A brave opinion on Russia by an Englishman

Ed Lucas can not travel to Russia. He simply can not obtain a visa. This is how the Kremlin mildly intimidates foreign journalists critical of its regime. Ed’s book “The New Cold War” has just come out this week. I am reprinting here his piece from The Times.

 From The Times

February 5, 2008

Why kowtow to brutal, cynical Russia?

We have a new Cold War and we’re losing it. The West must stand up to the Kremlin now

Edward Lucas

Sixty years ago the Berlin Airlift highlighted the menace of Stalin’s Kremlin. Forty years ago Soviet tanks crushed both the Prague Spring and any remaining illusions about the Kremlin’s grip on the captive nations. Twenty years ago we began dropping our guard, as totalitarianism withered under Mikhail Gorbachev. Now it is time to acknowledge the inconvenient truth. Russia is back: rich, powerful and hostile. Partnership is giving way to rivalry, with increasingly threatening overtones. The new Cold War has begun - but just as in the 1940s, we are alarmingly slow to notice it.

The loudest alarm signal is Russia’s predictable yet mystifying presidential election on March 2. Predictable because everyone knows who will win: Dmitri Medvedev, Vladimir Putin’s polite, lawyerly sidekick; mystifying because the meaning of that victory is so unclear. Will Mr Medvedev be a mere figurehead? Will he stand down and allow Mr Putin to return? What does his stint running Russia’s energy giant, Gazprom, one of the world’s most corrupt, incompetent and sinister companies, tell us about his plans for the future? What does his rise mean for the clans of crooks and spooks whose murky feuds have increased so sharply in past months? Once a dead art, Kremlinology is now a lively and useful discipline.

Politics in Russia is a matter of life and death. Mikhail Khodorkovsky, once Russia’s richest man, is on prison hunger strike in protest against the ill-treatment of his aide Vasily Aleksanyan. Mr Aleksanyan is confined in a filthy mould-infested cell because he refuses to sign a bogus confession incriminating Mr Khodorkovsky. His judicial torture, including denial of medical care, which has blinded him, has been condemned by the European Court of Human Rights. It reads like something from Dostoyevsky, not a factual account of prison conditions in supposedly one of the world’s top eight industrialised democracies.

That doesn’t bother most Russians. Mr Putin is wildly popular; so is Mr Medvedev. Mr Khodorkovsky and other former “oligarchs” are seen as despicable emblems of the 1990s, a decade in which Russians feel they were swindled at home and humiliated abroad. Mr Putin has brought both stability and pride. For now, democracy has failed: most Russians say they agree that the media should be controlled and that the opposition should not be allowed to contend for power.

Those feelings are complex. They are partly the result of the state-controlled media’s propaganda. They also truly represent tragic misunderstandings and missed opportunities in the Yeltsin years, when oil prices were low and Russian governments struggled with crippling foreign debts. Mr Putin has been lucky - with oil at nearly $100 a barrel, Russia is bound to prosper. Yet he too is a product of the 1990s, an unemployed ex-spy who became a top official in the Yeltsin Kremlin. His denunciations of that era neglect to mention its strengths: press freedom, and also economic reforms such as privatisation and price liberalisation from which Russia has hugely benefited.

Communism has gone, but in its place has come “sovereign democracy”, a potent cocktail of self-righteousness, nationalism and xenophobia that fuels the Kremlin’s power grab abroad. In the “swing states” of Eastern Europe - Bulgaria, Latvia and Moldova - we are already losing the new Cold War. We have avoided catastrophe in Serbia by a hair’s breadth. The great engines of EU and Nato expansion, which brought half a continent into our orbit after the collapse of communism, have stalled.

But it is not just “faraway countries of which we know nothing” that are at stake. Russia plays divide and rule with the West, ruthlessly using our democratic politics and open economies to undermine us. It has brazenly hired Gerhard Schröder, the former German chancellor, to promote its biggest energy project, Nord Stream. This is a hugely expensive and strategically vital gas pipeline on the Baltic seabed that will bypass Poland and deliver gas straight to Germany. Like a rich and powerful man who becomes pathetically dependent on heroin, Germany is mainlining on Russian energy. The new pipeline hooks up addict and pusher directly. Instead of urgently diversifying away from gas and to other suppliers, the Netherlands, Italy and Austria are following the same path.

Russia has cowed and muzzled the Organisation for Security and Co-operation in Europe, supposedly the Continent’s main democracy-promoting and election-monitoring body. It has nobbled the Council of Europe, a talking shop that is supposed to be the custodian of human rights. The British Conservatives, in bizarre alliance with Mr Putin’s United Russia party, came within a whisker of electing a former KGB man and Kremlin propagandist, Mikhail Margelov, to the presidency. At its summit in Bucharest in April, Nato’s European members are all set to kowtow to Kremlin pressure and give a cold shoulder to Georgia’s bid to move towards membership. The EU can not even summon the willpower to liberalise its internal energy markets, let alone counter the Kremlin’s ruthless use of cheap energy deals and lucrative pipelines.

