Ruminations on Russia

Failing to come up with anything useful to say about Gazprom's acquisition of Sibneft I am reduced to reproducing other people's thoughts. These are from the Economist

In one of the jokes Russians tell about Roman Abramovich, owner of Chelsea football club and until this week an oil tycoon, he complains that London is an expensive city. Punch-line: “He still can’t buy it.”

The second question is: are the deal, and the trend it represents, good for the Russian oil industry, and Russia itself? After the Yugansk and Sibneft transactions, the share of Russia’s oil production controlled by the Kremlin will approach a third. The state also influences oil exports via its pipeline monopoly; Gazprom has monopolies both on gas pipelines and gas sales outside the former Soviet Union. True, the Russian government still has a weaker grip on the energy sector than the governments of many other petro-states. But as one Moscow-based tycoon puts it, the problem is not with state ownership per se, but with this state in particular. The growth of Russian oil production has already drooped. More state oversight—meaning more graft and less efficiency—is unlikely to help.

Still, why is Mr Putin, hammer of the oligarchs, letting him walk away with all this cash? With whom will he be sharing it? There are rumours.

Couldn't really work out how to describe the Gazprom/Sibneft merger. Adam Landes from Reniassance Capital cuts to the chase.

"Clearly, this deal is way below the market price and below a fair estimate of [Sibneft's] market value," said Adam Landes, an analyst at Moscow-based brokerage Renaissance Capital. "From an industrial point of view, it adds very little for Gazprom, and strategically it's a waste of time."

From the Daily Deal.

Technorati Tags: Company, Russia

If you read my ramblings you probably don't need me to tell you that the domestic economy is booming. Not just in Moscow, but in the Volga heartland, the oil towns and in strange places such as Novosibirsk. The growth in consumer spending is drawing in the multinationals from autos to cheese in search of growing markets and driven on at the board level by Goldman Sachs BRIC report (Brazil, Russia, India and China) (the link is to the original Goldman Sachs pdf report.) Russia provides a surer path to profitability than I & C but worse beaches than Brazil. I have half an eye on Russia's agribusiness industry, in particular the dairy and beef end of the business. Two headlines over the past couple of weeks caught my attention. Chronologically the first was Kraft's that they intend to be a major player in Russia's booming cheese industry. The second and the one that caused me to think about this post was Wimm-Bill-Dann's interim reports. Most analysts tend to focus on WMD's surrendering its leading position in the juice business to Lebedansky. To me the most telling statement related to its dairy business;

Sales in the Dairy Segment increased 20.1% from US$399.1 million in the first six months of 2004 to US$479.5 million in the first six months of 2005, while the average selling price rose 13.7% from US$0.73 per 1 kg in the first half of 2004 to US$0.83 per 1 kg in the same period of 2005. This increase was primarily driven by ruble price increases. Gross margin in the Dairy Segment declined from 24.1% in the first six months of 2004 to 23.8% in the same period of 2005. This change was primarily driven by the increase in raw materials costs and stronger demand for raw milk intensive traditional products in the regions.

In short what drove margins down despite above inflation price rises were a lack of raw materials. Domestic raw milk supplies are effectively flat. Any increase in sales has to be offset by an increase in dry milk crossing the border from the near abroad - Poland and Estonia. The supply problem is further exacerbated by the very poor quality of domestic milk. Maximum bacteria parts per millimeter in raw milk in the US is 100,000. In a dairy plant in western Siberia I trawled recently they were not particularly concerned by the count but did measure it. The average for the hot summers day that we were there was 700,000. Somatic cell counts were also very poor. The long and short of which being that the milk was worse for you to drink than unpasteurized milk and would be useless for dairy products that require high fat content - cheese for example.

I am sure that a behemoth such as Kraft is not going to announce a major expansion in to Russia without first securing its supplies. I just have not seen any evidence that there is meaningful investment in agribusiness that would supply Kraft, WMD et al. WMD made a strategic decision last year not to invest in upstream production. A mistake in my mind if they want to maintain an interest in the dairy business. It will be interesting to see how long WMD can pass on its costs increases to its customers.

