Bringing the WTO Into the Relationship

William Burns, US Ambassador to Russia in a speech printed in Moscow Times, cites that last month's US-Russia bilateral agreement on Russia's entry into the World Trade Organization is the single biggest achievement in economic relations between our two countries in over a decade. To read the article, please download the attachement below.

Download bringing_the_wto_into_the_relationship.doc

FRAEC to host first Ukraine group

FRAEC is pleased to announce an opportunity to host visitors from Ukraine in your home this coming fall! Ten visitors from across Ukraine will spend three weeks in the Puget Sound region in October 2006 on the Community Connections Program meeting their American counterparts and experiencing U.S. culture and professional life.

Hosting Dates are September 30 – October 18, 2006. Click here for participant profiles.

The Community Connections Program, managed by the Bureau for Europe and Eurasia at the U.S. Agency for International Development (USAID) and administered by World Learning, is designed to promote public diplomacy through the exchange of cultural ideas and values among participants, U.S. families local community host organizations. It seeks to establish and strengthen ties between U.S. communities and communities in Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

Home hosts provide a separate bedroom, along with breakfast and dinner on most days. USAID funds cover all other participant expenses, including a daily stipend, medical insurance, transportation, and phone cards. Participants will spend weekdays in group training activities; most evenings and weekends are yours to share together. This is a wonderful opportunity to make a new friend, to learn more about a new culture and to share the best of our community with our guests!

For more information, or to volunteer as a host, please contact Ryan Boe at (206) 770-4002 or ryanb@fraec.org.

G8 Summit Results

The G8 Summit held in St. Petersburg, Russia has ended with a variety of results. For further information on the results, please go to G8 Summit Reports.

Kudrin Warns of Spending Diaster

An article in The Moscow Times highlights the various views of Russian government officials on the state of the economy and strategies being dicussed at the St. Petersburg International Economic Forum. Finance Minister Kudrin warned that raising government spending as petrodollars flood into the economy could be "catastrophic for Russia" -- one day after President Putin and Deputy Prime Minister Medvedev reasserted plans to do so. Also plans to expand a proposed new law limiting foreign ownership from 17 to 39 strategic sectors is expected to become law by the end of the year. To read more please go to The Moscow Times.

Upcoming Tech & Entrepreneurship Conference in Russia

FRAEC is pleased to extend this invitation to our partners to take part in the upcoming Emerging Technologies and Entrepreneurship Conference, organized by TEKAMA, and to be held in Moscow, Russia, June 15-16, 2006. Please visit the conference web site, www.etecr.ru/eng, for more information.

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We are honored to extend the invitation to you to participate in the first international Emerging Technologies and Entrepreneurship Conference – Russia/CIS 2006 (www.etecr.ru), which is going to be held in Moscow, Russia, on June 15-16 of 2006. ETEC(R) will present an in-depth and substantive discussion on the emerging technologies that originate from the private, corporate and academic sectors; look into best entrepreneurial practices; and stage a dialog between the government, industry and academia on various partnership models to foster invention, innovation and entrepreneurship.

ETEC(R) is organized by TEKAMA – the leader in education and consulting for the high tech industry in Russia/CIS, sponsored by Intel, Microsoft, the US-Russia Center for Entrepreneurship, supported by the AmBAR, Mid-Atlantic – Russia Business Council, New Eurasia Foundation, and a number of industry organizations.

 

This is a perfect opportunity to learn about the exciting emerging technologies coming out of the Russian industry and academia, network with international business community, and showcase the latest technologies developed at your company.

 ETEC(R) presentations will focus on the Business of Technology:

• Russian Success in Global Technology Markets
• Cross-Border Tech Companies
• Venture Financing for Russian Technology Companies – from Russian and International Sources
• Corporate Governance in Technology Markets
• Business Models for Technology Startups
• Skating Where the Money/Technology Will be

Technology Roundtables will discuss the most prominent technologies emerging in Russia:

•  Healthcare: Biotech, Medical Devices
•  Alternative Sources of Energy, Advanced Materials
•  IT, Multicore Technologies, Embedded Systems
• Real World Web: Wireless Sensor Networks, RFID, Mesh Networks, Location-Aware Applications.

In addition to conference presentations and technology roundtables, ETEC(R) will feature the Emerging Technology Exhibition, Business Lab (open discussion on real cases submitted by labs and start-ups), ‘Guru’ Workshops and Entrepreneurship Seminars, Match Making for potential partners and an array of networking events.

For more information about ETEC(R) please visit www.etecr.ru or contact the organizers at etecr@russee.com.

