Friday, September 11, 2015

Vincent Varisano How Russia Hopes to Repatriate Lost Scientific Talent

Vincent Varisano,

This article originally appeared in The Moscow Times


Skoltech is just one part of a larger project known as the Skolkovo Foundation, launched in 2010 by then-President Dmitry Medvedev as part of his initiatives to modernize Russia's oil- and gas-dependent economy.

Four years after the Skolkovo Institute of Science and Technology (Skoltech) was founded, the startup university has finally moved into its own purpose-built campus, and has succeeded in luring accomplished Russian diaspora scientists back to Russia after periods of up to 20 years abroad.

Some of them say they have returned for love of the country they left behind, and an opportunity to shape its scientific and technological future. They have also been enticed by the goals of the Skolkovo project, which are nothing less than to create a Silicon Valley-type ecosystem in a quiet Moscow suburb.

One of the most prominent scientists to be lured back to Russia by the Skoltech project is Artyom Oganov, who specializes in computational materials discovery, which he describes as “a revolutionary field promising major technological innovations and discoveries in materials science.”

Oganov’s story is a classic example of Russia’s scientific diaspora. After receiving his master’s degree from the prestigious Moscow State University, he left Russia for University College London in 1998 “because at that time there was no future in science, no prospects, no possibilities to work on the cutting edge of modern science,” he told The Moscow Times.

After 16 years, Oganov is back to teach and conduct research at Skoltech. Asked why he returned after so many years, Oganov said he “wanted to try this opportunity to work in my own country.

“Now science is again a major priority in Russia, science again attracts the best students, there is state of the art equipment and a desire to excel in science and technology. It is a very interesting time here,” he said.

Russia’s Silicon Valley

Skoltech is just one part of a larger project known as the Skolkovo Foundation, launched in 2010 by then-President Dmitry Medvedev as part of his initiatives to modernize Russia’s oil- and gas-dependent economy.

In an interview (page 5) with The Moscow Times at the new campus, Skoltech president Edward Crawley explained the university’s mission as an educational and research hub designed to infuse the ailing Russian economy with cutting-edge science and technology.

“Skoltech isn’t just a new university, it’s a different kind of university, one where the three acknowledged missions of all universities are present: teaching, research and innovation and industrial development. But here the latter role is the primary mission,” Crawley said.

Read the Full Interview: 4 Years of Innovation: An Interview With Skoltech President Edward Crawley

The institute was launched from humble beginnings in 2011 as something of a virtual university hosted by the Massachusetts Institute of Technology in partnership with the Skolkovo project.

Four years on, Skoltech has grown from a small program with 20 students and a handful of dedicated professors to a university boasting some 60 professors and a few hundred students.

While Crawley estimates that 20 to 25 percent of the institute’s faculty are foreign like him, the remaining 75 to 80 percent of the faculty are Russian-born scientists, he said.

“Fifteen to 20 percent of the faculty were hired in Russia, and the remaining 60 percent are diaspora who have returned. So we really have attracted a significant slice of the faculty back to Russia,” Crawley said.

Reverse Brain Drain

Russia’s scientific diaspora numbers several thousands, Crawley estimates. This leaves Skoltech with a large pool of talent to recruit from, but also begs the question of how many of these Russian scientists are even interested in returning to their native country after establishing themselves abroad — often in the United States and Western Europe.

Skoltech has worked since 2011 with the Russian-American Science Association (RASA) to increase interaction between Russian diaspora scientists and the community they left behind. Crawley said he is scheduled to speak at RASA’s annual conference in early November.

According to the U.S. professor, there are two types of Russian diaspora scientists: those who for various reasons are not looking back, and those that are interested in the possibility of returning, and Skoltech is actively recruiting from the latter category.

The halls of the newly christened Skoltech campus are now home to Russian scientists who have in the last few years accepted offers from the institute to return to their country of origin to help work on the engine of innovation.

“I came back to my home country about a year ago to build a new kind of university,” said Albert Nasibulin, who received his Ph.D. in physical chemistry from Kemerovo State University in Siberia in 1996, but left for Finland in 1999 and spent 15 years there, most of it at Aalto University.

Nasibulin, who cofounded a company in Finland specializing in commercializing carbon nanotubes, said he was enticed to come to Skoltech by its mission “to promote the commercialization of scientific results,” he told The Moscow Times.

“Another reason to return to my home country was to teach my children Russian culture,” he said, adding that they are able to speak perfect Russian, but were born abroad and “can hardly be treated as Russians.”