Technorati Tags: Agribusiness, Russia

Maxim Kononenko the author of the smile worthy satirical take on the daily life of Vladimir Vladimirovich Putin vladimir.vladimirovich.ru (Russian only) provides the only logical answer as to why the powers-that-be decided to cancel the visa for Khordokovsky's US/Canadian lawyer, Robert Amsterdam.

Khordokovsky is off to a penal colony somewhere where the sun don't shine for the next 8 years, it looks like his side-kick Platon Lebedev, probably won't come out alive. His appeal was a travesty of justice; fair enough, so was the trial. Why make the news last any longer - it's just plain stupid.

Without translating the whole of Friday's piece a quick synopsis. VVP is talking to Patrushev, the head of the FSB, and asks why they decided to expel Amsterdam. A non-literal translation goes something like this - "we have to do something truly idiotic from time-to-time; they expect less from us as a result."

Could not have put it better myself.

And to ensure that coverage is even a dig at George W. And my favourite joke of the moment.

Donald Rumsfeld is giving the President his daily briefing on Iraq. 
He concludes by saying:  "Yesterday, 3 Brazilian soldiers were killed."
"OH NO!" the President exclaims.  "That's terrible!"
His staff sits stunned at this display of emotion, nervously watching as the President sits, head in hands.
Finally, President looks up and asks, "How many is a brazillion?"


Technorati Tags: Russia, Visa

Ultra Motors one of my favourite bizarre technologies to emerge from Russia makes its way on to the pages (sic) of Red Herring. Good work by Russian Technologies and Flintstone Technologies.

It has taken a while for the Company to make the break through that it's technology deserves. As always bringing in a good CEO in Paul Dyson seems to have made a huge difference.

They are out looking for cash right now.

Technorati Tags: Russia, Technology

I should really start a section on the Reiman/Alfa battle. Back from my summer hols, obligatory school essay to follow, to discover that the MinSvyaz has convinced the Prosecutor's office to open a criminal investigation in to kompromat.ru (a Russian-language scandal website) for reporting that documents lodged with the courts in the British Virgin Islands allegedly show that Reiman took a $1mn bribe for easing a British businessman's way to obtain a license. Here's the link in the Moscow Times it will degrade in a day or so. I'll update when I find a permanent link.

The only thing that it proves is that the "law" is whatever the authorities want it to be.

Technorati Tags: Reiman+Alfa, Russia

A phone that is smart enough to make you part with vast amounts of cash to acquire it but fulfills neither the function of a phone, a PDA or a camera (as if having a below par camera makes up for having a crap phone and PDA)

In the case of my Treo650 it also has French Workers syndrome. Thus if it is doing one thing and is required to do another the whole thing shuts down and takes 15 minutes of coaxing to get back to work.

Technorati Tags: mobile, Treo, Smartphone

From the eponymous Moscow Times reporting on the collective head in the sand approach by Julia Tymoshenko announcing that there is no crisis in Ukraine.

The only crisis is that March 2006 cannot come soon enough for her so that she can stop pretending that she is working for Yushchenko.

Ordered yesterday to "dump their arms" (from the Economist)the IRA's legitimate campaign finally spluttered to something like a halt yesterday. Though if someone could translate "dump their arms" that feeling of been here, done that may also come to a halt. It has that weazle-worded feeling that the IRA specializes in.

It will be interesting to see what happens to the likes of Slab Murphy who according to Families Acting for Innocent Relatives is more interested in his business activities. This Google search link provides more links and thanks to the advent of blogging more truth.
To paraphrase the Republican song; no more armoured cars, tanks and guns come to take away our sons

An excellent guide to the habitat in Moscow from the eXile. Once Moscow's most notorious newspaper (sic) unfortunately a rather poor imitation today.