Our biggest weakness is money. During the old Cold War, doing business with the Soviet Union was a rare and highly suspicious activity. Now bankers, lawyers, consultants and spin-doctors (and even, it is whispered, politicians) flock to take 30 silver roubles for services rendered, even when they are privately disgusted by the source. Until that changes, we have little chance of resisting the Kremlin - and even less of persuading ordinary Russians that their corrupt, cynical, brutal and incompetent rulers are harbingers of disaster, not triumph.

Edward Lucas is author of The New Cold War: how the Kremlin menaces both Russia and the West 

Consolidation in Eastern Europe: Who is Still in the Outsourcing Game?

Here is my article which came out in February issue of the Outsourcing Journal.

For a long time the management of EPAM Systems, Eastern Europe’s largest software development company, was looking to enter the Russian outsourcing market. At the same time the labor market in Belarus, with a population of nearly 10 million and EPAM’s first offshore location, began heating up. So the need for new resources became more urgent.

EPAM management selected Vested Development (VDI), a Russian software development company headquartered in Burlington, Massachusetts. “We looked at a number of companies, but with VDI we knew each other for many years and there was a strong level of comfort,” says Arkady Dobkin, CEO of EPAM. VDI, founded in 1993, began life as an offshore software development company. However, since the beginning of 2000, the company has placed a strong focus on the Russian market.

Such is the picture across Russia: many software development companies have seen more success on the local IT market than abroad. The Russian economy, rich in natural resources, finally showed a need for the talented engineers back home. Besides, unlike publicly-listed Western companies looking to squeeze every cent of efficiency out of their outsourcing business case, privately-owned Russian businesses pay well to keep the best suppliers delivering the best results.

The growth of the IT industry in Russia has been remarkable. According to the estimates of Russian information agency RosBalt, in 2007 the IT market in Russia grew by 25 percent compared to the previous year; the market has maintained that growth rate for a number of years in the past. The increasing local market need for IT professionals, exceeding existing supply, resulted in the first signs of the industry consolidation.

Thus in 2007 one of the largest Russian system integrators, IBS Group, completed an acquisition of Borlas, a consultancy and IT services company. At the end of the year the company employed 6,000 people. Also, last year Systematica acquired systems integrator TopS BI. In the meantime Verysell, which employed 750 employees in 2007 and was valued at $300 million by Troika Dialog, raised $50 million to acquire an IT services company in preparation for an IPO.

Across other eastern European countries the fight for IT resources gets tougher. In Poland, the third largest country in the region after Russia and Ukraine, there are only a few large specialized offshore outsourcing service providers. In 2007, the total IT outsourcing market volume was 750 mln PLN (3.5 PLN = 1 Euro). Most of the key players, though, offer software development services to their international customers, accounting for approximately 45 percent of their revenue, although there is no firm statistical data, according to Andrzej Horodeñski, the spokesman of the Polish Chamber of Information Technology and Telecommunications.

“The Polish IT labor pool is close to being exhausted,” he says. “The basic reason for that is not labor migration, but mainly the internal IT industry growth.” Here IT companies merge to survive fierce competitions from the international giants such as IBM and HP. In 2007 Computerland merged with Emax to form 3000-people-strong Sygnity Group, and at the end of the year Asseco merged with Prokom, creating Poland’s largest IT company.

In Romania, where the country entered the EU on the first of January 2007, its outsourcing industry was simply sold out. U.S.-based Techteam acquired Akela, one of the oldest Romanian outsourcing companies; UK-based Endava acquired AGS; and Adecco bought IP Devel to expand its embedded development team. U.S.-based Computer Generated Solutions bought EasyCall, the largest Romanian call center operator, with 600 employees and Euro 1.8M revenue.

Also, in 2006 Adobe bought the Dreamweaver development experts InterAKT. Now, according to Vasile Baltac, the president of ATIC - Romanian IT association, there are few small outsourcing companies with Romanian capital left. Branches of ICT multinationals or joint ventures where the main shareholder is a foreign company produce 80 to 90 percent of the industry turnover,” he says. “All the big names are present in Romania now: Oracle, HP, IBM, Alcatel, and Siemens. Large multinationals number about 3,000 people, and they are very aggressive on the local IT market too.”

In Bulgaria the demand for software developers exceeds supply, and the local providers are fighting with Coca Cola, HP, SAP, and Siemens for the talent. VMware solved the problem with resources fairly easily. In 2007 it simply acquired its outsourcing supplier Sciant, a Bulgarian software development company with a lower-cost subsidiary in Vietnam; so Sciant clients had to look elsewhere to set up their operations from scratch.

Acquisitions of outsourcing companies have been happening across Eastern Europe. Exigen, the U.S. outsourcer, has been buying companies in Eastern Europe for a while. In its portfolio, for example, is Dati Gruppa, a Latvian IT company, and Starsoft, a Ukrainian company.

