Putin, Facing Sputtering Economy, Declares a Tax Crackdown

By Gabrielle Tétrault-Farber

Sergei Karpukhin / Reuters

Putin speaking in the Kremlin on Thursday during his State of the Nation address. The president said he is not abandoning his spending pledges.

President Vladimir Putin capped off a year of aggressively seeking to fill the government's coffers by announcing Thursday that the government would begin to tax Russian offshore companies and no longer support foreign-registered enterprises

Pro lift export barriers, reform the education system and provide tax breaks to regions that support business development.

The unsurprisingly business-oriented speech and the new crackdown on tax evasion come amid Kremlin efforts to keep capital within its vast borders, an objective Putin addressed in last year's Constitution Day speech, as well as at this summer's Group of Eight summit and St. Petersburg International Economic Forum.
Putin has been keen to fill state coffers that were depleted following the 2009 recession. Economic growth has slowed to an expected 1.5 to 1.8 percent this year from 3.4 percent in 2012, leaving the government struggling to make ends meet and putting enormous pressure on both Putin and the Cabinet led by Prime Minister Dmitry Medvedev.
Putin, speaking in the Kremlin on the 20th anniversary of the adoption of the country's Constitution, said that companies could go offshore, but that they would have to "bring the money back to Russia."
Putin boldly suggested that Rosneft's takeover of TNK-BP, a Moscow-based oil company whose parent company is registered in the British Virgin Islands, was an example of problematic corporate conduct.
Rosneft head Igor Sechin, head of state-run oil company Rosneft and a close ally of Putin, defended his company's $55 billion offshore transaction in March, telling RIA Novosti on Thursday that business partners often insist that businesses be registered offshore.
Sechin also said that for Putin's announcement to come into effect, Russia would have to withdraw from agreements on the avoidance of double taxation with offshore companies.
Putin's efforts to keep capital at home left another longtime Putin confidant, former Finance Minister Alexei Kudrin, unimpressed.
"Unfortunately, the proposed measures will hardly stop the outflow of capital," Kudrin tweeted.
Indeed, Putin's measures, while matching the OECD's global efforts to fight offshore tax evasion, will not necessarily curb the flight of capital from Russia, said Art Franczek, president of the Moscow-based American Institute of Business and Economics.
"Companies have smart tax lawyers who will look for ways to get around this," he said. "Russian companies still do not feel the business environment is positive enough for them to keep their capital in Russia."
If Putin's plan were to succeed, the Russian government could collect an additional "tens of billions of rubles," said Finance Minister Anton Siluanov,  Interfax reported.
Capital flight totaled $48.1 billion in the first three quarters of 2013, the Central Bank said last month. On top of that, investment funds withdrew $355 million from Russia between Nov. 6 and Nov. 20, Prime reported.
Putin also used his annual address to appeal to his nationalist supporter base, exalting the Russian military's "superiority" and promising to enforce tougher regulations on migrant workers from other former Soviet republics.
"We are facing a complex task. We cannot sever our ties with the former republics of the Soviet Union, but we need to enforce order," he said.
Putin said that foreigners who entered Russia without a visa and remained in the country "without a purpose" could be banned from the country from three to 10 years.
Despite ordering a stricter regulation of Russia's migrant workers, Putin did not shy away from expressing Russia's willingness to exercise its "soft power" to win over and build ties with foreign allies.
"We need to significantly increase the export of high-quality educational services, to create conditions for education in Russian universities for foreign citizens and our compatriots, mainly from CIS countries," Putin said. "This is a serious tool for strengthening the cultural and intellectual influence of Russia in the world."
While openly promoting Russian cultural domination over the Commonwealth of Independent States, Putin denied that the Kremlin bullies the former Soviet republics.
"We do not impose anything on anyone," Putin said, referring to ongoing pro-European protests in Kiev.
Putin's speech was also imbued with subtle retorts to Russia's Western detractors.
Toward the end of his address, Putin obliquely backed Russia's "gay propaganda" law, which has infuriated rights groups and the international community.
"We know that more people in the world support our position on the protection of traditional values," Putin said, listing "traditional family values" first among Russia's array of moral principles.
Putin took another subtle shot at the West, making self-congratulatory remarks on his instrumental role in striking a United Nations Security Council resolution to rid Syria of its chemical weapons, which earned him a Nobel Peace Prize nomination.
"Our choice [regarding Syria] was made exactly on the basis of fundamental principles of international law, common sense and logic," Putin said.
Despite his forward-looking — albeit unsurprising — address, Putin remained surprisingly silent on a draft bill he submitted to the Duma on Monday that was to grant mass amnesty to scores of prisoners in honor of the 20th anniversary of the Constitution. The legislation, the brainchild of entrepreneurs' rights commissioner Boris Titov, could release, among others, thousands of businessmen jailed on tax and other charges that supporters say are fabricated.

Contact the author at g.tetraultfarber@imedia.ru

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The Moscow Times 

Russia-EU Tug of War Over Ukraine Escalates

By Yekaterina Kravtsova

Andrew Kravchenko / AP

U.S. Assistant Secretary of State Victoria Nuland, right, and U.S. Ambassador to Ukraine Geoffrey Pyatt offering food to riot police officers in Kiev.

As pro-European protesters continue to face off against riot police on Kiev's central square, a related confrontation between Western governments and Russia over the future of geopolitically crucial Ukraine is escalating, with both sides vying for the upper hand.
European Union foreign policy chief Catherine Ashton continued a two-day visit to Kiev on Wednesday, walking among the demonstrators on Maidan and meeting with Ukrainian President Viktor Yanukovych, and U.S. Assistant Secretary of State Victoria Nuland traveled to the Ukrainian capital as well in an effort to help "save Ukraine's European future."

