Tuesday, April 24, 2012

EDITORIAL

Nationals enjoy HK hospitality

Russians are making their presence felt in Hong Kong.

Just venture down to the IFC mall and you can find Lyuba - the preser-ved remains of the baby Russian mammoth - that will be on display until May 10.

There is more to Russia than mam-moths, however. Also next month, controversial Russian chef Anatoly Komm will demonstrate his extraordi-nary culinary skills in the heart of Central for three nights.

Then there is a Russian gallery that is taking part at next month’s Hong Kong Art Fair for the first time.

On the business front, the Russia In-vestment Forum is planned for the beginning of July.

Meanwhile, the Russian language was heard around the Convention and Exhibition Centre in Wan Chai by thou-sands of business visitors looking for great bargains at this month’s electro-nics, toys and home-appliances fairs.

Elsewhere in Hong Kong, there was an incident involving Russian sailors, who were locked inside their ship for almost two months in port because the captain could not pay the port bills. They have now been released and are waiting for the ship to be sold next month, so they can get their sala-ries and leave.

But Russia is also conspicuous in its absence in the city, as the country’s corporations have yet to make signifi-cant inroads into Hong Kong via initial public offerings.

A detailed look at the cautious way Russian companies view Hong Kong’s stock market can be found inside this issue.

There is also a story about Russian submarines taking part in voyages to the wreck of the Titanic, and a feature on how a controversial art movement is causing a storm in Russia.

These and many more stories can be found in this issue of Russia and Greater China, which is available with the South China Morning Post.

Distributed with the

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

China policy is key issue for Putin’s new cabinet

PAGE 3

Politics

PAGE 5

Five countries aim for one system

BRICS

PAGE 13

Controversial group continues to be provocative

Art

SPECIAL REPORT

Convertibility of currency gains momentum, writes Mark Zavadskiy

Beijing’s yuan strategy

Russia is playing a vital role in China’s global strategy, aimed at eventually making the yuan a fully convertible currency.

Currency trade in roubles and yuan is still in its infancy on the mainland, but resulting transactions are expected to provide the basis for further liber-alisation of the Chinese currency.

“We will accumulate experience work-ing with the rouble and see how it can be applied to other currencies,” says Sun Jie, assistant president of the China For-eign Exchange Trade System.

“The currency price on the interbank market is determined directly and not through the US dollar, as with other cur-rencies, and daily fluctuations can be up to 5 per cent, not 3 per cent as for other currencies.”

In addition to the rouble, the yuan is directly quoted against the Malaysian ringgit and, via the US dollar, against the euro, the Hong Kong dollar, the Jap-anese yen and the pound sterling.

As of late last month, some 637 rou-ble transactions, worth 5.6 billion yuan (HK$6.9 billion), had been carried out in Shanghai and 3,483 deals worth 1.4 billion yuan had been struck in Mos-cow.

> CONTINUED ON PAGE 7

> CONTINUED ON PAGE 11

China’s bid to make the yuan a fully convertible currency is being aided by Russia. Photo: Reuters/Vostok-Photo

HK drivers hit the road

Fifteen adventurous Hongkongers take to the road in their attempt to discover the “real” Russia. Pages 14 and 15. Photo: Private archive

Bridging the great divide Artem Zagorodnov RGC

Residents of the Far Eastern Russian city of Blagoveshchensk enjoyed a firework display the night after Vladimir Putin was elected president last month.

But they didn’t come from Russia – they were launched on the south bank of the Amur River, which separates Blagoveshchensk from the Chinese city of Heihe.

China was celebrating victory for Putin whose time in power, both as pres-ident and prime minister over the past decade, has overseen a five-fold increase in bilateral trade to US$70 billion, a fig-

ure that could grow to US$200 billion by 2020.

Few places in the world offer quite as sharp a contrast between European and Asian cultures as the five-minute bus or hydrofoil journey across the Amur.

What’s more, contacts between Rus-sians and Chinese in the area are be-coming more frequent because of visa-free travel for local tour groups.

“I’m going to rest and buy some stuff,” says a Blagoveshchensk native as he boards a bus to make the journey across the Amur.

RUSSIA ANDGREATER CHINA

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2

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Nations united in naval exerciseFour Russian warships from the Pacif-ic Fleet, as well as support vessels, war-planes, helicopters and naval infantry, are taking part in a joint exercise with Chinese forces in the Yellow Sea.

The Russian Navy’s guided-missile cruiser Varyag and three anti-subma-rine ships will be among more than 20 Russian and Chinese vessels taking part. China and Russia have conduct-ed several joint exercises within the Shanghai Co-operation Organisation, a regional group that also includes Ka-zakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

RIA Novosti

The bear necessities

You don’t often get the chance to see a bear on a Moscow street. You have to be really lucky, and this picture, Out With a Star of the Moscow Cir-

cus, by Hongkonger Wing Sze, won the second runner-up prize in the “Russia in your eyes” photography competition organised by Russian company Rusal to commemorate the second anniver-sary of its listing in Hong Kong. The photo, and other winning entries, was on display in Hong Kong’s Statue Square this month. The six winners received prizes including air tickets and accom-modation for two in Moscow, along with a masterclass in photography, a trip to Lake Baikal for two, and cash coupons worth HK$26,000.

Countries in major tourism drive

It’s Swede success

Petrov gains experience in China GP

Olga Gorshkova RGC

China and Russia are actively promot-ing bilateral tourism this year and for 2013.

For Russia, the aim is to boost the number of Chinese visitors.

“China is our neighbour, and it’s one of the most important tourism markets for Russia today,” says Alexander Rad-kov, head of Russia’s Federal Tourism Agency.

In 2006-2007, the two countries had successful exchanges during the “Year of China in Russia” and the “Year of Rus-sia in China”. A language-exchange pro-gramme followed in 2009 and 2010.

“Now, for the first time, we’ll have a special focus on tourism. China is a very large potential market,” Radkov says.

Brands such as Zolotoe Koltso (Gold-en Ring), Serebryanoe Koltso (Silver Ring), Bolshaya Volga (Great Volga), Vostochnoe Koltso (Eastern Ring), or Gorny Altai are world-famous. Howev-er, they “represent only a small fraction of our country”.

Other attractions, such as Russia’s Eastern Ring and the Great Tea Route, and projects being developed, such as cruise tourism on the Amur River, Baikal Harbour and Northern World, are also attractive.

Tourism chief Alexander Radkov. Photo: Alexandr Utkin, Ria Novosti

A full version of the interview is available at hk.rbth.ru

Miss Russia winners with Miss World 2011, Ivian Sarcos (second left). Photo: ITAR-TASS

Hong Kong-based online magazine Traveler’s Digest has ranked Russian women fourth in a global beauty rank-ing, conflicting with the saying that Rus-sian women are the most beautiful in the world.

Girls from Sweden grabbed top spot in the ranking, which the author admits is “chauvinistic and sexist”.

“Sweden is still firmly in first place. The first time you visit Sweden is an unreal experience, as you realise that everything you have ever heard is true. The women are tall, blonde-haired, blue-eyed goddesses who are friendly and educated,” the magazine says.

Runner-up is Argentina. “Maybe it’s the high-fashion or romantic culture, or maybe it’s just because the women are tall, striking beauties, but there’s something special about them,” Trave-

Russian Formula 1 driver Vitaly Petrov says he is “really pleased” that he fin-ished 18th in this month’s Chinese Grand Prix. Petrov’s third race for the rookie Malaysian team, Caterham, was considered a success, not least because he nearly finished on the same lap as the leaders. Nico Rosberg won for Mercedes, with McLaren duo Jensen Button and Lewis

ler’s Digest explains. Ukraine is third. In a similar ranking, the magazine calls Ukraine’s capital, Kiev, the city with the most beautiful women in the world, but also calls lovers of “scantily-clad women”

ROUND-UP

Cities with the most beautiful girls

to check out Ukraine’s Black Sea coast, and especially Odessa.

“Mother Russia makes an appear-ance at number four on this list, but when we’re talking about women this

beautiful, there’s really only a slight dif-ference between number four and number one,” the magazine says.

Rounding out the top five were the gorgeous women of Bulgaria.

SPECIAL SUPPLEMENTS AND SECTIONS ABOUT RUSSIA ARE ALSO PUBLISHED BY RUSSIA BEYOND THE HEADLINES, A DIVISION OF ROSSIYSKAYA GAZETA (RUSSIA), IN: THE WASHINGTON POST AND THE NEW YORK TIMES (UNITED STATES), THE DAILY TELEGRAPH (UNITED KINGDOM), LE FIGARO (FRANCE), SÜDDEUTSCHE ZEITUNG (GERMANY), EL PAÍS (SPAIN), LA REPUBBLICA (ITALY), LE SOIR (BELGIUM), DUMA (BULGARIA), GEOPOLITICA (SERBIA), AKROPOLIS (GREECE), LA NATION (ARGENTINA), FOLHA DO SAO PAOLO (BRAZIL), EL OBSERVADOR (URUGUAY).

“RUSSIAN AIRLINES HAVE BIG PLANS FOR CHINA”“WOMEN’S EMANCIPATION: WHY FEMINISM IS UNPOPULAR IN RUSSIA”

“BRICS: MAKING NEW PATHWAYS IN SHIFTING POWER POLITICS”

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In China Business News (China) In Yomiuri Shimbun (Japan) In The Economic Times (India)

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Hamilton second and third, respective-ly. “I am really pleased with my per-formance,” Petrov says. “We got as much out of the car as we could, and the fact we were on the same lap as the leaders until the final lap is a very positive sign.”

Petrov says the team was still fine-tuning the car, gaining crucial experi-ence along the way.

Caterham F1 driver Vitaly Petrov.Photo: AP

He retired from the first race in Mel-bourne with a steering-wheel issue but finished 16th in Caterham’s “home” race at Sepang, in Malaysia.

“Vitaly had a problem-free afternoon and was putting in good lap times, stay-ing on the lead lap until almost the final lap, and with every race is more confi-dent in the car,” says technical director Mark Smith.

3

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Igor Sechin Igor Shuvalov Dmitry Rogozin

Igor Sechin, a long-time ally of Vladimir Putin, is sometimes called Russia’s energy tsar because he con-trols oil and gas in the government. He is seen as the head of a group in-side the cabinet that opposed Dmit-ry Medvedev’s privatisation plans in the past. Sechin could quit and take a post in the Kremlin. A high-ranking government source says this is the key condition set by Medvedev, who has had a running feud with Putin’s most loyal deputy. But Sechin could still remain a key figure in the ener-gy sector if he leaves.

In the days following his inaugu-ration on May 7, president-elect Vladimir Putin will appoint a new cabinet. High-ranking sources in the Kremlin confirm that outgoing president Dmitry Medvedev will be prime minister until the end of Pu-tin’s presidential term. As much as he is protected in his hopes of be-coming prime minister by his close ties to Putin, analysts say Medvedev will have little room to manoeuvre for fear of losing Putin’s support. Rumours abound about the compo-sition of the future cabinet and, es-pecially, the fate of deputy prime ministers Igor Sechin and Igor Shu-valov. Medvedev has hinted at major changes, but a big question remains: can new faces significantly change policy? Medvedev has increasingly spoken about the need to speed up selling stakes in state-owned enter-prises.

Igor Shuvalov, who oversees econom-ic policy, is expected to continue in this role. Considered the leader of a liberal-technocratic group in the government, Shuvalov might pur-sue the modernisation agenda Dmit-ry Medvedev championed during his presidency: mass privatisation and a dismantling of the state capitalism that was prevalent during Vladimir Putin’s first two terms. Shuvalov has come under pressure after admitting his wife made millions of dollars in financial investments involving three billionaire oligarchs.

Keep an eye out for Dmitry Rogozin, curator of the defence-industrial complex. His political activity has been sanctioned by Vladimir Putin and this gives him an edge. He rep-resents a nationalist, anti-Western faction within the upper echelons of power, a vital power base. Rogozin is a strong candidate for defence min-ister. His present role is intended to eliminate conflict between the mili-tary and industry. Should he be ap-pointed, his main tasks would be to develop the defence industry and modernise the armed forces.

AGE 51

PRESENT POSITION

DEPUTY PRIME MINISTER

AGE 45

PRESENT POSITION

DEPUTY PRIME MINISTER

AGE 48

PRESENT POSITION

DEPUTY PRIME MINISTER

China strategy is crucial Moscow-Beijing partnership is a key issue for Putin’s new government, writes Dmitry Butrin

MAJOR PLAYERS JOSTLE FOR POSTS IN NEW CABINETMore than at any time in the past, Russia’s trade with China will play a large role in determining who will get a cabinet seat in

Vladimir Putin’s new government, and who will be sidelined.

As is frequently the case, whenever a new government is formed, the peo-ple appointed to cabinet positions are only the tip of the political iceberg. In today’s Moscow, anyone who claims to know the make-up of the new govern-ment is most likely lying. It is doubtful that even president-elect Vladimir Putin himself truly knows.

