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THE ECONOMIC TIMES SATURDAY, DECEMBER 29, 2007
Business
03
Interview Kirill Androsov, Deputy Economic Development and
Flying high-tech
Trade Minister, shares his views on the future of energy exports
Power switch
Technology sector is
ready to take on the
global market
Before the recent change in Russia’s leading high-tech
Exporters turning from crude
government, Russian companies. The incentives
officials set in train a series would, he said, predominately
of radical programmes focus on the areas in which
aimed at modernising the Russia is already competitive
to refined petrol products
high-tech sector of the and has considerable expert-
economy. Rather than ise, such as space, atomic and
distance itself from the military technologies.
previous policy, the new A special governmental
administration decided to agency would be created to
As the New Year approach- cancel import duties on im- ments over the past year?
extend its modernistic manage the tax programmes,
es, Deputy Economic Devel- ported high-tech refinery I would say, in the first in-
agenda. Central, it seems, is which are supplementary to
opment and Trade Minister equipment was a significant stance, the initial public offer-
a belief that high-tech, IT, the existing Development
Kirill Androsov expressed step. ings of Sberbank and VTB bank.
and knowledge-based Bank and Development Corpo-
satisfaction with the course Then there is the merger of
industries will eventually ration, and the three billion
of 2007. In an interview Which companies in particular Sovkomflot and Novoship into
form a major part of roubles ($120m) in annual
with Rossiyskaya Gazeta, he are choosing to do this? the United Shipbuilding Corpo-
Russia’s economic output. subsidies already promised to
outlines what he considers Both TNK-BP and Rosneft have ration; the creation of the
non-commodities exporters
to be the main develop- plans to considerably increase AirUnion airline alliance; and
this year.
ments. capital investment for the the successful sale of Elgaugol EVGENIY ARSYUKHIN
Two thousand and seven
modernisation of oil refineries. Coal. These may appear fairly MOSCOW
was, overall, a pivotal year for
EVGENIY ARSYUKHIN But government has to make localised achievements, but
Russian high-tech industry,
ROSSIYSKAYA GAZETA oil refining – and thus the pro- each one will, I believe, have
S
S
It was German Gref – the for- not least because it witnessed
A
MOSCOW duction of high-quality fuels – lasting benefits in terms of de-
mer Minister for Economic the sector’s first IPOs. These
profitable. As far as I’m con- veloping competition in all sec- AR_T
Development – who intro- were regarded as highly posi-
How is the structure of Russian
cerned, I think we’ll come to a tors.
duced the term “high-tech” tive developments, not just
petrocarbon export currently
“point of no return” in the next If we are to speak about leg-
into Russian governmental because they opened Russian
changing? Is there any move
two or three years, when you islation, then we should men-
parlance. Before he left office,
away from crude?
VERKIN_T
IT firms to worldwide finan-
will see a substantial increase tion the bill we passed to es-
A
Gref announced a series of re- cial resources, but also be-
Producers will continue to ex-
in investment in Russian re- tablish the Development Bank,
RS
D
forms aimed at emulating the cause they made it necessary
port crude as long as it is more
X
fineries. and indeed the establishment
high-tech performance of Chi- for these businesses to adopt
profitable to do so than to sell
of the bank itself. We have also
ALE
na and India, and predicted international standards of
it on the Russian domestic
Is the cancellation of import launched an investment fund
that Russia would eventually transparency and corporate
petrochemicals market. If this
duties on equipment tempo- which will provide similar long-
Born in 1972, Murmansk general of the local power supply
increase its global share in governance.
trend continues there will be
rary? term benefits to the country.
company Lenenergo
this sector to 10pc (from to- The view of industry insid-
no reason to build refineries in
No. Duties have been perma- Here we have already made
1994: graduated from the St Peters- 2004-2005: department director
day’s 0.13pc). ers is also broadly positive.
Russia.
nently cancelled for any equip- agreements to fund four proj-
burg State Marine Technical Univer- at the Economic Development and Today, Gref is gone, but his
Mikhail Pogosyan, CEO of the
But the thought behind this
ment produced outside Russia. ects and work is underway in
sity (SMTU) PhD in Economics Trade Ministry radical plan remains top of the
well-regarded aircraft holding
reasoning remains sound only
two of them. We have held four
Worked as a project manager at the November 10, 2005: appointed government agenda. Sukhoi, believes that Russia
if there are enough petrochem-
What effect do you believe this concession tenders. And, by the
Dom Plus agency and an investment Deputy Economic Development and Speaking at the Hanover In- will soon regain its leading po-
icals on the domestic market.
will have? end of the year, we expect to manager at Hansa Financial Services Trade Minister
dustrial Fair, Communications sition in aircraft manufactur-
As far as I know, some 230
Principally, that the export of begin operating the Petrochem- From 1997: worked on the St Peters- November 2007: appointed
Minister Leonid Reiman said ing. Indeed, today overseas
million metric tons of oil out of
high value hydrocarbon prod- icals exchange. burg Municipal Property Manage- member of the government
the government recognised its sales are now the main source
the 492 million metric tons
ucts will now increase. These are real, important
produced in Russia are refined
ment Committee commission for major national
responsibility to the high-tech of income for Russian aircraft
and substantive milestones. –
in this country. Of this, 50pc is
2000-2004: first deputy director investment projects
sector, and considered inter- manufacturers. Sukhoi, for ex-
How much political influence is
vention and active support es- ample, has had great success
used in the domestic market
there on your work at the
sential. He used the occasion in exporting the Sukhoi Su-27
and the rest is exported.