"We also made clear that we believe there is a way out for Ukraine and it is still possible to save Ukraine's European future, and that is what we want to see the president lead, and that is going to require immediate security steps," Nuland told reporters after a two-hour meeting with Yanukovych, news agencies reported.
Meanwhile, in Russia, the State Duma issued a statement condemning Western countries for purportedly interfering in Ukraine's internal affairs and putting pressure on the country's government, echoing earlier sentiments communicated by Foreign Minister Sergei Lavrov. Russian lawmakers called on the Kiev protesters to "stop the illegal actions" that they said were destabilizing the country.
With Russia and the West dug in to their positions of trying to sway Kiev toward them, the Ukrainian government appears torn over how to proceed, and national polls show a roughly equal division in the country's population over which path to take.
Ukrainian Prime Minister Mykola Azarov said Wednesday that Ukraine was not going to discuss joining the Russia-led Customs Union at an intergovernmental meeting with Moscow next week and that talks with the EU were ongoing over an association agreement. Kiev had declined to sign a deal with the EU in late November after strong pressure from Russia.
But, speaking at a Cabinet meeting, Azarov also said Russia and Ukraine were close to a decision on bilateral trade, while Yanukovych said Tuesday that it was not possible to talk about the future of Ukraine without talking about restoring trade relations with Russia.
Azarov said that in order to prop up the struggling Ukrainian economy, the government would need 20 billion euros in financial assistance from the EU budget, presumably to compensate for revenues from trade with Russia that would be lost if the EU deal were signed.
"I want to draw attention to the motives behind the protests of our citizens," Azarov said. "Those who came to Maidan demand the immediate signing of the Association Agreement with the EU. The government also is in favor of signing the agreement as soon as possible, but we want to create conditions under which losses for the Ukrainian economy will be minimized."

Vasily Fedosenko / Reuters

Ashton, right, on a visit to Maidan.

Azarov said European officials were "not in a hurry" to help Ukraine financially, but Reuters reported late Wednesday that the EU was holding talks with the International Monetary Fund and the World Bank on arranging assistance for Kiev were it to sign the association deal.
Ashton visited Maidan on Tuesday night and held talks with Yanukovych on both Tuesday and Wednesday, saying in a statement Wednesday that she was "impressed by the determination of Ukrainians demonstrating for the European perspective of their country."
Speaking at a news conference Wednesday, Ashton said Yanukovych had told her that the crisis in Ukraine would be resolved within 24 hours, Interfax reported. She did not elaborate.
Riot police moved to clear the protesters from Maidan overnight Tuesday to Wednesday but were repelled, and they retreated. On Wednesday evening, Yanukovych, who a day earlier in a televised meeting with three former presidents of Ukraine called the protests a "shameful page" in the country's history, called for dialogue with opposition leaders who are presiding over the protests.
Yanukovych also met Wednesday with U.S. Assistant Secretary of State Victoria Nuland, who visited protesters at Maidan earlier in the day and said it was still possible to for Ukraine to move closer to the EU.
U.S. Secretary of State John Kerry used stronger language in a statement Tuesday, saying the U.S. was disgusted by the actions of the Ukrainian authorities.
"For weeks, we have called on President Yanukovych and his government to listen to the voices of his people who want peace, justice and a European future. Instead, Ukraine's leaders appear tonight to have made a very different choice," he said, referring to the attempted clearing of Maidan by riot cops.
But Viktor Mironenko, head of the Ukrainian Research Center at the Russian Academy of Sciences, said Western politicians' statements did not represent serious pressure on Ukraine when compared to the actions of Russian authorities.
"Today, Russia announced that it would no longer buy delivery vehicles produced in Dnepropetrovsk, so both economic and political pressure on Ukraine will be continued," Mironenko said by phone. "But the pressure that started this summer has been so strong that it is difficult to imagine how much stronger it can be in the future."
Russia tightened customs controls at the Ukrainian border over the summer, signaling to Kiev that economic punishment was in store if it signed the EU deal.
Mironenko also said that even though Ukraine did need economic help, it was unlikely that the EU would provide it until the situation in the country became stable, adding that 20 billion euros was a "fantastical amount" and the mechanisms for the EU to give it were unclear.
Given the aggressive tug of war over the country, Mironenko said the future of Ukraine was unclear.
"Ukraine has turned into a reason for a fight between Russia and the West. The situation in the country could develop in a completely unexpected direction," he said.

Contact the author at e.kravtsova@imedia.ru

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The Moscow Times 

Moscow Minimum Wage Set at $384 per Month From January 1

The Moscow Times

Timothy Misir / MT

January ses a 400-ruble raise in the city's minimum wage, and a further increase of 250 rubles in July.

The minimum wage in Moscow will increase to 12,600 rubles ($384) a month starting in January, with a further 250-ruble raise planned for July.
Moscow Mayor Sergei Sobyanin signed the order after negotiations with the city's trade unions and employers' associations, an unidentified official said, Interfax reported Tuesday.

In July, the minimum wage in the capital was raised from 11,700 rubles to 12,200 rubles.
The average monthly wage in the city is about 57,000 rubles, a city official said in October. The official country-wide minimum wage, as decreed by President Vladimir Putin this year, is 5,205 rubles.

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The Moscow Times 

Putin Shuts State News Agency RIA Novosti

By Gabrielle Tétrault-Farber

Vladimir Filonov / MT

Late-afternoon traffic zooming past the massive headquarters of the RIA Novosti news agency next to metro station Park Kultury on Zubovsky Prospekt.

President Vladimir Putin on Monday issued a decree ordering the liquidation of RIA Novosti, the massive state-owned news agency, and mandated the creation of a new global news agency to be headed by an aggressively pro-Kremlin television host.
In its own article about the news, RIA Novosti's English-language service said the decision signaled a strengthening of the Kremlin's grip over media in the country.