Although the government has de-scribed itself as “non-political” since 2000, the selection of a new cabinet has less to do with people and more with the principles and political concepts those people embody. This makes it dif-ficult to say anything definite about fu-ture ministers, even if we know a great deal more about the issues at stake than at any time in the past. And one of these issues, the one at the top of the policy agenda is Sino-Russian relations.

The topic invariably crops up in any serious discussion with government of-ficials or major businesspeople. Quite tellingly, this was not the case when Rus-sia was forming new governments in 2000, 2004 or 2007. Nobody could have imagined then that businesspeople would be interested in the opposition’s stance on China. Today, the situation is different. The China issue looms large. Even in government corridors, it is an awkward issue and one people are not used to addressing, as it was long con-sidered outside the sphere of domestic policy for several reasons.

First, the medium-term strategy for Sino-Russian relations is inextricably linked with the development of Rus-sian oil companies and Gazprom. Sev-eral factors have conspired to create this situation: the drop in demand for Rus-sian energy in the European Union due to economic stagnation, the closure of the United States market for liquefied natural gas projects from the Shtokman field, uncertainty surrounding the East-ern Siberia-Pacific pipeline, and prob-lems between Gazprom and the gov-ernment that reduce investment opportunities in eastern Siberia.

The “Chinese” strategy followed for several years by the team of deputy prime minister Igor Sechin, which over-saw energy in Putin’s government, is, if not in question, at least negotiable. Sechin is one of the most powerful and pugnacious members of Putin’s team. Whether he stays in government – and on what terms – will go a long way to determining how Gazprom, Rosneft, Transneft, TNK-BP and Rusal, along with large swaths of the metallurgical and automotive industries will approach Chinese partners.

Sechin’s ideas on economic policy are thought to be similar to the “Chi-nese way of development”, based on “managed development” controlled by major state-owned banks and develop-ment institutions with an emphasis on the planned development of territories and natural resources and a preference

for companies that are government part-ners.

Another area of economic policy pre-viously associated with Vice-Premier and Finance Minister Alexei Kudrin - and now to a large extent with first Dep-uty Prime Minister Igor Shuvalov - is slightly more complicated.

Previous Russian governments avoid-ed any discussions of competition be-tween Customs Union projects and Chi-na’s regional alliances with Central Asian countries, or of the inevitable rivalry be-tween the Moscow International Finan-cial Centre, Shanghai and Hong Kong, which is attracting the attention of Rus-

POLITICS

sian corporate financiers in the wake of Rusal’s initial public offering. They also avoided discussion of Russian Rail-ways transit policy in eastern Siberia and the Far East. The discussion is like-ly to spill into the open, as uncertainty drives these projects into an impasse.

Vladimir Yakunin, head of Russian Railways, declared late last month that the company had to choose between investing in the development of the Baikal Amur Railway or the Moscow-St Petersburg high-speed railway. Given the importance of transport links from China to Russia and the rest of Europe, one wonders if the case can be made

in favour of one or the other project without mentioning China, something that was easily done before.

Another problem is that developing a medium-term strategy for the Rus-sian economy can no longer be done without discussing China. When map-ping out Russia’s economic develop-ment, priority is afforded to metallurgy, machine building and exports, which raises the question of competition and the division of influence with Chinese companies in those sectors. And the main issue of the labour market – the cost of labour in Russia – cannot be meaningfully discussed without con-

sidering the influx of migrants into the country’s economy and how compa-nies can compete with the Chinese com-panies on costs.

In general, the discussion of “innova-tive development” immediately leads even the most ultra-liberal economist to the question of whether a modernised economy will work with or against China, which has an edge from the start.

Indeed, the world in 2012 is one in which pretty much any investor in a start-up company in a developing mar-ket will be faced with a choice between a Chinese and a Russian project: this, at any rate, is what is already happen-ing with venture funds in IT and inter-net services. This factor could be ignored before 2008, when Russia and China were both wrestling with overheated economies but, this year, Russia has to compete for the attention of inves-tors.

There is a third factor. The subject of co-operation with China has been mo-nopolised on the Russian side by major state companies. On the Chinese side, however, it is the burgeoning medium-sized companies that are interested in the Russian market.

For most Russian businesses, China is a less familiar partner than Eastern Europe, North Africa or South Korea - or France, Germany and the US for hi-tech companies. The monopoly is in many ways artificial because, at the mid-dle level, the main obstacle to trade is Russian customs. But that situation is likely to change as customs reforms be-come a priority.

If constraints on Russian-Chinese part-nerships among medium-sized compa-nies are removed, we may witness an explosion of co-operation with the kind of unpredictable side-effects that invar-iably accompany any explosion.

Even cautious attempts by the Rus-sian government in 2007-2009 to squeeze open the door for Russian busi-ness in Hong Kong resulted in the un-expectedly rapid growth in trade and tourism and the accelerated assimila-tion of the financial infrastructure of Hong Kong by Russian companies.

Until recently, business contacts be-tween Russia and China was similar to that with the US. Will a future Russian government do anything to change this? In any case, one can be fairly sure that contenders for ministerial jobs are being asked their opinion about China. And they had better be prepared.

Dmitry Butrin is head of economic poli-cy at the Kommersant

May 29Hong Kong investor to build the tallest skyscraper in the Russian Far East

Reuters/vostock-photo

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RUSSIA AND GREATER CHINATuesday, April 24, 2012

Moscow begins to exert its influence in region

Building relationships

Country’s position in Southeast Asia is becoming increasingly important, writes Ramón Pedrosa

Russia is becoming more in-fluential in Southeast Asia following decades of a neg-ligible presence in a region where the United States,

China, Japan and the European Union were the most important players.

The region is booming again. As they did during the 1990s, Indonesia, Ma-laysia, Vietnam, the Philippines and Sin-gapore are growing – in terms of eco-nomic output and trade, and in energy consumption.

“The Association of Southeast Asian Nations' [Asean] primary energy re-quirements are projected to triple be-tween 2005 and 2030,” diplomatic sources say. In the 1990s, the 10 Asean member states committed themselves to becoming developed nations by 2020. Infrastructure and energy are key components of development and Asean has had a plan of action for en-ergy co-operation since 2010. The main objectives of the plan, to be complete by 2015, include the consolidation of an Asean common power grid and a Trans-Asean gas pipeline; the adop-tion of a common position towards clean coal technology; nuclear energy, and the development of Asean as a hub for renewable energies.

“Massive investment is required for energy infrastructure to meet rising re-gional energy demand, improve ener-gy access and address energy poverty,” according to the 2010 plan.

The group’s development objectives require more energy than what the 10 countries can produce on their own. This is where Russia’s value as a major energy partner is important.

Southeast Asian states are interested in energy exports from Russia. And, thanks to its growth, Asean is becom-ing an attractive energy market for Rus-sian companies, leading Asean-mem-ber states to start to trust Russian firms

DIPLOMACY

Southeast Asia is not only a market for Russia's primary energy sources, but also for infrastructure and services

and the Russian government with their energy needs.

According to analyst Evgeny Kanaev, professor and head of Southeast Asian research at the Center for Asia-Pacific Studies in Moscow, “in a not-too-dis-tant future, Russia’s role in ensuring Asia-Pacific energy security will be suf-ficiently bigger – especially if the pipe-

line from Eastern Siberia to the Pacific Ocean becomes operational in 2012”. The continuing operation of the Skov-orodino–Daqing pipeline, which trans-ports oil from Russia to China will be key to delivering up to 15 million met-ric tonnes of oil per year to Southeast Asia until 2030.

Southeast Asia’s booming economies need fuel to boost their growth. Kuala

Aiming for regional integration and growthMark Zvadskiy RGC

Young, energetic Ziyavudin Mago-medov is not your typical Russian busi-nessman. He speaks fluent English and likes talking about current affairs.

Today, he and his company, Summa Group, play a leading role in bringing Russia into Apec. Magomedov is the chairman of the Asia-Pacific Econom-ic Co-operation forum (Apec) Business Advisory Council – a vibrant business community with members from all of the Apec nations – which advises sen-ior government officials on key issues relevant to the business community in the region.

For the first time in many years, Rus-sia is trying to push its agenda in the Asia-Pacific using the “soft power” of business-level negotiations.

Russia and Greater China asked Magomedov how these discussions are progressing.

What will you consider to be a success for Russia’s Apec chairmanship?

We must try and promote regional in-tegration and growth, and Russia has put forward several initiatives to help achieve that ... For example, environ-mental standards in urban areas and technology transfer.

If we make progress on these issues, then we will consider this year a suc-cess. We came up with the initiative to create a national environmental stand-ard – there are standards of this kind in many developed nations – and it is with-in the framework of Apec that we can take the first steps. The technology trans-fer initiative is causing some debate, as many suggest limiting it to only food security. This amuses me – a modern human being has other requirements besides food and drink. I am, therefore, pushing to promote our initiative and we believe we can reach a compromise with senior Apec officials.

The main problem is the legal rights to inventions, is that right?

Yes, and there are two options. The first one is to create a guarantee instrument at the state level, but we do not think this is the best option. Instead, we sug-gest placing intellectual rights in a spe-cial depositary and secure the rights through depositary receipts.

I know that this is a problem – a rep-resentative of the University of Leuven in Belgium came to a seminar in Hong Kong and said that they had a substan-tial number of patents, but did not know what to do with them, because com-mercial channels have not been formal-ly established.

Russia has created a special centre for Apec. Can you give details about this centre?

Several large Russian companies acted as co-founders. The objective of the cen-

tre is to bring Russian businesses up to speed and give them a clear picture of what goes on in the Apec economies and how they can use this knowledge to their benefit.

Will Russia be able to address any of its domestic problems with the help of the Apec chairmanship?

The underdevelopment of the transport and logistics system is one of Russia’s major domestic problems.

Our primary internal impulse is to deal with infrastructure “bottlenecks”.

Is the administration of the country aware of these problems?

They know that they need to address certain problems, but the execution is not always good.

There are some monopolies that are stagnant and are incapable of acting on their own.Z Magomedov Photo: Press Photo

Lumpur, Jakarta, Hanoi, Singapore and Manila are all developing rapidly. Vis-its by Russian President Dmitry Medvedev and Foreign Minister Sergey Lavrov, and a hectic bilateral agenda, have strengthened Russia’s presence in the region. The foundations for further co-operation increased in October 2010 in Vietnam with the signing of the Asean-Russia Energy Co-operation Work Programme 2010-2015 treaty.

While the agreement's objectives are to enhance co-operation on both sides in oil and gas exploration, the develop-ment of renewable resources and the use of nuclear energy, it also expands Russian interests in the region. The world’s largest natural gas company, the state-controlled Gazprom, Rosatom (Russia’s State Atomic Energy Corpo-ration) and Inter RAO UES, an electric power corporation, are all already look-ing for further business opportunities in the region.

For Russian companies, Southeast Asia is a market for primary energy sources, infrastructure and services. The region needs hydropower plants in plac-es such as the Mekong River, and it is expected that Russian companies will be involved in the development of that region and also in the development of the TransAsean pipeline.

Trade relations with the region have reached US$15 billion, a growing number, but still far from the US$180 billion in trade between Asean and China, or the US$150 billion with the US. Nevertheless, Russia and Asean are poised for their own honeymoon. The activity of Russian energy companies in the region is proof of that. Further proof is visible in the presence of Ma-laysian astronauts travelling to the In-ternational Space Station aboard Rus-sian spaceships, and the fact that Russian tourism to the region grew 300 per cent from 2005 to 2009.

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RUSSIA AND GREATER CHINATuesday, April 24, 2012

STRATEGY

Nations aim for economic and political change

OLEG DANILIN

Brazil, Russia, India, China and South Africa (BRICS) are moving to-wards creating a fullly fledged poli-tical and economic bloc, and they are doing it in the same manner as the European Union: first they determi-ned to implement an economic me-chanism and then go onto political issues.

The countries want to dramatically enhance their role in the global eco-nomy and politics.

There is no hint at any common se-curity mechanism or any other mili-tary aspects of co-operation because the national development strategies and economic structures remain dif-ferent.

The creation of a multinational confederation BRICS development bank and a mechanism for mutual cre-diting will have a far-reaching impact on global finances. Such a bank will be a powerful and almost autonomous structure that may accumulate resour-ces from world markets and redirect them into development projects. These will be projects the countries themsel-ves consider promising, thus making all these economies more competitive without any damage to one another. What really matters is the appetite among the BRICS for direct invest-ment. China, as the largest and fastest-growing economy, will tend to domi-nate, but it will not be the only one to benefit. Currency diversification, mu-tual investment and a partial wi-thdrawal from the dollar and euro are in the interests of all.

Mutual trade between BRICS is growing rapidly. It depends on inter-nal demand, which in turn is deter-mined by growing disposable incomes. And these countries account for half of the world’s population.

