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Russia's Chubais Eyes U.S. Tech Firms With Putin Blessing
Stepan Kravchenko, Olga Kharif - Bloomberg - bloomberg.com - 8.24.12 - JRL 2012-153

Anatoly Chubais, the mastermind of Russia's first privatization program, is now leading a charge by Vladimir Putin to emulate Silicon Valley's success by investing in high-tech firms, many of them American.

Anatoly Chubais file photo
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Chubais, who helped organize the state-asset sales in the first post-Soviet decade that created Russia's oligarchs while most citizens sank into poverty, is buying up stakes in research-and-development companies in Europe, China, Israel and especially the U.S. as chief executive officer of Moscow-based OAO Rusnano, the former state-funded Russian Corporation of Nanotechnologies.

A finance minister under Boris Yeltsin who ran the electricity monopoly under Putin, Chubais has "a direct phone line with the tsar," Michael Fonstein, co-founder of Cleveland BioLabs, a Rusnano investment, said in reference to Putin. "You can't have an ally in a better position."

Nanotechnology Model Artistic Rendering
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The effort by Rusnano, founded by Putin during his second term, is part of a bid to diversify the $1.9 trillion economy of Russia, the world's biggest energy exporter. Firms that accept Rusnano funds must transfer technologies to Russia, build laboratories there, train local scientists and, in some cases, give Russians patent rights for the products developed, Bloomberg Businessweek reports in its Aug. 27 edition.

'Vacuum Cleaner'

This fall, BIND Biosciences Inc. and Selecta Biosciences, two U.S. biotech companies, will open laboratories in a technology park near Moscow, becoming the first American enterprises to start research in Russia with Rusnano. The effort marks a new start for Russia, which exported high-tech ideas with the West during the Cold War.

"We had no transfer and no technologies in the 1990s," said Andrei Fursenko, a former education and science minister who is now a scientific adviser to Putin. While Russia still lacks "finished scientific projects," America "is like a vacuum cleaner, absorbing innovations, part of which were made by our compatriots who emigrated to the U.S."

Putin gave Rusnano an initial budget of $5.2 billion for 2008-15 as well as access to billions in state-guaranteed loans. Since mid-2010, the company has invested $1.3 billion in 18 U.S. high-tech projects. Rusnano's incorporation in 2007 triggered a kind of nanotechnology fever as hundreds of companies and research groups began adding "nano" to their names in efforts to get state funding.

'Putin's Child'

"It is Putin's child," said Fursenko, adding that he's been talking to U.S. officials and companies about technology transfer since 2002. That process resulted in a "signal that they don't object."

Rusnano now works with U.S. venture funds such as Draper Fisher Jurvetson, well known in Silicon Valley. "For me, Chubais was a representative of a new generation who behaved as American businessmen," said Managing Director Alexandra Johnson, who came to the U.S. from Russia in 1990 to study.

The first direct investment in a U.S. company took place in March 2011, when Rusnano paid $4.5 million for a 29.7 percent stake in BiOptix Diagnostics, a Colorado-based producer of biochips for drug tests whose technology was developed by Nobel laureate John Hall.

Other American deals include Cleveland BioLabs, which is seeking to conduct cancer-drug trials with the Russian company; Quantenna Communications, which develops chips for Wi-Fi video networking devices; and NeoPhotonics, which works on voice and video transmission technology for clients such as Alcatel- Lucent.

Blame Chubais

"Luminaries in science work for these American companies," said Chubais, 57, who was once reviled in Russia for his role in the state-asset sales. "Chubais is to be blamed for everything," a popular saying of the 1990s went. He now collects jokes about himself on his personal website.

While Chubais is in the U.S. at least once a month and is so enthusiastic about western business practices that he peppers his Russian with English-language management terms, the U.S. companies Rusnano courts have sometimes had to educate the Russian company about how business is done in America.

Russian-born Fonstein of Cleveland BioLabs said a 2009 proposal he made to Rusnano marked the start of "a mutually painful learning experience." A state-controlled corporation, Rusnano insisted it can't lose money on its investment, he said.

