder for govern-ments to implement policy change dur-ing two periods: when energy prices and tax revenues are high and during an election year — which is the cur-rent situation in Russia. However, the Russian government should re-evaluate its regulatory and tax policies concern-

ing the oil industry now so that an improved regulatory framework could provide targeted incentives to devel-op new oilfields located far away from any existing infrastructure. The govern-ment also needs to readjust export duties to match the timing of oil price changes and eliminate the lag effect that compounds oil price fluctuation.

It seems as if Russia’s strategy of building large national champions was based on a belief in the ben-efit of monopolies’ strength and their ability to control markets.

What are the key factors of Russia’s success in this approach, and what are the pitfalls and consequences for international companies, U.S. business and consumers?

Mr. Robertson responded by stating that developing large national champi-ons has its advantages because it often takes large companies to supply the kind of volume of investment necessary in this sector. Rosneft and Gazprom will potentially play an important role nationally and internationally, perhaps following the example of Total, an international oil company that started out as a national one. However, it is unlikely that they will be able to make all the necessary investment today to ensure sufficient production in the future. Therefore, these companies will have to compete with international oil companies — which they are qualified to do. The hope is that this competi-tion will occur on a relatively level play-ing field.

Mr. Dudley added that Russian compa-nies possess important expertise devel-oping oil and gas in some of the harsh-est climates in the world. However, they will have to share the risks as is customary for state companies in the

energy sector — it is unusual to have a company operate 100 percent of a proj-ect. They will also have to incorporate the best new techniques and project management skills from around the world.

In Russia’s oil sector, the “low-lying fruit” has been picked and future projects will be more complex. Is there any such “low-lying fruit” in the Russian gas industry? Also, please give your opinion on the issue of gas flaring.

Mr. Robertson responded by noting that, so far, Russia’s large-scale onshore gas projects are sufficient to meet Europe’s demand for gas. However, according to some reports, Gazprom has fallen behind on investment that could cause a supply shortfall begin-ning in 2011-12. At this point, Rosneft, TNK-BP and LUKoil are all produc-ing gas but do not have full access to Gazprom’s pipeline system. The result is that large amounts of gas are flared during oil production. For example, Chevron sells 70 percent of its gas and flares the remaining 30 percent. If this gas reaches the market, the production gap may be closed. Even if Gazprom ends up unable to meet European demand, other companies will be able to step up and fill it.

Mr. Robertson concluded by asserting that no oil company wants to flare gas. However, shutting that gas production off in many cases would entail also shutting down oil production, which may put a producer in violation of its licenses. The issue is not as simple as just stopping flaring.

Mr. Dudley added that gas flaring has attracted a great deal of attention at the highest levels. There is currently a risk that short-term regulatory penalties will be imposed in order to resolve this issue rather than relying on market incentives to do so. n


Peter Robertson, Chevron Corporation

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Roger Munnings opened the panel by noting that more clarity and balance are needed in the discussion of Russian corporations in the world market today. This balance is necessary to recognize the progress already made and the chal-lenges that remain for Russian compa-nies. At the macro and political levels, turbulence will continue as Russia seeks to establish itself in the position that it feels it deserves owing to not only its energy resources, its size or the skills of the population, but also through the increased integration of its businesses with foreign counterparts.

Blake Marshall continued the discus-sion by pointing out that the frame of reference toward Russian companies in the global market has evolved. He emphasized that Russia is becoming a base for worldwide growth, and that Russia’s global reach is evident by its presence in capital markets and major exchanges. In 2006, 18 Russian IPO’s were undertaken, compared to 23 for the entire previous decade. In 2007, increases are expected both in the num-ber of listings and in the volume they represent. Russia’s integration into world markets and its attractiveness to foreign companies is no longer the

exception to the rule but the norm.

Mr. Marshall noted that, even though there has been a conceptual shift in how Russian companies are viewed, they still face three reputational chal-lenges when engaging in international expan-sion. The first concerns financial communication: companies must decide how best to introduce their management and their corporate story to investors. One of the central problems here is that of separating Russia’s business environment

from Russia’s overall image and the impact of state affiliations on corporate governance. The second challenge is that of media relations and how to help potential business partners see beyond the often negative newspaper headlines. The third challenge is overcoming the obstacles emanating from the govern-ment and the policy community and ensuring foreign partners that the regu-latory and other approvals for M&A and FDI are separate from and not endangered by the political apparatus.

Mr. Marshall proceeded to discuss the dichotomy of perceptions vs. real-ity when dealing with Russia com-panies. The Russian corporate story is not well known, misunderstood and often misrepresented in Western media. Primarily, the perceived image of Russian investments in emerg-ing markets is removed from reality. Recent examples include stories about investments by Norilsk Nickel, Rusal, Renova, and Alrosa in Africa that were portrayed in the media as a safari for the oligarchs, when in fact the deals totaled more than $5 billion in invest-ment over the last three years. Recent investment in the U.S. steel industry by Russian companies has received similar treatment. The Russian companies are portrayed as carrying out the imperial-istic desires of the Kremlin on U.S. soil when, in reality, Russia’s biggest pro-ducers have invested over $3 billion in


RUSSIAN COMPANIES IN THE WORLD MARKETPANELModerator: Roger Munnings ChairmanandCEO, KPMGRussiaandCIS

Panelists: David Iakobachvili Z. Blake Marshall ChairmanoftheBoardofDirectors SeniorVicePresident-International Wimm-Bill-DannFoods ThePBNCompany Ralph Tavakolian Morgan Lev Koshlyakov DeputyGeneralDirector DeputyDirectorofPublicAffairs MMCNorilskNickel AeroflotRussianAirlines

Roger Munnings, KPMG Russia and CIS

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U.S. steel operation in the past 4 years, revitalizing run-down plants and even winning union support for their busi-ness development actions.

Mr. Marshall concluded by saying that Russian corporates are formidable com-petitors, with professional management, industry expertise, capital, and other resources and the drive to match their talent. They have found the key to suc-cess in starting early and reaching out to build allies and coalitions in order to impact public opinion and break the stereotypes that hinder the development of their business abroad.

Ralph Tavakolian Morgan continued to address the key challenges facing Russian corporates in international mar-kets. He began by discussing a topic of increasing importance: the execution of international ventures and transactions. Participation in such international deals demands special effort as it already influences how Russian corporates will participate in international industry con-solidation and growth.

Mr. Morgan, like the other panelists, emphasized that tiresome stereotypes about the country still linger that make

investment abroad much more challenging. He pointed out that Russian executives spend too much time expressing their dis-satisfaction with these stereotypes or aggressively dismissing them rather than working to retire them. Matters are exacerbated by the Western media, which by constantly portraying Russia in a negative light renders companies’ advertis-ing budgets and government relations efforts ineffective. Mr. Morgan recognized that rumors are easy to report but that they carry the real negative consequences of impeding the development

of large and medium-sized corpora-tions.

He noted that, over the last couple of years, Russian corporations have gained a reputation for being undesir-able acquirers of foreign companies. The belief that Russian companies are unable to undertake and execute trans-actions abroad is fairly widespread. It is important to keep in mind that Russian companies are enduring the multi-fac-eted challenges and changes that are taking place in Russia: that of rapid economic growth, restructur-ing and a shrinking domestic population. Furthermore, they are still learning to master the acquisition process.

Mr. Morgan pointed out that his company, Norilsk Nickel, made the largest foreign transaction in Russia’s history. He revealed the most important elements of executing such transactions, as well as the most criti-

cal challenge, which was to tackle the company’s “Russian-ness.” Mr. Morgan offered patience and balance are both virtues in dealing with the negative ste-reotypes that hinder expansion abroad. When potential business partners ask somewhat irrelevant questions about the political situation in Russia, it is impor-tant to avoid the role of apologist or to become a cheerleader but instead to promote an accurate view of the situa-tion in Russia.

Foreigners need to overcome their suspicions of offers emanating from Russia, regardless of the ownership structure of the company. Holding subsequent meetings with potential business partners in Russia is crucial to dissipating these fears, as they are often impressed by the state of affairs in the country. Communications efforts must be doubled to compensate for the per-ceived physical and cultural differences between the countries. Personal execu-tive commitment and informal relations must accompany corporate efforts.

Mr. Morgan concluded by pointing out that the leading Russian companies need to develop skills in integrating assets into their corporations. These are not only Russian companies acquiring assets abroad, but also global companies based

Z. Blake Marshall, The PBN Company

Ralph Tavakolian Morgan, MMC Norilsk Nickel

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in Moscow. Knowledge, skills and experience must be gathered and active-ly applied in Russia to complement the unique experience that has been gained by Russian companies in Russia over the last 10 years during a time of intense business restructuring. Norilsk remains committed toward becoming a fully fledged global company. This is possible, but requires a personal com-mitment from the senior management to break down significant barriers to understanding between Russian corpa-rates and their future counterparts.

Lev Koshlyakov began his presentation with an overview of Aeroflot’s experi-ence as a corporation on the global market, which, he believes, reflects the general perceptions of Russian companies. Newspapers continue to begin business articles with negative associations with the Soviet days and the unpleasant memories of “Aeroflot chicken.” Mr. Koshlyakov emphasized that Aeroflot deserves to be described and assessed as a serious company and that, even though stereotypes persist now, facts and figures can and will expunge the misperceptions.