The factors that hinder trade are mainly the high cost and low produc-tivity of labour, in Russia, for exam-ple; low-tech production, which in Rus-sia depends on the availability of investment; and structural imbalan-ces (priority development of extracti-ve industries at the expense of trans-p o r t , c o m m u n i c a t i o n s a n d science-intensive production). These determine a country’s place in the in-ternational division of labour. The crea-tion of a BRICS union fits very well with the concept of creating an inter-national financial centre in Moscow because we will be able not only to pro-vide a platform and rules of the game and infrastructure for foreign invest-ments, but also create great potential for direct investment of BRICS capi-tal.

In the longer term, the yuan may become partially convertable. A stron-ger yuan is bad for China’s economy because it slows down its growth. But the introduction of cross-crediting me-chanisms between BRICS countries may make their currencies quasi-con-vertable against one another and make each of them more attractive against the dollar.

Oleg Danilin, partner, Ernst & Young

The dawning of five countries one system

At their latest summit in New Delhi, BRICS leaders agreed to consider setting up a joint development bank. Photo: AFP/Eastnews

Introduction of cross-traded derivatives futures may fill need for new financial products and a build on a strategic partnership, writes Vickie Chan

Markets move in the same direction A growing share of the world

Stock exchanges in Brazil, Rus-sia, India, China and South Africa (BRICS) have started cross-trading derivatives fu-tures after reaching agreement

last month.Bourses in BRICS will offer a range

of index-linked futures for trading across the five countries. The Hong Kong stock exchange will represent China.

Although the products have yet to at-tract much attention – only one futures contract was recorded in Hong Kong in the first week of trading – there has been consultation among professional investors.

Bids in Brazil and one in Russia have been close to expectations.

Speaking to the Credit Suisse Asian Investment Conference last month, Hong Kong Exchanges and Clearing (HKEx) chief executive Charles Li said a slow start was expected, but that the new products represented a “strategic partnership initiative”.

Representatives from the bourses of BRICS announced plans to expand the range of financial products offered across all five markets during the World Federation of Exchanges’ conference in Johannesburg in October.

It is still too early to tell how much attention these cross-listed futures de-rivatives will hold for investors, says Jer-emy Sparrow, head of Renaissance Cap-ital Hong Kong.

Renaissance is a Moscow-based in-vestment bank with operations in Hong Kong. The firm does not have a licence to trade futures.

Nevertheless, exchanges across BRICS have expressed optimism that the new products will create widespread inves-tor interest.

“HKEx reached out to involve us and get our opinion,” Sparrow says. Creat-ing more financial derivatives is one way to create global influence and develop financial markets.

The JSE has reason to be optimistic. Its FTSE/JSE Top 40 index has been one of the best performing over the past year within the BRICS countries.

“It represents a further step towards globalising South Africa’s financial mar-kets,” says Graham Smale, director of bonds and financial derivatives.

It is also difficult to ignore the grow-ing importance of the BRICS in the glo-bal economy.

According to a McKinsey Global In-stitute report, the financial assets of the five countries could triple by 2020.

What’s more, investors in BRICS have an average of 16 per cent of their assets in equities compared with 42 per cent in the United States and 29 per cent in western Europe.

“It’s certainly a nice strategy. Growth rates in Europe and the US are going to be lower,” says Bluford Putnam, chief economist at CME Group, which owns a s t a k e i n S a o P a u l o - b a s e d BM&FBOVESPA.

The push to expand the range of fi-nancial derivatives available for trade comes as the five countries boost finan-

cial and economic links between them and work to raise their global influence. For the BRICS, the agreement is just an-other step in a growing collaborative relationship.

Exchanges in the five countries are also to develop products related to eq-uity indexes such as exchange-traded funds and cash-market products that might generate more interest and cap-ital flows among investors.

The BRICS account for more than 40 per cent of the global population and 15 per cent of world trade.

During a meeting of the five leaders in New Delhi, India, last month they agreed to extend more development loans in local currencies to combat the global influence of the US dollar.

They also plan to consider a BRICS development bank.

Products included in the deal are Bra-zil’s IBOVESPA Futures, Russia’s MICEX Index Futures, India’s Sensex Index Fu-tures, Hong Kong’s Hang Seng Index Futures and H-Shares Index Futures, and South Africa’s FTSE/JSE Top40 Fu-tures.

The push to expand the range of financial derivatives comes as the BRICS boosteconomic links and work to raise their global influence

BRICS

South Africa’s Johannesburg Stock Exchange (JSE) believes the move is “the ideal way for more investors to gain ex-posure to the BRICS bloc of emerging economies”.

The exchange commented that the five markets will “become increasingly relevant in the coming decade”.

6

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Companies cautious about HKCity is considered as a ‘third choice’ when it comes to IPOs, write Ben Aris and Mark Zavadskiy

Since Russian aluminium giant Rusal listed on the Hong Kong stock exchange in January 2010, Russian firms have been intrigued with the idea of tap-

ping into the pool of Asian investors but, to date, that has not translated into in-itial public offerings (IPO).

The Hong Kong stock exchange is keen to attract Russian companies as it seeks natural-resource-related companies. Meanwhile, China’s growth is built on its cheap labour and low manufactur-ing costs, but the country lacks natural resources. So, while consumer and fi-nancial companies are well-represented in the bourse, investors have a very lim-ited choice when it comes to areas such as metal, mining and energy. For the most part, Russian companies interest-ed in the Hong Kong bourse are from these sectors, including oil giant Lu-koil.

The downside is that some investors in Hong Kong remain suspicious of Rus-sian companies.

“If Russian companies float in Hong Kong as their primary listing, they will delist again within three years,” says Stu-art Maxwell, a private investor, who is one of the few locals with a large expo-

The Hong Kong stock exchange is keen to attract more Russian initial public offerings, but few firms have listed. Photo: Reuters/Vostok-Photo

BUSINESS

sure in Russia. “The same was tried with American companies listing on the Tokyo exchange, where there is a huge pool of capital. But there, as here, there just won’t be any turnover. It just doesn’t make sense.”

Many Russian corporations feel the same way.

“For Russian companies, Hong Kong is usually the third choice. If they are here you know that they have tried Lon-don and New York,” says Michael Han-son-Lawson, CEO of fund manager East Capital Asia.

London has emerged as the natural hub for international capital headed to

Moscow. “London has only a few hours’ time difference with Moscow. There is an army of Russian-speakers in Lon-don who can produce research and sales. And if an investor wants to meet with Russian businesses then the flight is relatively short,” Maxwell says.

“None of this is true with Hong Kong. There has been some Asian money in-vesting into Russian real estate as that is a business they know in Hong Kong, but not much else.”

Nevertheless, this started to change when Russian investment banks Ren-aissance Capital and VTB Capital opened offices in Hong Kong last year and built up local teams to produce re-search and educate local investors on the benefits of investing in Russia.

“We have 30 people in the office and made a few senior hires,” says Jeremy Sparrow, head of Renaissance Capital’s Hong Kong office.

“We have been surprised at how fast the Hong Kong market is moving up. There is interest in mining, as Asian in-vestors start to look outside of China. But no one has educated them about these sectors, and so we are pushing at an open door.”

VTB Capital’s CEO Yury Solovyov is similarly upbeat. He was one of sever-al business leaders who accompanied Russian President Dmitry Medvedev on a trip to Hong Kong last year, the first by a Russian president. VTB opened an office in the city in November. Solovy-ov says that several Russian energy, commodities, transport and consumer firms are toying with the idea of a Hong Kong listing, but current global insta-bility has left most plans on ice for the time being.

Others people are less optimistic. “After the Rusal saga and the change

of leadership at HKEx [Hong Kong Ex-changes and Clearing] the prospects of further Russian IPOs are grim,” says a source involved in Russia–Hong Kong business and governmental exchanges. This attitude is shared by more than a few financial professionals.

Overcoming regulations is a challenge

Listing plans have yet to materialise

Hong Kong regulators are sometimes dubious about the push by Russian companies to tap Asian capital mar-kets. Aluminium maker Rusal saw its listing delayed several times be-fore the Hong Kong stock exchange gave it the green light, but set a min-imum-share allotment of HK$1 mil-lion, effectively barring small private investors. Still Rusal is upbeat.

“We were pleased with the re-sults, as through the IPO we raised HK$2.24 billion. Around 230 inves-tors participated, among whom were Kerry Group, Li Ka-shing, Value Part-

Several Russian companies have talked about going public in Hong Kong over the past three years, but it has just been talk.

Russia’s second-largest oil com-pany, Lukoil, considered an initial public offering (IPO) in Hong Kong for several years, but finally post-poned it indefinitely, citing “unstable financial markets”. Russian Presi-dent Dmitry Medvedev surprised mobile phone retailer Evroset by suggesting the company was a pos-sible candidate for an IPO during a visit to Hong Kong in April last year, but there has been no news on that front since then. Russian shoe re-tailer Centrobuv started to prepare for a listing last year, but aborted

ners, China Life Asset Management,“ says Rusal’s equity and corporate capital director Oleg Muhamedshin. Although a Russian company, Rusal is registered on the Island of Jersey, a zero-tax jurisdiction.

Other Russian companies may find it difficult to tap the local market.

“Now, its almost impossible for a company registered in Russia to list in Hong Kong due to lack of some regulations in Russia,” says a diplo-matic source.

“We hope it can be resolved by the end of the year.”

it after a major shareholder left the company. Russian energy company Evrosibenergo also planned an IPO early in 2011, but eventually de-layed it until “better times”.

Soyuz Metal Resource, owned by Oleg Deripaska, was supposed to be the first Russian IPO in Hong Kong three years ago, but the tycoon list-ed parent company Rusal.

Finally, the Hong Kong subsidi-ary of London-based gold miner Petropavlovsk, whose Russian name suggests most of its operations are within the country’s borders, is-sued an IPO in Hong Kong in 2010, but the company had to reduce the size of the offering due to a lack of interest from investors.

“An IPO is not a very effective way of raising capital, so companies are lean-ing towards mergers and acquisitions,” says Sergio Men, managing partner at investment consultancy Eurasia Capi-tal Partners.

Despite all the buzz, Rusal remains the only example of a Russian compa-ny successfully completing an IPO in Hong Kong and there are no signs of new ones on the horizon, even though some would consider it. A Hong Kong IPO might be of interest to joint ven-tures between Russian and Chinese companies involved in the exploration of mineral resources. Russian holding company Metropol, for example, is look-ing for a Chinese partner to develop its zinc and lead deposits in Buryatia.

“We might try to raise money for this project through an IPO in Hong Kong if conditions are good,” says Denis Palet-skiy, director of Metropol China.

For its part, the HKEx is keen to ex-pand ties with Russia.

Chief marketing officer Lawrence Fok is a regular guest at conferences in Mos-

cow where he highlights the ease of doing business in Hong Kong.

An investor can arrive and make an investment on Monday and if they are lucky and their investment doubles in a day they can leave again on Tuesday taking all their profits with them with-out restrictions, Fok says.

“Hong Kong offers one of the most dynamic and stable markets in the world today.”

Unlike most countries in the world, Hong Kong had no bankruptcies nor did the city have to support any busi-nesses during last financial crisis.

“We were one of more unaffected markets in the world during the 2008 crisis.” The message is one that the HKEx wants to pass to Russia and other mem-bers of the Commonwealth of Independ-ent States (CIS), but attracting new list-ings from those countries is not easy.

“Kazakstan wants to develop its own financial centre in Astana, so it will not allow its companies to do IPOs in Hong Kong, only secondary listings,” Men says.

7

RUSSIA AND GREATER CHINATuesday, April 24, 2012

BUSINESS CALENDAR

RUSAL PRESIDENT’S FORUM MAY 3, 2012HKUST

The UC Rusal President’s Forum is organised by HKUST Institute for Advanced Study, bringing world-re-nowned speakers to Hong Kong. This year’s main speaker is the chair-woman of Esquel Group, Marjorie Yang. She was listed in Forbes Asia’s 50 Power Business Women and named in Fortune as among the Top 50 Most Powerful Women in Busi-ness in 2009, 2005, 2004 and 2000. Yang has an interest in education, especially in finding ways to improve the ability to teach better.WEBDEV.UST.HK

ASTANA ECONOMIC FORUMMAY 22-24, 2012ASTANA, KAZAKHSTAN

The goal of the Astana Econom-ic Forum is to unite economic ex-perts and the public in discussing and searching for solutions to socio-economic, legal and cultural issues in Kazakhstan, and the world’s eco-nomic development.