In Ukraine, acquisitions also started to take place although the country has still over a hundred small and medium-size players, with only a handful of them employing over 200 people. For example, Global Logic whose resources are based in India and the U.S., merged with Bonus Technologies, whilst Kharkiv-based Telesens was sold for $2.7 million to NASDAQ-listed TTI Telecom in December 2007. The purpose of the latter deal was to open up markets for both companies, rather than simply secure a resource base.

Tom Scharning, the Vice President of Business Development at EDB, a Scandinavian IT company, has conducted extensive research looking for infrastructure outsourcing capabilities in Eastern Europe. “We looked at both outsourcing and acquisition options. However, we didn’t find sufficient level of expertise in infrastructure management, only some rudimentary skills,” he says. So the company decided to acquire a company in the region and train specialists in house.

“We looked at many Eastern European countries such as Russia, Bulgaria, Poland, Belarus, Ukraine, Romania, and Baltic States. We found that only Russia and Ukraine fit the bill. We feared that Belarus, Bulgaria, and Romania will follow the steps of the Baltic countries where the resources became drained quickly and the prices reached those of Finland.” Eventually, EDB bought a majority stake in two companies in Ukraine.

“We had a long list of about 40 Ukrainian companies, some of which had high expectations of their valuation,” says Sharning. “So finally we made a deal with Infopulse and Miratech, which are now part of the EDB global operation.”

In defining its Eastern European strategy, EDB looked not only just at low-cost resources, but it has also followed the steps of its clients. “Scandinavian banks are the key EDB customers. They are moving eastwards towards Russia and Ukraine,” adds Scharning, so the company looked for the resource base nearby to continue supporting its clients worldwide.

The consolidation of the offshore outsourcing industry in Eastern Europe has become a reality, which demonstrates both the high demand for the local professionals, located close to the Western European markets, and the bottleneck of the labor supply. As for EPAM Systems, the acquisition was a success; it completed the post-merger integration in 2007. “As a result of the merger we’ve got interesting CIS clients, and now 50 percent of our resources are in Russia and Ukraine,” concludes Arkadiy Dobkin.

Lessons from the Outsourcing Journal:

• As the consolidation of IT industry in Eastern Europe has started, the companies looking to secure IT resources in Eastern Europe need to look for the locations carefully, avoiding overheated labor markets.
• Companies looking to buy an outsourcing supplier in Eastern Europe should look at additional benefits of an acquisition such as access to the new markets.

Private Equity: is local presence in Eastern Europe necessary?

I have always claimed that Russian beer is superior to German (although Russian breweries use German equipment anyway). We have our mini-arguments about it at home, especially when I get the treat from a local Russian supermarket.

This week however I was pleased to learn that the battle around the Russian Baltic Beverages Holding is heating up. Carlsberg and Heineken are fighting with Scottish & Newcastle as to who will end up owning it.  Blackstone and TPG have both stepped in to finance this joint venture buy-out on S&N side.

In my work I see many PE firms forming Eastern Europe-focused strategy out of the local offices: Poland (3TS), Ukraine (Advent), Russia (TPG). Other firms, such as Blackstone however build their East European teams within their existing teams in the West.

There are arguments for both approaches. Local presence offers a better chance to find a good deal while minimising the likelihood of a competitive bidding which occurs when deals are advertised by investment banks. It offers an ease of networking, a better chances of doing due diligence, an access to the local advisors and a much better availability of the executives at a short notice. But it comes at a price, especially when the dealflow is scarce and really good deals are are hard to come by.

Russia is perhaps still such a country where despite the economic growth risks are perceived high, preventing many investors from playing an active role there (few will remember a murder of Baltic Beverages’s CFO in 2000). Both Blackstone and TPG name Russia amongst their regions of interest. Blackstone, which started actively looking at Russia only a few months ago, does it out of its London office. Texas Pacific however went all the way to establish local Russian presence with the former British Olympic athlete Stephen Peel running it.

Should S&N win the bid for Baltic Beverages Holding, Blackstone would justify its strategy based on a pan-European team structure. but Mr. Peel would question whether moving to Russia was necessary.

Scottish & Newcastle’s Russian buyout

January 13, 2008  Sunday Times

 John Waples and Louise Armitstead

TWO private-equity groups, Blackstone and Texas Pacific, have held detailed talks with Scottish & Newcastle, the brewer, to help buy out Carlsberg’s £4 billion share of the Russian joint venture Baltic Beverages Holding.

Blackstone and Texas have made separate approaches to S&N’s chief executive, John Dunsmore. Both groups have said they are prepared to invest as much as £2 billion. The approaches form one of the key reasons why the S&N board last week rejected a revised offer of 780p per share from a European brewing consortium comprising Carlsberg and Heineken, valuing the company at £7.6 billion.

Dunsmore is confident he can generate significantly higher value for his investors by buying out Carlsberg’s interests in BBH, rather than selling out. However, some big investors are concerned that his determination to see off the bidders will result in a big share-price fall if he is successful.

A top five shareholder said: “There will be a severe backlash against the board if they let this deal fall through.”