He noted that, currently, Aeroflot is one of the most financially efficient airlines in the world, ranking in 40th

place concerning the vol-umes of traffic, but 9th in terms of profit. The company overcame chal-lenges and transformed itself before it reached its current success: it acquired new manage-ment, introduced new standards of corporate governance and transpar-ency, adopted interna-tional accounting stan-dards, and learned from international consultants in terms of improve-ment of its service and rebranding. Aeroflot has experience in terms of revenue management, com-mercial operation, network restructuring, and crisis management. Mr. Koshlyakov stated that the compa-ny plans to improve its competitiveness and stay on top of modern technology and trends. He reiterated that Russian market holds great potential and that Aeroflot is working to bring benefits to the Russian aviation industry overall.

David Iakobachvili began by pointing out that Wimm-Bill-Dann was one of the first Russian companies to be listed successfully on the New York Stock

Exchange (NYSE). The success has not been easy, as the company was forced to undertake a fundamental transforma-tion after the financial crisis of 1998.

Wimm-Bill-Dann’s pres-ence on the NYSE is indicative of the com-pany’s adherence to the highest levels of transpar-ency, which is crucial for removing misperceptions about Russian corpora-tions. Furthermore, the relationship with the U.S. is very important for the

company, as it has learned from see-ing how farm and dairy production has been developed in the United States.

American dairy companies are not largely present on the Russian market like European companies, and Wimm-Bill-Dann welcomes their presence. Competition from U.S. dairy produc-ers would help to alleviate the current dairy deficit in Russia and would ben-efit consumers. He noted that Russia invests only 1.3 percent of the govern-ment budget to agricultural subsidies, compared to 25 percent in Belarus and 12 percent in Ukraine. Russia is too dependent on imports of milk and milk powder from abroad. Additionally, the traditional exporter of milk products to Russia, Belarus, now sells much of its products to Algeria and Ghana, who are willing to pay more for them.

Mr. Iakobachvili noted that Wimm-Bill-Dann wants to be present in all regions of the Russian market, as well as to expand to other markets such as Armenia and Georgia. He expressed hope that the presence of his company, as well as other big dairy companies, will continue to improve and develop the agricultural sectors of the countries in which they operate. nLev Koshlyakov, Aeroflot Russian Airlines

David Iakobachvili, Wimm-Bill-Dann Foods

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Andrei Kortunov introduced the panel by emphasizing the increase in human capital that occurred in Russia over the last 10 years. The number of students doubled, the number of higher educa-tion institutions tripled, and over 2,000 private training facilities emerged. In addition, a migration boom took place that made Russia the number-two des-tination country for migrants after the United States. Russia also experienced a radical increase in professional and geographic mobility of its labor force.

However, human capital development in Russia is still characterized by a vari-ety of problems. The system of higher education is not linked to the market, and many graduates are not using their knowledge and skills at work. Private educational and training institutions tend to combine high cost with low quality. In addition, the country turned out to be unprepared to accommo-date the large numbers of incoming migrants, thus creating serious social,

economic and political problems as a result. These factors have combined to create a deficit of human capital on all levels in Russia, from higher manage-ment to qualified civil servants to blue-collar labor in some regions.

Mr. Kortunov noted that the private sector could contribute to resolving these problems. The American experi-ence of conducting corporate training programs may be used as a model for setting up corporate universities in Russian companies. It would also be greatly beneficial for companies to forge public-private education and training partnerships with Russian public uni-versities, vocational training institutions, regional departments of education, and government bodies.

David Pearson continued the discus-sion by describing Deloitte’s growing personnel needs and the company’s experience in successfully filling them. He noted that the company’s regional offices grew from 150 employees six years ago to 3,500 today. To fill an additional 1,800 jobs available this year, Deloitte draws entry-level candidates from many Russian universities and attracts qualified expatriate and regional executives for senior-level slots.

Given the complexity of today’s Russian business environment, the company invests time and effort not only in find-ing the strongest outside candidates, but also in developing talent from within, which is achieved through a variety of successful employee training programs. Overall, Mr. Pearson sees Deloitte as an

opportunity firm that continuously sup-ports its talented Russian workforce, encouraging them to achieve their full potential and thus reducing its staff turnover rate to less than 15 percent for the past six years.

George Abdushelishvili discussed the concept of leadership that may pres-ent a challenge to companies from Russia and other post-Soviet states. The meaning of the word “leader” has changed significantly in the last ten years owing to an increase in the number of stakeholders with whom managers now have to interact. These stakeholders include shareholders, subordinates, clients, competitors, the government, and regulatory agencies. Today’s leader has to play at least seven roles: operational director, strategist, coach, energizer, innovator, ambas-sador, and owner. However, many Russian CEOs and general directors do not fully understand their role as leaders or owners because they tend to measure their success only in the pres-ent moment, without envisioning it as a


Andrei Kortunov, New Eurasia Foundation


RUSSIA’S HUMAN CAPITAL CHALLENGEPANEL Moderator: Andrei Kortunov President NewEurasiaFoundation

Panelist: George Abdushelishvili Sergei V. Kravchenko David Pearson SeniorPartner President GeneralDirector WardHowellInternational Boeing-Russia/CIS Deloitte&ToucheCIS

David Pearson, Deloitte & Touche CIS

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step in building a great company. Mr. Abdushelishvili advised Russian busi-ness owners, regardless of the type and size of their companies, to devote much of their time to identifying, attracting and developing their present and future leaders.

Another challenge for multinational corporations in Russia is their difficulty attracting or retaining their best talent. It is hard for international companies to attract a qualified workforce because they cannot offer the same system of remuneration, including incentive plans, options plans, etc. Russian employ-ees prefer to have more responsibility in local companies and they tend to require constant access to the compa-ny’s top manager, which may pose a problem at a regional office far from the central location in Moscow. In this case, Mr. Abdushelishvili recommended giving freedom to local and regional managers to make decisions that would allow them to hire the best and the brightest and let them function outside a rigid corporate framework.

Sergei Kravchenko began by portray-ing Russia as a human-capital power-house and proceeded to envision it as the world’s supplier of intellectual ser-vices, such as information technology and research and development. Today, Russia may lack specialists in the field of public relations or accounting, but

it boasts many well-educated, highly skilled people who can assist American companies in cutting costs, win new business, and simultaneously create a knowledge- and innovation-based economy.

Compared to China and India — who, in the last 25 years, established them-selves as cost-effective and efficient suppliers of customer support, back-office, and IT services — Russia’s niche lies in performing a combination of IT, engineering and research and develop-ment services that foreign companies currently conduct in-house. Boeing, Intel and Motorola have recognized this by establishing thousands of high tech jobs in Russia, the latter two within their own structure and Boeing by cre-ating separate Russian firms such as Progress-Tech that become its main Russian partners. According to Mr. Kravchenko, these jobs account for only about $0.5-1 billion in costs, which makes them 15 times less expensive than similar intellectual services export-ed from India in 2007.

Mr. Kravchenko cited Boeing as a successful example of U.S.-Russian cooperation in the field of intellectual services. Boeing created about 2,000 high-tech jobs in Russia not by hir-ing people directly but by establishing independent software companies such as Infosys, Infotech, and Progress Tech. The Boeing management team in Russia consists of about a hundred local employees who are trained in-house. Russian high-tech specialists designed about one-third of modifications of the company’s largest projects, including the Boeing 747 and 777, and a thousand Russian engineers worked on the com-pany’s newest Dreamliner jet, giving Russia a reason to be proud not only about an influx of foreign jobs but also about preserving its scientific traditions.

Mr. Kravchenko noted that, although Russia has begun investing in education, investing in universities is not enough.

In his opinion, Russia needs American contracts and jobs that would be more effective than investment of any kind. American and international business owners will have to work with schools and universities to raise professionals who may never become millionaires but will be able to provide a good standard of living for themselves and their fami-lies. While the Russian government is doing its part by establishing free eco-nomic zones, hundreds millions of dol-lars in contracts from Motorola, Intel and other major foreign companies are needed to fill those zones. Russia needs contracts, not investment.

Mr. Kravchenko concluded by empha-sizing that intellectual services could be the antidote to the over-reliance on oil and gas. While he admitted that the Russian economy is out of balance today, he saw the key to a future bal-ance in the convergence between an energy-based economic model and a model based on knowledge and intel-lect. This convergence will allow American businesses to decrease pro-duction costs or launch new products faster, as well as help Russia develop its surplus intellectual potential and integrate it into the outside world. It is up to Russia to decide whether to take advantage of its untapped intellectual potential, but if it chooses to do so, Boeing, Intel, Motorola, and others will be there to take an active part in this process. n


Sergei V. Kravchenko, Boeing-Russia/CIS

George Abdushelishvili, Ward Howell International

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Moderator: Kendrick White ManagingPrincipal MarchmontCapital

Panelist: Robert Droogleever Mark T. Robinson GeneralDirector President CaterpillarCIS CitibankZAO

Darrell Stanaford Evgeny Zakablukovsky ManagingDirector,Russia&Ukraine RegionalGovernmentAffairsManager CBRichardEllisNobleGibbons IntelCorporation

Kendrick White began by noting the tremendous amount of potential found in Russia’s regions and the emergence of policies on the federal and local levels that increase the regions’ attractiveness to Western companies. Compared to Moscow and St. Petersburg, the regions boast lower barriers of entry for foreign investment that induce local Russian companies to compete to retain their market position. Local political elites are interested in increasing competition and attracting foreign investment, which generates a need for greater transpar-ency.