The forum will provide econom-ic-development, growth and sus-tainability recommendations to the government of Kazakhstan, the gov-ernments of the countries partici-pating in the forum and G-20 na-tions.WWW.AEF.KZ

HARBIN TRADE FAIR JUNE 5-19, 2012 HARBIN, CHINA

China Harbin International Economic and Trade Fair is a large-scale nation-al level international fair sponsored by China’s Ministry of Commerce and co-sponsored by governmental de-partments and promotional institu-tions from more than 10 countries, including Russia’s Ministry of Eco-nomic Development. Since its first session in 1990, 1.8 million exhibi-tors and visitors from more than 80 countries and regions attended the fair with more than US$100 billion in contracts concluded.EN.ICHTF.COM

ANNUAL RUSSIA AND CIS INVESTMENT SUMMITJULY 5-6, 2012HONG KONGThe Third Annual Russia and CIS Investment Summit examines the trade and investment opportuni-ties for Asian investors across all as-set classes in a market that’s part-Europe, part Asia, and all-booming. The summit will attract 250 of the region’s most senior and well-re-spected asset owners, asset manag-ers, investment chiefs, and Russian and Asian corporates, looking to un-derstand opportunities, emerging trends, and regulatory policies for Russia and the CIS. WWW.RUSSIAINVESTSUMMIT.ASIA

FIND MORE IN THE GLOBAL CALENDAR

at www.rbth.ru

Convertibility gains ground

More than 50 per cent of China’s trade will soon be done in yuan. Photo: Reuters/Vostok-Photo

BUSINESS

“The rouble in China is already more popular than the pound sterling and the volume of trading is approaching that of the euro and the Hong Kong dol-lar,” Sun says.

More currencies might soon be avail-able for settlements and trade in the mainland in the near future. Reports suggest the South Korean won could be next. China has also signed a cur-rency swap agreement with Belarus, which may provide another alternative, given the rapid development of trade and investment relations between the countries.

“Everything would depend on the de-mand for such transactions. We are ready to develop this practice with other countries,” Sun says.

According to a paper published by Swift, a global organisation which han-dles financial transactions, more than 900 financial institutions in excess of 70 countries around the world are al-ready doing business in yuan.

HSBC analysts say more than 50 per cent of China’s trade will soon be done in yuan compared with 0.7 per cent in 2010 and about 9.5 per cent last year. If that happens, the yuan will be the third most popular trading currency after the dollar and euro.

JP Morgan makes similar forecasts. The bank says the amount of yuan in Hong Kong accounts collected from trading may reach 2.6 to 3.5 trillion yuan by 2015.

Hong Kong’s monetary authorities say that late last year, up to 80 per cent of trade deals done through the city were done in yuan. Hong Kong has already emerged as the key “yuan pool” from which the currency flows to other coun-tries, including Russia.

“We are looking at a global offshore yuan market. Our bank has experience buying yuan in Hong Kong to meet de-mand in Moscow,” says Mikhail Anisi-mov, head of FX and Rates Trading at VTB Capital.

Anisimov is a pioneer of the yuan business in Russia, having played the key role in organising yuan-rouble trad-ing on the MICEX in late 2010.

VTB is the most active among Rus-sian banks in trade with China. To date, it is the only Russian bank with an op-erating branch on the mainland. Later this year, the bank plans to open client accounts in yuan.

“We already applied to the China Banking Regulation Commission for it,” says Aleksandr Milyukov, head of the bank’s Shanghai branch. Milyukov organised a banking conference in Shanghai in mid-April. VTB is also one

of the four market-makers for the yuan-rouble pair, along with Harbin Bank, ICBC and two smaller Russian banks.

Their rates make up the final rate of the yuan on the Shanghai and Moscow currency exchanges and they are re-sponsible for providing liquidity.

Initially, it was costly for Russian busi-nessmen to settle in yuan.

Dmitry Barkov, the corporate finance director at Sportmaster Group, recalls how he first tried to use the yuan to pay for a contract with Chinese suppliers in 2010.

“The Chinese hiked the price by 17 per cent because they did not know how to get VAT rebates if they sold in the national currency, which made the deal economically pointless,” says Barkov.

Today, deals in yuan are routine

among procurement managers of doz-ens of Russian companies.

“Sberbank, Gazprombank and Zenit have good ‘yuan lines’,” Barkov says. Sportmaster gets its credit from one of the major Western banks, which have cheaper yuan than VTB.

“It used to be just a quarter of the price, but now it is half and perhaps the situation will even out when VTB fully starts RMB business in China and will be able to get ‘cheap yuan’ inside [China],” says Barkov.

Roman Bulin, head of the China de-partment of a big Russian metallurgi-cal company, says that starting this year all purchases in China will be made in yuan. “It is more convenient as forex risks are smaller,” he says.

Bulin’s company buys yuan from Unicredit, but also partners with VTB on some deals.

The most popular service today is trade financing, when a bank agrees to pay a supplier after getting the package of transaction documents and allow-ing the buyer to defer full payment for several months and up to two years.

“The structure of bilateral trade be-tween Russia and China calls for diver-sification and we hope that a growing number of medium-sized companies will break into the Chinese market,” Milyukov says.

So far, yuan settlements account for only a few percentage points of the trade

turnover but market participants expect considerable growth over the next cou-ple of years.

“Part of the problem is informing po-tential clients about the advantages of such settlements,” says Qi Hongshi, gen-eral manager of the international busi-ness department at Harbin Bank.

Theoretically, when paying in yuan, the buyer assumes the main currency risks and may be able to claim discounts of between 2 and 8 per cent. In prac-tice, the discount is not easy to obtain.

“Not every company can make a con-vincing case to the Chinese seller for such a discount, though major custom-ers find it easier,” Barkov says.

During the conference, a represent-ative of a Chinese company asked reg-ulators whether there was any way to limit fluctuations in the rouble-yuan rate, which often “exceed fluctuations between the dollar and the yuan”.

But Chinese businesspeople may have to learn to deal with a currency that fluctuates more on the market.

“When the Chinese yuan becomes a freely convertible currency, they will realise that exchange-rate fluctuations are the norm,” Anisimov says.

“The experiment with the rouble might teach them how to hedge cur-rency risks correctly, a skill that will come in handy for Chinese business-men in the future.”

More than 900 financial institutions in excess of 70 countries around the world are already doing business in yuan

Timeline: Russia-China cash links

1993 – Bank of China Elosi established in Moscow

2002 – Two border towns, Blagoveshchensk and Heihe, start trading in yuan and roubles

2006 – The same privilege is extended to Heilongjiang, Inner Mongolia, Xinjiang and Jilin

2007 – ICBC opens in Moscow

2008 – Russian investors take part in the QFII programme (invest in yuan-denominated assets in China)

2008 – VTB opens in Shanghai

Nov 2010 – The rouble becomes the seventh foreign currency traded in the China Foreign Exchange Trade System

Dec 2010 – The yuan starts trading on the Russian MICEX

Dec 2010 – VTB Capital is first to issue CNH bonds in Hong Kong

Jan 2011 – China allows inward direct investments in yuan for all foreign entities

June 2011 – Bank of Russia and People’s Bank of China reach an agreement allowing all types of Russian and Chinese companies to trade in national currencies

Oct 2011 – China allows all kinds of outward investment in yuan

Feb 2012 – All Chinese companies granted the right to VAT rebates if they trade in yuan (previously, they had to be on the exporters’ list)

> CONTINUED FROM PAGE 1

8

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Nation’s leading galleries target HK’s art scene Maria Semendyayeva RGC

The contemporary art fair, Hong Kong International Art Fair (ART HK), returns for its fifth edition next month, and in association with Art Basel for the first time.

Despite their proximity to China, Rus-sian galleries have mostly targeted West-ern markets. However, things are chang-ing. ART HK will for the first time feature Russia’s art flagship, XL Gallery. The gal-lery has changed locations and artists since its founding in 1993, but remains respected by collectors and critics alike.

The XL Gallery has repeatedly rep-resented Russia at Art Basel fairs, but it was reported late last year that it would not be taking part in Miami Art Basel this summer, and Vladimir Ovcharenko’s Regina Gallery will take its place. XL Gallery director Elena Selina has cho-sen the fledgling ART HK platform ahead of the more established Art Basel.

The Russian gallery business is in the midst of major change. The three old-est galleries – the Marat Guelman Gal-lery, Aidan Gallery and XL Gallery – are changing their formats this month. Marat Gelman and Aidan Salakhova have confirmed that their galleries will stop selling contemporary art in the old gallery format.

Art dealer and artist Salakhova, whose works caused a scandal in the Azerba-ijan pavilion at the 2011 Venice Bien-nale, has repackaged her gallery as the Aidan Studio workshop-showroom. She says: “I feel more comfortable as an art-ist than a gallery owner now.” Rumours persist that the Aidan Gallery is shut-ting down because it is no longer prof-itable.

Gelman has similar motives. His Cul-ture Alliance production centre will re-place the gallery, which his wife has run for the past five years and displays works by little-known Russian artists from re-mote regions.

Gelman, who helped create the new Russian cultural capital in Perm and now heads the Perm Museum of Con-temporary Art, says 80 per cent of his customers from 1996 to 2008 have left the country.

He adds that the new business class, which can afford the works on display at the Winzavod Centre for Contempo-rary Art, a hub for Moscow art galleries since 2007, are government officials

“who are unwilling to expose their wealth” and so do not buy art.

Elena Selina, founder and director of the XL Gallery, has yet to comment on the future of her Moscow gallery.

It is unclear whether Chinese collec-tors will want to buy Russian art or whether Russian galleries will bring works by Ai Weiwei and Zhang Xiaogang back to China. Milena Orlova, editor-in-chief of the Art Newspaper Russia, believes that “the best idea would be to offer socialist realism there [on the Chinese market]. I’m not sure about contemporary art.”

However, it is contemporary art that the XL Gallery is taking to China – works by Alex Buldakov, Mikhail Kosolapov, Sergei Shekhovtsov and others which the gallery represents.

Vladimir Ovcharenko, owner of the Regina Gallery, which will represent Russia at Miami Art Basel this year, be-lieves China is a “peculiar market that is now too difficult for Russian galler-ies.

Russian art galleries are starting to set their sights on Chinese collectors. Photo: AFP/Eastnews

The partnership of Art Basel with ART HK will attract regular customers of major art fairs

It normally takes about three years for an internet user to make their first online purchase. This will be the third year for a vast number of users

It is no secret that Chinese buyers prefer Chinese art now, and that a Rus-sian gallery that goes to China will have to work there for at least three or four years.”

Now that Art Basel has partnered with ART HK, the Chinese fair will attract regular customers of major art fairs around the world.

Hong Kong has become the third-largest centre for contemporary art sales, after New York and London. However, it is still uncharted territory for many in Russia. The XL Gallery’s role as a trail-blazer will be important to all Moscow galleries.

Ovcharenko says he would be ready to go to Hong Kong if ART HK were to move to February, avoiding a clash with Miami Art Basel.

He says: “Regina caters to London customers, but any market has poten-tial. If the Art Basel owners take on Hong Kong, this market will have great po-tential in four to five years.”

Russian retailers expect a 150 per cent expansion in the country’s online market over the next five years. Photo: Photoxpress

Chinese missing out on bonanza

ONLINE SALES

Regulatory restrictions impede retailers from tapping into rapidly growing market in Russia, writes Viktor Kuzmin

Experts expect explosive growth in the Russian online retail sector this year, but Chinese suppliers may miss out on a rare opportunity because of

limitations that restrict access to Rus-sian buyers in Chinese online shops.

“It is not clear why the Chinese won’t develop the Russian market,” says Svet-lana Sorokina, who organised the On-line Retail Russia forum in Moscow ear-lier this month. “We anticipate explosive growth in this market. It normally takes about three years for an internet user to make their first online purchase. This will be the third year for a vast number of Russian internet users, and big retail businesses are aware of this.”

Russia has the youngest and fastest-growing online retail market in Europe. Sales started growing rapidly about four years ago and, last year, Russia became the largest online market in Europe in terms of internet users. Online retail-ers estimate that sales topped US$9.1 billion last year, up from US$8 billion in 2010. The market is projected to ex-pand by 150 per cent over the next five years, says PricewaterhouseCoopers.

More than 30 retail chains plan to open online shops this year, including X5 Retail Group, Russia’s biggest retail-er. Mobile phone retailer Euroset says online sales accounted for 5 per cent of the total last year, up from 1.5 per cent and expects them to reach 20 per cent within five years.

M.video, one of Russia’s biggest con-sumer electronics retailers, reported 90 per cent growth in its online sales last year. OZON, one of the country’s big-gest online retailers with turnover of al-most US$300 million, says online cus-tomers typically buy clothes (25 per cent), electronics (15 per cent), books (15 per cent), cosmetics (13 per cent),

children’s products (9 per cent), and music and videos (8 per cent). Interna-tional retail giants Amazon, eBay and Alibaba have also shown interest in Rus-sian expansion. Groupon Russia has announced plans to open its online dis-count store this year. Late last year, Grou-pon’s local rival Biglion.ru launched its retail business and sold 40,000 items in the first month.

But Chinese online retailers have not been as quick to develop the Russian market because of regulatory limitations that make it difficult to distribute prod-ucts.

Most online shops in Russia operate from Moscow, but it can take an order

six to eight weeks to reach the far east of the country. Delivering directly from China would be much faster, but this has not been easy.

Many Russians know China’s popu-lar TaoBao shopping platform, but its penetration has been limited, says Yulia Popova, a spokeswoman for RuTaoBao.com. Suppliers often cannot deliver merchandise in Russia and buyers need an account with a Chinese bank and a Chinese Sim card.