Knowledge Application

Vasili Perebeinos left Russia for the U.S. in 1997 to complete his Ph.D. in physics, after which he worked on advanced materials and nanostructures for electronics at IBM’s T.J. Watson Research center.

Asked why he left his career at IBM behind, Perebeinos said that Skoltech was a once-in-a-lifetime opportunity “to actually apply the knowledge I acquired abroad and influence how it is applied in the future.”

Dzmitry Tsetserukou, head of Skoltech’s Intelligent Space Robotics Laboratory, studied robotic technologies at the Belarussian-Russian University in Mogilyov, Belarus, but followed his mentors abroad to France and Japan, where he spent 10 years.

“In Japan I made a successful career and highly appreciate the time I spent there, but it is time to bring my expertise to a country that needs it more, there are a lot of opportunities to develop and apply new technology here in Russia. This is my new challenge,” said Tsetserukou.

Philipp Khaitovich, a Moscow State University-trained biologist who left Russia 20 years ago to do his Ph.D. in the United States, echoed Tsetserukou’s words, saying he decided to come to Skoltech “to use my experience to help build up a strong modern research and education base in Russia.

“I also missed Russian food,” he added.

 



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Thursday, September 10, 2015

Vincent Varisano German Corporate Titans Forge Ahead With Major Russia Investments

Vincent Varisano,

This article originally appeared in The Moscow Times


Major German retailer Globus Group, which owns the Globus hypermarket chain in Russia, has leased a 45,000-square-meter plot at an industrial park in the Moscow region.

The company will use the warehouse space at the Kholmogory industrial park as a distribution center, according to real estate firm Jones Lang LaSalle (JLL) which advised Globus on the deal.

It is a record-setting deal for an international grocery retailer on the Russian warehousing market, Pyotr Zaritsky, head of the warehouse and industrial department at JLL, said in a statement last week.

The value of the deal remains confidential, JLL said.

Globus has operated on the Russian market since 2006 and has 10 hypermarkets in Russia. The company plans to open its largest outlet yet in the town of Pushkino in the Moscow region this year.

The Kholmogory industrial park is located 30 kilometers outside Moscow. The total area of the complex is 250,000 square meters.

According to industry analysts polled by the Vedomosti business daily, the 45,000-square-meter lease is the largest deal on the warehouse property market involving a foreign company in two years.

The absolute record belongs to Swedish furniture giant IKEA, which in 2013 leased 71,800 square meters in the Moscow region logistics park Logopark Sever, according to Vedomosti.

A year earlier, German sportswear retailer Adidas leased 65,000 square meters in warehouse complex PNK Chekhov-2 in the Moscow region, Vedomosti reported.

In the first eight months of 2015, eight out of 45 warehouse lease deals in the Moscow region involved foreign companies. In total they rented about 103,000 square meters out of the 460,000 square meters of warehouse space rented out, Vedomosti reported, citing Vyacheslav Kholopov, director for office and warehouse property at real estate consultancy Knight Frank.


This article originally appeared in The Moscow Times. Click here for the Reuters report


Volkswagen AG started production at a newly built engine plant in Russia on Friday, aiming to cement its position in a market which it sees as offering long-term potential despite its recent contraction.

Sited next to Volkswagen's vehicle plant in Russia's car-manufacturing centre Kaluga, 150km south of Moscow, the factory has the capacity to produce 150,000 engines a year. It will make engines for the Polo and Skoda Rapid models that are assembled in Kaluga and will later service the Volkswagen Jetta, Skoda Oktavia and Skoda Yeti models.

“We need to continue and strengthen our partnership (in Russia) despite the current situation,” said Volkswagen board member Thomas Schmall. “We are doing everything in our power to strengthen our market position in the long term.”

After a decade of annual sales growth in excess of 10 percent, the Russian car industry has been hit hard by an economic crisis caused by lower oil prices and Western sanctions over Moscow's actions in Ukraine.

Domestic car sales have halved from their peaks in 2012-2013, when during some months the country ranked ahead of Germany as Europe's largest car market by sales, and eighth biggest in the world. It now ranks only fifth in Europe and 12th globally.

Russia has sought commitments from foreign carmakers to boost local production and wants 60 percent of manufacturing costs spent domestically by 2020. In return, producers enjoy lower import duties on car components.

Volkswagen announced plans in 2012 to spend around 250 million euros on the engine plant, in line with Russian government targets to equip at least 30 percent of vehicles produced in Russia with locally-made engines by 2016.