“The move is the latest in a series of shifts in Russia’s news landscape, which appear to point toward a tightening of state control in the already heavily regulated media sector,” the news service wrote.
The presidential decree came as a shock to the Russian media scene — including to RIA Novosti employees, who were not informed of their agency's reorganization ahead of time. One employee of the agency, who requested anonymity because he was not authorized to speak to the media, said the corporate New Year's party had been cancelled and that everyone was “demoralized.”
Another RIA Novosti employee said they were told that after a change in leadership over the next month, the organization could be sold off piece-by-piece to other Russian media companies.
Kremlin administration head Sergei Ivanov justified the decision to shut the agency on financial grounds, while also admitting to the “soft power” purposes behind its replacement, to be called Rossia Segodnya.
“The new agency is a more rational use of budgetary funds allocated to state information resources, and we are talking about reducing — and not increasing — funding,” Ivanov told journalists, Interfax reported.
“Russia is pursuing an independent policy, firmly protecting its national interests and explaining this to the world is not easy, but it can and must be done,” Ivanov said.
The direct translation of Rossia Segodnya is “Russia Today,” the former name of state-owned English-language television channel RT. The new agency apparently will remain separate from RT, however, while it remains unclear what languages it will publish in.
RIA Novosti is the successor of the Soviet Information Bureau, founded in 1941 to cover World World II. It has since become Russia's most prominent news agency and is considered one of the most objective media outlets in the Russian government's large array of holdings. The agency has hundreds of employees, including in 69 cities across Russia and in 49 countries.
The move to close it came as no shock to political analyst Stanislav Belkovsky, who said there had been talk within the government for almost a year of replacing RIA Novosti editor-in-chief Svetlana Mironyuk with a “harsher Putin propagandist.”
“I was not terribly surprised to hear of RIA Novosti's liquidation,” said Belkovsky, who is founder and director of the Moscow-based National Strategy Institute.
“The regime is in a state of degradation. They needed a new agency to more adequately circulate Putinist propaganda abroad,” Belkovsky said.

Mikhail Klimentyev / RIA Novosti / AP

Dmitry Kiselyov in 2008

The “Putin propagandist” to replace Mironyuk will be Dmitry Kiselyov, a television host on Russia's state-owned Channel One, who was appointed head of the new Rossia Segodnya agency with the stated goal of “highlighting the state policies and social life of Russia abroad.”
Kiselyov is infamous for praising Stalinist politics and saying in August that the hearts of homosexuals should be “buried or burned” if they were to die in an accident.
Last week, Kiselyov raised eyebrows again by saying that Sweden, Poland, Lithuania and Ukraine had used recent anti-government protests in Kiev to “foment war with Russia.” Kiselyov argued that these foreign nations were “taking revenge” on Russia for the 1709 Battle of Poltava, in which the Russian Empire defeated Swedish forces.
“The Kremlin's direct nomination of the head of the agency inherently jeopardizes its journalistic independence,” said Johann Bihr, head of the Eastern Europe and Central Asia Bureau at Reporters Without Borders. “While we are only speaking of a 'reorganization' of the agency, the announcement does not change the Kremlin's vertical control of the media.”
Russia currently ranks 148th in Reporters Without Borders' Freedom of the Press Index, placing behind Libya, Angola and Afghanistan.
Anna Kachkaeva, dean of the media communication department at the Higher School of Economics in Moscow,  expressed her dismay at the decision, writing on her Facebook page that the appointment of Kiselyov “was a 'slap' for all critics and many dissatisfied journalists” and that the decree meant a “return to the Soviet Union” and demonstrated “a remarkable lack of understanding of the current world of communications.”
While the reorganization of RIA Novosti and the expected purge of its senior management seems to point to the Kremlin's desire to increase the loyalty of its media outlets, the agency faces similar financial challenges to those of other international news organizations, many of which have been forced to cut spending and lay off staff in recent years.
RIA Novosti's presence in 45 countries and coverage in 14 languages has come at a high cost. In 2011, the government allocated 3.15 billion rubles ($109 million) in "subsidies" for the news agency, three times more than for Itar-Tass, the country's oldest state agency, which received 1.1 billion rubles.
RIA Novosti editor-in-chief Mironyuk told The Moscow Times in 2011 that the agency would supplement its state subsidies with its own earnings, a sum equal to 25 percent of the government grants, and planned to increase its earnings share to 33 percent.
The liquidation of RIA Novosti, which had received the status of national host agency of the 2014 Sochi Winter Olympics, also raises questions about Russia's coverage of the event with its new outlet.
An International Olympic Committee representative told The Moscow Times that it was aware of Putin's decree and that it “understands it would not impact the Games' operations.” The representative did not elaborate.
Putin's decree also abolishes the State Fund of Television and Radio Programs, subjugating it to the All-Russia State Television and Radio Broadcasting Company. It also places Voice of Russia, a state-owned broadcasting corporation, under the management of Rossia Segodnya.

Contact the author at g.tetraultfarber@imedia.ru

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The Moscow Times 

Greenpeace Activists Seeking Exit Visas

Twenty-six of the “Arctic 30” posing in St. Petersburg. The four not pictured: Francesco Pisanu of France, Tomasz Dziemianczuk of Poland, and Yekaterina Zaspa and Andrei Allakhverdov of Russia.

Environmental campaign group Greenpeace said Wednesday it was seeking to obtain documents allowing its foreign activists being prosecuted by the Russian authorities to return home to their families for Christmas.
Twenty-six of the 30-member international crew of the icebreaker Arctic Sunrise, detained by Russian border guards in the Arctic in September and bailed last month, plan to leave the country pending trial as soon as they receive the proper permits, the organization said.

"They were not planning to come to Russia, so they do not have any visas," Mikhail Kreindlin, a representative of Greenpeace Russia, said Wednesday.
The activists have been registered by the Federal Migration Service at a St. Petersburg hotel where they are staying. They have their passports but no documents that would allow them to cross the Russian border, Kreindlin said.
The 28 activists and two journalists were arrested last month after some of them attempted to scale the Prirazlomnaya oil platform, owned by an affiliate of state-owned energy giant Gazprom, in protest at offshore drilling in the environmentally sensitive Arctic.
They face a maximum sentence of seven years in jail in convicted.

http://www.themoscowtimes.com/business/article/greenpeace-activists-seeking-exit-visas/490926.html#ixzz2mZwhVevk 

The Moscow Times 

Russian Banks Exposed in Ukraine's Political Crisis

Gleb Garanich / Reuters

Protesters in Kiev are not planning to allow a return to business as normal.

VIENNA/MOSCOW — The political crisis in Ukraine, sparked by an East-West power struggle in which Moscow has gained the upper hand, is increasing the risk to the country's financial system and creating a particularly acute headache for Russian banks.
As crowds took to the streets to protest after Ukrainian President Viktor Yanukovych rejected a trade and cooperation deal with the European Union last week in favor of closer ties with Russia, Ukraine's rattled central bank, low on reserves, appealed to people not to pull their deposits from the banks.