Still, there are tens of thousands of companies from around the world sell-ing goods through TaoBao. In Russia, they fall into two categories. The first are intermediaries that provide acqui-sition and shipping. The second are service companies that operate inde-pendently on the TaoBao Open Plat-form, including RuTaoBao.com.

Typically, Russian companies obtain a catalogue and translate it into Russian. Demand for Chinese-made products quadrupled last year, Popova says.

“There is a stable and rapidly-grow-ing interest in Chinese goods,” she says. “This trend should be attributed to the vast range of products offered by Chi-nese producers – you can find virtually anything. TaoBao’s supply is infinite.”

The average parcel weighed 5.4kg last year and the average purchase was US$170 and only a handful of buyers, about 20 per cent are from Moscow or St Petersburg. Most are from regional centres where there are fewer goods available through traditional retail out-lets. In Novosibirsk, the third-biggest city in Russia by population, a shopper can only access about 60 per cent of the goods available in Moscow.

The only category of Chinese prod-ucts which is not in demand on the Rus-sian online retail market is food, Pop-ova says.

9

RUSSIA AND GREATER CHINATuesday, April 24, 2012

AlterGeo is a location-based social networking service for mobile de-vices. It allows users to discover new cafes, shops and other venues in-cluded in a list the application lo-cates nearby. Launched in 2008 – even before Foursquare appeared on the US market – AlterGeo now claims 800,000 registered users. Only a fraction, however, are con-sidered active users. On the domes-tic market, the Moscow startup is still well ahead of Foursquare, which launched its Russian version only in September 2011.

Cut the Rope has a straightforward gameplay: the player has to swipe a finger across the screen to cut ropes that hold candies to feed the little monster Om Nom. After hitting Ap-ple’s Appstore on October 4, 2010, Cut the Rope was downloaded 1 mil-lion times in its first 10 days and a total of more than 60 million times to date. In comparison, Angry Birds, released by Finnish Rovio Mobile in 2009, was downloaded 120 million times since March 2011. Cut the Rope was masterminded by twins Semyon and Efim Voinov.

MewSim is a comic interactive simu-lator that allows players to raise a cat into an obedient and affection-ate pet or just a small terror. You can choose gender and colour of your pet, give it a name and choose unique characteristics and talents. You also can trade your cats with your friends via Bluetooth. After ini-tial success in Russia and abroad in traditional Java format, MewSim was made available in 2010 to iPhone and Samsung users in English, French, German, Italian, Polish, Rus-sian and Spanish versions.

A high-definition, role-simulation game, where players turn sun, sea and beaches into a flourishing resort business. Gamers entertain rich tour-ists in casinos and entertainment centres, build hotels, restaurants and discos and learn to manage their own business. Launched in Decem-ber 2010, the game has maintained first place in Top Grossing Android Market since May 2011, generating as much as US$1 million in monthly rev-enues for its publisher, Game Insight. In September last year, the game reached 5 million players.

Blondie wakes you in the morn-ing, chats about recent news, makes jokes, sends out birthday reminders, delivers a morning horoscope and keeps her eye on the weather. Blond-ie also remembers things: If sudden-ly you clean or change your phone, she will remember you. Pocket Blonde was developed by i-Free, a content provider from St Petersburg, as part of Brainy, a series of “Smart Mobile Aide” applications. Launched last month on the Android market, the app has been downloaded by more than 1 million users.

TITLE: ALTERGEO

PLATFORMS: IOS, ANDROID

DEVELOPER: ALTERGEO

TITLE: CUT THE ROPE

PLATFORMS: IPHONE, ANDROID

DEVELOPER: ZEPTOLAB

TITLE: MEWSIM

PLATFORMS: J2EM, IOS, BADA

DEVELOPER: DYNAMIC PIXELS

TITLE: PARADISE ISLAND

PLATFORMS: IOS, ANDROID

DEVELOPER: GAME INSIGHT

TITLE: POCKET BLONDE

PLATFORMS: IOS, ANDROID

DEVELOPER: I-FREE

Country’s top fi ve mobile applications

The Russian mobile content industry has been developing for almost a decade. Photo: Alamy/Legion Media

Fun and games for millions

TECHNOLOGY

From Crime Story to Virtual City, country’s apps are taking over the world, writes Tatiana Schenkova

Move over Doodle Jump and Zombieville USA, Russia’s mobile application and game developers are be-ginning to assert them-

selves with world-class products.Among the emerging players are tra-

ditional mobile content companies Dy-namic Pixels, Herocraft and i-Free, and Game Insight, which originally focused on social games.

In Game Insight’s new Crime Story, a player can become a crime boss, build-ing a criminal empire by eliminating rivals and expanding the business. Founded in Moscow in 2005 as a mo-bile development studio, G5 Entertain-ment is now a global company devel-oping mobile and PC games on a massive scale – one release per week, claims the company’s website – with such international successes as Stand O’Food, Virtual City Playground and Supermarket Mania 2.

Tens of millions of mobile-phone gamers across the globe are now famil-iar with Cut The Rope. The game, fea-turing a little monster fed with candies, was developed by a Russian team.

Moscow programmer Maxim Petrov has built a flourishing business with Power Amp, which has been praised as one of the best available media players

on the Android market. “The Russian mobile content industry has been de-veloping for almost a decade,” says Le-onid Kovalev, marketing director of Das-uppa, a Moscow-based mobile game company. “But in recent years, the new generation mobile games and apps have created a new situation. Through glo-bal stores such as the Apple App Store or the Android market, Russian devel-opers can easily sell everywhere. Their vision and practice are now global.”

The market for mobile applications continues to develop dynamically all over the world. According to the World Mobile Applications Market, the global apps market exceeded US$6.8 billion last year and is expected to reach US$25

billion by 2015. Nick Johnson, vice-pres-ident and analyst at the Gartner con-sulting company, says payment systems, mobile search and local-based servic-es will be in big demand this year.

“The manufacturers will be mainly fighting for control over ecosystems and user preferences. He who takes control of ecosystems will win in terms of rev-enue and customer loyalty.”

The limited size of the domestic mar-ket drives Russian companies to focus on the thriving international market. Smartphone sales are growing fast in Russia, more than doubling from 2010 to 2011, but the share of smartphone owners is still about half of Europe or the United States, according to a recent TNS survey. The total number of iPhone and Android-supported smartphone owners barely reaches 1.5 and 5 mil-lion respectively, according to recent estimates from i-Free.

In addition, monetisation is more dif-ficult in Russia than elsewhere.

“Most Russian users are ready to pay for good mobile products,” says i-Free co-founder Kirill Petrov. “But Apple’s

App store and Google’s Android Mar-ket accept payments almost exclusive-ly through bank cards, which Russians are reluctant to use for digital pay-ments.”

New generation mobile applications and games generate huge revenues for Russian developers, Petrov says. The Rus-sian market for traditional mobile con-tent, such as ringtones, themes and Java games, is still worth hundreds of million dollars, but its decline is widely expect-

ed by developers who are switching to new-generation content. The burgeon-ing markets in India and China are also attractive. “Our latest Everfriends app has already been downloaded by over 1 million users, with China accounting for 30 per cent of global downloads,” says Evgeny Kosolapov, i-Free’s repre-sentative in China. To help promote the product, i-Free developed an Asian-looking assistant and translated the manual into Chinese.

Another Russian company develop-ing technologies of intelligent personal assistants, Nanosemantics, plans to open a US$10 million research and develop-ment centre in China. According Natalya Kasperskaya, an investor in the compa-ny, “the Chinese market is vast and it is for this reason that we have ambitious plans to introduce and spread our tech-nologies” .

Russian and foreign firms will be able to discuss the latest research in artifi-cial intelligence at the Global Mobile Internet Conference in Beijing on May 10 and 11, in which about 5,000 dele-gates are expected to attend.

The Chinese market is vast and it is for this reason we have ambitious plans to introduce and spread our technologiesNATALYA KASPERSKAYA, NANOSEMANTICS INVESTOR

10 Tuesday, April 24, 2012

RUSSIA AND GREATER CHINA

Sheng Shiliang Special for RGC

Stepan Pachikov Special to RGC

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All eyes are fixed on Putin

Re-elected to the presidency, Vladimir Putin faces a changed society in Rus-sia. Political and business elites, hav-ing formed vested interest groups, wish to maintain the status quo; the

new middle class hopes to elevate its social po-sition; and middle- and lower-class citizens want to improve their quality of life. Almost everyone is looking to Putin to restore Russia’s glory and help her rise once again. Ever the savvy politician, Putin has been dynamically re-sponding to these changes and challenges.

Putin says “Russia must have 10 years of sta-ble development”. He has also called for “re-constructing the democratic tradition, estab-lishing multiple political parties and developing a more civil society”.

He has proposed restoring the direct election of governors, simplifying the party registration process, discussing important bills on the inter-net before promulgating them, establishing ad-ministrative and judicial mechanisms to ad-dress the “citizen-suing-the-state” problem in addition to other political reforms.

These include expanding the financial juris-diction of city governments, allowing pressing city or district issues to be decided through public referendums in addition to other decen-tralisation measures, monitoring the income and expenses of public officials and addressing malfeasance with heavy fines, demotions and other anti-corruption measures.

Putin is interested in enhancing the global competitiveness of the energy industry, tradition-ally one of Russia’s strengths. At the same time, he aims to develop other industries, in particular pharmaceuticals, chemical engineering, non-metallic composites, aviation and nanotechnolo-gy taking precedence. His goal is to put Russia at the cutting-edge of technology again.

Having already proven effective, Putin is re-maining steadfast to his three principles of for-

“Is Russia the motherland of talent?” It’s a ques-tion that my foreign colleagues often ask, con-sidering the number of talented Russian devel-opers and engineers working for major multinationals.

These include Google co-founder Sergey Brin and PayPal founder Max Levchin. Yet neither can be considered voluntary emigrants, be-cause both left Russia or a former Soviet repub-lic at an early age; like many IT figures, their parents having made the decision for them.

Many computer specialists have chosen to live in the United States as adults, including two legendary programmers of the late 1980s – Arkady Borkovsky, who heads the Yandex re-search and development centre in California, and Eugene Veselov, a leading programmer for Microsoft. Boulder, Colorado-based Parascript, a leading developer of handwriting recognition solutions for mail, cheques and early cancer de-tection, mostly employing Russian engineers.

I have never come across comparative talent statistics by country or group of countries and I don’t believe that Russia supplies more talent than other countries. However, many felt this

illusion of “extraordinarily talented Russian sci-entists and engineers”.

After the Soviet Union collapsed in 1991, talented young Russians hurried into business, banks, law and stocks. Russian science has re-

own country are limited in virtually all areas, for oil and gas are killing science, education and the alternative economy. The “murderers” are those who have built the Russian economy upon the oil and gas pillars.

To succeed, they need to flout moral stand-ards. They are impeded by a mediocre political system and the authorities – the existing “verti-cal structure” is essentially feudal: the closer you find yourself to the authorities, the more opportunities, power and money you have.

All of the Russian billionaires and the shadow super rich are in some way connected with the authorities.

The “vertical structure” of life makes anyone above you your sovereign and those below you – your vassals.

As Chulpan Khamatova, co-founder of the children’s oncology foundation, “Gift of Life”, put it: “In this country, you can’t live the way you ought to.”

The IT industry has a vague future because the authorities only need people capable of pumping oil and servicing those who pump oil. They plan to buy the rest, including new talents.

Putin says Russian-US relations continue to “rise and fall like the tide”, attributing the situa-tion to two major issues. A US missile defence system in Europe threatens Russia’s strategic security. Without a solid economic foundation, the quality of the two countries’ trade and in-vestment is low. Putin expresses respect for the US’ incontrovertible position at the forefront of modern technology and expressed hopes of “a breakthrough in Russian-US relations, and that the US will abide by the principle of fairness and respect its allies”.

In another document, “Russia and a Chang-ing World”, Putin positions Asia-Pacific ahead of Europe and the US in his discussion on foreign policy, devoting more than half the article to Sino-Russian relations.

Putin has identified two general points in the Sino-Russian relationship. Russia needs a flour-

way in the 20th century. In answer to my col-leagues’ questions, I normally provide the fol-lowing explanation.

Russia was under the sway of an ideology-driven dictatorship for most of the 20th century. All intelligent people realised that, to minimise the ideological imprint on their lives, they should avoid history, philosophy, law, literary studies and politics and, engage in pure science – maths, astronomy, physics or chemistry.

Yet, ideology played havoc even with exact sciences – biology, genetics and cybernetics. One of the most prominent botanists and ge-neticists, academician Nikolay Vavilov, was sen-tenced to death by shooting during Stalin’s reign. Soviet genetics was ruined and most So-viet geneticists died in the camps.

The notion “bourgeois pseudoscience”, ap-plied at the time to cybernetics and genetics, became a common term.

In the 1930s, there was an attempt to brand probability theory as a pseudoscience, but was saved by the ingenuity of mathematician An-drey Kolmogorov, founder of algorithmic com-plexity theory.