Ministry?
to outline a series of tax-ex- and Su-30MK fighters; ex-
However, that situation is
The year 2007 was different
gradually changing. The local
Oil/gas reserves by company Structure of the fuel balance up to 2020
emption initiatives, including perts estimate the market
from the previous three. The
tax-free business zones, which share of the Su-27 alone
Russian market is now offering
elections to the State Duma,
will soon be made available to amounts to more than $10bn.
producers the chance to turn
the lower house of the Russian
-
more revenue than could be
parliament, in early December
gained from export. Subse-
greatly influenced the dynam-
quently, this is encouraging
ics of the government’s work, T
S
companies to invest in refining
especially its adoption of the
activities.
three-year budget before au-
XPER
The economy needs
Indeed, the state has sever-
tumn. It also encouraged the
al tools for regulating this
introduction of fundamental
restructuring. But how?
process. For example, it can
laws, which we tried to pass in
limit the consumption of low-
the first half of the year, so
quality fuel by enforcing the
High-tech industries in Russia have never been regarded
that parliamentary hearings
Euro-2 and Euro-3 standards
as areas for investment. This is hardly surprising as the
would not be influenced by pol-
for petrol. It can also grant ex-
economic model has historically been dependent on|
itics.
cise privileges for higher-quali-
natural resources.
ty fuel, which would provide a
What, in your opinion, are Rus-
further incentive for deeper
growth of manufacturing has
sia’s main economic achieve-
GLEB FETISOV ECONOMIST
conversion. The decision to
SOURCE: INDEPENDENT E
been 3pc slower than GDP.
MOSCOW
Fourth, technology slow-
Russia’s hydrocarbon exports
down is common in a commod-
increased from $28bn in 1998,
ity-dependent economy, while
Resources Increases in production no longer straightforward
to $191bn in 2006. A massive
technological progress is a key
rise of 583pc. Over that same
source of economic growth.
period, the share of commodity
If nothing is done, Russia’s
exports in the country’s GDP
role will eventually boil down to
Reaching a natural end
doubled from 10pc to almost
merely supplying the West and
20pc. Why is this dependence
China with raw materials. But
on commodity export harmful
can anything be changed now?
for Russia?
The government is searching
First, by relying on global en-
for ways of replacing the com-
ergy prices, the system is inher-
modity-based model with a
There are no official figures ployed. This has a huge impact Saudi Arabia is estimated to industries, even if exploiting largely unrealistic. The rea- gistical challenges, and the
ently unstable and vulnerable
new, diversified one; and in-
available for Russia’s proven on the cost of the final prod- hold 22pc of the world’s re- them may pose considerable sons for this include severe need to build new pipelines
to regular financial and even
cluded this in its medium-term
reserves, but experts agree uct. serves. problems. Vladimir Shelkov, climatic conditions, labour to transport gas to the
social and political crises. In-
programme and the draft con-
that there is well under 100 How do things currently Approximations of how director of Norilskgazprom, a shortages, the immense lo- mainland. –
deed, the key reason behind the
cept for Russia’s long-term so-
years assured supply left. stand in Russia? long this volume can last are major gas company in north-
recent flow of petrodollars into
cial and economic development
As the inevitable shortage No one knows the exact fairly gloomy. ern Russia, thinks that the
Additional reading material the country was not increased
until 2020.
approaches, the country amount of national resources Yevgeni Kozlovsky, a former known resources of Taimyr
production, which was only
This may have some effect,
must turn its attention to Russia started with, or indeed, Soviet minister of geology, peninsula (north of the Arctic
IGOR TYUKHOV Professor at the All-Russian Research modest, but a boom in global
but what the country really
the treacherous fields north how much it has left. The puts oil reserves at 50 years Circle) could last 80 years.