Mr. White went on to discuss the “bot-tom-up” regional development trends, supported both on the municipal and

private level, of a growing number of business clubs, consulting companies, Western banks (that bring with them new credit and financial mechanisms), and Russian microfinance companies. The number of local MBA programs has also increased over the years, alleviat-ing a deficit of qualified, experienced personnel and counteracting a shortage of Moscow-trained managers who are still hard to persuade to relocate to the regions. Commercial clusters devel-oping in Rostov, Nizhny Novgorod, Yekaterinburg, Novosibirsk, and Kazan are a result of such “bottom-up” efforts by the local administrations to attract investment, develop technoparks and business incubators and support the development of more diversified region-al economies.

Robert Droogleever noted that his company has expanded into the regions in order to remain close to its customer base — many of Caterpillar’s regional offices are located on customers’ sites. Most regions offer the advantage of cleaner air and fewer traffic problems than Moscow, as well as steadily improv-ing living standards. However, regional expansion is complicated by a lack of adequate infrastructure — including internet and phone service (one of the reasons the company had to close its Vladivostok office) — and levels of cor-ruption that are higher than in Moscow.

Although Caterpillar hires its employees both in Moscow and in the regions, shifting people between the central and regional offices has proven difficult due to the company’s pay structure and a shortage of affordable real estate in Moscow. However, despite the chal-lenges, a regional presence is important because of the wealth located there and the increasing spending power of the population.

Mark Robinson continued the discus-sion by noting that Citibank has also moved into the regions in order to remain close to its customers. The regions hold great potential for services industries such as banking due to their growing middle class, expanding private


Robert Droogleever, Caterpillar CIS

Kendrick White, Marchmont Capital


RUSSIA’S REGIONS — THE NExT BIG OPPORTUNITYPANEL

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wealth (as illustrated by the increasing number of retail stores and worsen-ing traffic conditions), and insufficient number of bank branches. In addition to customers, the regions are also rich in intellectual capital, which inspired Citibank to launch a project this year to create its first regional back-office pro-cessing center.

Mr. Robinson noted that, when consid-ering where to expand, the company is guided by several considerations. The first is the human capital consideration. When choosing a location for its back-office facility, the company approached a number of local universities, who clearly understood the potential of attracting investment into their cities. Effectively, Citibank faces significantly less com-petition for young labor of the same caliber in the regions than in Moscow, and its regional compensation costs and turnover rate are significantly lower as a result.

Citibank also considers available office space. Although there is a lot less office space of acceptable quality in the region-al cities than in the capital, this situation is changing rapidly. In addition, office space in the regional cities costs at least 50 percent less than in Moscow, which presents a significant attraction.

Regional infrastructure (particularly roads, airports and hotels) has improved significantly over recent years, although the degree to which it has improved still varies from city to city. Transportation connectivity within Russia now enables business travelers to conveniently reach most Russian cities and regions.

Technological costs are still higher in Moscow where the necessary infrastruc-ture has been in place for years. In con-trast, much of the regional infrastructure still needs to be created from scratch, which is a more significant consideration in a service industry such as banking compared to manufacturing.

Mr. Robinson concluded by stating that the Russian regions drive a lot of business opportunities for Citibank. A decade ago the regional cities were ten years behind Moscow, and now this gap is only two years and will continue to shrink. To those companies that are considering doing business in Russia, Mr. Robinson recommends developing their regional strategy at the same time as they develop their general Russia strat-egy. The opportunities in the regions are immense, and they will be captured by those who move the quickest.

Darrell Stanaford viewed the Russian regions as his company’s main oppor-tunity for development, as most of the resources, consumers and intellectual talent are located in the regions. As a commercial real estate company, Richard Ellis sees its task as building an entirely new country — most of the Soviet-era real estate has become obsolete, includ-ing housing, industrial warehouses and shopping. Commercial real estate is a growing business where a lack of mate-rial and expertise is driving up the cost of doing business. Infrastructure pres-ents another challenge, as the attitude to development varies widely among differ-ent regions.

Moscow remains a default destination

for foreign business, although the city’s saturation with foreign business makes for an ambivalent attitude from Moscow Mayor Yuri Luzhkov. In contrast, when American corporations go beyond Moscow, they are welcomed in rap-idly developing regional centers such as Tatarstan, Lipetsk and Nizhny Novgorod, whose growth may be attributed in part to advantageous local government atti-tudes. For example, Valery Shantsev, the head of Nizhny Novgorod’s regional administration, has learned from Mayor Luzhkov’s experience. He now intends to implement in his region what Mr. Luzhkov has done in Moscow, includ-ing conducting large-scale infrastructure projects such as international airport and port construction. Novosibirsk has a great deal of human talent, and Russian developers built a techno park there to take advantage of it. This is not the case in every region — overall, each Russian region is developing at its own pace. The regions are where the future is and where Richard Ellis’ customers are expanding.

Evgeny Zakablukovsky began by talk-ing about Intel’s commitment to the Russian market. The company first started contracting with engineers in Sarov in 1992 and opened its subsidiary in Nizhny Novgorod in 2000. Although Intel has invested a great deal in Russia,

Darrell Stanaford, CB Richard Ellis Noble Gibbons


Mark T. Robinson, Citibank ZAO

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its Russian operations are limited to soft-ware development, engineering, sales, and marketing. The Russian govern-ment has approached Intel about locat-

ing a silicon manufacturing facility in the country, but the company remains cau-tious due to insufficient legal and politi-cal stability and infrastructure, as well as the existing import and export duties. He noted that it took Intel almost two years to remove customs duties from the microprocessors that the company imports into Russia — a temporary mea-sure that will expire in nine months.

Russia is a fast-growing market for Intel, and much of this growth occurs in the regions. The company has made a policy of consulting trusted local experts on the best growth strategies for a particu-lar region; for example, Intel created a Corporate Experts’ Council in its Nizhny Novgorod office. The company also invests in building relationships with the

local governments, looking for possible synergies and opportunities for coopera-tion. Mr. Zakablukovsky noted that an added benefit of close cooperation with the local authorities is that they some-times take federal positions in Moscow, thus elevating one’s connections to the federal level.

Mr. Zakablukovsky also emphasized the importance of corporate social responsi-bility in the regions. Intel has established a Department of Nongovernmental Relations (NGR) through which it coop-erates with the government in finding solutions to community problems on a charitable basis. Through various pro-grams, Intel funds, supports and moni-tors projects by local non-profit organi-zations. n

Evgeny Zakablukovsky, Intel Corporation

Moderator: Vladimir Pozner President AcademyofRussianTelevision

Panelist: Vladimir Frolov Andrew Kuchins President SeniorFellowandDirector,RussiaandEurasiaProgram LEFFGroup CenterforStrategicandInternationalStudies

vIEWS OF THE U.S.-RUSSIA RELATIONSHIPPANEL

Vladimir Pozner opened the discussion by noting that Russia’s newfound posi-tion as a political heavyweight is reflected both in the views of its president and its people. The West’s concern over what it sees as the rollback of democratic reforms instituted in the 1990s rings hollow in the ears of most Russians today, while President Putin’s comments last year referring to the collapse of the Soviet Union as the greatest geopolitical catastrophe in world history are echoed by a majority of Russians. Sixty-three percent of Russians agreed with Mr. Putin’s views, despite the fact that many of them have never experienced life in the Soviet Union. Nearly 50 percent also

agreed that Stalin was a wise leader, and — perhaps most disturbing — 64 per-cent actually consider the United States to be Russia’s main rival.

Andrew Kuchins continued the con-versation by noting that, over the last 15 years, the U.S.-Russia relationship has never been as good as some people thought it was, and it is not as bad as some people try to characterize it to be today. Many would like to believe a new Cold War is upon us, but the inter-national system today is fundamentally different from what it was during the Cold War. The Russian political elite do not seek a return to the posture of the

Cold War because it led to the demise of the Soviet Union and such a relationship would not be in Russia’s interests.

Mr. Kuchins believes that over the last decade, the United States and Russia have experienced a reversal of fortunes. At the end of the 1990s, the United States had a sense that it had an extraordinary historical role to play. That all changed with the Bush administration coming to office and the September 11th attacks. After a seemingly successful campaign in Afghanistan and early in the Iraq war, the turning point came in 2003. Since then, U.S. budget surpluses evaporated and now the subprime mortgage crises

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looks like it will drag the economy into a recession.

In contrast, the Russian economy has rapidly accelerated since 2003 due in large part to the high price of oil. When Vladimir Putin took office, Russia’s for-eign currency exchange reserves were less than $10 billion. Today, reserves are hovering over $400 billion, with over $130 billion in the Stabilization Fund. As a result, Russia has become a more confident player and seeks to have a greater voice in global affairs.