Another said: “There is real commercial sense behind this deal. The board might say it can go it alone, but so far it has failed to do so.”

Blogosphere is invaded by Pro-Kremlin Oligarchs

Russian pro-Kremlin Oligarch is reported to have purchased a US blogging site Live Journal. Russians are amongst the largest user base of the firm- 28%. More than 2 million bloggers use the website, but now there is a concern that Live Journal will be censored.

It has been used by many outspoken critics of the Kremlin as I have been writing about previously. Let’s wait and see what happens but I believe Russia is a few steps behind China in censoring the Internet, not the least because Mr. Putin is known not to even own an email account. All can change with the arrival to power of Mr. Medvedev, who is told to regularly read electronic news channels.

Prices rise in Russia

Natural resources export, not supported with the proportional growth of the other sectors of Russian economy is likely to cause last year’s price increases. In Russia, according to Interfax, the inflaction for 2007 reached 12%.

This perhaps would also be reflected in the corresponding salary increases of IT personnell, making offshore outsourcing less attractive proposition for the Western customers.

But so long as the population keeps its savings in a stable currencies (albeit salaries of many employees are still measured in declining dollar), the impact of the price increases on savings would not be anything like hyperinflation of the mid-90s.

Outsourcing to Ukraine: Why the US$246 Million Industry Is Expanding to the Provinces

This is one of my latest articles which appeared in December 07 issue of Outsourcing Journal.

By Natasha Starkell for Outsourcing Journal

December 2007

When the executives of Rotterdam-based ISM eCompany decided to expand its software development capabilities outside the Netherlands two years ago, little did they know their core development team would be based in a small town of Zhytomyr 140 kilometers away from Kyiv, the capital of Ukraine.

The Netherlands is experiencing a shortage of IT engineers, so ISM eCompany, an Internet solution provider, had to find alternatives to hiring locally. “We looked at 20 countries and came up with India, China, and Ukraine as the top three locations to set up a captive operation,” says Michiel Schipperus, the company’s COO.

The company’s decision is not surprising. Ukraine, the second largest Eastern European country after Russia, with a population of 47 million people, is a popular outsourcing destination in Eastern Europe. A key attraction: according to the Ukrainian Ministry of Education, over 670,000 technical students are currently enrolled in Ukrainian universities.

Offshore Outsourcing Industry in Ukraine

In its recent study Goaleurope, an Eastern European advisory firm, estimated the size of the outsourcing industry in Ukraine reached over US$246 million in 2006. Ukraine is not a member of the EU, so Ukrainians cannot take jobs freely outside their country, unlike Polish, Czech, and other nationals of the new EU members. So the Ukrainian software developers stay in their homeland, where the prices are low; work comes from offshore outsourcing customers.

According to Schipperus, ISM eCompany chose Ukraine because it has a large pool of highly educated people and the geographical location was convenient. He found the English competency of his employees was better than in China. And the cultural differences were less noticeable compared to those in India and China.

Ukrainian Capital and the Provinces

Ukraine still maintains a low cost of living. An average salary in the capital of Ukraine, Kyiv, is only US$329 per month; in Kharkiv, the second largest city, is only US$186, according to the State Statistics Committee of Ukraine.

However, the property boom resulted in higher real estate prices, primarily in Kyiv, and that impacted the salaries of those living in the capital. The salaries of the IT professionals there rose to the level of US$800-$1500 per month, which differs significantly from the salaries in the provincial towns.

For example, the salaries for IT engineers are set around US$600 in towns like Lviv, Kharkiv, Dnipropetrovsk, and Odessa, according to the Web site developers.org.ua. In addition to salaries, the high prices of real estate and the tougher competition in Kyiv were reasons why ISM eCompany decided to look outside of the capital for a location for its development center.

In fact, many outsourcing companies already established their subsidiaries in provinces. While Kyiv is still responsible for over 50 percent of all development resources, according to Goaleurope, 18 percent are in Lviv and 13 percent in Kharkiv.

After a careful analysis, the company went to Zhytomyr, which has a population of just under 280,000 people. The reasons behind choosing Zhytomyr included availability of a technical university, which provided a high quality of education, and its location, which is a short drive from Kyiv, notes Schipperus.

Ukraine Advantages

There are many good reasons for choosing Ukraine. It is well situated for doing business with Western European countries. There are no visa requirements for Western European and North American citizens. Ukraine is relatively well connected to the rest of the world, as it has international airports in Kyiv, Kharkiv, Dnepropetrovsk, Donetsk, Odessa, and Lviv. Kyiv is within a two-hour flight from the European capitals, and other cities are connected to the rest of the world via Vienna, Warsaw, Kyiv, and Munich.

Maybe that is why over 60 German companies outsource their software development to Ukrainian companies, accounting for six percent of all employed engineers in the industry, according to Goaleurope.

As for the labor pool, qualified resources are in abundant supply, despite the high demand. Many experienced engineers are already employed by software development firms. To hire IT professionals, recruiters look to hire university IT graduates.