 

Putin's "State of the Union" Address

It has been said that “Russia’s business is Russia”, and that is evident in President Putin’s Annual State of the Nation Address, given on May 10^th. In his speech, which focused on domestic concerns, he highlighted the challenges to Russia’s development and proposed initiatives that are geared towards addressing key issues: corruption, economic development, innovation, energy development, technology, education, reforming the army, health and Russia’s decreasing population. These areas are critical to Russia’s development and it is encouraging to read his comments. In the international sphere he focused on the importance of cooperation on many fronts including nonproliferation, terrorism and accession to WTO. There were several indirect references to the U.S. government, but much of his focus on foreign policy could be construed as the priority of the “near abroad”, the CIS. To read Putin's address (in English) in its entirety on the Kremlin.ru website, click here.

Sakhalin Island: Journey to Extreme Oil

Business Week Online has posted an interesting article and slideshow on the challenge of oil development on the extreme north of Sakhalin Island:

The 600-mile-long strip of mountains and forests off Russia's Far East is as good a vantage point as any to see the international oil industry's future and the challenges it faces. Big Oil is having to place ever bigger bets to get the reserves it needs. As a result immense new landmarks -- drilling platforms, pipelines, and liquefied natural gas facilities -- are rising through the mists of this forbidding island. An estimated 45 billion barrels of oil equivalent lie beneath the icy seas off its shores, a figure rivaling what remains in the U.S. or Europe. But developing those resources is proving lengthy, difficult, and expensive. Cost overruns have been huge, and no one knows if the Russians will end up controlling the assets now being built. "This is a frontier project like the North Sea or Alaska [was]," says Ian Craig, CEO of Sakhalin Energy Investment Co. "The industry doesn't know how to do everything" here yet...
 
There's a lot at stake. Oil and gas from beneath three platforms off the island's northeast coast will be pumped onshore by pipeline and sent 500 miles south to the tip of the island. There the oil will be loaded into tankers and the gas supercooled in giant liquefied natural gas plants, to be shipped to energy-hungry Japan and South Korea, and probably to China. Some gas will also pass through a terminal in Baja California, Mexico, and on to the West Coast of the U.S.

If successful, the project will confirm Sakhalin's stature as a major new energy province and transform Russia into a key supplier to Asia. Sakhalin II will also be Russia's first ticket into the game of liquefied natural gas, a hot area of the energy industry these days. Altogether, Sakhalin II boasts 4.5 billion barrels of reserves. Shell expects to be producing 185,000 barrels a day of oil plus condensates from gas and 467 billion cubic feet per year of gas by 2008. Sakhalin II "is a vanguard project for all of Russia," says Dinty Miller, BP PLC's recently retired senior VP for Sakhalin. "It's a huge barometer on what can be done."

Click here to read the entire article and to view the slideshow.

FRAEC Governance Group at Seattle City Council Meeting

FRAEC is hosting a delegation from Primorsky Krai focused on governance. Yesterday the group was at the Seattle City Council Meeting and met with Seattle City Council member Tom Rasmussen and then attended the full council meeting. View on line on the council web site a presentation by Vladimir Novikov, the Mayor of Artyom, Primorsky Krai at Seattle City Council web site, then click on "Full Council 3/20/2006" (requires RealPlayer). The presentation of the group starts at 2 minutes 43 seconds into the video.

Response to "Russia Through the Looking Glass"

Mischa Gabowitsch, editor-in-chief of Neprikosnovenny Zapas (NZ), a Russian journal on politics and culture, has taken issue with and posted a reply to Nicolai Petro's article "Russia through the Looking Glass", which an excerpt of which appeared on the FRAEC blog. Mr. Gabowitsch presents some interesting counter-arguments from the Russian perspective, with recommendations for ways to encourage democracy in Russia:

Vladimir Putin is not a fascist, and it would be disastrously wrong to blame all of Russia's problems on him and his administration. They probably earnestly believe they are working for the good of the country – mainly because they are unable to distinguish between themselves and Russia. And many people remain convinced that Putin is steering the right course, although few would refer to it as "democratic". However, more and more groups – soldiers' mothers, pensioners, students, and others – are seeing their rights being trampled upon, and are consequently becoming alienated from the state. The oil bubble is still growing, but once it bursts or even begins to deflate, people will start asking difficult questions.

While it is important that western governments and foundations support human-rights groups and other civil-society initiatives even more than they have done in the past, they must realise that no amount of direct foreign involvement is likely to produce large-scale grassroots support for democratic change – that is something that must evolve from within.

Meanwhile, the west can do two things: first, refuse to slam the door in the face of Russian civil society by taking everything the Kremlin's spin-doctors are saying at face value; second, set an example. What Russian democracy needs is higher ground, not the common ground of Grozny and Guantánamo.

You can read the full article, and Mr. Petro's response, on the Open Democracy web site.

Recap of U.S.-Russia Technology Symposium

By Carol Vipperman

Three years ago when I first attended the US-Russia Technology Symposium hosted by Stanford University the message was clear – venture capitalists were not looking to Russia for investments. The general message was “if you have to drive further than one hour, then it isn’t worth investing in – come to Silicon Valley”. Although the majority of Silicon Valley VC’s still consider options at home more attractive, a small number of venture capitalists are now following the many companies looking abroad in China, India and to some degree Russia for new opportunities.