Most intelligent people understood the dan-ger inherent in the humanities and focused on the limited range of exact sciences, creating the

Motherland of vanishing professionals

Dr Stepan Pachikov, founder of ParaGraph and Evernote companies, lives in New York

Professor Sheng Shiliang, chief researcher, Centre for Global Challenges Studies, Xinhua

mained bloodless, largely owing to the murder-ous policy of the authorities, which has margin-alised education and science. Contemporary Russia has made it prestigious to be a banker, stockbroker, prosecutor, restaurateur, TV host or a tax or customs inspector, but not a scientist.

There are no indications that Russian science will recover any time soon. When it finally does, will there be any demand for it in the world?

Many talented people leave Russia, under-standing that the prospects of success in their

ishing and stable China, and China needs a strong and successful Russia. Putin also clarifies two misunderstandings towards China. China’s economic development is not a threat, but a challenge. It contains vast potential for eco-nomic co-operation, and Russia will benefit from China’s growth. Siberia and the Far East can also draw upon China’s potential. China has no desire to dominate the world. Russia and China should support each other and work together, in addition to increasing their interac-tion in international organisations.

With characteristic Russian frankness, Putin has highlighted two unresolved issues. With the commercial interests of third-world countries being far from consistent, Russia remains unsat-isfied with the trade structure between the two countries, as the quality of mutual investment remains quite low. Also generating concern is the rate of Chinese immigration.

Putin has performed brilliantly during his first two terms. As he said, “give me 20 years, and I will hand over a miraculously reformed Russia”.

Russians eagerly await the fulfilment of his promise. This hope is shared by many Chinese, Russia’s fondest allies.

eign policy – diplomatic activities must serve Russia’s security and economy, diplomatic pre-dictability, and the primacy of international law. What will change are the diplomatic priorities.

Should Russia “retreat to Europe” or “ad-vance to Asia”? This is a question that has been debated ceaselessly among Russia’s experts. In “Eurasia’s New Unification Plan – The Future is Born Today”, Putin concludes that Russia will re-ceive support from the Eurasian Union, realise the integration of post-Soviet space and become the world’s first independent energy centre to keep pace with the United States, European Union and Asia.

Europe and the US are two of Putin’s focal points. As Russia is a European country, it should naturally establish a unified economic and cultural space that will lend stability as Rus-sia’s economy turns towards the “New Asia.”

OPINION

Chances of success are limited, for oil and gas are killing science, education and the alternative economy

NIY

AZ

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RIM

11

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Bridging the great divide

The Amur River separates Blagovesh-chensk and Heihe. Photo: Xinhua

Signs in Chinese and Russian give directions in Heihe, China.

Heihe has shopping malls, saunas, res-taurants, dental clinics and teashops, all offering their wares in Russian to cater to visiting tourists with rapidly growing incomes.

The malls cater to Russian tourists with bilingual personnel and signs. Even the street signs are bilingual.

Blagoveshchensk is famous for hav-ing some of the world’s best-preserved dinosaur remains and, by 2015, the Amur region will host Russia’s main spa-ceport, which is under construction.

But not everyone is happy with the boom on the Chinese side.

“They used to have a small village over there with huts and dirt roads,” re-calls Nikolai Kukharenko, a lifetime res-ident of Blagoveshchensk and head of the local Confucius Institute, a Beijing-based organisation that promotes Chi-nese language and culture at academ-ic institutions around the world.

“Now there are more skyscrapers on that side than here. A lot of locals are concerned that they’re advancing eco-nomically at our expense.”

Local papers carry stories of Chinese poachers caught smuggling everything from protected timber to rare tiger pelts. The vast majority of trade between the two neighbours is in raw materials from Russia and manufactured goods from China. The nature of the economic re-lationship is symbolised by the East-Si-berian-Pacific Ocean pipeline, which ships Russian crude oil to fuel China’s factories.

An enduring wariness about China’s success has led many locals to lament that increasing numbers of young peo-ple in Russia’s border regions see their academic and professional future de-pendent on China and other neighbour-ing countries.

“I think it’s our usual Russian para-noia,” Kukharenko says. “It’s true that there’s a growing interest among the younger generation in learning foreign languages, including Chinese, but this is true of almost every country.

“Students here want to study abroad and broaden their horizons through for-eign cultures, just like everywhere else. I can count only a few who want to move abroad permanently.”

Yet, this suspicion has led to econom-ic and political obstacles for the sever-al thousand Chinese citizens perma-

nently residing in Russia. The 20-something Chinese owner of sever-al restaurants in Blagoveshchensk says he is not allowed to own property be-cause he is not a Russian citizen.

“The owners and authorities know that and take advantage,” he says.

and we have accurate figures on how many are here and what they’re doing” (see box).

“Most of the Chinese citizens work-ing in Russia don’t assimilate or reside here permanently. It’s something we should be taking advantage of,” Push-karev says.

Some Russian officials have begun to think about how they can change the economic relationship.

Igor Gorevoy, the newly appointed economy minister for the Amur Region, says he would like to start attracting Chi-nese consumer spending along with cheap consumer goods.

“The way I see it, there’s no way we’ll be able to out-manufacture the Chi-nese,” he says.

“Their products are cheaper and bet-ter. We have to look at our competitive advantage, and offer them the one thing they can’t produce.”

Gorevoy’s plan is to attract some of the 100-million-plus potential tourists with rapidly rising incomes who live just across the river.

“Many of the ideas came to us from a Hong Kong businessman visiting Blagoveshchensk,” Gorevoy says.

“He said convincing some interna-tional giants to build hotels here should be relatively easy, and the tourists will flock.”

Gorevoy’s vision is based on the no-tion that the Chinese see Russians as a European people and are eager to “visit Europe” when it’s so close.

“If we set up a few Eiffel Tower mock-ups, a Big Ben and some basic infra-structure for a leisurely family vacation, they’ll be eager to visit.”

Gorevoy hopes that a boom in tour-ism and service industry jobs will keep young people in Blagoveshchensk.

He has spent much of his first six months in office obtaining permits for commercial construction along the bor-der. Development in border areas is sen-sitive and controlled by Moscow be-cause it can be a matter of national security.

But the first signs of progress are al-ready evident.

Cranes and trucks now dot the Rus-sian side of the Amur as Gorevoy’s “Golden Mile” of Ferris wheels and ho-tels begins to take shape. The minister is discussing the possibility of a pedes-trian bridge or aerial lift across the Amur.

Far Eastern Federal District

Dinosaur cemeteryDinosaur remains were first discov-ered on the right bank of the Amur River in the early 20th century. In 1911, some excavated skeletons were taken to St Petersburg and put on display at the Museum of the All-Union Geological Institute. Exca-vations ceased for many years, un-til a Russian-Belgian team returned to the site in 1999 to discover the skeleton of a 10-metre long platy-pus mammoth.

Since then the area has been des-ignated a federal monument as sev-eral more species have been un-earthed.

SPECIAL REPORT

Few places in the world offer quite as sharp a contrast between European and Asian cultures as the five-minute bus or hydrofoil ride across the Amur

“They’ll arbitrarily raise rent and evict me if I don’t agree.”

Ironically, many people in Moscow believe that Russia’s Far East is being overrun by Chinese migrants. “God gave us a peaceful, hard-working neighbour eager to engage in mutually beneficial economic activity, and all we can do is live in paranoia,” exclaims Sergei Push-karev, former head of the Vladivostok office of the Federal Migration Serv-ice.

“One of the biggest myths in federal politics is that the Chinese are some-how taking over Russia’s Far East,” he continues. “Yes, we have problems with illegal immigration in Russia. But the illegal immigrants come from Central Asian states, not China. All Chinese cit-izens in Russia need a visa to be here,

Chinese fl ock across the Amur River

According to the Russia Federal Mi-gration Service, about 450,000 Chi-nese citizens were officially reg-istered in the Far Eastern Federal District in 2011.

Non-government organisations es-timate 600,000 Chinese constantly live in the region.

It is difficult to know the exact lev-el of Chinese migration into the Rus-sian Far East because of the constant flow of illegal immigrants - thou-sands of Chinese cross the Sino-Rus-sian border in search of work every year. China has more than 1.2 bil-lion people — more than eight times

Russia’s population. Only 6.3 million Russians populate the entire Russian Far East, against more than 70 mil-lion in northeast China.

The Russian Far East is compara-tively empty, with only 1.1 people per kilometre.

Is the return of Chinese influence to these territories a threat to Rus-sia? The country’s experts differ on this question.

Obviously, Chinese migration is not a current problem, but it will be a major headache for the country’s socioeconomic and geopolitical de-velopment in the coming decades.

> CONTINUED FROM PAGE 1

12

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Amazingvoyage of discoveryEugene Chernyayev has visited the sea’s depths to offer a rare glimpse of the Titanic, writes Diana Laarz

In 1984, American Robert Ballard discovered the wreckage of the Titanic at 3,803 metres below sea level. Photo: Corbis/Foto SA

Chernyayev has completed more than 30 underwater expeditions.Photo: ITAR-TASS

James Cameron talks to Eugene Chernyayev and his daughter. Photo: Alexey Vlasov_RIA Novosti

Film footage of an electricity meter on the Titanic. Photo: Corbis/Foto SA

One of the legendary liner’s mas-sive propellers. Photo: Corbis/Foto SA

Eugene Chernyayev looks very much like a “Russian hero”. He is a man with stony features, an upright posture, grey streaks in his moustache, and

a large Russian flag emblazoned on his jacket sleeve. But all that changes when Chernyayev dives into a sea of thought and into an underwater world.

The 57-year-old submariner seems boyish when he begins to talk about the bronze lamps that still shine after dec-ades at the bottom of the ocean; bot-tles that are still corked and ornately carved wooden columns still standing. Chernyayev saw these historic items, and much more.

The ill-fated luxury liner Titanic still captures the imagination of people from across the globe. April 15 marked the centenary of the tragic sinking of the liner in the icy waters of the Atlantic Ocean, with a loss of 1,514 lives.

Chernyayev is one of a few people with an intimate knowledge of the wreckage, lying nearly 3,800 metres below the surface of the Atlantic.

Eight expeditions

As the pilot of the Russian research sub-mersible Mir 2, Chernyayev has made eight expeditions to the Titanic and spent about 1,000 hours diving around the ship.

Chernyayev says he had never dreamed of playing a role in the histo-ry of the Titanic. He had not even dared to think of the possibility. And then things changed quite dramatically. Or, to be more precise, perestroika hap-pened.

It was not long after the end of the cold war that a team of Russians and Americans took part in a joint expedi-tion to the Titanic. The wreckage had been discovered in the autumn of 1985 by American deep-sea archaeologist Robert Ballard. Two years later, Finn-ish company Rauma-Repola delivered to Russia research submarines Mir 1 and Mir 2. Both had been developed at the Shirshov Institute of Oceanology in Moscow. At the same time, Canada’s IMAX film corporation was looking for a vehicle to film a documentary called Titanica.

Deep sea adventure

Although other vessels from other coun-tries were also capable of diving that deep, none of them met the filmmak-ers’ requirements. In addition to hav-ing sufficient space for the camera and divers, the Mir also had an extra-large porthole which made filming easier. When director Stephen Low asked how much light the small submersible could provide, Chernyayev’s answer was: “you’ll get as much light as you need”.

On May 10, 1991 the Russian research vessel Akademik Mstislav Keldysh set out from Kaliningrad. On board were the two Mirs and an international crew, including Chernyayev, who could hard-ly believe his luck in being able to take part in an historic expedition.

Life in Russia and at the Shirshov In-stitute was not exactly rosy in 1991. The

ADVENTURE

Costs weigh down famous ship

The 1997 film Titanic was a block-buster and director James Cameron’s epic returned to cinemas this month with a 3D version.

To film deep beneath the sea, the director chose a Russian research vessel called the Akademik Mstislav Keldysh.

“We never could have made the film without the ‘Keldysh’ people and the Mir sub,” Cameron said, 15 years ago, at the Russian premiere

in Kaliningrad where the ship is an-chored.

Today, the Keldysh faces an un-certain future because of the cost of keeping it in port. “[It costs] 1,500 euros [HK$15,240] per day [to main-tain,” says Robert Nigmatullin, the director of the Shirshov Institute of Oceanology. “We can’t afford that for very long.” To help finance costs, the research vessel is now also avail-able for commercial voyages.

peared when the two Mir subs finally reached the wreckage of the Titanic. Chernyayev, who was forced to share his small seat with the IMAX camera and two cameramen, had to contort his body just to reach the steering con-trols.

Chernyayev has seen many wreck-ages, before and after the Titanic. He

was American film director James Cam-eron’s turn to set out with the crew of the two Mirs. But working with the fa-mous film director, who is a perfection-ist, was often difficult.

The crew spent up to 18 hours un-derwater. The descent and ascent alone took five hours to complete. Again and again, the director wanted to repeat complex tracking shots for a second or third time. Each dive was first rehearsed, down to the millimetre, on a model in a tent on the deck of the Keldysh. To simulate the murky waters, the tent was filled with smoke.