They need to be trained in the new technologies and processes before becoming valuable to the industry, as the universities are not always up to date with the new trends in the IT industry. Some outsourcing executives even teach university courses and use them to find the best new talent for their organizations.

To improve the level of education, the Ukrainian Minister of Education Stanislav Nikolaenko announced the government plans to spend 6.52 percent of its GDP on education. This compares favorably with the education budget in Romania, reaching 3.5 percent of GDP, and 3.8 percent of GDP in Russia, according to the CIA World Factbook 2006.

The Challenges of Outsourcing to Ukraine

Disagreeable politicians are still scaring off some foreign investors. First, the Orange Revolution brought the expectation of the bright future for the country and attracted US$10 billion of foreign direct investment, according to Globe and Mail’s interview with the President of Ukraine Victor Yushchenko. Then continuous disagreements between Yushchenko and the government resulted in the recent parliamentary crisis and questions about democratic consolidation.

Software developers’ level of experience is another issue if a company sets up a software development center outside the capital. Most of the software developers with experience are in Kyiv, says Schipperus. In Zhytomyr they are mainly students with minimal work experience. This is why ISM had to invest in training its employees since it hired many straight from the university.

Now ISM eCompany employs 50 people, who represent the core of its software development team, although the growth was not without challenges.

Communication was the major challenge. “At first we had to learn how to understand each other. In practice, it can be really complicated. Some tasks here are often clear, but they weren’t clear at all to the Ukrainians,” says Schipperus. Workers who interface with the Ukrainian team must understand how Ukrainians think so they can explain something to get the results they want.

To improve communication between the teams, the representatives of the Ukrainian office work at the Dutch office for a few months, and ISM eCompany has kept two Dutch managers in the Ukrainian branch from the beginning.

Employee retention is also a recent inconvenience. As the demand on experienced IT professionals grows, people seek higher salaries to compensate for the rising rental costs and cost of improving their living standards. Employers have to make extra efforts in helping their personnel develop their careers, improve their knowledge, and establish strong social ties to the organization. Outsourcing centers in the provinces also help retain employees, who value their local environment and do not want to move to Kyiv to make a living.

Alexander Farstad, the CEO of eZ systems, which owns a development center in Odessa, treats his Ukrainian employees exactly the same as employees in the Norwegian headquarters. The open-source content management company pays “white salaries” and offers the same benefit packages, including maternity leaves.

The company also makes its Ukrainian group feel like members of the larger eZ family. “We organize annual employee conferences when everybody comes to our headquarters to Norway. Our Ukraine team has high stability because we involve them in the company,” says Farstad.

The Future of Offshore Outsourcing Industry in Ukraine

Given the number of small players, the outsourcing industry will inevitably go through the consolidation process, which is already happening in smaller Romania. There Techteam purchased Akela, Endava acquired AGS, Adecco bought IP Devel, CGS bought EasyCall, and Adobe bought Interakt. In Ukraine, the consolidation of the industry started with a large Norwegian IT company EDB buying two local software development companies.

With the assurances of the larger firms investing locally, more companies will outsource to Ukraine. Ultimately though, Ukraine will occupy a niche in the international outsourcing business, focusing on highly complex software development projects delivered by smaller teams.

Finally, customers looking for the best quality of service for a good price will shift further into the provinces. The question is: which will be the next capital of outsourcing: Lviv, Odessa, Dnipropetrovsk or Kharkiv?

For ISM’s captive development center in Zhytomyr, the future is bright but challenging. “The last year and a half were an investment because we had to devote a lot of extra attention to the Ukrainian subsidiary. It might take us another year until we can reap benefits,” concludes Schipperus.

Lessons from the Outsourcing Journal:

• For a captive operation, do your research to find the best location that will sustain cost advantages over a longer term.
• Invest in training to ensure growth of your development team.
• Prepare your communication process well in advance and engage teams from both countries to learn more about their culture and approach to sharing, understanding, and interpreting information.
• Develop a set of incentives other than salary and bonuses to keep your team motivated to remain a part of your team.
• If you are setting up a captive operation, be prepared to spend a year before it is up and running.

Controvercial Time’s Person of the Year: a Marketing Trick or an Insight?

Russia’s President Vladimir Putin was elected Time’s Person of the Year. At first, I was outraged, for the cynicism of the Russian parliamentary elections made many outsiders eyebrows rise to the other side of their heads.

However having looked at the explanation in more details, indeed the choice is commendable. And whilst Tom Casey, the US Government spokesman refused to comment as he didn’t want to help Time sell more magazines, the decision behind such an award is surely not only PR related, though undoubtedly controversial.

Previous winners include Adolf Hitler and Joseph Stalin. After Ayatollah Khomeini won the award in 1979, thousands of readers cancelled their subscriptions but it has certainly created talk in the media. So here is why I think there is more to the award than a PR stunt.

To start with, the award is not an honour, no matter how Kremlin’s Administration is using it to its advantage. It is a mark of a significant achievement or change. Surely, there are both as far as Putin is concerned. The country is an economic power, and its oil and gas not only drive the prosperity,  but also respect from the worlds nations.