Institute for Electrification of Agriculture prices. Put simply, Russia’s rev-
needs is a joint effort from gov-
of the Arctic Circle. Russian government, quite un- and gas reserves at 75 years. “Practically all of the easily
“SEEKING ALTERNATIVES” enues will plummet if global
ernment and business in sec-
derstandably, has been reti- Vladimir Milov, president of accessible deposits are al-
Russia Profile/business, November 30, 2007 prices fall.
tors that already have a com-
cent in disclosing this infor- influential think-tank Energy ready under development, but
www.russiaprofile.org Second, mineral resources be-
petitive advantage, such as
mation. Policy Institute, thinks simi- the fields located in Yamal,
come depleted over time, while
high-tech. No one’s under any il-
ALEXEI ALEXEYEV
MOSCOW
The most credible figures larly: according to his view Taimyr and generally those
VLADIMIR MILOV President of the Energy Policy prospecting for new deposits re-
lusion that re-orientation will
so far are those provided by Russia’s gas will last 80 years that are north of the Arctic
Institute quires greater investment.
naturally be a long, difficult and
Natural energy reserves
British oil company BP, which and oil just 40 years on cur- Circle provide an option for
“RUSSIA-EU ENERGY DIALOGUE: FILLING A VACUUM” Third, commodity depend-
costly business. This might ex-
worldwide are being extract-
places Russia first in the rent trends. Milov, however, the country’s gas producing
Russia in Global Affairs, ? 4, October-December 2007 ence is fraught with what some
plain why so few policymakers
ed at a rate which means
world in terms of proven gas believes that both figures can industry,” he said.
eng.globalaffairs.ru call the “Dutch disease”. This is
are prepared to support it. -
they’ll soon run out. Conse-
reserves (28pc of the world’s be doubled if geological av- Shelkov emphasised the im-
the excessive concentration of
quently, what remains is hard-
reserves or 48 trillion cubic enues are properly explored. portance of keeping one eye
GROUP OF AUTHORS labour and resources in one
Dr Gleb Fetisov, economist, is
er to source, so highly ad-
metres) and seventh for oil re- But industry insiders feel on the future, but given the
“THE EVOLUTION OF THE GLOBAL ENERGY MARKET” sector at the expense of all oth-
a member of the Russian
vanced methods – including
serves (6.1pc or 72 million there are still plenty of ways present conditions, the Arctic
Russia in Global Affairs, ? 1, January-March 2007 ers. In Russia, for example, the
Parliament’s upper house
robotic technology – is em-
barrels). As a comparison, Russia can develop its energy Circle development remains
eng.globalaffairs.ru
Technology IT sector is experiencing a sharp upturn in fortunes most complex problems: export and import potential,
“The policy we have at Intel allowing as it does foreign
is simple. If we can, we com- clients to approach Russian
Skills and local growth shift IT balance
mit difficult problems to en- companies “not only as out-
gineers in the USA. If the sourcing partners, but also
task is very labour-intensive, as local promotion and mar-
we assign it to the Indian keting partners”.
One of the main pillars of ing a capitalisation of some companies with interna- the main areas of growth
specialists. If the problem Makarov was also keen to
the Kremlin’s “national proj-
1,162 trillion roubles (ap-
Software development trends (pc)
tional ISO or CMM/CMMI has been outsourcing, with
cannot be solved, we offer it emphasise the rapidly im-
ect” programme is support-
proximately $48bn). standard management sys- Russian companies increas-
to Russians.” proving economic situation
ing the growth of the high-
Indeed, Russoft, the soft- tems increased from 18pc ingly able to become reli-
Almost uniquely, Russia is in Russia. In broad terms,
tech industry. Much of this
ware industry’s representa- to 28pc. able strategic partners for
not only experiencing accel- the volume of direct invest-
strategy focuses on long-
tive, suggest that software According to Alexis Western high-tech and soft-
erated growth in the export ment in Russia is now grow-
term deliverables and com-
export alone accounts for Sukharev, founder of Auri- ware companies.
of IT products, but also a ing by 100pc annually.
plicated science. Nonethe-
some $1,5m, a 54pc in- ga, a software R&D outfit In terms of the outsourc-
consolidated growth in the Specifically in the area of IT,
less, one particular area –
crease on last year. incorporated in the US, ing market, India naturally
local market. there have been radical
the provision of IT support
No less significantly, what this has meant is an remains the undisputed
Indeed, global IT con- changes in federal govern-
and software – is already
there has been movement exponential growth in the leader in the field. But its
glomerates are finding that ment policy, including the
starting to witness some-
thing of boom.
to resolve many of the is- demand for Russian IT skills superiority at the top end of
a focus on the Russian con- provision of tax breaks and
sues that previously hin- abroad. “The Russian engi- this sector is no longer
sumer is now as profitable investment capital to high-
The most recent figures
dered foreign collaboration neering labour pool now has quite as assured as it once
commercially as their export tech companies. The Russoft
available from the govern-
– eg weak infrastructure, a lot to offer to companies was.
dimensions. survey showed 76pc of mar-
ment suggest that the vol-
lack of knowledge of Eng- who need specific R&D Steve Chase, president of
Valentin Makarov, ket-leading companies con-
ume of this market grew by
lish, management and intel- skills and comprehensive Intel Russia, believes global
presided of Russoft, is par- sider government support to
20pc in the last year, reach-
lectual property rights. Just approaches to complex leaders are increasingly
ticularly enthusiastic about have improved significantly
last year, the number of
SOURCE: RUSSOFT
projects,” he said. One of turning to Russia with the
the combination of strong over the last two years.
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