Russian sales of the VW brand fell 44 percent year-on-year in the first seven months of this year and the company in March cut jobs and working hours at the Kaluga factory. But it says its investment plans are intact due to the market's longer-term prospects.

Ford Motor Co's Russian venture, Ford Sollers, also opened a $275 million engine plant in Russia this week. General Motors Co, by contrast, quit the market in March, winding up its Opel brand there and shutting its plant in St Petersburg.



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Wednesday, September 9, 2015

Vincent Varisano Russia and China to Launch Huge $10 Billion Agribusiness Fund

Vincent Varisano,

VLADIVOSTOK, September 3 (Sputnik) — Russia and China plan to create a Russian-Chinese Far East Agribusiness Development Fund, signing a memorandum of understanding to this end on Thursday.

The ministry's press service told Sputnik that the fund will have a total capital of $10 billion. A number of financial institutions, including Russia's Sberbank, will participate in its operations.

The ministry added that the fund's goal is to stimulate the production of 10 million tons of grain and agricultural products annually, starting from 2020.

According to the document, the sides agreed to cooperate on joint investment projects in the Russian territories of priority development, nine of which are located in Russia's Far Eastern Federal District. These projects encompass investments in agribusiness, grain growing, processing, storage and logistics as well as the construction and operation of agribusiness infrastructure.

The first EEF is being held in the Russian city of Vladivostok on September 3-5, as a platform for dialogue between international investors, the Russian government and countries of the Asia-Pacific Region.

Some 72 agreements of intent and memorandums of cooperation are expected to be signed during the three-day-event, including 10 on the development of agribusiness.



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Vincent Varisano Russia Close to Deal to Build Pakistan Pipeline

Vincent Varisano,

MOSCOW, September 9 (Sputnik) — Russia and Pakistan could sign an agreement on the North-South gas pipeline project in late September, Russian Energy Minister Alexander Novak said Friday.

In December 2014, RT Global Resources, a subsidiary of Russia's state technologies corporation Rostec, and the Pakistani Inter State Gas System (ISGS) announced a project to build oil and gas infrastructure in Pakistan.

The project includes the construction of liquefied natural gas terminals as well as the 683-mile North-South pipeline, stretching from southern Pakistan's Karachi to Lahore in the country's northeast.


For more context see this story from Russia & India Report from August:

A subsidiary of the Russian state corporation Rostech has offered to build a pipeline that will carry gas from Iran to cities in Pakistan. The project is estimated to cost $2.5 billion dollars. The pipeline will extend almost 1100 kms from Karachi, in southern Pakistan, to Lahore in the north-east. This is the first major project in Pakistan in 40 years in which Russians are involved.

Project terms

The project envisages the construction of five compressor stations. As planned, the project should be ready for the gas pipeline to enter into operation in 2017. During construction, “technology, materials, equipment and products of Russian manufacture” must be used “as much as possible”. Additionally, it is expected that Russian research, design and construction organizations will be involved.

Pakistan, for its part, guarantees the right to use the land along the defined pipe laying route, including for research and other works.

Moscow and Islamabad must now sign an agreement at the ministerial level within a month’s time.

Rostech’s partner in the project will be Inter State Gas Systems (ISGS) controlled by Pakistan.

“The project is being implemented according to a BOOT (build-own-operate-transfer) scheme,” reports the state corporation’s press service. “The gas pipeline will belong to the design company for 25 years. Ownership rights will then be transferred to Pakistan.”

Rostech will attract debt financing, and the state corporation says they are considering Russian as well as foreign (including Pakistani) investors for this.

But Rostech has been under sanctions since 2014. So attracting loans from Western banks is practically excluded as a possibility. “Taking into account the political importance of the project, these could be quasi-public funds, for example, from the VEB,” writes Kommersant, providing a link to a source in the government.

Will Russia be able to compete with China?

The energy deficit in Pakistan has become a major economic problem, in addition to a political one over recent years. The population endures constant rolling blackouts, notes chief researcher at the RAS Institute of Oriental Studies, Vladimir Moskalenko.

“The development of relations  with Pakistan lagged behind for a long time because of Russia’s traditional orientation towards India, and now Moscow must make haste not to lose the Pakistani market to China, which is becoming Islamabad’s main economic partner,” said Moskalenko.

China and Pakistan preliminarily agreed to construct a gas pipeline from Iran to Pakistan in April this year; called the “Peace Pipeline”. Tehran claims the Iranian segment, around 900 kms long, is already built. Islamabad conducted secret talks with China for many months about the construction of its segment of the pipeline, for which US $2 billion is required.