Ukraine has a "systemic" problem with bad loans, but its interbank money market is functioning normally despite the upheaval of the past week, Russia's state development bank VEB said Wednesday.
Ukraine seems to have little immediate prospect of additional financial help to meet its big external deficits and financing needs, making it even less attractive to the foreign banks that flocked there before the 2008 collapse of Lehman Brothers triggered the worst of the global financial crisis.
While other foreign lenders have cut their Ukraine exposure in the five years since — to 20 percent of Ukraine banking sector assets in 2012 from 40 percent in 2008, according to a Raiffeisen Research survey — Russian banks have maintained a strong market presence, still accounting for 12 percent.
Among foreign banks, the Russians have easily the biggest exposure, more than twice that of Austrian lenders, the next biggest.
In a credit outlook note this week, ratings agency Moody's cited President Vladimir Putin as saying Ukrainian borrowers owed about $28 billion to four Russian banks and named Gazprombank, VEB, Sberbank and VTB as creditors.
"We estimate that these banks' exposure to Ukrainian risk is $20 billion to $30 billion, a sizable amount indeed, considering that their combined Tier 1 capital was $105 billion in June," Moody's said.
Moody's, which estimated that 35 percent of all bank loans in Ukraine were problem loans, said the country's severe economic problems would keep local borrowers under pressure and could result in higher loan losses for the Russian lenders.
In the absence of the Association Agreement with the EU, Russian-Ukrainian trade is likely to rise, and the four big Russian banks may well increase their exposure to Ukraine, it added.
Yekaterina Trofimova, a Gazprombank board member, played down the concerns.
"Gazprombank is the least exposed to Ukrainian risk among major Russian banks. Gazprombank has no subsidiary in Ukraine. Gazprombank does not lend locally [and] has no retail lending in Ukraine. All credit exposure is contract-based secured lending," she said.
A spokesman for VEB said its own loan exposure in Ukraine was nearly $4 billion, mostly through subsidiary Prominvestbank, which it said had a corporate loan book of $3.5 billion and interbank lending of about $250 million.
"It is indeed the case that one of the systemic problems that Prominvestbank encounters is the low quality of debt servicing," the VEB spokeswoman said in e-mailed comments, saying the bank held more than $1 billion in problem loans. Prominvestbank was working flat out to recover these loans and had won $287 million in repayments through the courts in the form of money and property, the spokesman said, adding that no risks had materialized on the interbank markets following last weekend's protests, in which 350,000 people rallied in Kiev to demand Yanukovych's resignation.
Sberbank, Russia's largest bank, declined to detail its exposure to Ukraine when it announced third-quarter results last week. VTB declined to comment.

Eyeing The Exit 

Foreign banks have $28.2 billion in cross-border claims and local loans in foreign currency, according to the Bank for International Settlements, whose figures cover 31 countries excluding Russia.
Gianni Franco Papa, head of Italian bank UniCredit's market-leading central and eastern European business, said the bank was not being put off by the drama playing out on Kiev's streets. The country has handled crises in the past. "Whether they are able to cope this time or not we will know in a few days."
An executive at Greece's Piraeus Bank, whose Ukraine unit has 60 branches, said: "There is no panic and no deposit outflows. Ukrainians are used to political crises. But what does happen — with us and at other banks, too — is that there is increased interest to buy foreign currency, mainly U.S. dollars."
Some European banks have already pulled out of Ukraine since 2008, including Commerzbank, Erste Bank and Swedbank. Emerging Europe's second-biggest lender Raiffeisen Bank International has said it would not rule out an exit from Ukraine as it sharpens its focus.
Dimitry Sologoub, head of research at Raiffeisen in Kiev, said the banks had learned lessons from the 2008 crisis, so were much less exposed to credit risk, liquidity risk and forex risk, and the central bank was calming matters by providing liquidity and foreign exchange.
"The question is how long it will go? The reserve cushion of the national bank is not so big."
In the meantime, Ukraine might secure short-term benefits from its closer ties with Russia, enough perhaps to stave off the kind of currency crisis that nearby Belarus suffered in 2011, said Charles Robertson, chief global economist at Renaissance Capital in London.
"In the long run, it will probably keep Ukraine poor. This is bad for Ukrainians and bad for Russia," he added.
"Instead of being a strong, successful economy on Russia's borders, able to buy plenty of Russian exports, Ukraine risks becoming another Belarus."

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The Moscow Times 

Yota Launches Double-Sided Russian Smartphone Across Europe

By Guennadi Moukine

Vladimir Filonov / MT

Yota Devices chief Vladislav Martynov speaking at Wednesday’s presentation of his firm’s new smartphone.

Russian technology firm Yota Devices launched the world's first dual-screen mobile phone on Wednesday, breathing fresh air into the fast-growing and competitive smartphone market.
The YotaPhone has two screens — a 4.3-inch touch screen with a familiar Android interface on the front and a curved Kindle-like electronic paper display on the reverse side. Both screens are protected by the state-of-the-art scratchproof Gorilla Glass.

The back screen is designed to display e-books, alerts and text messages. As it only uses power to generate new images, the phone battery lasts up to 85 hours in e-book reading mode.
Even when the phone is switched off, the image on the back screen does not disappear — a convenient feature for displaying a boarding-pass barcode, a map or just a wallpaper.
The device is not just another smartphone, Yota Device's chief executive Vladislav Martynov said at the launch. It is "a new user experience" that will change the way people use their phone.
Founded in 2011 to produce mobile connectivity devices for Yota, a private wireless internet provider, the base of Yota Devices' business is LTE modems and routers, where the company has a worldwide market share of 6 percent.
The YotaPhone goes on sale this month. It will be available in Russia for 19,990 rubles ($600), and in Austria, France, Germany and Spain for 499 euros ($680). Next year sales will begin in the Middle East at a similar price. Currently, there are no plans to try the U.S. market.
"If we really hit the mark then in two to three years everyone will be copying us, and we will be happy" Martynov said.
Artyom Lutfullin, editor of mobile-review.com, however, poured cold water on that notion, pointing out that products with similar functionality already exist, such as mobile phone cases with inbuilt electronic paper displays on the back.
Bayram Annakov, from Moscow-based mobile application developer Empatika, said that while the idea of the always-on electronic paper display sounds interesting, it has yet to be seen if the market will adopt it.
"Most likely, the device is not intended to become a smartphone as such, but as a platform upon which to sell applications and services suitable for the back screen," Annakov said.
Yota Devices' goal was to create a product that was unlike anything else on the market, and they succeeded, said Lutfullin. YotaPhone cannot and will not compete against the market leaders, he said — it has created a market segment of its own.
Yota may have a good chance — smartphone sales grew 44.5 percent year-on-year in the first half of 2013 to reach 77.5 billion rubles, according to data from telecoms giant MTS.