 On the other side of the scale are corrupted courts and an intricate legal system, making it easier for the government or other interested parties to shout “Illegal!” and get the victim out of business or action, if the motives are political. Rossneft, British Council and Garry Kassparov, the presidential candidate, are just few examples. Taking Victor Shenderovitch to jail after legally allowed one person’s demonstration took place - using a prop student with a flag to increase the number of demonstators to two - is another simple way how unwanted action can be served under illegal sauce.

Then there is infrastructure, which didn’t see much money also the government is awashed with cash. Education and health system are less than inadequate. Corruption is of staggering proportions. The freedom of speech is extinct, as is any viable political opposition.

The award of Time magazine is perhaps more fascinating, as it allows us readers and viewers to see the free Western press interact with the Russian President, who has not been challenged by journalists for many years.

And finally, this feature on the Time website is a true blend of technologies: read the condensed article, make your own judgement from a full transcript, or watch the facial expressions of the Russian president in this video. And if that’s not enough information, check out the videoblog about the Russian countryside.

I don’t know if the authors have irritated Putin enough to be refused Russian visas during their next visit, but they have certainly made an impact: they let us all see Putin without Russian media’s pink glasses, or political correctness of the oil hungry politicians.

Does Russia need a democracy?

I was watching Euronews yesterday, where Mr. Putin has proudly announced that he will not allow other countries to meddle into internal Russian affairs. The atmosphere in the palace was that of respect and awe. Instead of asking themselves how international observers can harm Russia’s sovereignty and what is a true reason behind this decision, the public instead settled for a national pride.

Whilst I don’t live in Russia for over 10 years, I keep asking myself if Russia needs a democracy. In a country where security is non-existent and one can loose their life’s work in seconds, a job in the government offers a brief yet lucrative opportunity for self-enrichment and thus future security.  So the story repeats itself again and again when new politicians come to power, and instead of serving the nation they serve their own pocket (apologies to all honest politicians out there, I do not mean to generalize). When their pocket is full, their term is over, and so are the hopes of the electorate for brighter and better future.

But if Russia had a permanent government, then once it has become reasonably comfortable financially and secure, it can think about making a positive mark on the country’s future. It’s just like a Maslow pyramid where the need for self-realization comes after all basic needs (and they can be a matter of interpretation) are satisfied. This would be at least an honest set-up: we do not pretend we have a democracy, in fact, we don’t need one. Instead, the parliamentary elections circus continues, as further elaborated by Clifford Levy of New York Times.

Russia’s Election Is for Parliament, but the Real Vote Is on Putin

By CLIFFORD J. LEVY

Published: November 29, 2007

MOSCOW, Nov. 28 - His valor is extolled on billboards across the nation, and his daily feats dominate the television news. At a keynote election speech last week, his handlers even showcased a shimmying girl band singing an ode to that heartthrob in the Kremlin: “I want a man like Putin, full of strength!”

Thousands of candidates are vying on Sunday for seats in the next Parliament, but the election is really about only one politician, President Vladimir V. Putin. After steadily securing control over Russia since taking office in 2000, Mr. Putin has transformed the election into a vote of confidence on his leadership and on the nation’s economic recovery, and he is throwing the full weight of his government and party machine into the fight.

But to many in the opposition, the fight does not seem entirely fair.

Opposition parties have been all but suffocated by strict new election laws, scant television coverage, curbs on their ability to organize and criminal inquiries. Workers at government agencies and companies that receive state financing said they were being exhorted by their bosses to pull the lever for Mr. Putin’s party, United Russia.

A professor in Siberia named Dmitri Voronin, for example, said in an interview today that he and others at his university had been repeatedly called in by administrators and told that if they did not vote for United Russia, they would be dismissed.

An overwhelming victory for United Russia, which is all but assured, could embolden Mr. Putin to maintain power over the government after he formally leaves office next year. Mr. Putin cannot run for a third consecutive term, according to the Russian constitution, and he has vowed to abide by that rule. But he has also said he will continue to exert influence over Russia after the presidential election in March.

Whomever Mr. Putin endorses is most likely to become president, but he has not indicated a preference. Aides said he had recorded a major speech to be delivered to the nation on Thursday, but it was not known whether he would discuss succession.

To make the case that Mr. Putin has rescued Russia after the crises of the 1990s, the Kremlin has relied upon the kind of sophisticated political imagery seen in American campaigns. Mr. Putin’s speech last week occurred at a rally that had the trappings of a political convention at Madison Square Garden, with Mr. Putin shaking the hands of the faithful as he walked through the arena, just as American presidential candidates do.

“Together, my friends, we have already done so much,” he told the crowd at the Luzhniki arena in Moscow. “We have strengthened the sovereignty and revived the integrity of Russia. We have revived the power of law and the supremacy of the constitution”

At the same time, the party has deployed stylish television commercials that make the ones put together by its opponents seem like high school productions.