From A Russian Blog more thoughts on bribery in Russia, the whole post is here; Civilized Way of Bribing:

I picked this particular quotation from the bottom of the post because I think in an otherwise well thought through take on the changing rules of bribery in Russia this one is wrong.....

"The irony in this matter is that Russian businessmen know exactly that they are still giving good old bribes. Western businesses operating in Russia act as a crowd in a fairy tale delighted by the emperor new clothes. American, European or Japanese businesses hire a Russian – ‘a guy who solves problems’ – and are very happy with his incredible effectiveness and luck."

Technorati Tags: Bribery, Russia

However close your relationship with VVP is I for one would not want to take on Alfa Bank.

This fairly lengthy report from the Moscow Times details the latest back and forth in the ongoing spat between Alfa and Reiman that is being played out in the courts. Having been stymied by Jeff Galmond's bare-faced lies to a court in the British Virgin Islands, Alfa have convinced the German's to investigate the less than open relationship between Commerzbank and Telekominvest/TCI/First National Holdings (an entity that was on Commerzbank's balance sheet in 1999) under money-laundering rules.

I would guess that the fall out will be sufficient to condemn some ex-Commerzbank bankers now "working for" Jeff Galmand. Eventually Jeff himself will also be unable to travel to Europe. It should be fairly clear to anyone with half a brain that a very bad lawyer and a worse businessman did not suddenly end up with a pan-national mobile license for free without some "help."

My assumption is that proving the money-laundering charge will be very difficult, allowing Reiman and his close associates to escape censure in Russia. It is however, increasingly close to home for certain members of the Presidential Administration and I am sure that Alfa will struggle to win this set.

Just in case you happened to be on Mars for the last couple of weeks; there were a number of bombs in London on July 7th. 55 people have died so far.

So working on the theory that lightening does not strike twice in the same place, and that the original bombers were seeking an early meeting with the virgins, my wife and I are heading for London for a visa run (and the subject of a whole new post).

Which leads me to the point of this post; the relationship between Islam and Britain.

Some guides to my politics;

• I come from that part of UK society that make me a “Foreign Office Arabist”
• I have immense respect for Jewry but very little for the State of Israel
• There are very few areas of foreign policy on which George W. Bush and I would agree
• I know more people who have died from the results of terrorism than old age

{}

Technorati Tags: 7/7, UK

It was not the first, it will not be the last. That alone will ensure that London returns to normality within weeks.

As the apocryphal member of the IRA said to the apocryphal soldier in the early 90's;

"we only have to be luck once, you have to be lucky all the time"

2008 and the Lesser of Two Evils:
The Kremlin's current inhabitants have no knowledge of how to run a business or state. Yet they are highly professional in their ability to craft special operations and diversions and to manipulate public opinion. Operation Lesser Evil is right up their alley.

Wither Russia?

Or where has it been recently and where is it going?

The Financial Times had an editorial piece on Russia's forthcoming Presidency of the G8. As the author correctly pointed out, an organization that is dedicated to free markets and democracy should not be headed by a country whose support for both of the above is questionable.

The recent past has not been Russia's most glorious since 1992. The Khordokovsky affair was not good, what happened to Yukos was worse and is another example of wealth acquisition by a group who were not clever enough to do so the first time around, at somebody else's expense. In case that is not clear; it was Rapine pillage.

There are rumours that certain 5th Directorate Thugs are being reigned in. I personally don't believe it - but for clarity; the strong Russia natural resource policy is a smokescreen behind which some individuals are enriching themselves. Expect further bizarre behaviour that is clearly not in Russia's long term benefit. It will continue to make good FT/WSJ/NYT headlines to say that democracy is being hindered by media concentration and the direct appointment of Governors. At best the case is unproven that democracy has been harmed at all. Neither the media nor local politicians act in a way that is in anyway democratic. The instinct is anti-democratic; the outcome is open to debate. It's clear that the commanding heights (what a crass phrase. Try telling an entrepreneur that his chain of sandwich shops is not worthy of a commanding height) are being concentrated for the wrong reasons, but Russia is a country of 140mn people and the rising tide is making their Roubles available to all of us.