Contact the author at g.moukine@imedia.ru

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The Moscow Times 

Culture Ministry Looks to Expand Anti-Piracy Law

The Moscow Times

Maxim Stulov / Vedomosti

Watching a movie on the computer might soon be harder, if the anti-piracy law is expanded.

The Culture Ministry has asked the government to review a set of amendments to the anti-piracy law aimed at extending the measure's reach to other types of online content, but not music.
The law in its current form allows courts to block or delete web pages containing pirated video content at the request of copyright holders if the site owners fail to remove it within 72 hours following the notice.

The proposed changes extend to other types of content, except music, letting the copyright owners of software programs or photographs bypass the court, contact hosting providers directly and request the questionable content be removed. The hosting providers will have 24 hours to contact the content owner and block the material or risk a hefty fine of 300,000 to 1 million rubles ($9,000 to $30,000), Vedomosti reported.
Previous versions of the law obligated copyright holders to complain to the Federal Mass Media Inspection Service first and did not include fines for the hosting providers.
The Culture Ministry is in favor of protecting music copyrights as well, Deputy Minister Grigory Ivliev said, but the Internet has such a large number of "phonograms," that including them all in the law would lead to difficult disagreements about types of sound files.
The ministry's decision to exclude pirated songs has raised eyebrows in the music world. The director of the National Federation of the Music Industry, Leonid Agronov, said songs were downloaded more often than other types of content online and that excluding music from the law would inhibit the development of paid music distributors such as Yandex.Music and iTunes.

http://www.themoscowtimes.com/business/article/culture-ministry-looks-to-expand-anti-piracy-law/490759.html#ixzz2mTWJizVt
The Moscow Times 

Moscow Fights Dark Winter Nights With a Sea of Light

By Natalya Bokareva

Vladimir Filonov / MT

In the first phase of City Hall’s initiative, more than 7,000 trees will be dressed up with decorative colored lighting in some of Moscow’s open spaces.

Moscow city authorities are fighting back against complaints that winter days are too long and dark, especially now that the Kremlin has abolished daylight savings time.
The solution: thousands of new LED lights on Moscow's streets.

Over the weekend, City Hall wrapped up the first phase of the new lighting strategy, which is placing decorative lights and banners over major city streets and highways, pathways and more than 7,000 trees. In addition, LED garlands imitating the starry sky will hang over roadways, and decorative lighting constructions will be placed on lampposts.
The city has long strung up lights for the New Year's season, but the effort this year far surpasses those of previous years after concerns were raised about depression and other side effects associated with spending up to 18 hours a day in the dark during the winter.
The nights seem even longer after Dmitry Medvedev, as president, ended daylight savings time in 2011.
This week, the sun is setting at 5 p.m. and rising around 10 a.m.
"Moscow receives seven to eight times less sunlight in winter compared to the summer, and the number of daylight hours goes down by half," said Pavel Livinsky, head of City Hall's fuel and energy department, which developed the lighting strategy.
Previously, lighting was mostly restricted to building facades and light poles on major streets and the Garden Ring, and it was usually switched on only for the holidays, thereby not fully meeting the city's needs during the autumn and winter seasons, according to the fuel and energy department's lighting strategy.
With the completion of the first phase Sunday, more than 4,000 trees are wrapped up in lights in the city center, and hundreds more are in the pipeline. New 3D structures and other lights have been raised on Tverskoi and Gogolevsky bulvars, across the Boulevard Ring, and along popular pedestrian zones such as Patriarshiye Prudy and Chistye Prudy.
City authorities are paying special attention to public spaces that offer panoramic views for greater visual effect, Livinsky said.

City Hall 

Pavel Livinsky

Overall, more than 12,000 new lighting elements and constructions will emerge across the city after the second and final phase is finished on Dec. 15. This is the installation deadline for lights to be raised on major roadways running across the Third Ring Road and the Moscow Ring Road.
The shades of the lights will vary depending on the season: warm gold, pink and orange will prevail in November starting from next year, giving way to seasonal silver, blue, violet, cool and warm shades of white from December through February to reinforce the impression of a snow-white city.
Lighting designer Maria Chernyak, the author of the lighting concept, said in an interview that 3D elements would change locations between recreation areas, pedestrian zones and walking routes every year to shape constantly developing city spaces and produce intriguing new impressions of well-trodden paths. She said this would encourage residents to go out on walks and to discover favorite places over and over again.
Livinsky said in an interview that the power drain of the seasonal LED lighting would be a low 1,350 kilowatts, a figure that is similar to the amount needed to light a small apartment building. He also said the lights would be energy-efficient and safe.
"The new innovations employ low-voltage 12-volt and 24-volt LED lights that are not harmful for trees and not dangerous for any kids who might touch them," he said.
Garlands are wrapped around trees and fixed without nails.
City Hall said figures were not yet available for how much the lights and electricity needed to power them would cost but said the work was being funded mostly from non-budgetary sources such as investors and sponsors, so the burden to the city budget was expected to be rather small.

New Year's Lights

The new lighting is being joined by New Year's decorations, which are organized by City Hall's media and advertising department. The snowmen, reindeer and fir trees have started appearing on the streets and will remain in place until Feb. 1.
A total of 73 Christmas trees will be raised in streets and squares across the city, including in Moscow's new southwestern territories, by Dec. 20, said Vladimir Chernikov, head of the media and advertising department, according to Rossiiskaya Gazeta. Thirty trees will have a completely new design that allows them to rotate.
The forthcoming Winter Olympics in Sochi will be a key subject for the New Year decorations. Sochi's Olympic mascots — a rabbit, bear and leopard — will greet Muscovites and visitors from posters and light installations, inviting them to go to Sochi and wishing them a happy new year.
Also, candle-shaped illuminations and a singing electric light fountain will brighten up Teatralnaya Ploshchad in front of the Bolshoi Theater, and a three-dimensional light installation imitating falling water will appear at the beginning of Gogolevsky Bulvar.
The overall price tag for the New Year decorations is about 380 million rubles ($11.5 million), as can be seen from the results of tenders announced by City Hall's media and advertising department. The amount is less than the 440 million rubles that City Hall initially earmarked for the decorations, an amount similar to what was spent last year.