The advertisements often appeal to Russian patriotism, drawing an implicit contrast between the country’s current success, which has been spurred by the high price of oil, and the failings of the years after the fall of the Soviet Union, which were scarred by economic collapse, crime and political chaos.

“Today we are successful in politics, economics, arts, sciences, sports,” says the announcer in one advertisement to a stirring brass accompaniment and images of Mr. Putin and other smiling Russians. “We have reasons for pride. We enjoy respect and deference. We are citizens of a great country, and we have great victories ahead. Putin’s plan is a victory for Russia!”

Mr. Putin has high approval ratings, and it is clear that for some Russians, the nation’s stability and the sense of authority that he projects are more important than the ideal of having an active opposition.

But Mr. Putin’s opponents contend that he is popular only because he has prevented the airing of criticism of his policies.

Prosecutors confiscated more than 15 million campaign newsletters, calendars and fliers from the Union of Right Forces, one of the mainstream liberal parties that has come under regular harassment. In some cities, leaflets were anonymously distributed saying that the party was employing people with AIDS as canvassers.

Nikita Y. Belykh, a party leader, said he could not recall the last time that the party was covered by the main television news programs positively. Mr. Belykh was briefly detained by the police last weekend during protests conducted by an opposition coalition, Other Russia that is led by Garry Kasparov, the former chess champion. Mr. Kasparov was arrested and sentenced to five days in jail.

“United Russia, through all the mechanisms at its disposal, does not allow other political parties to enter the political landscape,” Mr. Belykh said.

He added that the party had received numerous reports from around the country of people being threatened with retribution if they did not vote for United Russia.

That was the experience of Mr. Voronin, the professor in Siberia, who lives in Prokopyevsk, 2,000 miles east of Moscow. Speaking by phone, Mr. Voronin said local United Russia officials had guaranteed party leaders that they would receive 80 percent of the vote in the region.

“They periodically summon directors of the local branches of the universities, directors of technical schools, specialized schools, head doctors of clinics and hospitals and give them instructions on how to vote,” Mr. Voronin said. “They also call together different categories of voters - for instance, young people who are going to vote for the first time - and explain to them how they should do it ‘correctly.’”

Nonpartisan groups that are monitoring the campaign, like Golos, a watchdog group in Moscow, said such complaints were common. The most prominent international election monitors have pulled out of Russia, saying that they were thwarted by Russian officials. But Vladimir Y. Churov, an ally of Mr. Putin who is chairman of the Central Election Commission, told reporters on Tuesday night that he did not believe such accusations. Mr. Putin himself said on Wednesday that he had no doubt that the election would be fair.

“We know the value of authentic democracy and are interested in conducting honest, maximally transparent and open elections without organizational shortcomings and malfunctions,” Mr. Putin said. “We are sure that this will be done.”

Microsoft Server Farm in Siberia

I saw this today and thought that if Microsoft goes ahead with the data centre in Irkutsk, then other businesses should take it as a sign that long term investments in Russia are feasible. By hosting its online business out of Siberia Microsoft is making a leap of faith and hope that the Russian government will not seize the assets of the giant for the weak environmental policies or worse - for tax code violations. Below is the article from El Reg.

Microsoft wraps up MOU for Siberian data centre

Ice station server

By Kelly Fiveash, 27th November 2007

Microsoft said yesterday that it has signed a memorandum of understanding with the Siberian government which could see the software giant park its latest data centre on a remote, sub-arctic part of Russia.

The city of Irkutsk has been pinpointed as a possible location for Microsoft’s latest data-pumping farm.

Over the past few months it has announced plans to build new data centres in Chicago and Dublin, at $500m a pop. The firm already has a number of US sites that power servers for the likes of Windows Live, Exchange and SharePoint.

The potential Siberian build could prove a significant investment for Redmond as it continues to push its growing online business. Aside from the planned Dublin site, Microsoft has - up to now - only had a data centre presence in the US.

Perhaps the firm has been eyeing up the Siberian city as a possible location from which it can spit out web-based apps to the masses because of its favourable weather conditions, which could provide natural cooling to the data centre.

In a recent interview with CNET, Microsoft’s senior director of data centres Mike Manos said that the software giant had 35 different criteria when selecting a site that included access to water and power, low energy costs and decent telecoms links.

But the jury is still out in chilly Siberia. The firm said in a statement:

“Microsoft is in the midst of an ongoing initiative to expand its global data centre presence… While we are very excited about the potential in Russia, no formal decision or commitment has been made to a data centre build in Russia at this time.”

Little Choice for Patriotic Russians

In conversations with my university friends from Siberia, I have posed a question: what is happening with Russia? Surprised, I received a reaction of pride and benevolence to the country’s leadership. ‘Russia, they said, is a strong country thanks to Putin. He finally made us feel proud of Russia. He doesn’t think twice about telling Americans off for setting up a radar base in Czech Republic, or supporting Iran on the nuclear programme if he feels it’s right’.