There will be battles over economic control whoever sits in the Kremlin for some time yet. Short-to-medium term policy is substantially more important. Which leads to my largest worry: Gref vs Fradkov (with Fradkov playing at home) Either Gref feels that he is strong enough to take on Fradkov, or so weak that it no longer matters that there is open warfare. The pessimist in me says the latter.

More important than the personal battle is the actual policy. In spite of Yukos, inward investment is picking up again; concentrated in autos and consumer sectors. Ford (apparently) has a 12 week waiting list to acquire a locally produced Ford Focus. Despite the increase in tariffs on foreign produced cars 2/3rds of all cars bought today were not made in Russia. There is growth evident in every aspect of the consumer sector. Cheese imports, for example, are growing 30% y-o-y (and that's just the reported imports.) Oil is no longer driving growth, it's impact is mostly being neutralized by the reserve fund and a taxation policy that is more favourably skewed to Russia than previously. Still inward investment is not stubstantial enough to kill off inflation driven by an excess of demand over supply. Russia's largest trading partner (the EU) is having a self-induced crisis, as is the $ (one induced by a political elite, the other by credit cards). So it does not matter whether the Rouble is appreciating or the $ and € are depreciating the result is the same. Rouble wages are not inflating as fast as real Rouble inflation. Whilst the Russian Economic Forum week in London is one of the best shopping weeks in London in the year (when did you ever see an underdressed Russian girl (except the strip clubs) Russia's growth is about the Roubles that are being spent by the people who are working for my wife (SWMBO) and thousands of mid-size businesses across Russia. The long awaited middle class. My gut feeling is that they are feeling poorer and less secure. The Ford statistics/rumours and the HUGE number of people going on holiday at Domodeydevo Airport today would not support my gut feeling. My only excuse is that a rising tide is adding to the people who get to go to Anatalyia for the first time, but those who have been through this process before are less secure. An economy that is grown on the seeds of oil, gas, gas, oil, steel and oil and an underserved consumer is storing up substantial problems for the future. In case anyone whose economics education extends beyond mine reads this guff tell could they tell me what happens when you have internal inflation as a result excess demand over supply, a current account surplus and substantial problems in your counterparts currencies.

So on one hand we have an investment climate that is tempered (good choice of word) by Yukos (not Khordokovsky,) Gazprom/Rosneft and directional insecurity and on the other a dynamic consumer sector that is crying out for investment.

Both medium-term (Private Equity) and strategic investors are bullish across a range of sectors. Portfolio investors are wary but then their access to Russia's real story is limited and the market will flit about on UES restructuring and GAZP de-ringfencing - which is not where money is being made today.

I think my money is with the long term investors. There will be good times, there will be better times and there will be worse times but even when the measure is not good my guess is that very little money will be lost.

Technorati Tags: Russia

No longer will this be Ruminations on Russian Tech and Venture Capital Investing but just plain Ruminations on Russia.

There will be a de-emphasis on the technology part, more on the joys of investing in this part of the world and more on this part of the world generally as viewed from my privileged window.

{}

Technorati Tags: Russia

A German in Moscow blogs his observation of two Mercedes bumping in to each other and the benefits of being able to call “supporters.”

Too add to the; it's summer therefore in addition to trying to kill myself with a combination of vodka and swimming (it's a break from vodka and ice-fishing during the winter) I'll try the summer sport of high speed crashes whilst failing to observe a. the rules of the road b. traffic lights or c. any form of “society” in which you might want to help your fellow man.

However, as a cynical observer and (eager) participant in the road rage game of; there are no rules but the ones that I am making up at the moment the likelihood of crashes comes with the territory. So as we headed to the Dacha (dacha; noun
a country house or cottage in Russia, typically used as a second or vacation home) two weekends ago we were involved in an incredibly low speed accident; we were stationery and the truck that hit us was going at least 3km/hr.