Kommersant’s interlocutor in the government agreed that it was important for Russia to strengthen its position in Pakistan, including in the area of gas transport, from a geopolitical standpoint, since the country could become a major gas transit route to India in the future.

But constructing pipelines in Pakistan could also have a negative effect for Russia,” writes Gazeta.ru. The publication quotes RusEnergy partner Mikhail Krutikhin, who said that “Iran will now conduct negotiations with Pakistan and China, and, essentially, the gas pipeline that Russia builds will become part of a future gas highway from Iran to China. Participating in the Pakistan project is quite disadvantageous to Russia: supplies from Iran will lower Chinese demand for gas, including from Russia,” warned Krutikhin.



via Vincent Varisano, Russia Close to Deal to Build Pakistan Pipeline

Vincent Varisano EU Can't Sell Ukraine Any More Russian Gas

Vincent Varisano,

This article originally appeared at ICIS


A planned increase in eastbound pipeline capacity to flow natural gas from Slovakia to Ukraine may not happen this year, a source at the Slovak grid operator Eustream has told ICIS.

In July it was announced that capacity at the Budince border point would rise from 40 million cubic metres (mcm)/day to 57mcm/day by 1 December.

“This is not an easy task, this project requires both investment and construction,” the source at Eustream said. “We are conducting a technical analysis and waiting for permissions from different government agencies at the moment.”

Neither the exact date of when the project could be implemented, nor the final capacity have been agreed yet.

The source said that the Ukrainian grid operator Ukrtransgaz – which approached its Slovak counterpart with an offer to increase the capacity in late spring – was pushing Eustream to accomplish the project as soon as possible. “We are very unhappy about their method,” he said.

Despite repeated requests, Ukrtransgaz was unable to comment on the planned expansion at Budince.

There is currently no written agreement between the two parties over the project, with Eustream unwilling to sign any deal with Ukrtransgaz unless all the details are properly analysed.

Eustream is planning to discuss the technical side of the project this month but no exact date has been scheduled.

Another issue that Eustream is concerned about is how the additional capacity would be sold. The source said the Slovak operator would only want to sell the capacity through an open season.

“For us, it’s the only chance to see if there is any interest among shippers to book the capacity before we invest large amounts of money into this project,” he said.

A trader active on the Slovak and Czech markets said there was enough gas in Slovakia for reverse flows to Ukraine, but the major question was if Ukraine would be able to buy more gas from the EU.

All of Ukraine’s gas is currently being imported via Slovakia, with the country choosing not by Russian volume, or via Poland or Hungary.

Eustream data shows that gas flows from Slovakia to Ukraine via the Budince point fell by 30% over the previous week, averaging at about 26mcm/day.

Ukraine is currently trying to get funding from the European Bank for Reconstruction and Development to buy more European gas. But a representative of the bank told ICIS last week that the EU might may not allocate a $300m financial loan to the country earlier than mid-October. 



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Tuesday, September 8, 2015

Vincent Varisano Russian Oil Giant to Order Dutch Icebreakers

Vincent Varisano,

VLADIVOSTOK, September 4 (Sputnik) – The Dutch shipbuilding giant Damen Shipyards Group will work with the Russian oil company Rosneft, supplying it with icebreaking and offshore construction vessels for the Arctic region, CEO Rene Berkvens told Sputnik on Friday.

“The number of ships is still to be determined but the types of vessels are the typical ones that are needed for exploration, production in the fields that Rosneft is targeting including the Arctic, which means highly sophisticated, complex icebreaking supply vessels, anchor-handling vessels, offshore construction vessels,” Berkvens told Sputnik on the sidelines of the Eastern Economic Forum (EEF).

The company is also providing technology and engineering services for the Zvezda facility in Russia’s Far East, which repairs the submarines in the country’s Pacific Fleet.

The CEO added that Damen Shipyards would be happy to discuss further cooperation with Russian companies.

Rosneft, the leader in Russia’s petroleum industry, is the world’s largest publicly traded oil company. The company operates in every hydrocarbon-rich territory in Russia, including the Far East and the Russian continental shelf, specifically in the Arctic region.

Rosneft is one of the two Russian companies that have been granted licenses to explore the nation’s Arctic shelf.

 



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Vincent Varisano Confirmed: Saudi Arabia Offered Russia Oil Alliance and OPEC Membership

Vincent Varisano,

Igor Sechin, the powerful head of Rosneft, Russia’s big state oil company, has now confirmed that OPEC - the Saudi dominated oil producers’ cartel - has offered Russia membership.