'Winning Big'

"We had to tell them: 'Guys, there is a potential of losing everything or winning very big.' That was not easy for them to understand," Fonstein said. Rusnano signed an accord with BioLabs in 2011, when the Russian corporation became a joint-stock company.

Other U.S. executives have also gone the extra mile to work with Rusnano. Sam Heidari, chief executive officer of Quantenna, said he visited Moscow six times to "make sure things are going right."

Rusnano has pledged up to $40 million for Quantenna, which may open a research center in Russia. "They had the whole package -- the size of the check -- and they have visibility in that part of the world," Heidari said.

The company, which says it's considering 152 applications from U.S. companies, relies on the continued good will of the U.S. Committee on Foreign Investment, or CFIUS, the watchdog over strategic American assets. "We are now reviewing some projects we'll have to get CFIUS permission for," Chubais said in an interview in Jerusalem on June 26.

John McCaslin, U.S. minister counselor for commercial affairs at the U.S. Embassy in Moscow, said he didn't see any issues. "We routinely recommend to American companies that they should talk to Rusnano," he said.

Still, Chubais doesn't rule out possible misunderstandings with U.S. officials, calling it "a risk that exists" in every country. "We clash over Syria and make up over Afghanistan, but I don't expect an overall worsening that could put a brake on our projects," he said.

©2012 BLOOMBERG L.P. ALL RIGHTS RESERVED; article also appeared at www.bloomberg.com/news/2012-08-23/russia-s-chubais-eyes-u-s-tech-firms-with-putin-blessing.html


Keywords: - Russia, Economy, Business, Investment, Trade - Russia, Science - U.S.-Russian Relations - Russian News - Russia - Johnson's Russia List


Michael Bohm is opinion page editor of The Moscow Times.

To illustrate how outrageous the two-year sentence handed down last week to three Pussy Riot members really was, it is worth recalling a March incident at the Pokrovsky Cathedral in Nevinnomyssk, a city of about 100,000 people in the Stavropol region.

The Nevinnomyssk attack was clearly a criminal case, while the Pussy Riot stunt was only a misdemeanor. Yet Judge Marina Syrova manipulated the law to classify the Pussy Riot case as criminal so she could give the three punk rockers a serious jail sentence.

On March 20, a 22-year-old man armed with a hunting knife stormed into the Nevinnomyssk cathedral, destroyed a candelabra, threw the main cross down on the ground and drove the knife into it. When a priest tried to intervene, the attacker punched him several times in the chest. Then, the man, calling himself God, stepped up to the solea, a restricted place in the church off-limits to laypeople, kicked open the doors in the sanctuary and screamed curse words while citing Bible verses.

Pussy Riot Defendants in Courtroom Enclosure, As Man Shows Papers to One Defendant While Female Guard Glances Over
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The assailant was charged under Article 213 of the Criminal Code: hooliganism motivated by religious hatred ­ the same article that Judge Syrova cited on Aug. 17 when she sentenced the Pussy Riot musicians.

Unlike the Pussy Riot case, however, the Nevinnomyssk attack clearly fit the definition of Article 213 because the motive of religious hatred was firmly established: destruction and defilement of sacred church property and a physical attack against a member of the church. (The trial is still pending, but it will be interesting to hear the verdict and sentence.)

In contrast, the Pussy Riot stunt in Christ the Savior Cathedral involved no sign of violence ­ a necessary condition to establish religious hatred under Article 213. The punk rockers didn't damage any church property, had no weapons and did not assault members of the church.

But the prosecution claimed that witnesses of the stunt suffered "moral damages" ­ loss of sleep and psychological trauma ­ after they saw the women punching the air and kicking their legs up high. The prosecutor argued that the dance was a "violent act" under the Criminal Code and thus constituted "religious hatred." But few ­ except the judge ­ accepted this absurd legal reasoning.

The prosecution also tried to argue that "c " (holy crap), which the Pussy Riot members cried out in the cathedral, also qualified as religious hatred. But even two of the three language expert witnesses approved by the judge concluded that this calque from English is only a figure of speech that suggests astonishment and does not constitute religious hatred.