Usual story; traffic jam ahead - three lane road becomes a 5-7 lane road as we all try to get 5m further ahead of anyone else in a classic portayal of the zero sum game / prisoner's dilemma. We were in lane 4-5 1/2 (i.e. not one of the lanes that the Russian government has painted lines on the road to encourage us to use) and were trying to edge ahead of a large truck. We were trapped and the truck was not - result a 2m gouge down the side of the car.

Now the fun starts. After a crash you are not allowed to move your car until the traffic police arrive - we crashed at 13.30. they turned up at about 17.00. Fortunately the sun was shining so we sat by the side of the road. Once they had turned up it took another 90 minutes of form filling (and 3500 rubles to “expedite” matters) to get a form from the police to use with the insurance company.

Pictures to be added on my return from Novosibirsk.

{}

Technorati Tags: Russia

A blog from a Peace Corps volunteer in Andijon, Uzbekistan where latest “revolution,” apparently this one is Cotton, is or is not underway. She has now been evacuated to Tashkent.

I like her take on the background to the troubles;

It would be “reductionist” to interpret this as a purely religious movement, or a drive for democracy. I maintain that the worsening economic situation for the general population, coupled with increased taxation, systemic corruption, and a host of other factors converge into a force of disobedience that leave no other choice, no other outlet for people who need to find a way to improve their lives, even if it means risking it. There's not much else to lose...

I defy you to agitate a man on a full stomach

{}

Kevin Laws from Venture Blog on the similarities between Peacocks having sex and making VC investments; Why Are Startups Like Peacocks?

I take his point that signaling in the VC world, as opposed to the Peacock sex world, can be ultimately disadvantageous especially when taken to the extreme. However, its pretty hard to argue a company is doing well unless some of the signals are being flashed. Nothing makes people happy like revenue, especially when its early and in greater volumes than expected, which is not like.......an analogy too far.

{}

Jeff Nolan ordered a Sonos Digital Music System. I man-handled three back from the US in to Moscow and am the happiest music bunny out there. As it says on the Sonos website you can play it anywhere, and you can play different music in different places at the same time.

In over a month of regular use I have had no problems with it at all. A HUGE fan.

Russell Beattie asks what is PalmOne celebrating exactly? And then gives PalmOne a due smacking for its Treo. I am a 650 owner - OK PDA, very bad phone.

I take mild issue with the conclusion. The winner is not Nokia or Sony/Ericsson, Moto etc but RIM, Good, M$soft (Exchange 2003 upgraded w/ push service) and, interestingly, Sonus and Broadsoft.

I am not pro-M$oft but the free ActiveSync upgrade to 2003 Exchange Server is a great idea, just 5 years too late. The option to IT managers; buy a b'berry server et al or a smartphone and a good email client. And they will still go b'berry. You don't get fired for buying what everyone else is.

This too good to miss - Romanian hides stolen mobe in vagina. As with all mobiles in public places stick it on vibrate....

Glenn Fleishman on the death of TelSym. I can't say that I am hugely surprised. They were trying to fill a market position that was in constant flux and has not even begun to settle down. I watched them quite closely at the time because we spent a fair bit of time trying to figure out a business plan for a similar company. We passed because we could not figure out how to make money from a smart company. Same was true of TelSym. They had a bunch of financing to ensure that they had to worry less about hitting the wall. When it came more money slammed in to it.

In the same week that they failed a possible answer to their woes. I am a Skype-sceptic and cannot quite shake my feeling that nothing has changed since I voiced my skepticism last year. Today I heard from a friend with more knowledge than most of security-related issues that his SkypeOut account identity had been stolen and the contents of his account spent on calls to Australia. He points out that your account's security is based purely on a password. Not a great way to keep cash online.

I'll go back to why I don't think Skype is the answer; security and maintaining call state to provide applications. If TelSym had not been so arrogant maybe they could have hung around long enough to find nirvana.

Russian universities two in first three and three in top ten; which includes Izhevsk, which to the best of my knowledge has the honor of producing my excellent receptionist and little else.