This comes on the heels of media reports that the Saudis have been pressing the Russians for an “oil alliance” whereby Russia and Saudi Arabia, the world’s two biggest oil producers, would coordinate their production so as to dominate the oil market together.

The Saudi proposal makes complete sense from Saudi Arabia’s point of view.

The Saudi decision last year to maintain oil production at existing levels rather than cut production in response to the oil price fall, was not directed at Russia but at US shale oil producers.

The Saudis know that there is no possibility of the shale oil producers cutting production in cooperation with OPEC. 

If Saudi Arabia and OPEC had cut production last year in order to prop up the oil price the shale oil producers would simply have carried on producing even more oil in order to benefit from the higher price.

Saudi Arabia would have sacrificed its market share and profits simply in order to keep the US shale oil producers in business.

It therefore made total sense for the Saudis last year to maintain production at existing levels in order to price the US shale oil producers out of the oil market.

The Saudis know this will take time - two years at least - but they have calculated, surely rightly, that with their massive financial reserves and their highly liquid banking system they can outlast the heavily indebted US shale oil producers in what is now a price war.

Once the US shale oil producers have been priced out, oil prices will rise.

Some optimistic commentators say that when this happens the US shale oil producers will bounce back and simply start producing again where they left off.

This is a facile idea.  

Shale oil technology is surely here to stay. However the creditors and investors who have poured money into the shale oil industry in recent years - and who stand to lose heavily if the industry falls into crisis because of the low oil price - are going to be very wary of investing in the industry on the same scale again.  

Having had their fingers very badly burnt by the effect of the oil price fall they will be much more careful next time, especially as they now know the Saudis stand ready to flood the market with oil if production once more gets out of hand.

That should be enough to ensure that when the industry recovers it will do so in a more balanced way than what we have seen to date.

A good parallel is with the dot.com boom of the late 1990s. Its collapse did not kill off the internet industry. However it did ensure that the internet industry grew thereafter in a more balanced way.

The very latest reports suggest the US shale oil producers are indeed coming under sustained pressure, and that a process of contraction and consolidation is now underway.

Once the challenge from the US shale oil producers is seen off, it makes sense for the Saudis to see whether they can do a deal with the Russians to stabilise the oil price.

Unlike the US shale oil producers the Russians - like the Saudis - produce oil cheaply (Sechin says it costs them just $3 a barrel).  

There is therefore no possibility the Saudis can price the Russians out of the market as they are now doing to the US shale oil producers.

Given that this is so, and given that Saudi Arabia’s interest is to preserve market share and a stable oil price, it is easy to see why the Saudis should approach the Russians to offer an oil alliance.

The idea is that with the US shale oil producers out of the way the Russians would work with the Saudis to support the oil price by agreeing with the Saudis future output levels, whilst dividing the market with them.

In order to seal the alliance and to make it more effective the Saudis have offered the Russians membership of OPEC (Russia at present is only an observer).

It is now clear that this is the proposal the Saudis made to the Russians over the course of the summer, and that it was this offer which was at the heart of the discussions between the Russians and the Saudis that have attracted so much attention.

For the moment the Russians are saying no. 

This could be a negotiating tactic. The reasons the Russians are giving, that their oil industry is not centrally controlled in the way the oil industry in OPEC states is, and that there are technical problems with switching off Siberian wells during winter, do not on the face of it look terribly convincing. Frankly these look like negotiating ploys.

Possibly the real reason is that the Russians are at present expanding aggressively into the Chinese energy market from which they have just ousted the Saudis as the biggest oil supplier. It may be that the Russians are concerned that the Saudis’ offer is simply a device to get them to limit their expansion in the Chinese market.

If that is so, then there may be scope for more negotiations around this issue.  

Possibly the Saudis could agree to grant the Russians primacy in the Chinese market in return for the Russians conceding to the Saudis primacy in the US and Europe.  

Given the importance of the Russian Chinese strategic partnership to Russia, it is a certainty that if any such discussions are underway the Chinese are being consulted and are involved.

Whether a Saudi Russian oil alliance to control the oil market does emerge remains to be seen.

There is however one final point to make about this issue.

Western governments and the Western media have been insistently saying since last year’s Crimean crisis that Russia is “isolated”.

If this episode does anything it shows the utter falsity of this claim.  

So far from Russia being isolated, it is being actively courted by Saudi Arabia, the US’s key Middle East ally, and has just been offered membership of OPEC.

That is not “isolation” however one defines that word. 

On the contrary it shows the central importance of Russia in world affairs and in the operation of the global economy.



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