Best technology

“Cameron wanted the best technology, the best team, and the best subs,” says Chernyayev.

It also helped that the technically as-tute Cameron had long been fascinat-ed by the underwater world. “He’s like an engineer – he understands every-thing,” Chernyayev adds.

In 2010, Cameron went on an expe-dition in Mir 1 to the bottom of Lake Baikal.

His most recent expedition, just a few weeks ago, took him to the deepest part of the ocean, the Mariana Trench – 50 years after Swiss researcher Jacques Pic-card was there for the last time.

The Russian premiere of Cameron’s film Titanic took place in Kaliningrad, the home port of the Akademik Mstis-lav Keldysh. Chernyayev thoroughly en-joyed the film. The best parts were the scenes showing original footage of the wreckage, one of which offers a glimpse of him at work underwater.

In 2010, American film director James Cameron went in Mir 1 to the bottom of Lake Baikal

country was in a state of turmoil and the economy had collapsed. The re-searchers were worried about their very survival and did not dare think about the future. At the same time, the pilots of the Mir had almost no experience with expeditions of this magnitude and the weather in the Atlantic was rough.

All these problems quickly disap-

has seen the German battleship Bis-marck and has dived to the bottom of the ocean at the North Pole. But even after 20 years, his memory of seeing the wreckage of the Titanic suddenly still leaves him speechless.

His mind fills with a flood of images that he can hardly put into words. He says he imagined how this massive ship must have sailed across the ocean, of the courageous men and women who worked on board, and of the tragedy of its sinking.

Chernyayev could see rusty railings, silver coins, and perfectly intact dinner-ware.

“Water is my element, and every ex-pedition is like a fairy tale,” he says, but the tale of the Titanic is his favourite, especially the film.

A few years after this expedition, it

Press photo

13

RUSSIA AND GREATER CHINATuesday, April 24, 2012

Art of sending a messageControversial group Voina continues to be provocative, writes Anastasia Gorokhova

On the night of June 14, 2010, nine young people dressed in black, wearing masks and armed with canisters of white paint stormed the

Liteyny drawbridge in St Petersburg. The bridge is raised at night and low-

ered at dawn. This takes 40 seconds, the act by the artists took only 23.

As they fled into the night, they left on the raised bridge a 65-metre-tall painted phallus staring straight into the windows of the local headquarters of the Federal Security Agency, the former KGB.

The act, dubbed D**k captured by KGB, was planned and carried out by the art group Voina (Russian for war). The group’s previous acts, such as group sex in the Zoology Museum (Orgy) and Storming the White House (the Russian government’s house), went generally unnoticed. This time the whole coun-try paid attention.

The art group is again the focus of media scrutiny and public discussion after a scandalous performance at the Cathedral of Christ the Saviour in Mos-cow in February, in which some of the members of the punk rock band Pussy Riot were arrested, including former Voina member Nadezhda Tolokonnik-ova. Three women who took part in the performance are in prison and face up to seven years in jail.

Created in 2007, Voina has about 60 members, but the driving force are phi-losopher Oleg Vorotnikov, his physicist wife Natalia Sokol and Leonid Nikolaev, also known as “Crazy Lyonya”. The phal-lus stunt earned Nikolaev 48 hours in jail for hooliganism.

Nikolaev is not easily frightened. Soon after painting the bridge, he was seen with a blue bucket on his head taunt-ing a Special Services car as it passed the Kremlin in protest against the flash-ing blue lights on government cars that give them right of way over all other drivers.

“Voina is merely reflecting popular opinion,” says philologist Alexei Plutser-Sarno, a group leader and chief ideolo-gist who has taken a passive role and flew to Estonia for fear of arrest after an act.

One of the group’s best-known per-formance acts, called A Palace Revolu-tion, targeted “werewolves in epaulettes” - a term for corrupt law-enforcers). Voina turned the public discussion into a performance on Palace Square in St Petersburg, which is patrolled by po-lice, while patrol cars are stationed on all nearby streets.

Vorotnikov and Sokol’s two-year-old son Casper rolled a ball under one of the patrol cars and four activists turned the car over to “save” the ball.

This act landed Voina in court after police pressed charges for vandalism.

Vorotnikov and Nikolaev spent the next four months in prison. Banksy, a British conceptualist, is known to have paid the bail money to have Voina mem-bers released.

Not everyone in Russia shares Banksy’s respect for Voina, but another group proposed nominating Voina for the Innovation state prize for contem-porary art.

Andrei Erofeyev, the curator of the exhibition “Religion! Watch out!” appeared in court to say that “gigantic graffiti as a symbol of protest deserves a prize”.

Voina boycotted the award ceremo-ny because the prize was handed out

by the Ministry of Culture. After the pres-entation bureaucrats from the ministry wrote a letter saying they had nothing to do with the decision.

Many established artists have also become involved in the debate.

Painter Ilya Glazunov, whose studio is near the Kremlin, says: “To paint a sexual organ on a bridge, what sort of art is that? That has absolutely nothing to do with art.”

Art historian Iosif Bakshtein disa-grees: “Not all of Voina’s stunts are syn-onymous. Many are intended to create a scandal, which for Russia today is a rarity. Voina is sending society impor-tant impulses.”

“We want to stir people up,” Vorot-nikov says.

“And we don’t need a government, that’s an obsolete form of social sys-tem.”

His wife is more specific. “We want

to overthrow Putin’s regime,” Sokol says. Despite these loud declarations, both Vorotnikov and Sokol still consider themselves only artists.

Activists from the pro-Kremlin youth movement, Young Russia, think other-wise. Some protested outside the Min-istry of Culture against giving Voina the prize, saying the group is made up of extremists.

Voina’s performances are growing more provocative. On New Year’s Eve they burned a police van.

As their fame grows, documentaries and books are emerging.

Some say they are breaking new ground, others say they are banal hoo-ligans.

The Forum programme at the Berlin International Film Festival featured the documentary Tomorrow, directed by Andrei Gryazev and dedicated to Voina.

CITY FOCUS

Voina’s performances are growing tougher and more provocative. In a recent act, they burned a police van

The group’s leader, Oleg Vorotnikov, his wife Natalia with their son Casper Photo: Photoxpress

Members of the group daub slogans (above) and overturn cars (right). Photos: Press photo

Voina’s Liteyny drawbridge graffiti was the talk of St Petersburg.

Pussy Riots rock band provoked an uproar. Photo: ITAR-TASS

Punk prayer leads to prosecution

Russian feminist punk rock band Pussy Riot became popular overnight after it staged an illegal performance in the Russia’s main cathedral. Society, church and law are divided over how they should atone for their sin. On February 21, five young women in masks tried to stage punk prayer at the Cathedral of Christ the Saviour in Moscow, chant-ing: “Virgin Mary, Mother of God, Expel Putin!” The song lasted for less than a minute and was stopped by the cathe-dral’s security service.

The women have been charged with hooliganism, which carries a maximum penalty of seven years in prison. In early March, three Pussy Riot members, Na-dezhda Tolokonnikova, Maria Alyokhi-na and Yekaterina Samutsevich, were arrested. The three women will remain in custody for 60 days pending the re-

sults of the investigation. The prank by Pussy Riot caused a wide response and split public opinion.

The Russian Orthodox Church and a considerable number of believers de-manded that the feminists be punished and called on society to condemn the prank and brand it as a crime.

Typically of modern Russia, Internet blogs featured the most intense discus-sion. “I won’t be asking whether pranks of this kind should be pardoned or en-couraged in mosques and synagogues, not just in Orthodox churches. But hoo-liganism remains what it is, even in a library, doesn’t it?” writes blogger pio-neer-lj. Blogger Maksim Petrenchuk adds: “If you are Christians, give them pancakes, or better still, suggest a fast.”

Sergei Smirnov, an attorney with Yukov, Khrenov and Partners, does not believe that criminal charges are appli-cable in this case.

Vladimir Ivanov RGC

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RUSSIA AND GREATER CHINATuesday, April 24, 2012

Road toadventure

China scholar Arseny Popov spent two weeks in July last year travelling with members of the Hong Kong 4X4 Club.

Troitsk 1

The rendezvous point is the town of Troitsk, on the Kazakhstan border. Today it looks like a deserted outpost dating from the times of the Mongol invasion. “Let’s synchronise our maps, shall we?” I ask the group.

“We haven’t got any maps,” they say.

“How did you get here then?” I ask, thinking, “this is going to be one hell of a trip”.

“There’s only one road there! Are there more roads in Russia?”

Of course, there are more roads in Rus-sia, but the temptation to follow the keep-to-the-main-road rule is overwhelming, so we cannot help ourselves and reach Poland using no map except for the one of the Southern Urals we bought in Chely-abinsk, which covered 120km with a sin-gle centimetre of map.

Chelyabinsk

There is a kind of metaphysics that trav-ellers seek here in Russia. You cannot choose a road but just have to drive it or walk it.

Let me introduce the Hong Kong HK4X4 club.

There is a cameraman now shoot-ing pieces about demons in Guangzhou; a media mogul; a producer with his as-sistant; a married couple; an honorary member of the Land Rover Club Hong Kong; a young couple; Andy; and even a singer.

“Does this trip have any specific pur-pose?” I ask them.

“It does! To stay alive!” the young man laughs.

The following day, he plunged into a pit in the centre of Chelyabinsk.

As for Chelyabinsk, you have to re-member that, as soon as a picture of, say, a collision between two police cars or a bicycle with square wheels appears on the Russian internet, they immedi-

ately add a “Chelyabinsk” tag to it. Now we have more proof of the harsh Chely-abinsk reality encompassing everything, from its climate to its people.

Meanwhile, “to stay alive” does not seem to be a joke.

I make a note of some very serious gear and outfits, and even oxygen con-tainers in our cars. They definitely may come in handy.

Sunsets look a lot like cocktails fea-turing the entire Mendeleev periodic table – constant emissions from numer-ous plants in Chelyabinsk lend the sky some unbelievable colours.

We grab our wheels, step on the ac-celerator – everyone wants to change the urban setting for the woods.

We make stops at random villages on the way – the silence rings in our ears after the roar of the engines.

There are old wooden houses that must be a hundred or two hundred years old, and roads to match.

Children ask us what planet Hong Kong is on, and adults ask us inside to meet us and celebrate the occasion.

Yekaterinburg 3The relief becomes more conspicuous, justifying its name, the Urals Ridge. Slowly and surely, we drive into the pic-

The capital is a big and over-crowded monster of a city. It receives the overwhelming share of the country’s intel-lectual, financial and human resources.

Colloquially named Nizhny, the coun-try’s third largest city is an economic, transport and cultural centre. Located on the Europe’s longest river, the Volga, and the historic cradle of the Russian state. From 1932 to 1990 the city was known as Gorky (after Maxim Gorky, the famous writer who was born here).

An industrial, com-mercial and cultural centre in central Rus-sia, it is the capital of the re-public of Tatarstan, the biggest Muslim region in Russia. Histor-ically, it has been a melting-pot of languages, traditions, cus-toms and cultures.

“Perm” is the name of the geologi-cal period (245-290 million years ago) when the Ural Mountains were formed. The city is an historic stronghold for the conquering of Si-beria in the 18th century.

A metallurgical hub in Russia’s rust belt in the Ural Mountains, the region is home to the May-ak Chemical Combine, nucle-ar-reprocessing facility. Due to accidents and nuclear waste, this area is one of the most contaminated places on earth. Chelyabinsk is a hub for goods and has one of the largest rail-way stations in Russia.

The travellers covered more than 2,000km from the town of Troitsk, on the Russia-Kazakhstan border, to Moscow, Russia’s capi-tal, and 1,100km more from Moscow to the border between Belarus and Poland.

Nearly 13 million people live here, with over 3 million more coming from the suburbs to work each day. As part of the “Big Moscow” concept for the next 30-50 years, the city will be en-larged. Photos: Lori/Legion media

For many Russians, the Volga river is the symbol of their Motherland

Moscow

Nizhny Novgorod

Kazan

Perm

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5

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3

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TRAVEL

Chelyabinsk

YekaterinburgThe largest city in the Urals and the fourth big-gest in Russia, sometimes called the country’s third capital. The city is on the border of Europe and Asia and is the place where the last Russian tsar and his family were executed in 1918.

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15

RUSSIA AND GREATER CHINATuesday, April 24, 2012

A tour guide in Hong Kong told us not to go out at night and to be afraid of everything. But we did go out and did a lot, and nothing hap-pened to us. In fact, Russia was re-ally amazing - everybody was very liberal, and we were exposed to new things and adventures. We once stopped at a picnic area and we could have been in Switzerland. We used to travel off-road a lot around China, but Russia was really different - and we liked it. The people we met on the road were particularly warm to us, you know the famous Russian hospitality. At one point we set off by ourselves without the guide, and despite not having any knowledge we made our way to Moscow very easily.