A Russian friend working in the Valley forwarded me this report. He has a PhD in something complicated and a 7-year old son. He is worried that the public-education that he is giving him will qualify him to be a lawyer, consultant or investment banker but certainly nothing that requires 2x2 being equal to 4 at all times.

I'm damned if I can import the chart and keep the formatting so you will have to find the standings here. The top 13 included 5 Universities from Russia, 5 from China (not bad on a comparative per head of population basis,) and 5 from Europe. The first US university/ies came 17th=. By which time a bunch more Russian, Belorussian and Chinese Universities had also joined the list. It is true that the average standard of education across Russia is falling rapidly. In a comparative report sponsored by the OECD has the average level of mathematics in Russia and the US at the same level. The statistic seems to me to be out, but as a trend it's difficult to argue with. Yet at the top end the trend is clear. Russia and the CIS is the world's leading powerhouse in mathematics. That strength is beginning to show up in complicated programming problems and has been recognized by (inter alia and/or principally) Intel, Motorola and Boeing. And I mention them because they were the principal players in Tuesday's poorly attended session on high technology at the Russian Economic Forum. The panel was led by Sergei Kravchenko of Boeing who stated in his opening comments that VV Putin wanted Russia to catch-up with India's $12bn in exported IT services. Russia's export services in 2004 amounted to a paltry $0.5mn. Ex-Komsol leaders like Kravchenko are unlikely to publicly disagree with Our Great Leader.

The comparison is misleading. Not that Russia's export services are paltry, they are, but that India is Russia's competitor. It seems unlikely that an Indian design team will be responsible for 1/3 of the Boeing 7e7 or 777, or build Motorola's phone software development which is being developed by a great company in Nizhny Novgorod. Nor would Intel go to Indian scientists to sort out RF issues with the Centrino chip, after their Israeli development team ran in to issues. But even that maybe missing the point. No one refers to the quantity of export services from Israel. Instead Israel's high tech success is measured in companies that raise venture financing and go public on NASDAQ. This is where Russia should be competing. Where the comparison is meaningful is that competition to provide intellectual services is global. Nearly all of Russia's competitors provide inducements of one kind or another to build outsourcing centers. Russia cannot assume that its intellectual abilities alone will create demand for its scientists.

REF is Russia's leading big business conference. Everybody who is anyone is there which means that the best attended event is coffee. It may also have something to do with the fact that Russians are not great at listening to what others have to say. I had intended to try to blog the sessions that I attended. Power sockets were slightly rarer than rocking horse shit and there was not a WiFi connection to be had for love nor money. So instead here is this consolidated impression and some specific thoughts on the technology session in another post.

My leading and most useless observation impression is that Russian presenters have improved little over the preceding 10 years. Lack of structure, verboseness and irrelevance were the hallmark of the majority of the speeches from Russian presenters. My second impression is the overwhelming negativity of the majority of the Russian participants. Maybe the only happy guys at the whole event were the money managers; Bill Browder of Hermitage Capital winning the award for most overwhelming positive speech (paraphrased - the things that the press worries about are overblown from a stock market perspective). Boris Fyodorov, Honorary Chairman of UFG, a Russian investment bank, and a board member at Gazprom definitely won most logically optimistic speech (paraphrased - things have been a lot worse and are actually pretty good right now; GDP growth, budget surplus etc.)

Sitting somewhere in the middle was Bob Dudley, CEO at TNK-BP, who told a story of substantial investment in the opportunity that is natural resource exploitation in Russia but worried that the business climate was getting worse and worse. Brian Gilbertson, formerly CEO at BHP-Billiton, and now CEO at SUAL did not really touch on the business environment. However, his subsequent statements to the press where he stated that SUAL would probably not seek a London listing because the Russian government did not look kindly on foreigners owning strategic reserves spoke volumes for what he really thought.