The Russian political elite believe the balance of the economic power in the world is shifting. Large emerging econo-

mies, including Russia, China, India and, even Brazil, are gaining more economic power and have more political influ-ence. The great challenge faced by the U.S. and Russia is how to adjust global governance institutions and structures to reflect a more multipolar world.

Mr. Kuchins believes the adjustment process will be anything but easy. What is happening in Russia in terms of public opinion is in some ways an over-reac-tion to what happened in the 1990’s. He noted that Russia is not shunning inte-gration; it simply does not want it under the terms that were offered in the 1990s. This goes to the heart of President Putin’s Munich speech and the current posture of Russian foreign policy.

Mr. Kuchins emphasized that, while the U.S.-Russia relationship may be frosty in many respects today, relations have come a long way and that the Cold War is a distant memory. Today’s situations are new and the challenges are new. Anti-Americanism in Russia and anti-Russian stereotypes in the U.S. are dominating the headlines, but both nations do need each other to establish new institutions and to manage global governance more effectively.

Vladimir Frolov continued the discus-sion with his somewhat more optimistic views of the current state of the relation-ship. He noted that, despite differences over U.S. plans for a missile defense system in Eastern Europe, the strategic security relationship crafted under the Moscow Treaty is still in place, and discussions have been launched on a new strategic framework to govern that relationship after the START I treaty expires. On Iran, the relationship has been completely transformed — Iran has moved from being a major irritant to a major area of cooperation. Russia has tightened and enforced its export control policies and the issue of legal missile and nuclear technology exports has been removed from the bilateral

agenda. Russia has also supported the UN Security Council resolutions impos-ing sanctions on Iran over the nuclear program.

He believes the state of today’s rela-tionship is healthy because it is real-istic. Since the end of the Cold War, U.S.-Russia relations have been swinging wildly between periods of idealistic opti-mism bordering on irrational exuberance and politically self-serving pessimism. However, a healthy relationship based

on realism will allow both nations to understand each others’ strengths and vulnerabilities. The U.S. and Russia must cooperate where interests overlap and agree to disagree but not undermine each others’ positions on issues where interests diverge.

As it is viewed in Moscow, the relation-ship with Washington is not an end in itself and it cannot trump Russia’s other interests. A strong bilateral relationship with the U.S. is just one way for Russia to strengthen its position in the world. In some cases, though, close association with misguided U.S. policies could actu-ally weaken Russia’s position, like in Iraq, for example. He emphasized that Russia faces its greatest threat of instability, extremism, terrorism, and radical Islam on its southern border — an area where both nations share a common interest

vIEWS OF THE U.S.-RUSSIA RELATIONSHIP

Andrew Kuchins, Center for Strategic and International Studies

Vladimir Frolov, President, LEFF Group

Vladimir Pozner, Academy of Russian Television

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and that could drive U.S. and Russian interests together, as it did after 9/11.

While Putin’s Russia has succeeded in having its voice heard at the big tables of world politics, it has had to raise its voice to get the audience’s attention. The recent U.S. proposals on missile defense that seek to integrate Russia into a joint regional missile defense architec-ture, indicate that Russia’s new assertive posture, with a more vocal defense of

its interests, can yield important results. Russia should emphasize historical and natural characteristics that are at play in the long and difficult evolution of its democratic values, practices and tradi-tions. Mr. Frolov emphasized that the U.S. will need to give Russia and, more specifically, Vladimir Putin, the benefit of the doubt that in the end his adminis-tration will do the right thing and finally set up a sustainable democratic system.

What is critical to ensuring continuity in the relationship and preventing politi-cal change from disrupting the order of business is to have a viable com-munications structure; viable working mechanisms that function on a non-political but bureaucratic level. Viable communication channels are those that could function smoothly, without daily interference or stewardship by the prin-cipals or by the top leaders of the two countries. n


Выдержки из выступления Заместителя Председателя Правительства РФ на торжественном ужине Американо-Российского Делового Совета 23 октября 2007 года.

“…От имени Правительства Российской Федерации я хочу поприветствовать всех участников и гостей уже 15-го Ежегодного Заседания Американо-Российского Делового Совета. И хочу вас сегодня поздравить с еще одним знаменательным юбилеем, а именно с 200-летием со дня установления дипломатических отношений между Россией и Соединенными Штатами Америки. Я думаю, что работа Американо-Российского Делового Совета, его ежегодные сессии, являются очень важным инструментом укрепления•взаимопонимания между нашими странами, а также обмена опытом и мнениями.

Вы конечно знаете, что этот год был очень успешным для России и ее экономики. Мы имеем почти 7,5 процента роста нашей экономики на первые 9 месяцев этого года. Это самые высокие темпы роста за последние годы в России. И что, наверное, может быть, еще

более важно — у нас изменились главные движущие силы этого роста. У многих по-прежнему бытует мнение, что российская экономика развивается в основном за счет роста цен на нефть и газ на мировом рынке. На самом деле это уже не совсем так. Конечно, мы получаем большие дивиденды и прибыли оттого, что цены на нефть высоки, но на самом деле, две трети экономического роста в России сегодня обеспечиваются за счет роста внутреннего спроса. Доходы граждан России растут значительно быстрее, чем наша экономика в целом. За первые 9 месяцев этого года заработная плата российских граждан выросла почти на 14 процентов в реальном выражении.

И что, наверное, наиболее отрадно, это то, что в этом году мы наблюдаем небывалый приток капитала в Россию. Этот приток начался в прошлом году, когда в Россию

поступило порядка 40 миллиардов долларов иностранных инвестиций, а затем в первом полугодии этого года — более 60 миллиардов долларов. Однако, с началом финансового кризиса в Соединенных Штатах и в мире, мы наблюдаем некоторый отток капитала из России. Но за два последних месяца он составил всего навсего 10 миллиардов долларов.

АлексАндр ЖуковОСНОВНОЙ ДОКЛАД nnЗаместительПредседателяПравительстваРоссийскойФедерации

Юджин Лоусон и Александр Жуков

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Так что в целом, можно сказать, что Россия вполне успешно преодолела тот финансовый кризис, в котором оказались многие страны летом этого года.

И это не случайно, поскольку за последние годы мы сумели создать очень серьезный запас прочности в нашей экономике. В первую очередь мы расплатились практически со всеми внешними долгами, которые были у нашей страны. Кроме того, наши валютные резервы сейчас уже превышают 430 миллиардов долларов. Мы вышли по этому показателю на третье место в мире после Японии и Китая.

За счет постоянного профицита нашего бюджета мы также сумели накопить значительные бюджетные резервы, которые позволяют нам нормально финансировать все необходимые государственные расходы в течение трех лет, даже в том случае, если цены на нефть будут в три раза меньше чем сегодня.

Думаю, что это позволяет говорить о том, что мы создали в макроэкономике все необходимые условия для того, чтобы инвесторы, которые приходят в Россию были абсолютно спокойны и не боялись того, что в России наступит дефолт, который многие из вас наблюдали в конце 90-х годов. Думаю, что России сейчас это не грозит. И, наверное, это существенно влияет на улучшение инвестиционного климата в нашей стране, о чем и свидетельствует увеличивающиеся иностранные инвестиции.

При этом мы, конечно, рассматриваем иностранный капитал не только как чисто финансовый ресурс. Денег в России сегодня и так много. Мы рассматриваем иностранный капитал как приход высоких технологий и современного

оборудования в Россию. Здесь, кстати, мы можем отметить, что импорт в Россию за последний год увеличился примерно на 30 процентов, и почти половину всего импорта составляют машины и оборудование. Это означает, что российская промышленность проходит этап очень быстрого перевооружения.

Мы поставили перед собой цель освободить нашу экономику от нефтяной зависимости, сделать ее более диверсифицированной, а также развить высокотехнологичные сектора экономики. Надеюсь, что постепенно мы эту цель достигнем. И в обозримой перспективе, думаю, что в течение 10-15 лет, Россия должна войти в пятерку наиболее развитых стран мира. В течение ближайшего полугода будет утверждена среднесрочная программа развития нашей страны до 2020 года, которая как раз и преследует эту цель.

Мы сейчас стараемся внедрить сразу несколько новых инвестиционных механизмов в нашей стране. Речь идет о

создании особых экономических зон и инвестиционного фонда, который с помощью бюджетных инвестиций позволит нам привлечь в Россию капиталы, в первую очередь, в инфраструктурные проекты. Мы вновь начали развивать концессионные механизмы и с их

помощью собираемся построить дороги, железные дороги, порты, аэропорты.

Надо сказать, что мы, конечно, рассчитываем на то, что в ближайшие годы, а именно в ближайшие 15 лет, в российскую инфраструктуру — я имею в виду, в первую очередь, дорожную инфраструктуру, энергетику, электроэнергетику, строительство портов, аэропортов —будут вложены огромные деньги.

По нашим расчетам, для того, чтобы инфраструктура не препятствовала высоким темпам роста нашей экономики, нам необходимо вложить туда примерно триллион долларов США до 2020 года. Это огромные деньги.