Vladimir Filonov / MT

The thousands of lights installed city-wide will use the same amount of electricity as a small apartment block.

Lighting Up Moscow

Lighting has been a city priority in recent years, with about 6.5 billion rubles allocated to improve architectural lighting in 2013. By September, 260 buildings along the Garden Ring had received new, uniform illumination, replacing the 100 motley-lit buildings that had previously stood on the road.
Livinsky said further improvement would involve facades along the major outbound highways like Kashirskoye, Yaroslavskoye and Leningradskoye shosses and would last year-round.
The improved architectural lighting would create a new image of Moscow at night by highlighting not only the main sites and streets but also bridges, which are prominent in the city landscape during the day but almost lost in the night, he added.
A company called Svetoproekt has won a tender to design the lighting for 38 downtown bridges over the Moscow River within the Third Ring Road. Designs for 22 bridges are finished, and the other 16 are in the pipeline.
The bridges are to glitter in all shades of natural minerals, gems and rocks. The lighting design for the Smolensky Metro Bridge was inspired by VatnajЪkull, an Icelandic glacier, while the Bolshoi Moskvoretsky Bridge will shine in gold and red, complementing the red-brick walls of the nearby Kremlin. The glittering bridges reflected in the river will lend the city a touch of natural beauty that it badly lacks, Livinsky said.

Contact the author at bizreporter@imedia.ru

http://www.themoscowtimes.com/business/article/moscow-fights-dark-winter-nights-with-a-sea-of-light/490834.html#ixzz2mTVUaqnM  The Moscow Times 

High-Tech Ceramic Production Starts in Siberia

NOVOSIBIRSK — A factory producing nanostructured ceramics for orthopedics and dental implants, bulletproof armor and circuit boards opened its doors in Novosibirsk on Thursday as a part of the government's effort to breathe life into domestic manufacturing facilities.

Rusnano chief Anatoly Chubais and Novosibirsk region governor Vasily Urchenko officially switched on the production lines in NEVZ-Ceramics, a 1.5 billion ruble ($45.9 million) joint venture between Rusnano and a 72-year old Siberian electronics and ceramics factory, NEVZ-Soyuz.

Rusnano has invested 790 million rubles ($24.2 million), with the rest coming from private investors and the federal government, including $4.7 million from the Education and Science Ministry and $184,000 from the federal Fund of Assistance to Development of Small Enterprises.

German engineering firm BBL Technology Transfer provided technology to optimize the machines that pulverize raw materials into nanoscopic particles and compress them with other nano additives to reduce porousness and increase strength, resulting in a ceramic material stronger than titanium.

"The factory already had a basic process of ceramics production," said Karl Billau, managing director of BBL Technology Transfer, the only person without a white lab coat in what looked like a black and white futuristic film from the '60s.

"But we made improvements and brought state-of-the-art technology from Germany. This is the only place in Russia that has these machines," Billau added.

Hip joints made from this material, for example, have a life span of 20 years, which is twice as long as conventional titanium replacement hips. It makes a world of difference for elderly people, Chubais said.

The factory will also produce ceramic spinal disks. The Novosibirsk Institute of Traumatology, Orthopedics and Neurosurgery has already performed three successful operations using prototypes.

Catherine Mamontova, head of the Medical TechnoPark in Novosibirsk, said that it's time for a mindset change. People travel overseas for complicated surgeries, while cutting-edge technology is already available in our country, she said.

The strength of this project is that "it is built on a foundation of research conducted by local scientists from Novosibirsk — a region which has and will be a leader in new technologies," said Rusnano managing director Dmitry Lisenkov.

"The task of producing modern complex composite ceramics for the military, electronics and life science is very ambitious," Chubais said. "These technologies are not just world-class, they are a step ahead of world-class."

In 2012, the global market for ceramics reached $57 billion, growing nine percent per year on average, while the domestic market reached $483 million and grew at a rate of 18 percent per year.

It is expected that by 2016 NEVZ-Ceramics' turnover will reach 2.5 billion rubles but to achieve that management needs to put as much effort in sales and winning new customers as they put into setting up the production line in the first place, Chubais said.

Currently Russia imports over 70 percent of its high tech ceramics needs. Steep prices and inflexibility of suppliers have hindered the use of ceramics in industries such as oil chemistry, electronics and medicine, according to a statement from NEVZ-Ceramics.

By 2016, the company expects to replace up to 10 percent of the current import volume with its own products.

Novosibirsk Mayor Vladimir Gorodetsky said that this project is "not a demonstration of future hopes for new technologies, but of a practical adoption of these technologies on Siberian territory."

NEVZ's evolution is in line with Prime Minister Dmitry Medvedev's recently comments about the evolution of the country's industrial base.

In a trip to the Yaroslavl region earlier this week, Medvedev said that employment problems and performance of certain factories have to be considered within "the scale of the whole country," Vesti Reported.

Modernization of existing production lines is critical to win contracts and keep jobs. Russia lags behind developed countries like Germany, where innovative technological processes are deployed at 62 percent of businesses, said Labor and Social Protection Minister Maxim Topilin. In Russia, only 9 percent of enterprises use modern technology, he added.

Contact the author at g.moukine@imedia.ru

Local Car Parts Manufacturers, Clustered With Foreign Firms, Face Annihilation

Russian auto parts manufacturers face complete disintegration if the government does not support them inside specialized automobile clusters, industry insiders said at a summit Thursday.

A lack of competitiveness in the industry threatens the future of producers but is even more dire for those working on new innovations in the field.

"Russia is now at a breaking point," said Yury Mikheyev, deputy head of the Center of Innovative Development and Cluster Initiatives in Samara region. "Either we take an innovative path of development … or we turn into a raw resource country and an assembly line for auto giants."

At the Cluster Summit in Moscow, Mikheyev outlined two scenarios along which Samara region's automobile sector could develop. In the pessimistic scenario, the value of auto parts production falls from 49 billion rubles ($1.4 billion) in 2012 to 26 billion rubles in 2020. In the optimistic version — where government supports Russian manufacturers in auto cluster initiatives — the value of production rises to 52 billion rubles.   