Moreover, it is obvious that the man who defiled the Nevinnomyssk cathedral was mentally unbalanced. Interestingly enough, Judge Syrova tried to prove the same thing about the Pussy Riot members. She cited conclusions from the prosecution's psychological and psychiatric report that the three women suffered from "personality disorders" and thus should be isolated from society. Notably, the experts did not appear in court and could not be questioned by the defense.

This is how the psychiatrists described the defendants' supposed disorders: Nadezhda Tolokonnikova shows signs of "an active life position ... and a tendency to express her opinions categorically"; Yekaterina Samutsevich suffers from "obstinacy, decisiveness and a tendency toward oppositional forms of behavior during conflicts, along with subjectivist and vigilant character traits"; and Maria Alyokhina shows signs of "demonstrative, overrated self-opinion."

In contrast to the genuine act of religious hatred in Nevinnomyssk, it is clear that Pussy Riot's "punk prayer" should have been classified as a misdemeanor under the Civil Code ­ either under the article "insulting the religious feelings of believers," which carries a fine of 1,000 rubles ($30), or, at the most, as petty hooliganism, which is punishable by a 1,000-ruble fine or up to 15 days of detention.

The Russian Orthodox Church has tried to gain its comeuppance against what it considers blasphemers ever since 2007, when artists Yury Samodurov and Andrei Yerofeyev held their controversial Moscow exhibit in which Jesus was depicted as Mickey Mouse and Lenin. A lawsuit was initiated by an Orthodox group called the People's Synod, and the prosecutor sought three-year prison sentences against the artists for inciting religious hatred. Samodurov and Yerofeyev ended up paying fines of about $5,000 each, although no prison terms were handed down.

Since then, Russian Orthodox Church has redoubled its efforts to make blasphemy a criminal offense punishable by serious prison terms. Judging by the Pussy Riot criminal conviction in a minor case of disorderly conduct, the church seemingly scored a major victory. But the majority of Russians oppose this type of medieval, religious-based jurisprudence, which is more characteristic of the Taliban than Europe's largest secular state. In a recent Levada Center poll, 54 percent said they oppose jail sentences for the Pussy Riot members but condemn the stunt itself.

Meanwhile, Putin, most likely, sincerely believes that the two-year sentence meets the "not too harsh" standard that he articulated in London during the Olympics. After all, the prosecution asked for three years, and the judge could have given them seven if she had really wanted. Evidently, Putin, like Voland in Bulgakov's "Master and Margarita," believes that "sometimes kindness appears in people's hearts."

The church's strong-armed approach to quell dissent will only further alienate the church from mainstream Orthodox believers as well as the public at large. According to an Aug. 14 VTsIOM poll, 75 percent of Russians said the church should not be involved in the country's political life.

The church's crusade against blasphemy has also caused a split within the Orthodox clergy. For example, a Tambov deacon earlier this week asked Patriarch Kirill to defrock him over the Pussy Riot farce. This demarche, albeit in a radical form, nevertheless represents the indignation that many mainstream clergy feel against the reactionary bent of Kirill, Archpriest Vsevolod Chaplin and other ultraconservative members of the patriarch's inner circle.

Syrova, it seems, set a record for a judge in post-Soviet Russia in terms of openly manipulating the law and delivering a blatantly biased and politically driven verdict in the Pussy Riot case. She turned down nearly all of the defense's requests for witnesses and expert testimony, restricted the right of defense lawyers to meet and consult with their clients, denied the defendants sufficient time to read the charges against them, ordered pretrial detention of the defendants on the questionable grounds that they posed a threat to society, and unjustifiably applied the Criminal Code to a misdemeanor.

In typical fashion, United Russia Deputy Ilya Kostunov, in response to the widespread criticism of Syrova's abuses of power in the Pussy Riot case, said on Monday that he will introduce a bill that will make "unqualified criticism" of judges a criminal offense.

Syrova was the point person in executing the Kremlin's repression against Pussy Riot, a show trial that rivaled the most outrageous Soviet criminal cases against dissidents. But it seems even Syrova was ashamed of playing this repressive role. Maybe this was the real reason she set one firm condition before allowing television cameras in the courtroom when she read the sentence last Friday: They were prohibited from showing her face.

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