И естественно, что мы ожидаем еще в большей степени прихода иностранных инвесторов и стараемся создать для этого все необходимые механизмы. Должен сказать, что в России очень долго шли споры по поводу того, нужно ли снять все ограничения на свободный приток и отток капитала из России. У нас

на протяжении длительного времени существовали, очень жесткие правила валютного регулирования. Но после долгих дебатов мы, наконец, решились и отменили все ограничения. Сегодня капитал может свободно приходить в Россию и свободно уходить из России. И

“СеЙчАС мы рАбОтАем НАД тем, чтОбы мАКСимАЛьНО зАщитить прАВА чАСтНОЙ СОбСтВеННОСти В рОССии.... В бЛижАЙшие гОДы, я НАДеюСь, чтО мы Сумеем КАрДиНАЛьНым ОбрАзОм зАКрепить прАВА иНВеСтОрОВ и прАВА чАСтНОЙ СОбСтВеННОСти В рОССии и СОзДАть ВСе НеОбхОДимые КОрпОрАтиВНые прОцеДуры, КОтОрые буДут этОму СпОСОбСтВОВАть.”

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опасения тех, кто говорил, что если мы вот так откроем двери настежь, капитал будет уходить, не оправдались. Все случилось ровно наоборот: капитал в значительно больших объемах пошел в Россию.

Сейчас мы работаем над тем, чтобы максимально защитить права частной собственности в России. Мы меняем наше корпоративное законодательство. Думаю, что сегодня это пока достаточно слабое место. Но в ближайшие годы, я надеюсь, что мы сумеем кардинальным образом закрепить права инвесторов и права частной собственности в России и создать все необходимые корпоративные процедуры, которые будут этому способствовать.

В российских регионах сегодня есть множество весьма привлекательных инвестиционных объектов. Те из вас, кто был в этом году на инвестиционном форуме в Санкт-Петербурге, могли увидеть, как разные российские регионы представляют свои инвестиционные проекты, и это имело результаты. Десятки миллиардов долларов — это суммы, на которые были заключены соглашения в Санкт-Петербурге и в Сочи, где проводился совсем недавно аналогичный инвестиционный форум.

...Только в одном городе Сочи на

инвестиционном форуме были представлены проекты на общую сумму больше 20 миллиардов долларов США, причем, это все абсолютно реальные проекты, не только касающиеся Олимпиады. Например, частный проект по созданию острова, который будет насыпан в Черном море и на нем построены различные курорты — аналогично проекту, который есть в Арабских Эмиратах.

Два дня назад я был в городе Пензе. Это город, в котором нет никаких полезных ископаемых, а есть старые заводы, которые в свое время когда-то работали на оборонную промышленность Советского Союза, но в 90-е годы многие из них стали банкротами. Там тоже проходил инвестиционный форум. И, к моему

удивлению, в городе Пензе и в Пензенской области, где живет всего полтора миллиона человек, они сумели заключить инвестиционных договоров и контрактов на сумму больше двух миллиардов долларов, включая крупный цементный завод, нефтеперерабатывающий завод и огромное количество теплиц, где будут выращиваться голландские розы. Вот такие, на первый взгляд, экзотические проекты сегодня есть в России.

...Еще одни интересный факт, с которым я столкнулся. Когда опрашивают бизнесменов, нравится

ли им инвестиционный климат в России, то обычно те, кто уже работает в стране, отвечают “да” в два раза чаще, чем те, кто не работает в России. Поэтому очень важной проблемой или важной задачей, которую мы должны решить — это улучшение инвестиционного имиджа России в мире. Поскольку те, кто знает Россию, понимают, что здесь условия лучше, чем те, кто не знает и судит только по газетным публикациям и телевизионным репортажам.

Я считаю, что с точки зрения улучшения инвестиционного имиджа России сегодняшнее ваше Ежегодное Заседание Американо-Российского Делового Совета — это очень большой вклад в улучшение имиджа России, за что я хотел бы вам сказать большое спасибо.

...Завершая свое выступление, я хотел бы сказать, что мы очень рассчитываем, что наша работа, наше общение и отношения с крупнейшими иностранными инвесторами, бизнесменами, и конечно, в первую очередь, с представителями самой сильной экономики мира — Соединенных Штатов — будут развиваться так, как они, и развивались в последние годы — очень динамично.

Мне хотелось бы пожелать вам успешной работы в России. Мне хотелось бы, чтобы за вами пришли еще и другие американские компании в Россию. Я уверен, что это будет взаимовыгодное сотрудничество.” n


“и В ОбОзримОЙ перСпеКтиВе, ДумАю, чтО В течеНие 10-15 Лет, рОССия ДОЛжНА ВОЙти В пятерКу НАибОЛее рАзВитых СтрАН мирА.”

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Выдержки из выступления Министра экономического развития и торговли РФ на Ежегодном Заседании Американо-Российского Делового Совета 24 октября 2007 года.

“Прежде всего, разрешите поблагодарить руководство Делового Совета за предоставленную возможность выступить на Ежегодном Заседании авторитетной и влиятельной организации американских деловых кругов. Мы высоко оцениваем тот вклад, который Совет вносит в развитие взаимовыгодного сотрудничества между Россией и США.

Я также приветствую находящихся в этом зале руководителей американских компаний, как успешно работающих на российском рынке уже в течение многих лет, так и рассматривающих возможность выхода на наш рынок.

В последние годы российская экономика развивается высокими темпами. Ее ежегодный экономический рост составляет порядка 6-7%, что значительно опережает динамику мировой экономики. В этом году номинальный ВВП России (в долларах США) вырос до 985 миллиардов долларов по сравнению с 260 миллиардами долларов в 2000 году. В этом году наш номинальный ВВП достигнет 1,2 триллиона долларов США.

По предварительным данным, за январь-сентябрь 2007 года прирост ВВП к соответствующему периоду 2006 года составил 7,4% (против 6,3% за 9 месяцев предыдущего года). Объем ВВП превысил уровень 1991 года, причем по структуре это уже

качественно другой ВВП, созданный в рыночной экономике. И если в 2003 году ВВП на душу населения по текущему курсу составлял около 3 тыс. долларов, то в 2006 году — уже 7 тыс. долларов, а по паритету покупательной способности — около 12 тыс. долларов США.

Рост промышленного производства в январе-сентябре 2007 г. составил 6,6%, причем наибольший вклад внесли отрасли обрабатывающей промышленности.

Конечно же, успехи российской экономики не остаются незамеченными и иностранными инвесторами. За первое полугодие 2007 года чистый приток иностранных инвестиций составил в Россию более 60 млрд. долларов. Это в два с половиной раза больше, чем в первом полугодии прошлого года. Существенно — почти в полтора раза — возрос приток прямых иностранных инвестиций, составивший за первую половину этого года около 25 млрд. долларов.

Впечатляющие результаты демонстрирует и фондовый рынок. Так, капитализация российского рынка акций с 2000 по 2006 годы увеличилась более чем в 12 раз, сравнявшись в 2006 году с годовым объемом ВВП. Этот показатель за полтора года вырос более чем в три раза. По капитализации фондового рынка Россия занимает 18 место в мире и 8 место в Европе. Значительно растут объемы IPO российских компаний — рост по сравнению с первым полугодием 2006 года в 2,5 раза. Таким образом, фондовый рынок превращается в инструмент привлечения долгосрочных инвестиций в

реальный сектор российской экономики.

Взвешенная экономическая и финансово-бюджетная политика последних лет создали хороший ‘запас прочности’ для российской экономики. Большие золотовалютные резервы (более 400 млрд. долларов США), накопления Стабилизационного фонда (на 1 октября 2007 года — 3 трлн. 519 млрд. руб. или более 140 млрд. долларов США), низкий уровень государственного долга и бюджетный профицит (7,4% ВВП в 2006 г., 0,2% —в 2008 г.) являются подушкой безопасности, которая обеспечит стабильное развитие экономики России при внешних потрясениях — будь то снижение цен на нефть или наблюдаемое сейчас общемировое снижение ликвидности.

Конечно же, успехи, демонстрируемые российской экономикой, являются не только следствием благоприятной внешнеэкономической конъюнктуры, но и, прежде всего, результатом

ЭльвирА нАбиуллинА


ОСНОВНОЙ ДОКЛАД nnМинистрэкономическогоразвитияиторговлиРоссийскойФедерации

Эльвира Набиуллина, Министр экономического развития и торговли Российской Федерации

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экономической политики, которая проводилась в последнее время и обеспечила политическую и экономическую стабильность, укрепление рыночных институтов. Хочу еще раз отметить сохранение преемственности курса в области экономической политики с акцентом на институциональные изменения, рыночные преобразования, а также

формирование системы институтов развития, являющихся катализатором привлечения долгосрочных частных инвестиций в реальный сектор российской экономики.