There are several automobile clusters located across Russia, with the main ones found in the Central, Volga and Northwest districts.

Clusters bring together different companies, parts manufacturers and researchers to complement each other and increase their competitive advantage and innovations. Most of the clusters are part of special economic zones where investors can take advantage of tax benefits and ready-made infrastructure.

"We can see in the cluster strategy a complex, diverse system that is ahead of its time," said Valery Draganov, president of the Avtodor holding.

But starting up a cluster is hard work, and once they are established, domestic producers often struggle to achieve and maintain high standards.

Anatoly Sotnikov, chief of the Innovation Development Agency in Kaluga region, southwest of Moscow, recalled how his organization conducted a survey in 2010 among foreign car companies to find out why they don't place orders with Russian auto part manufacturers. Respondents said they were unhappy with the quality and price of the products, but most of all, they are not sure that Russian manufacturers can supply them the quantities they need.

No foreign investors wanted to join the Kaluga region cluster at first, but after Volkswagen made the move, others started pouring in, Sotnikov said.

Now the cluster includes seven car brands, including Volvo, Renault, Mitsubishi and Citroen. This increased interest also brought on challenges. The cluster needed a total of 14,000 workers, which the Kaluga region never had to start with.

As a solution, the regional government built a training center for automotive sector workers. 9,500 students have already graduated from its programs.  

A paucity of professional workers is an issue that clusters routinely deal with, the inevitable result of having several large manufacturers clumped tightly together.

The workforce is a general problem, but Russian companies, finding themselves at close quarters with global automobile powerhouses, have a hard time overcoming ineffective and uncompetitive engineering practices, and low production figures, as a result of which they can't invest in their future development, Mikheyev said.

But even if these issues are overcome, Mikheyev said Russian producers were now mostly playing second fiddle.

"The time has passed when we dominated the market and we could sell on our conditions," Mikheyev said, adding that in Samara region it is the foreign Renault concern that now dictates how the sector functions.

Contact the author at e.smirnova@imedia.ru 

Gazprom Says Ukraine Endangering Winter Gas to Europe

Gazprom is complaining that Ukraine is endangering the supply of Russian gas to Western Europe this winter.

The comments Thursday by Vitaly Markelov, deputy chairman of Gazprom's management committee, raise echoes of 2009, when Russia cut gas shipments to Europe for three weeks in a dispute with Ukraine. Most of Russia's gas to Europe goes through pipelines crossing Ukraine.

Ukraine, which Gazprom says owes $1.3 billion for gas imports, has announced that it does not intend to buy any more Russian gas this year and instead will use gas already stored underground. Markelov says that will deplete the amount of so-called "technical gas" needed to drive the gas through the pipelines to Europe.

Markelov was quoted by the RIA Novosti news agency as saying "this is a catastrophe."

The Moscow Times

Tobacco Advertising Ban Begins Friday

A ban on tobacco advertising goes into effect Friday, prohibiting cigarette commercials on television, the Internet and in newspapers and barring tobacco companies from sponsoring public events.

Violations carry a fine ranging from 3,000 to 600,000 rubles ($92 to $18,300), Vedomosti reported.

The ban was to become effective in June, along with an anti-smoking law that limits the number of places where Russians can light up, but the State Duma failed to write amendments into the country's law on advertising before the deadline.

In the run-up to the ban, tobacco companies nearly doubled their advertising budgets, before slashing them in June.

Major media outlets’ revenues from tobacco commercials reached 478 million rubles in January to May, 2013, compared to 269.5 million rubles during the same period last year, according to Video International.

Though the Federal Anti-Monopoly Service announced in May the ban would be postponed, some tobacco companies, such as BAT Russia, said they pulled their commercials from the media. Others, such as Philip Morris, said they continued placing commercials, but refused to disclose whether the volume of advertising was reduced.

Press revenues from tobacco ads dropped to 11 million rubles in June, compared to 55.9 million rubles in a year earlier, according to TNS Media Intelligence.

The Moscow Times

Central Bank Balks at Mechel Bonds

The Central Bank said Thursday that bonds issued by mining group Mechel would be zero-rated as collateral, effectively ruling out their use in refinancing operations.

The one-line statement followed a 40-percent slump in the price of Mechel's and a sell-off in its bonds — some of which have triple-digit yields — indicating that the market believes the company cannot sustain its $9.6 billion debt load.

The financial regulator said that a coefficient applying to Mechel's bonds as collateral would be reset to zero with immediate effect. Mechel had no immediate comment.

"It effectively means that the bonds are excluded as a means of obtaining refinancing," said Denis Poryvai, a fixed-income analyst at Raiffeisen.

The bid yield on Mechel ruble bonds maturing in February 2021 rose to 200 percent on Friday, suggesting that the market is pricing in a high probability of the default. The bid price was 76 percent of par.

Mechel's shares bounced by 11 percent Thursday after hitting all-time lows on Wednesday. Market sources cited forced selling, which some attributed to margin calls on shares pledged as collateral by Mechel's main owner, Igor Zyuzin.

Zyuzin directly and indirectly owned 67.4 percent of Mechel's common shares as of July 22.

Mechel said in a statement Thursday that talks with creditor banks on a covenant holiday and a debt restructuring were "going well."

Russia's financial markets regulator, which is now housed at the Central Bank, said it was looking into whether market manipulation was behind the slump in Mechel shares on Wednesday.

State-controlled banks are heavily exposed as creditors to Mechel, which continued to pile on debts through the global financial crisis to pay for acquisitions.

Last year, the company set a target of raising $4 billion through disposals but has been thwarted by a turn in the commodities cycle and has had to receive new state funding to press ahead with its flagship Elga coal project.

Reuters

Rosatom Seeking Partners for Turkish Nuclear Project

Reactor builder and supplier Rosatom is talking with a number of local and international firms interested in investing in Turkey's first nuclear project, worth $20 billion, an official in its Turkish subsidiary said.

"Five Turkish companies have applied to become an equity partner. Also there are foreign companies who have applied as well," Rauf Kasimov, deputy general manager of Akkuyu NPP, said in an interview.

He declined to name the interested companies.