This is why perhaps many close their eyes on the increasing dominance of pro-government party United Russia. The nationalistic pride and stability have come to matter more than the freedom of choice. Below is the article from the Independent about the upcoming parliamentary elections. The spirit of this article can be found in many Russian blogs.

An article from The Independent, UK Daily from 22 November 2007.  

One-party poll’ fuels voter apathy in Russia

Sitting in a swanky cafe in downtown Vladivostok, Katya stirs her cappuccino thoughtfully. “Well, in the presidential elections I’d vote for Putin, or whoever he suggests to replace him,” she says. “But I’m not going to vote in the parliamentary elections. What’s the point?”

Katya is 25 and has a relatively good job, working in an investment bank in the Pacific port city. She speaks fluent English and has her own car and apartment. And like many thousands of young Russians who have done well financially in the past few years, she doesn’t have any time for politics, save for a vague support for President Vladimir Putin.

“I don’t talk about politics with my friends or colleagues,” she says with a laugh, as if the mere idea is ridiculous. “Maybe if it affects business, but just to be having lunch and start talking about politics – no.”

Less than two weeks before the elections on 2 December, the Kremlin has a problem, partially of its own making: nobody really cares about the outcome. Interest in party politics is at an all-time low, say analysts, partly due to a concerted set of moves on the part of the Kremlin to stifle real political debate and partly due to the belief that voting will change nothing.

In Vladivostok, like in Moscow, seven time zones to the west, and in every city in between, the streets are decked with posters for the pro-Putin United Russia party, which is expected to win about 60 per cent of the vote. The party has little real ideology except for a steadfast support for Mr Putin and has a near monopoly on television coverage. Its campaign posters are simple: a Russian flag and the slogan, “Putin’s plan is Russia’s victory”.

Last month, Mr Putin agreed to head the party’s list at the elections, and it is only by linking themselves to the President – the only politician with true mass appeal in Russia – that they are able to inspire support. Mr Putin himself made a carefully coordinated attack on the party last week, saying it was full of “all kinds of crooks” but was the best option available.

Fair Russia, a party created last year with Kremlin backing and meant to act as a controllable opposition to United Russia, has been doing dismally at the polls and may not make it into the Duma, the Russian parliament.

Widespread indifference to the parties can be partly explained by the cynical nature of Russian politics. “Nobody standing for the Duma elections is actually doing so based on real ideas, except the Communists,” said a Vladivostok-based analyst, who asked not to be named. “Everyone else uses a party platform to advance their own personal or business interests. And of course the trouble with the Communists is that their ideas aren’t very attractive any more.”

Since the previous elections, a whole range of regulations have prevented smaller parties from getting in. It has become tougher to register political parties, the threshold for Duma entry has been raised from 5 to 7 per cent of the vote, and the “against all” option has been removed, meaning that the only way to register a protest vote is to spoil the ballot or stay away. The 7 per cent barrier is likely to shut out the Russian liberal parties.

In Vladivostok, one man who has been part of the past two Duma sittings is Viktor Cherepkov, a former mayor who claims to have links with cosmic forces. “He’s completely insane,” says Alexander Helbach, a retired local journalist. “But people remember that when he was mayor in the 1990s, he got things done. And unlike everyone else here, he’s not corrupt.”

But whereas before, a certain number of seats were allocated through direct single-constituency voting, this duma will be entirely elected from party lists. This will mean no space for people such as Mr Cherepkov or the Kremlin critic Vladimir Ryzhkov.

According to internet sources and blogs, workers in state institutions such as schools and hospitals are being pressured to vote for United Russia, and in some cases are even being told they must photograph their ballot papers to prove it.

“Apathy can work both ways,” says Boris Dubin, an analyst with the Levada Centre polling agency in Moscow, explaining why a turnout of 60 per cent is still expected. “People are worried what might happen if they don’t vote. So, given that they don’t care much anyway, they think it’s better to go and vote for United Russia and avoid any potential problems.”

Amid the apathy, a few have taken the path of protest. The most radical of these have joined the Other Russia coalition, led by the former chess champion Garry Kasparov and the controversial writer Eduard Limonov, which has no media coverage, little support and is banned from taking part in the vote.

Campaigning for a big election turnout in Moscow yesterday, Mr Putin denounced Other Russia, without naming their leaders, as foreign-fed ” jackals”. Referring to opposition marches planned for the weekend, he said: “Now, they’re going to take to the streets. They have learned from Western experts and have received some training in neighbouring [ex-Soviet] republics. And now they are going to stage provocations here.”

In Vladivostok, Other Russia has just 70 members. Its regional co-ordinator, Tatyana Korchevnaya, claims the population is not apathetic, but believes any resistance to United Russia is futile.

The election in numbers

41.5%

Percentage of prime-time TV news coverage devoted to Mr Putin in October

16.5%

Percentage of prime-time news coverage devoted to United Russia in October

1.2%

Percentage of prime-time news coverage devoted to other parties in October

29%

Latest approval rating for work of Duma

83%

Latest approval rating for President Putin