Если приводить более осязаемые аргументы преемственности курса, то необходимо отметить принятие ряда стратегических документов, ориентированных на перспективу. В частности, в этом году впервые принят федеральный бюджет, определяющий доходы и расходы государства на три года вперед (до 2010 года включительно). До конца года Правительством будет рассмотрена Концепция долгосрочного социально-экономического развития Российской Федерации до 2020 года. В декабре на заседании Правительства будет рассмотрен Сводный доклад о результатах и основных направлениях деятельности Правительства на 2008-2010 годы, в котором будут закреплены показатели деятельности как Правительства в целом, так и отдельных министерств и ведомств. Таким образом, принятые на

сегодняшний день или планируемые к принятию в ближайшее время стратегические документы задают четкий вектор экономической политики на ближайшие годы.

Каков же этот вектор? Конечно же, Правительство сохраняет безусловную ориентацию на рыночные преобразования.

Улучшение инвестиционного климата, ликвидация барьеров для развития предпринимательства остаются стратегическим направлениями нашей деятельности.

При этом необходимо отметить, что таких масштабных реформ, какие проводились в 90-е годы и в начале 2000-х, конечно уже не будет. Но, тем не менее, проводимые сейчас точечные реформы в области корпоративного права, налогообложения, судебной системы являются не менее важными, так как они направлены на качественное изменение институциональной среды.

Наиболее значимые проблемы, требующие серьезных институциональных преобразований, на наш взгляд, сегодня сосредоточены, прежде всего, в области эффективности государственного управления и регулирования, а также в области социальной политики. Создание ясных и прозрачных механизмов взаимодействия государства и бизнеса, эффективные

механизмы предоставления государственных услуг, прозрачный механизм госзакупок, внятные административные регламенты — это все важнейшие институты, определяющие, в конечном счете, благоприятную среду для предпринимательства, в том числе для развития малого бизнеса.

Также важным является прозрачный и понятный механизм инвестирования частного капитала, в том числе иностранного, в стратегические сектора российской экономики.

Еще одним важным направлением институциональных реформ является противодействие коррупции. Идентификация наиболее коррупционогенных полномочий государственных органов, а также анализ нормативных актов на выявление коррупции является основой программ, которые предполагается принять и реализовать в каждом органе государственной власти и в каждом субъекте Российской Федерации.

Другая крупная область, в которой требуются серьезные институциональные преобразования — социальная сфера. Причем реформы нужны по всему спектру вопросов — это и образование, и здравоохранение, и социальная защита населения.

Наконец, не решенной до конца задачей остается проведение пенсионной реформы. Выбранный несколько лет назад вектор на стимулирование развития накопительных механизмов продолжает оставаться актуальным. Сегодня нужно задать дополнительный импульс этому процессу — создать стимулы для граждан, инвестирующих свои пенсионные накопления. Тем


“и еще рАз хОчу пОДчерКНуть — бЛАгОприятНыЙ преДприНимАтеЛьСКиЙ КЛимАт, НА НАш ВзгЛяД, яВЛяетСя НеОбхОДимым уСЛОВием ОбеСпечеНия СтАбиЛьНОгО СОциАЛьНО-эКОНОмичеСКОгО рАзВития. имеННО пОэтОму СОВершеНСтВОВАНие эКОНОмичеСКих иНСтитутОВ ДЛя НАС быЛО, яВЛяетСя и буДет ВАжНеЙшеЙ зАДАчеЙ.”

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более, приток средств будущих пенсионеров на финансовый рынок позитивно скажется и на развитии экономики в целом.

...И еще раз хочу подчеркнуть — благоприятный предпринимательский климат, на наш взгляд, является необходимым условием обеспечения стабильного социально-экономического развития. Именно поэтому совершенствование экономических институтов для нас было, является и будет важнейшей задачей.

В то же время, постепенное формирование общеэкономических институтов, обеспечивающих благоприятные условия для ведения бизнеса, не позволяет решить стоящую перед страной задачу ускоренного развития. Для ее решения необходимо создание специальных инструментов, стимулирующих развитие инфраструктуры и высокотехнологичных отраслей, которые при этом не искажают существенным образом рыночные сигналы.

Ряд таких инструментов — так называемых институтов развития — был создан в России в

последние годы. Первый из них — Инвестиционный фонд, осуществляющий поддержку проектов в области развития инфраструктуры, а также имеющих общегосударственное значение. Намечается, что до 2010 года на эти

цели будет выделено из бюджета более 450 млрд. рублей. При этом Инвестиционный фонд является мощным катализатором притока частных инвестиций. По уже одобренным проектам на один рубль государственных средств привлекается от 3 до 5 рублей инвестиций частного сектора на основе государственно-частного партнерства.

Второй — это особые экономические зоны. Создаются зоны четырех типов:• Четыре технико-внедренческие зоны: Зеленоград, Дубна Московской области, Санкт-Петербург, Томск;• Две промышленно-производственные зоны: Липецкая область и Татарстан (г. Елабуга); • Семь зон туристско-рекреационного типа: Калининградская область, Ставропольский край, Краснодарский край, Алтайский край, Республика Алтай, Иркутская область, Бурятия; • Портовые особые экономические зоны.

...В прошлом году создана Российская Венчурная Компания, функционирующая по принципу фонда фондов. Уставной капитал РВК составляет 5 миллиардов

рублей (200 млн. долларов США). С участием средств РВК в течение 2007 года создано три венчурных фонда, совокупный капитал которых составит более 8 млрд. рублей (более 300 млн. долларов США). К 2008 году планируется

дальнейшая капитализация РВК, которая в последующем позволит создать семь новых венчурных фондов с совокупным капиталом 30 млрд. рублей (около 900 млн. долларов США). Кроме того, на базе Внешэкономбанка создан Банк развития, который предоставит к 2010 году свыше 700 млрд. руб. (28 млрд. долларов США) долгосрочных инвестиционных ресурсов.

Функционирование государственных финансовых институтов развития несет в себе риски, связанные с возможной неэффективностью их деятельности. Механизмами, направленными на снижение данных рисков, является прозрачность и подконтрольность данных организаций. Речь идет и о подготовке стратегий их развития, и о формировании системы целевых индикаторов эффективности их деятельности, а также о механизмах раскрытия информации и общественного контроля. Создание этих инструментов — инструментов контроля и оценки — сегодня является первоочередной задачей.

Также следует отметить, что государственные финансовые институты развития важны не как инструменты, обеспечивающие приток государственных инвестиций в экономику, а в большей степени как институты, обеспечивающие среду для частных инвестиций. Будь то строительство объектов инфраструктуры, которые обеспечивают возможность для инвестиций частного сектора, либо развитие механизмов венчурного финансирования — эффективность и действенность данных институтов, в конечном итоге, должна оцениваться не масштабом израсходованных средств, а размером повышения инвестиционной активности частного сектора. В заключение несколько слов хочу

“пО Объему тОВАрООбОрОтА СшА зАНимАют 8-е меСтО СреДи тОргОВых пАртНерОВ рОССии — НА их ДОЛю прихОДитСя ОКОЛО 3% ВСегО тОВАрООбОрОтА рОССии. из этих пОКАзАтеЛеЙ яСНО, чтО СущеСтВует ОгрОмНыЙ пОтеНциАЛ ДЛя рАСширеНия ДВуСтОрОННегО СОтруДНичеСтВА.”

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сказать о российско-американских торгово-экономических отношениях. В последние годы наблюдаются положительные тенденции в двусторонней торговле. В 2006 г. объем товарооборота между Россией и США, по данным российской статистики, увеличился на 41% по сравнению с 2005 годом и составил 15,3 млрд. Долларов США. По объему товарооборота США занимают 8-е место среди торговых партнеров России — на их долю приходится около 3% всего товарооборота России. Из этих показателей ясно, что существует огромный потенциал для расширения двустороннего сотрудничества.

США входят в число ведущих стран-инвесторов по объему привлеченных иностранных инвестиций в экономику России. По итогам 2006 года по объему накопленных иностранных инвестиций в России США находились на 6-м месте. При этом в отличие от большинства других стран в структуре поступающих из США инвестиций преобладают прямые инвестиции (около 60%). Весьма важно, что американские прямые инвестиции в России вложены, в основном, в ее производственный сектор, в котором, согласно данным американских экспертов, сосредоточено 75% их объема.

Однако очевидно, что инвестиционный потенциал нашего рынка используется американскими компаниями далеко не в полной мере. Один из сдерживающих факторов — отсутствие двустороннего соглашения о защите и поощрении капиталовложений. США — единственная из крупных экономик, с которой у России такого соглашения нет.

Мы рассчитываем, что в ближайшие

годы российско-американские торгово-экономические отношения получат дальнейшее развитие. Этому будет способствовать и ожидаемое присоединение России к ВТО. Очевидный и существенный фактор, препятствующий наращиванию американского экспорта и инвестиций в Россию — незавершенность этого процесса. Членство России в ВТО станет одним из наиболее эффективных инструментов закрепления позиций американских экспортеров на нашем рынке. Помимо улучшений условий доступа на рынки товаров

и услуг, этот инструмент — через международные обязательства России в рамках ВТО — обеспечит гарантии прозрачной, предсказуемой и соответствующей международным ‘стандартам’ правовой среды для деятельности американских компаний.