Turkey is pushing ahead with an ambitious nuclear program to provide 10 percent of its electricity needs by 2023 and reduce its dependence on imports of oil and gas for nearly all its energy.

Reuters

Moscow Strives to Make Itself a Global Financial Center

Moscow is going full-out to transform itself into an international financial center, building business centers and overhauling its regulations to present an open face to investors, but the city's hopes are undermined by the lack of a skilled workforce to do the job, foreign financial advisors said Tuesday.    

In recent years the Russian government has stepped up its efforts to stimulate growth in the financial sector, and harbors visions of Moscow as one of the world's leading international financial centers, on a par with London or New York.

But as of September, Moscow rated 69th in the Global Financial Centers Index, slipping down four places since March this year.

The index was prepared by the Qatar Financial Centre, set up by the Qatar government in 2005 to promote financial services development. It provides profiles and rankings for world's 80 top financial centers based on third party measures and indices and  questionnaires filled in by international businessmen.

According to the index, London and New York are currently the leading global centers of finance, with Hong Kong and Singapore poised to eclipse them in the coming years.

The Russian government has set a goal for Moscow to reach 40th position in 2014. The Qatar Financial Centre, however, made no forecast that the city would increase its significance over the next few years.

An example of the government's sense of purpose is the construction of a physical international financial center in Rublyovo-Arkhangelskoye on Moscow's western edge, for which a shortlist of eight designers was selected last week.

First conceived by then-president Dmitry Medvedev in 2008, the centre will have 5.4 million square meters of office space, hotels and other commercial and social infrastructure.

But it takes more than just buildings to create a competitive and comprehensive capital market, financial analysts said.

However, in many respects, Russia has established the conditions necessary for financial activity, they added.

"A liberalization of the market started in 2006 when international banks were allowed to open ruble accounts here, followed by a permit for foreigners to buy Gazprom shares," said Danny Corrigan, chair of TheCityUK Russia, an organization that represents British financial interests.

Two years ago, a newly set up task force for the Moscow International Financial Centre chose TheCityUK as its partner to push forward development, and a delegation was in Moscow on Tuesday to discuss the initiative's progress.

Besides Russia and the Commonwealth of Independent States, TheCityUK does overseas promotion for Brazil, India, China and Turkey.

Russia has gradually become a liberal financial market through the whole scope of financial products, Corrigan said.

According to his estimates, in the next few years financial trading procedures in Russia are likely to be the same as they are in London or New York.

But a key hindrance to Russia's development as a financial center is human resources, other financial consultants said.

"One of the key drivers for building a good financial center is the availability of skilled personnel. People need to know what they are doing in order to run anything," said George Littlejohn, a senior adviser for Chartered Institute For Securities & Investment, a London-based international investment consultancy.

While Russia does have quite a few skilled professionals, their qualifications need to be better tuned to their future workplace, and this has to be done at the university level, he said.

Moscow today has a large number of people employed in the financial sector but far too many of them are engaged in short-term trading or in other areas focused on short-term returns, said Chris Weafer, a senior partner with Macro Advisory, a Russia-based investment consultancy.

"For an international financial center to be successful, there needs to be a greater number of people engaged in building for the longer-term," he added.

In order to tackle this problem, a memorandum of understanding was signed between Britain and the Russian Financial University on training and qualifications in financial services on Tuesday.

This will enable Russian students to exchange experience with their British counterparts and vice-versa, hopefully generating the necessary skills in the process.

While a top-ranking financial center certainly needs a large number of skilled bankers, a whole range of complementary skill sets and experiences have to be also brought together.

"One of the reasons why London, for example, remains the top spot global financial center is because it has tremendous depth in support services, that is, in legal, insurance, financial IT, foreign exchange, etcetera," Weafer said.

London also has more than 100 years of experience in conducting financial business which it can draw on, he added.

Moscow, by comparison, has a history in modern financial practice of about 20 years.

Contact the author at a.panin@imedia.ru 

Lawmaker Seeks to Ban U.S. Dollar

Warning that the U.S. dollar is on the brink of collapse, a State Duma lawmaker has submitted legislation to ban dollar deposits and transactions at Russian banks.

Mikhail Degtyaryov of the Liberal Democratic Party said the dollar will collapse in 2017 if U.S. national debt continues to grow at the current rate, and he cautioned that countries with a high dependence on the currency would suffer an economic disaster.

"In light of this, the fact that confidence in the dollar is growing among Russian citizens is extremely dangerous," he said in an explanatory note attached to the bill, according to Interfax.

The bill, which would impose the ban within a year of its passage, says the holder of a dollar account would need to spend the money, convert it into another currency, or see the bank convert the account into rubles at the average rate for the previous year.

Russians could still buy and sell dollars while abroad, hold dollar deposits in foreign banks, and engage in e-commerce.

The legislation would not apply to the Central Bank, the government, the Foreign Ministry, the Defense Ministry, the Foreign Intelligence Service, the Federal Security Service and the Federal Treasury.

It was unclear when the bill might come up for a first hearing and whether it would find enough support in the pro-Kremlin legislature to be passed into law.

The Moscow Times

Permission Granted for Baumgertner Meeting

MINSK — Russian diplomats in Belarus said Wednesday that they have been allowed to meet with the detained head of Russian potash giant Uralkali, who is facing charges of fraud that Belarus estimates has cost it around $100 million.

The Russian Embassy said it received permission to meet with Vladislav Baumgertner in a fax dated November 11, one day ahead of Moscow's second request for its diplomats to see the businessman.

Baumgertner was detained in August in the capital of Belarus, Minsk, after Uralkali unexpectedly withdrew from a cooperation agreement with its Belarussian counterpart, causing a steep drop in prices and sparking a political dispute.

He has been charged with abusing his position at his company, an offense punishable by up to 10 years in prison, and is currently being held under house arrest.

Baumgertner also currently faces criminal charges in Russia that were filed after his arrest in Belarus.

Political commentators have suggested the Russian investigation could be an attempt by Moscow to get Baumgertner back home before dropping the charges against him.

Belarussian President Alexander Lukashenko has said Baumgertner could be extradited to Russia provided that he face criminal charges and that financial damages be covered.

Uralkali has claimed that Belarussian allegations against Baumgertner are politically motivated.

RIA Novosti