I was amazed by Moscow’s Sixth Ring Road. I have never seen such a wide road. I was impressed by the hotels. We stayed in a lot of nice places. Ka-zan was rich in history and the peo-ple were really nice. There was a lot more culture there. We could see the Kremlin from where we stayed. We went to the War and History Muse-um, to learn about the different peo-ple and cultures that have travelled through Kazan. We had no trouble on our trip. The immigration people were very nice. The Russian police saw our car many times, but they just smiled. You have to be alert on the roads. Russians were passing us all the time, even those in less pow-erful cars.

DECLAN DA SILVA RICARDO DA SILVA

‘We learned about Russian hospitality’

‘I wish I had seen more of Kazan’

Fifteen Hongkongers saw Russia as it should be seen, and had the trip of their lives when they took two Toyotas, a Lexus and a Land Rover on an often rugged, 15-day, 3,100km drive through eight cities. Photo: Private archive

“Does this trip have any specific purpose?” I ask them.“It does! To stay alive!” the young man laughs

tures you find in Russian books of fairy tales.

The border between Europe and Asia is one of those spots that China would use to build a huge multitier industry within just a couple of months, includ-ing a road and a whole town for the personnel servicing this natural land-mark.

But in Russia, they put down a con-crete surface, now cracked, over half a hectare of land around an inconspicu-ous monument that, for some strange reason, indicates the border between northwest and southeast; there must have been no money for signboards. The lonely road from the monument runs through a forest abounding in blue-berries and raspberries.

We take a day to walk around the city – old icons, a literary quarter, and graf-fiti. After Chelyabinsk, everything here looks almost like Barcelona.

Perm 4

You cannot miss the border of the Perm Region – the car starts shaking like a re-porter missing a deadline.

We cross this border talking about town-planning solutions, municipal support for modern arts and transpar-ency of chief executives.

About half an hour into the region, we agree that roads would dominate our agenda – you cannot do without roads.

The wilderness is all around us. We

drive more than 100km on a road that has no signboards, crossings, cafés, in-ternet or even mobile phone coverage. At the end of our battle march, half our group are of the opinion that we are driving in circles and treat me like Ivan Susanin, a 17th-century war hero who offered Polish invaders his services as a guide and led them deep into marsh-es.

Oil is pumped from wells along the road. The Russian oil industry is per-ceived as a bunch of transnational cor-porations, but a lot of this oil is pumped as easily here as they cultivate turnips in China.

Kazan 5

Kazan is an ancient town and we stop here to admire the magnificent munic-ipal museum and the Kazan Kremlin. We see shops and can go online – fi-nally, we are in a capital city!

Over lunch, we discover that our local guide owns a small Swiss company pro-ducing organic cosmetics.

The capitals are so different – if you owned such a business in Moscow, you would not even let us into your office, but here she takes delight in showing her town to the guests. We are delight-ed, too. When in town, we take one step instead of three, fascinated by mosques that seem to rival Orthodox churches, mosquitoes the size of apples and stun-ning girls.

The idea of a picnic suddenly comes

to us and the team takes time to dis-cuss the possible difficulties with fire-wood, finding a barbecue spot, meat and water.

I explain that we would have prob-lems with none of those. We feast on meat in an apple orchard that has been deserted for 30 years and lies next to a tiny pond, the only border between them being a fallen fence, and observe local children jumping into the water from a rope swing.

It seems at least one of the tasks has been accomplished – our cameras and blogs are filled with cows, landscapes and buildings sinking into the ground.

Nizhny Novgorod 6

An enormous city, but we still wonder how the monster Gorky Automobile Plant managed to fit into it. You can say that these are two different towns placed on the same spot – they hardly ever meet; they have different roads, resi-dents and functions.

The city of Gorky regained its old name Nizhny Novgorod after the Sovi-et Union collapsed, and opened its doors to foreigners. In contrast, the plant, vehicles and technologies have become almost indiscernible under a veil of secrecy.

Cars are one of our favourite topics – we discuss them, exchange jokes about Russians, their cars and their roads. No-body can believe that we are travelling

on the federal M7 Volga highway, not just some back road.

Moscow 7

We arrive in Moscow just in time for the Afisha Picnic, one of the capital’s key music festivals, which is carried on at every petrol station all the way to Lis-bon with the help of colourful frisbees. They say you can only see so many young non-aggressive people in Mos-cow once a year, but the Hong Kong guests do not seem too impressed – this is a normal thing for them.

During our trip, we never came across rudeness, theft or aggression. They lo-cals even returned money we left in the Kazan Marriott safe – about one-third of our tour budget.

We are pleased and surprised to learn that we will get the money back during a phone call while in Moscow.

The Moscow Kremlin is one giant postcard. It appears that everyone be-lieves that all of Russia is comprised of buildings looking exactly like the ones in Red Square. It was good to meet their expectations, at least partially.

Belarus 8

Former Soviet republic, now independ-ent Belarus, seems unreal because of two things – the roads are so good that you can’t feel them, and the local econ-omy takes you back to the final days of the Soviet Union, with old buses, so-

phisticated decor on shop counters made of cheap food cans, delicious bread and identical prices in restau-rants. Birch juice is available in three-litre jars. “Russian people are truly strong,” someone says. To get a cup of coffee you have to go to Minsk.

It is next to impossible to exchange currency, the city is deserted after 9pm and you can get a bottle of decent wine for US$3, which proves that you can have quality time, even if seven people stay in a single hotel room.

Minsk gives you mixed feelings. Time seems to have stopped here. Soviet ar-chitecture, cheap food, vast Soviet spac-es, giant arches and squares: this is true time travel.

The head of our expedition, a non-smoker, allows us to smoke in his vehi-cle, which is the highest level of trust, but it is time to say goodbye. The group leave for Lisbon and I stay in the village with its black earth.

Even the local rains can’t wash it off roads, with its oil-filled soil (if you drop a toothpick, you are sure to produce a gush of oil), fantastic sunsets, even by Himalayan standards, and tender dawns that are certainly the quietest in the world and give you a queer feeling in the pit of your stomach.

To those of you who have left, please come back. Those who have never been here, please come. All of our highways may look like country roads, but you can see so much more when you drive on this kind of route.

Russia is a vast land steeped in military history for locals and visitors.

Europe meets Asia in Russia’s Ural Mountains.

16

RUSSIA AND GREATER CHINATuesday, April 24, 2012

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‘Ambassador’ from ice age thrills visitors City to get taste of dramaOlga Kozlova RGC Mark Markoff RGC

A well-preserved 40,000-year-old baby mammoth, named Lyuba, is on display alongside other relics at the IFC mall in Hong Kong until May 10.

The exhibition also includes cos-tumes of the indigenous people from the Yamal Peninsula in Siberia.

Lyuba (right) is a special exhibit be-cause it is so well-preserved, and is expected to bring many visitors to the mall. There is more to Lyuba than meets the eye, however.

“It was an incredible coincidence that Lyuba was discovered, as the place where she was found in the per-mafrost is uninhabited,” says Evgeniy Koltunov, director of the Department

Theatrical director Tom Hope recalls seeing a play in Moscow when he first went to Russia with a group of Hong Kong literati in the early 1990s.

“That was for the Russian classic Mumu by famous director [Lev] Dodin, and they had a live dog on the table [where we sat],” he recalls. “Russia is carrying the torch to Western civilisa-tion, when you compare what you can see on Russian stages with what you have at other places.”

Hope became an admirer of Russia’s theatre tradition and is fighting for the future of classical theatre in Hong Kong. Earlier this month, he put on the play Forget Herostratus, by the well-known

of Culture of Yamalo-Nenetskiy District “The reindeer herder who found her went there by chance, so imagine how lucky we are to have made this unique finding.”

Behind its glass show case, Lyuba looks tiny, almost fragile.

However, the relic has the im-

portant mission of promoting Russian culture and building co-operation and cultural links between Russia and Hong Kong. Lyuba is the first “ambassador” of a Russian-Hong Kong programme of cul-tural exchange, and Hong Kong is the mammoth’s first stop in Asia, after which it will probably return home.

“Lyuba will most certainly continue to participate in the international co-

operation project, but soon we will need her back in Salekhard for a scientific conference,” says Kol-tunov.

The programme has been in the works for more than two years,

but it is definitely worth the effort, judging by the excitement the baby mammoth is generating among Hong-kongers.

Russian writer Grigory Gorin, with his Not So Loud Theatre Company, which is made up of amateurs who occasion-ally perform with professional actors.

Forget Herostratus was written dur-ing Soviet times, but remains relevant today. The main character, Herostra-tus, begins a life of crime to achieve power and almost succeeds.

Hope finds a lot of parallels between the play and life in Hong Kong today.The director’s dream is to have a rep-ertory theatre in Hong Kong, where he could run several shows a year, how-ever.

“They have plenty repertory theatres in Russia, and this can work for Hong Kong too,” he says, although he knows the format has not worked well in Lon-don.

One of the world’s best chefs, Anatoly Komm earned a place in the San Pel-legrino 50 Best Restaurants list for his restaurant Varvary (Barbarians) in Moscow. He represents the avant-garde of haute cuisine. Photo: ITAR-TASS

Top chef to cook up a storm in HKAnatoly Komm’s three-day stint in Central could whip up local tastes for Moscow cuisine, writes Elena Shesternina

Renowned Russian chef Ana-toly Komm will bring his in-novative cuisine to Hong Kong next month.

The visit is part of a tour across five continents. Komm, a mo-lecular chef, heads up a number of res-taurants in Moscow and abroad, in-cluding the upscale Varvary - Russian for Barbarians; the more popular Kupol; and the Green in Geneva, which was listed in the Michelin Guide in 2009.

He is opening new restaurants in Lon-don and New York this year. Varvary is the only Russian restaurant with a spot in St Pellegrino’s list of the 50 best res-taurants in the world.

The chef, known to his friends and colleagues as “Maestro”, will be at the Landmark Mandarin Oriental for three nights in May, as he works to spread the word about the often-overlooked cuisine of his native country.

Known to charge as much as HK$200,000 a night to cook at a restau-rant, Komm is a sought-after chef. His tour next month will take him to sev-eral Asian cities, including the stop in Hong Kong.

“The aim is very simple, I want to show the world that Russia is not just about oil and gas,” says the chef, who graduated as a geophysicist, then be-came a fashion entrepreneur and, fi-

nally, a chef at the age of 34. He was also the president of Koty, which car-ries prestigious brand names such as Dolce & Gabbana and Versace.

Komm, who was born in Moscow in 1967, says he first discovered his true calling to the world of fine cuisine at the age of four.

He has been credited with bringing international acclaim to Russian cui-sine.

However, in the world of haute cui-sine, Komm has been a controversial figure.

He has criticised Russians for not being able to appreciate fine food, while pushing forward the evolution of uniquely Russian cuisine.

Komm also once remarked that as far as fine food is concerned Russia is like a “wild forest full of wild animals”.

He believes the evolution of haute cuisine is slowing down, much like the evolution of technology. The great ad-vances of the past 100 years have cre-ated a world of trains, planes and cars, but he does not believe that there will be any radical changes or advances over the next several centuries.

Something similar, he says, is hap-pening with cuisine.

“It will take a thousand years for peo-ple to invent an alternative to the car, train or plane.

“It’s the same with food,” Komm told

the newspaper RBC Daily. “For a long time, French cuisine was fashionable. Then the Spaniards overtook the French ... They recently invented north Euro-pean cuisine.”

He does not expect Russian food to become fashionable any time soon be-cause, for a national cuisine to become fashionable, its leaders have to push the culture onto the global stage. And that is not yet happening in Russia.

“This is all about politics. If our lead-ers suddenly decide that Russian cui-sine should be the trendsetter, then per-haps it might happen. But, so far, the leadership is interested in oil and gas, not culture,” Komm says.

Still, great food is not just about eat-ing. Great food, he says, is about art. To appreciate great good one has to have an appetite in “not only in the physical sense but also intellectually. The art of cooking is the very difficult.”

The problem for professional chefs is that making money from art is very difficult.

“Real art has never been profitable,” Komm says.

“That is why I do cuisine for five or six restaurants with which I work and which are highly profitable in order to support cuisine that is real art.

“In the modern world, because there is no aristocracy prepared to be patrons of the arts, we have to bake buns in order

to be able to do real art.” Just like art, cooking requires a very specific sensi-bility, one that Komm is at pains to ex-plain.

“I do not have any special method. A musician must be able to play music from the script and hit the right notes. Cooks must fit in with my recipes.

“Whether they are Japanese, Chinese, Americans or Russians does not mat-ter,” Komm says.

“If they are professional cooks – and I only perform at professional sites – they must follow my recipes, just like a musician is obliged to follow the notes.”

The chef is not considered a tradition-alist, and he has been known to use the latest technology to produce well-known Russian dishes.

He also has a reputation for putting on a show when he creates his unique dishes.

Komm’s visit to the Landmark Man-darin Oriental will be his second and will run from May 7 to 9. He will put on an eight-course Russian dinner includ-ing caviar and Russian ingredients.

The chef’s Hong Kong visit may well spark a Russian culinary revolution in the city.