Сама перспектива присоединения России к ВТО улучшает ситуацию на российском рынке. Переговорный процесс дал мощный импульс борьбе с нарушениями прав интеллектуальной собственности. Нелегальные производства закрывают, контроль усиливается, совершенствуется законодательство. За первую половину года выявлено более пяти тысяч преступлений в области нарушения авторских прав. Приостановлена деятельность семи не лицензированных производств и

17 складов хранения контрафактных дисков. При этом понятно всем, что кардинально изменить ситуацию в сжатые сроки невозможно. Главное — обеспечить постоянное поступательное движение в правильном направлении. Закреплять и ускорять это движение будет юридическое закрепление обязательств России в ВТО.

По нашим оценкам, на переговорах по присоединению проделано более 90% работы. Последние шаги, как это обычно бывает, требуют очень больших усилий. Мы со

своей стороны делаем максимум возможного для завершения этих переговоров в ближайшее время. Поддержка американского бизнеса, для которого каждый месяц промедления выражается в реальных суммах потерь от недополученной прибыли и нереализованных проектов, очень важна для нас.

Нам хорошо известна активная позиция Американо-Российского Делового Совета в этом и других вопросах двустороннего сотрудничества. Хочу выразить уверенность, что Совет и его члены продолжат интенсивную работу, направленную на дальнейшее развитие наших торгово-экономических отношений и создание более благоприятных условий для взаимовыгодного сотрудничества.” n


“…ОчеВиДНО, чтО иНВеСтициОННыЙ пОтеНциАЛ НАшегО рыНКА иСпОЛьзуетСя АмериКАНСКими КОмпАНиями ДАЛеКО Не В пОЛНОЙ мере. ОДиН из СДержиВАющих фАКтОрОВ — ОтСутСтВие ДВуСтОрОННегО СОгЛАшеНия О зАщите и пООщреНии КАпитАЛОВЛОжеНиЙ. СшА — еДиНСтВеННАя из КрупНых эКОНОмиК, С КОтОрОЙ у рОССии тАКОгО СОгЛАшеНия Нет.”

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Annual Meeting

Russia Business W


Выдержки из выступления Помощника Президента РФ на Ежегодном Заседании Американо-Российского Делового Совета 24 октября 2007 года.

“…Позвольте рассказать вам о том, как мы в настоящий момент оцениваем экономическую ситуацию с политической точки зрения; как мы стараемся подвести некие итоги; и каким образом мы строим планы на будущее. Я хотел бы рассказать вам, как мы оцениваем тот интересный момент, в котором мы живем, как мы оцениваем результаты, достигнутые на данный момент, что мы планируем делать в будущем и какое значение мы придаем российско-американским деловым контактам.

... Почему же сейчас самое интересное время, когда эти итоги подводятся? Осталось несколько месяцев до окончания второго срока президента Путина. Как вы знаете, его рейтинг популярности очень высок, и политические партии строят свои платформы исходя из того, насколько они близко или далеко находятся от Президента Путина и насколько они помогали или мешали ему осуществлять его политику. Есть различные субъективные оценки того, чего нам удалось достичь, а чего не удалось. Нам же, тем, кто работает рядом с Президентом и кто пытается формировать политику на будущие годы или представить свое видение будущей политики, хотелось бы объективно оценить эти результаты. Таким образом, могу откровенно сказать — не как Помощник Президента, а как гражданин РФ — что по каждому из направлений, по которому мы работали, нам удалось достичь определенных позитивных успехов. Есть и очень значительные успехи,

и незначительные, но в целом за эти семь-восемь лет нам удалось достичь больших успехов.

Если Вы посмотрите на уровень реальной заработной платы, вы увидите, что она выросла больше чем в три раза за последние семь лет. Номинальная заработная плата выросла больше чем в шесть раз. Это особенно важно, потому что наши профессиональные кадры — достаточно высоко квалифицированные, хотя и с определенными недостатками в сфере производительности труда — в последние годы получили достойную оплату своего труда.

Далее, давайте поговорим о прямых иностранных инвестициях. Они значительно возросли с 2006 по 2007 гг. В 2006 году прямые иностранные инвестиции составили порядка 30 миллиардов долларов США. А за первые девять месяцев текущего года иностранные инвестиции превысили 40 миллиардов долларов США.

В последние годы очень интенсивно развивался энергетический сектор РФ. Металлургия и энергетика развивались высокими темпами и давали высокие приросты экспортной выручки. Наряду с этими отраслями весьма успешно развивались химическая и нефтехимическая промышленность, строительство и розничная торговля, обеспечивая высокую прибыль инвесторам. Кроме того, другие отрасли промышленности, например, лесная промышленность и рыболовство, вышли из тени и начали давать высокие результаты.

Кроме того, мы внесли изменения в законодательство, регулирующее

российский инвестиционный климат. Российский корпоративный налог на уровне 24 процентов — один из самых низких в странах Большой Восьмерки (ниже только 22,1 процента в Канаде). Нам также удалось снизить налог на добавленную стоимость (НДС)и развернуть широкую дискуссию о замене в ближайшее время налога на добавленную стоимость налогом с продаж. Если заменить НДС налогом с продаж не удастся, наши эксперты всерьез рассматривают унификацию ставок НДС и значительное их снижение.

Как вы знаете, в 2000 году мы перевели индивидуальный подоходный налог на плоскую шкалу вместо прогрессивной шкалы, существующей во многих странах. Теперь у нас ‘плоская’ ставка в размере 13 процентов, хотя некоторые политические силы, особенно левого толка, критикуют это решение властей и считают, что необходимо вернуться к прогрессивной шкале подоходного налога. Нам также удалось

игорь ШувАлов


ОСНОВНОЙ ДОКЛАД nnПомощникПрезидентаРоссийскойФедерации

Игорь Шувалов, Помощник Президента Российской Федерации

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отменить налог на наследование. В результате у нас теперь есть новая модернизированная налоговая система, которая значительно отличается от той, которая существовала в 2000 году, и она продолжает развиваться. В итоге у нас будет налоговая система, которая упростит работу инвесторов, особенно с точки зрения отчетности, и которая станет более прозрачной.

...Есть ли у нас проблемы? Конечно, например, с инфляцией. Я не знаю объяснила ли Министр Набиуллина, но мы исходим из того, что эти

проблемы носят краткосрочный характер, и у монетарных властей есть механизмы с ней справиться. Не думаю, что у них есть возможность моментально отреагировать, но через год-полтора инфляцию вернут в те рамки, о которых и говорилось ранее. Мы будем добиваться того, чтобы в ближайшие годы инфляция снизилась до уровня, сопоставимого с европейской и американской экономиками — о чем и говорил Президент Путин.

Что мы достигли к настоящему моменту? У нас есть стабильно развивающаяся экономика. У нас огромные золотовалютные резервы. У нас высокие накопления в Стабилизационном Фонде. Повышается уровень жизни людей. Повышается образованность граждан, потому что модернизируется система профессиональной школы, и мы по

этому пути будем и дальше двигаться.

Как вам наверное известно, два года назад мы начали активно развивать национальные проекты по образованию, здравоохранению и жилищу. Мы исходим из того, что какие бы мы проекты не вели, и какие бы успехи в целом в экономике мы не имели, мы ставим ставку на человека. Человеческий капитал и в дальнейшем будет для нас являться ключевой экономической единицей. И в настоящий момент, имея на руках все вот эти успехи и находясь накануне политических выборов,

Президент Путин повторяет, что необходимо обеспечить стабильность и преемственность курса.

Все, что сделано к настоящему моменту, было достигнуто тяжелым трудом, и многие решения приходилось принимать, допуская некоторые компромиссы. То, что достигнуто к настоящему моменту, достигнуто благодаря четкой и твердой линии в политике и пониманию, что это направление должно будет продолжено после выборов 2007-2008 годов. Это стратегическая и долгосрочная программа действий, которая не может быть уложена в два президентских срока, то есть в восемь лет. Это программа действий, которая может быть исполнена в течении десятилетия или даже больше.

Когда Президент Путин говорит о преемственности политического курса, — в том числе и экономического курса,— имеется в виду как раз то, что необходимо продолжить начатые изменения по модернизации экономики, во главе которой будет стоять человек, и чтобы перевести российскую экономику, которая была основана на природных ресурсах, на рельсы инноваций.

Для того, чтобы добиться этого, как Вы знаете, в последние годы наша политическая система претерпела некоторые изменения. Президент Путин сделал много для того, чтобы действительно стимулировать развитие политических партий; чтобы в стране появилась многопартийная политическая система; чтобы партии были представлены в Парламенте; чтобы партии были так же представлены в региональных парламентах; и чтобы реальные дебаты формировались и осуществлялись в недрах политических партий, а не каким-то иным образом, как это было раньше в России.