FRAEC was one of the marketing partners for this year’s Symposium held on February 9 and 10 in Palo Alto so I had a chance to hear first-hand the various speakers from Silicon Valley and Russia talk about this year’s theme of “Russia in the Global Marketplace”. Co-sponsors Russoft, and their marketing promotion company “Fort Ross” with support from the Ministry of Education and Science, Ministry of Information Technologies, Ministry of Foreign Affairs and the Russian Chamber of Commerce and Industry ensured that there was a wide attendance from the Russian side.

Some highlights from the many panels and presentations include:

Stacy J. Smith, VP of Finance & Enterprise Services and CIO, Intel Corporation gave an interesting account of Intel’s experience in Russia (the company has grown from 30 employees in 1995 to over 1200 today!) and the state of Russian IT. He reported that there are over 1000 assemblers of PC’s, over 100 million cell phone subscribers and 18 million internet users in Russia. Russia is 62nd out of 104 countries in network readiness and they are 19th out of 104 countries in scientific ability. He gave a call to action for the Russian government to maintain Russia’s educational focus and to form a stronger business and government partnership to foster the build out of the infrastructure needed for IT growth. Wireless is critical and common IP enforcement across the regions as well as clarity of business regulations are needed. This need for common enforcement of regulations was mentioned often during the two-day event.

Linda Himelstein, Author, Former Silicon Valley Bureau Chief, Business Week led a lively discussion with Ann Winblad, Co-Founding Partner, Hummer Winblad Venture Partners and Tim Draper, Founder & Managing Director, Draper Fisher about investing in future leaders. Unlike many of the VC’s Tim’s mission is to “spread venture capital around the world” and has formed affiliates in many places including a future presence in the Ukraine. He said that he would invest in Russia but wouldn’t locate there. When asked about why that was, Tim responded that the impression he gets as a business person is that Russia is less business friendly and that the message being sent is one of  “command and control”. That drew some interesting responses from the audience. Both of the speakers emphasized that the geographic barriers are gone and governments around the world need to understand and recognize this. They also commented that the US has been a competitive market and it is “ours to retain or lose”. The US has to look at its VISA and educational systems as well as capital structures.

Several panels compared Russia with China and India as sources of potential investment, environments for entrepreneurship and opportunities. The keys to success, according to some of the speakers are:

• Market driven approach
• Preferred shares system, which are in effect in the US, Israel and Japan.
• The belief that failure is a major component of success; and
• Understand the difference between effort versus results – as one panelist said “don’t confusemotion with progress”.

Participants were able to hear Geoffrey Moore, author of many books and a partner in a VC firm on the many faces of innovation and Vinton Cerf, Chief Internet Evangelist, Google who is considered to be the “father of the internet”. We learned that in 1973 he and his colleague developed the plan for the internet in the hotel where the conference was located. He talked about The New Big Thing which both educated and entertained us simultaneously.

It was personally gratifying to see the development of RUSSOFT Association, www.russoft.org, a participant in the outsourcing panel. Russoft Association is the voice of the industry and an active lobbyist of its interests in the Russian Government. FRAEC was an early supporter of the Russian IT industry and worked closely with some of the key members of Russoft while they were sorting out their various options to develop a voice for their industry.

Moderator Dr. Moira A. Gunn, Host, NPR’s “TechNation” and “BioTechNation" led a discussion with Patricia Cloherty, Chairman & CEO, Delta Private Equity Partners and Bill Draper, General Partner, Draper Richards focused on the topic “Valley to India and Russia”. Although Bill’s firm has focused on India and hasn’t ventured to Russia, Pat spoke candidly about the many opportunities in Russia. She commented on the decision to focus on consumer goods market was driven by the tremendous returns received from their investments. In a mature market consumer markets usually do not give such high returns, however in a market such as Russia, which is developing its consumer markets, the opportunities are limitless. She indicated that they are beginning to look at technology investments in response to questions from the audience.

Dmitry Livanov, Deputy Minister of the Ministry for Education and Science of the Russian Federation gave closing comments and highlighted key priority areas including:

1. Modernize the R&D sector which includes reforming the Russian Academy of Science and applied research institutions.
2. Develop the innovation infrastructure – provide support of small and medium sized enterprises, locate technoparks and incubators by universities to help promote innovation.
   
3. Create a legislative environment to support innovation including enhancing IPR.
   
4. Stimulate Russian companies to innovate in public/private partnerships. They will require changes in taxation.

As the Deputy Minister indicated, this is an ambitious program and the Russian Government is open for discussion with others on their ideas.

The panels were informative and exhausting as there were many and back-to-back, but time well spent.  My hats are off to the organizing committee led by Alexandra Johnson, Landbridge Capital for organizing and keeping this conference on the fore front of American investors.  For more information please go to the website http://www.usrts.org/stanford/live/home.asp.