What the Russian papers say

Russian defense industry losing ground despite demand / Russian foreign ministry warns Russians against going to Georgia / Russia and challenges of the new decade / NATO may open counterterrorist center in Tajikistan / Ukraine will lose out from Russia's South Stream

Novaya Politika

Russian defense industry losing ground despite demand

It appears that Russian weapons and military equipment are just about the only hi-tech national products in demand abroad. Nevertheless, availability has been steadily declining over the past few years despite increasing demand.

Prime Minister Vladimir Putin has noted that defense-industry enterprises lack the capacity to meet the demand of all prospective customers, and that only the Soviet-era backlog enables Russia to manufacture and export weapons. Despite increasing demand, Russia is unable to boost supply for the lack of material and human resources.

The Stockholm International Peace Research Institute (SIPRI) said Russia had become the second-largest arms exporter since 2005, and that it controlled 23% of the global arms market, whereas the U.S. share was 30%.

Anatoly Isaikin, CEO of Russia's state arms exporter Rosoboronexport, said Russia had exported $7.4 billion worth of weapons in 2009, or 10% more on 2008. He said Russia continued to boost arms exports which had soared by over 140% in the past nine years. However, Russia's declining market share implies that the national defense industry is unable to meet a rising demand.

Although Russia delivers weapons to over 50 countries, China and India are its main customers buying 80% of Moscow's arms exports. But their economic-development levels allow them to expand the production of weapons developed in line with Russian technology.

In the past 15 years, China has been Moscow's largest customer, buying up to 50% of Russian exported military equipment. In 2009, Beijing's share dropped to 18% because China and India are becoming more interested in technology transfers and licensed production, rather than weaponry.

Although Russia is the second-largest exporter of weapons and technology, its hi-tech potential will eventually be exhausted. Consequently, Russian military equipment will become less popular among the main customers.

Moreover, Japan, Germany and the Czech Republic spend 300%, 200% and 100% more, respectively, on R&D programs than Russia does. Meager R&D allocations may prove a fatal mistake.

Despite the current problems, Russia remains a major player on the global arms market and will retain this status for a long time. However, its advantage will decline each year, unless Moscow spends more on R&D, personnel-training and production-expansion programs.

RBC Daily

Russian foreign ministry warns Russians against going to Georgia

Russian Foreign Ministry spokesman Andrei Nesterenko has recommended Russian citizens against travelling to Georgia. He said the foreigners who go to Georgia after visiting Abkhazia or South Ossetia are fined or imprisoned there.

The Georgian authorities cite the provisions of the 2009 law on the occupied territories, which the European Commission for Democracy through Law (Venice Commission) criticized.

"Georgian authorities will do anything to sever Abkhazia and South Ossetia's connections with the world," Nesterenko said.

The Russian diplomat also said that Russians, both those who have been to the two newly-independent republics and those who have not, often fall victim to violence in Georgia.

"I have said more than once that virtually every Russian entering Georgia for personal reasons or to visit relatives is a potential target of the Georgian security services' provocations and can be thrown into prison," Nesterenko said. "Weapons, counterfeit banknotes or drugs are planted on them and later used as evidence."

P.Siukayev, V.Vakhania and P.Bliadze were imprisoned in that manner. A provocation staged in October 2009 against another Russia citizen, Ya.Kenkadze, was prevented only because he promptly appealed to the Russian Federation Interests Section at Switzerland's embassy in Tbilisi. In June this year, Yu.Marchuk and Yu.Skrylnikov were arrested in Georgia; the investigation is still under way, the Russian diplomat said.

Earlier Shota Utiashvili, the head of the information and analytical department of the Georgian Interior Ministry, said those Russians in Georgia who had been to Abkhazia or South Ossetia would be fined or imprisoned for five years if they visited the said territories without crossing the Georgian border. He said ordinary tourists who enter Georgia with passports stamped by Abkhazia or South Ossetia will be fined about $1,200, while those who "collaborate" with the two republics' authorities will face a five-year prison sentence.

However, Abkhazian Foreign Minister Maxim Gvindzhia said border guards in Abkhazia and South Ossetia do not stamp Russian foreign passports, which means Georgian authorities have no proof that a Russian citizen visited either of the republics.

Forbes (monthly)

Russia and challenges of the new decade

Even as the global economy is getting over the worst stages of the recent recession, Russia is beginning to estimate the potential challenges of the coming decade.

Finance Minister Alexei Kudrin warned in April that Russia can expect to see budget revenues stagnate; therefore, state expenditures should also be kept flat. He drew more public criticism recently by saying that the retirement age should be increased because of the country's aging population.

His concern is understandable. Russia, which has been consistently cutting its government debt, risks turning into a country with a rapidly accumulating state debt. On the other hand, a slight increase in government debt may do us good, the absence of any internal government debt market is a serious obstacle to having a healthy financial market. Yet, soaring government debt would certainly alarm investors, so if Russia does not set some limits internally, external limits may come into play as was the case with Greece.

Budget problems will not be the only challenges facing Russia in the new decade. It is also vital we brace ourselves for a change in the energy market structure. Gazprom's weakened position in Europe may not necessarily be a national tragedy, but the change will require a different approach to managing the state monopoly.

The innovation sector that the Russian government is currently trying to boost will face its own challenges: new products will be designed, go into production and become obsolete too quickly. Competition will increase as science and entrepreneurship develop in many countries. Given that situation, the government would be able to provide only limited support to the sector to make it internationally competitive.