Я и мои коллеги имеем приблизительно одинаковые взгляды на то, как должна развиваться наша экономика. Однако, мы все время спорим о том, какие же делать акценты, на какие приоритеты нам опираться. Специалисты исходят из того, что у России есть три магистральные линии развития: инерционный путь (то есть не предполагающий никаких изменений); инновационный путь и так называемый, энергетический путь. В настоящий момент все понимают, что в соответствии с задачами, поставленными Президентом Путиным, необходимо обеспечить соединение энергетического и инновационного путей, чтобы на плечах имеющейся у нас


“КОгДА презиДеНт путиН гОВОрит О преемСтВеННОСти пОЛитичеСКОгО КурСА, — В тОм чиСЛе и эКОНОмичеСКОгО КурСА,— имеетСя В ВиДу КАК рАз тО, чтО НеОбхОДимО прОДОЛжить НАчАтые измеНеНия пО мОДерНизАции эКОНОмиКи, ВО гЛАВе КОтОрОЙ буДет СтОять чеЛОВеК, и чтОбы переВеСти рОССиЙСКую эКОНОмиКу, КОтОрАя быЛА ОСНОВАНА НА прирОДНых реСурСАх, НА реЛьСы иННОВАциЙ.”

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энергетической и сырьевой базы экономика стала инновационной в ближайшие 10-15 лет.

Мы стоим на пороге значительных изменений. Эксперты оценивают нынешнее состояние российской экономики как инвестиционный бум, хотя мы не разделяем их мнение. Мы считаем, что Россия стоит только на пороге инвестиционного бума, который должен начаться в ближайшее время. Как только будет достигнута политическая стабильность и обеспечено продолжение политического курса, мы ожидаем значительного прироста прямых иностранных инвестиций, которые по своему качеству значительно изменятся: это будут инвестиции, связанные с инновациями и ‘know-how’.

Теперь поговорим о том, как мы относимся к взаимодействию между российскими и американскими бизнесменами, а также к американским инвестициям в РФ. Могу вам откровенно сказать, что среди тех, кто принимает политические решения или способствует подготовке таких решений, никогда не было никаких предубеждений в отношении американского бизнеса. Действительно, у нас намерения защищать некоторые отрасли российской экономики, и Государственная Дума в настоящий момент рассматривает закон о порядке инвестирования иностранными компаниями в некоторые стратегические отрасли. Этот закон будет носить более либеральный характер по отношению к ныне действующему порядку. Более того, мы считаем, что такой закон должен с течением времени меняться. Однако, это должно носить обоюдный, взаимный характер. Вот то волшебное слово, которое сейчас произносят на

Западе —reciprocity, — которое я очень люблю, и которое я активно пропагандировал, когда мы готовили встречу Большой Восьмерки.

Я считаю, что в настоящий момент Россия обязана именно таким образом себя вести с другими государствами и иностранными инвесторами, поскольку мы до сих пор переживаем некий переходный период, и российский бизнес (даже с большим количеством денег) за рубежом пока не ждут. Инвесторам на Западе, в частности бизнесменам из США и ЕС, кажется,

что существует некая управляемая рукой Кремля бизнес единица, и что русские люди совершенно непредсказуемы. Поэтому принцип взаимности, как мне представляется, необходим на недолгий период времени, пока на Западе не поймут, что российские предприниматели точно такие же предприниматели, как и американские, и английские, и все остальные. До тех пор, пока этого не будет, инвестиции должны осуществляться исключительно на взаимной основе. Они не должны носить какой-нибудь ограничительный характер, но принцип взаимности скорее должен быть в наших головах и умах, и в понимании тех, кто принимает конкретные решения. Невозможно, чтобы по требованию иностранных предпринимателей РФ открыла свои двери и сказала ‘Пожалуйста, инвестируйте в наш энергетический или сырьевой сектор,

либо в какой-нибудь иной сектор, какой вы хотите’, но, при этом, имела жесточайшие ограничения по аналогичным секторам на территории этих государств. Я считаю, что такой подход неверный; а если он верный, то по этому поводу нужно провести дебаты и доказать, почему он верный.

Я прекрасно понимаю как к нам, русским, сейчас относятся на Западе: как к ребятам, выросшим из маленьких штанишек за 15 лет. Экономика продемонстрировала такой успех, и российские

предприниматели заняли совершенно иные ниши. По списку Forbes у нас большое количество миллиардеров. Мы понимаем, каким образом появилось большинство этих капиталов, но является ли это основанием для того, чтобы вы так снисходительно относились к российскому капиталу? Конечно, же нет. Этот капитал очень быстро адаптируется к мировым реалиям, к цивилизованным правилам поведения, и станет точно таким же, как ваш. Но только при четком и жестком взаимодействии с мировым капиталом он как раз и станет более прозрачным и цивилизованным. Именно поэтому, я и являюсь проповедником вот такого принципа взаимности.

Я считаю, что мы на столько будем чувствовать себя в безопасности, на сколько будем зависеть друг от друга. Такую мою позицию не все

“КАК тОЛьКО буДет ДОСтигНутА пОЛитичеСКАя СтАбиЛьНОСть и ОбеСпечеНО прОДОЛжеНие пОЛитичеСКОгО КурСА, мы ОжиДАем зНАчитеЛьНОгО прирОСтА прямых иНОСтрАННых иНВеСтициЙ, КОтОрые пО СВОему КАчеСтВу зНАчитеЛьНО измеНятСя: этО буДут иНВеСтиции, СВязАННые С иННОВАциями и ‘know-how’”.

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поддерживают на Западе, считая, что ‘чем меньше от России зависим — тем спокойнее живем’. Я считаю, что это позиция тех, кто не понимает какую роль будет играть Россия в глобальной экономике. Наша экономика — восьмая в мире. Я

убежден, что в ближайшие годы Россия будет сильнейшим игроком. Возможно, что мы не сможем равняться с Китайской экономикой и с экономикой США, но мы станем очень важным балансирующим элементом, в том числе в мировой финансовой системе, без которого просто невозможно принимать важные решения. Я попрошу Вас не воспринимать это как амбициозные политические заявления. За каждым моим словом стоят определенные планы, которые мы готовили с моими коллегами. Я уверен, что даже если не мне, то моим коллегам, удастся эти планы реализовать.

В ближайшие годы (до 2020 года) характер российской экономики будет иметь совершенно иной вид. Я надеюсь, что в 2025 году мы с уверенностью сможем сказать, что экономика России — это

экономика, основанная на знаниях, предоставляющая свои значительные природные ресурсы мировой экономике для глобального развития. И самое важное, что ВВП, который необходим для выполнения всех социальных обязательств государства,

будет создан за счет инновационной экономики, а не за счет эксплуатации природных ресурсов.

Американский капитал сделал очень много для России....На первом ряду я вижу представителя компании Boeing....Мне было отрадно, что в Boeing 787-м есть часть российского труда; и это часть в форме ‘know-how’. Я в этот момент не думал про титан, я думал про ту молодежь, которая сидела в конструкторском бюро и создавала этот продукт. Это наша гордость. Поэтому я считаю, что у нас есть в этом плане большое будущее, и мы должны взаимодействовать.

Конечно же у российских и американских компаний большое будущее и в энергетическом секторе, не обязательно связанное только с американскими инвестициями на

на территории России. Это могут быть и совместные инвестиции на территории и США, и России, и на территории третьих государств. Самое главное, чтобы объединенные усилия российского и американского бизнеса могли продемонстрировать новую ценность. А мы в Администрации Президента, — все, кто работает по экономическому направлению, — всячески будем это поддерживать.

Что касается ограничений, то никаких ограничений, направленных исключительно на американский капитал, нет, не было и не будет. Любые ограничения будут вводиться законом, и они будут касаться любого иностранного капитала.

Завершая, во-первых, хотел бы поблагодарить за возможность перед Вами выступить. И во-вторых, поводя итоги экономического развития за тот период, когда Владимир Путин являлся Президентом, я их оцениваю, как исключительно положительные. Я думаю, что в ближайшие месяцы будет подготовлен глубокий анализ того, что нам удалось сделать, а чего не удалось. Будут сформированы конкретные планы действий, которые будут предложены тем, кто придет к власти после нас. Если будет обеспечена политическая преемственность, то эти планы будут востребованы, и тогда в течение ближайшего десятилетия российская экономика выйдет на совершенно другой уровень развития.” n


“я убежДеН, чтО В бЛижАЙшие гОДы рОССия буДет СиЛьНеЙшим игрОКОм. ВОзмОжНО, чтО мы Не СмОжем рАВНятСя С КитАЙСКОЙ эКОНОмиКОЙ и С эКОНОмиКОЙ СшА, НО мы СтАНем ОчеНь ВАжНым бАЛАНСирующим эЛемеНтОм, В тОм чиСЛе В мирОВОЙ фиНАНСОВОЙ СиСтеме, без КОтОрОгО прОСтО НеВОзмОжНО приНимАть ВАжНые решеНия.”

CONGRATULATIONSTOGENELAWSONONHISRECEIPTOFTHEORDEROFFRIENDSHIPOFTHERUSSIANFEDERATION,THEHIGHESTAWARDBESTOWEDBY

THECOUNTRYTOAFOREIGNCITIZEN.

ПОЗДРАВЛЯЕМ ЮДЖИНА ЛОУСОНА С НАГРАЖДЕНИЕМ ОРДЕНОМ ДРУЖБЫ — ВЫСШЕЙ ГОСУДАРСТВЕННОЙ НАГРАДОЙ РОССИИ, КОТОРАЯ МОЖЕТ БЫТЬ

ВРУЧЕНА ИНОСТРАННОМУ ГРАЖДАНИНУ.

rbw: winter 2007/08

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