Growth will mainly rely on open markets and a culture of entrepreneurship. However, the situation here is not likely to improve, and could even deteriorate. Russia came last in its group of similarly developed markets and last but one worldwide in the Global Entrepreneurship Monitor 2009 business activity ranking. What's more, the older generation of entrepreneurs, who set up their businesses in the late 1980s, are beginning to retire; younger Russians prefer civil service to business, as recent surveys say.

The demographic situation will be another destabilizing factor, as the thinnest generation in numbers, born in the early 1990s, will be joining the workforce. Neither the country's armed forces nor the education system are prepared for the change. The latter is in fact in for several shocks: the surge in demand for kindergartens caused by the mid-2000s baby boom will give way to a slump and a shortage of schools. The labor market will also have to adjust to the change.

The government began writing long-term strategies in the 2000s, yet, their ongoing policies were often dominated by tactical concerns. When the global crisis hit, many decisions were made for their short-term social effects. But the situation is changing again, and new trends still have to be analyzed and interpreted. It is time to find new scenarios and develop new strategies.

Kommersant

NATO may open counterterrorist center in Tajikistan

NATO may establish a counterterrorism center in Tajikistan, NATO Secretary General's special representative for the Caucasus and Central Asia, Robert Simmons, said on Tuesday following talks with the Tajik leader Emomali Rakhmon. Simmons did not specify a location, but it is no secret that Moscow takes a negative view toward any expanding Western military presence in its sphere of influence, which includes Tajikistan. Experts say that if NATO troops start arriving at the airport Aini, which is located near the town of Gissar, 25 kilometers from Dushanbe, it could strain relations between the alliance and Russia.

Robert Simmons made his sudden announcement on Tuesday right after his meeting with Tajik President Emomali Rakhmon. He did not specify a location. Furthermore, according to reports from other news agencies, the NATO official had in mind a Central Asian country other than Tajikistan.

But on Wednesday, Robert Blake, U.S. Assistant Secretary of State, who visited Dushanbe in Robert Simmons' wake and also had talks with Rakhmon, hastened to deny possible rumors about U.S. troops appearing in Tajikistan. Following the talks, the diplomat said the United States had no plans to set up a military base in Tajikistan.

Meanwhile, Moscow points to the increased attention being shown by NATO countries and the U.S. in Central Asia. "Missions and training centers are used as a way for the U.S. and its allies to establish their presence in other countries," said Dmitry Rogozin, Russia's NATO envoy. "Reports of possible NATO training centers from nearly every Central Asian republic continue to reach Moscow.. But these reports need verification." The Russian Foreign Ministry said it has no information in which of the region's countries NATO is interested.

Andrei Grozin, head of the Central Asia and Kazakhstan department at the Institute of CIS Countries, believes that if the alliance opts for Tajikistan as a base for a counterterrorist center, the most likely places for NATO counterterrorism fighters to appear are Kulyab and the military airfield at Aini near Gissar not far from Dushanbe. It is also true that Moscow has long shown interest in the facility. The Tajik government even promised to allow Russian pilots in as long ago as 2004.

However, the expert thinks any conflict over Aini between Russia and NATO is unlikely. "NATO appears to have no desire to step on Russia's toes. Moscow's calm response to Simmons' words also confirms this. What's more, the impression is that Moscow and Washington have already divided up Central Asia between themselves relative to a possible presence there," Grozin believes.

Vzglyad

Ukraine will lose out from Russia's South Stream

Kiev is concerned that the volume of Russian gas transited through Ukraine could be halved if Russia goes ahead with the South Stream pipeline, said Ukrainian Energy Minister Yuriy Boyko on Wednesday. However, he forgot to mention Nord Stream, which is already under construction.

In 2009, Gazprom paid Ukraine about $1.5 billion for gas transit.

"We proposed that our Russian partners abandon the South Stream gas pipeline, which bypasses our country, in part because it is not in our national interest. This bypass route through the Turkish economic zone would leave our gas transport system standing idle," Boyko said.

The Ukrainian authorities have repeatedly said that South Stream's construction is an irrational waste of money. So, officially Kiev continues to persuade Moscow to abandon its plans to build South Stream, and instead to continue delivering gas to Europe through Ukraine's gas transport system.

On July 2, Ukrainian President Viktor Yanukovych suggested to Russia and the European Union that Ukraine build an extra gas pipeline on its territory to increase the volume of gas delivered to European countries. On July 7, Boyko put forward a project to Russia and the European Union that could potentially replace South Stream. It would entail two Ukrainian gas pipelines: the Soyuz and the Ananyev-Izmail.

Experts say that Kiev does indeed stand to suffer as a result of South Stream's construction, as it would result in a considerable decrease in the volume of gas delivered through Ukraine. At present 80% of Russian gas delivered to Europe goes through Ukraine.

However, Director of the Due Diligence Department in 2K Audit - Business Consulting, Alexander Shtok, says that Ukraine offers no real alternative to South Stream. First, because gas transit tariffs lack transparency. Second, because Russia and Ukraine's past commercial disagreements on gas transit through Ukraine, which hit European consumers, have not yet been forgotten.

Viktor Markov, head analyst at Zerich Capital Management, agrees: "Russia started diversifying its exports so it does not need to depend on Ukraine and Belarus." He also said that it was not only the construction of South Stream, but also of Nord Stream that stood to impact on gas transit through Ukraine.

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MOSCOW, September 2 (RIA Novosti)