At the far end of the spectrum Misha "2%" Kasyanov, Andei Illiaronov and Boris Nemtsov launched in to a blistering attack on the government. The theme of all three was effectively the same; lack of continuing reform is really hurting economic progress. Misha "2%" in his "I'm standing for President in 2008" speech extended the criticism to every element of society. He may have a point, in fact he probably has a very strong point. However if the best that big business can muster to force a quasi-democratic discussion with those inside the Kremlin is a man whose moniker is 2% then we probably should not be holding our breath for a non-Putin blessed successor in 2008. I am assuming that the political world knows that there is little chance of beating Putin's anointed successor so rather than be damned in the process of failing they will put up a candidate who has no chance of winning anyway.

It does however illustrate the paucity of the level and purpose of the debate. The Russian businessmen presenting were all beneficiaries of "loans for shares." LFS was a bribe to big business in 1996 to get Yeltsin out of an electoral hole. Having succeeded the Government would like its economy back. To the extent that they are improving Russian business it is in their hiring of western businessman to run their cheaply-acquired assets. The concentration of assets in the hands of a few men (22 people control 40% of the economy) makes them a political liability and the means by which they acquired their wealth does not make them natural allies of the clean-hands school of business.

Not a single senior member of the Government or Presidential administration turned up. Apparently it was because Kasyanov was due to speak in a key note speech. It is a mark of their failure to understand that debate can be beneficial to policy that only lends credence to the criticism that they are not much better than a bunch of 5th Directorate Thugs.

After all is said is done it was great to catch up with guys who have been playing Russia for a while.

It's been a while since I have had the energy or inclination to take on a larger subject. The complexities of IP protection and rights in Russia, and to an extent Ukraine, have been exercising my grey matter for a while. To be clear this is not an attempt to engage in any beneficial lobbying for the software, film, music industries. With both Russia and Ukraine somewhere close to the top of the list of countries that peddle in pirated goods. M$oft, the music and film industries are already effectively lobbying the government. The issue in Russia is not about the law but the enforcement of it. In Ukraine the law needs to be implemented. What this post is about is the region's ability to turn its undoubted mathematical and scientific achievements in product-driven companies that compete in global markets.

So what is the problem that vexes the tiny group of us engaged in financing and developing high tech markets in Russia and Ukraine. The good news is that, in Russia at least, patent laws are well developed and clearly and definitively adhere to international norms. There is even a suggestion that they are actually well written, though that is beyond my competence to judge. As an entrepreneur or academic wishing to protect an invention specifically in Russia it is relatively easy, and cheap, to apply for a patent from RusPatent and subsequently to prosecute believed infringements of that patent. The process of transferring patents and patent applications owned by Russian firms to foreign ones is also very straight forward; as you would expect in a country that has no balance sheet recognition of soft/intangible assets. As with many aspects of Russian law the courts ability to understand and make coherent decisions based on the law may be lacking. As I have written before there are a number of international bodies training Russian judges and lawyers to help them make coherent decisions. As judges remain significantly under-paid they will remain vulnerable to bribery especially at the lower end of the judicial chain.

Russia's domestic firms are not major consumers of technology, and especially Russian developed technology. Nor have they developed the ability of Huawei, for example, to copy and turn out Cisco-like products. The lack of entrepreneurial and management abilities that mean that so much Russia-related technology remains unlocked potential also means that intellectual property theft is fairly low-level and certainly no greater than the usual academic spats over original ideas.

The issue that is frequently insurmountable relates to ownership of ideas. Many of the truly disruptive ideas that we come across in our trawls through the local high-tech universe were born in Universities and other government-funded high tech institutes and firms. The current Minister of Science and Technology has been trying to lay out the ground rules as to how to assign ownership rights but like many reforms they are being roundly ignored at the operating level.

By way of an example. A company which we are doing some background due diligence on, and we have to like it to be doing this work, is based on an invention by a core group of scientists which itself is the subject of a patent which in turn refers to the Institute at which they were working at the time of the invention. This patent was written before the collapse of the Soviet Union and so was the property of the State. No great issues so far. The company on which the invention is founded is willing to cede some ownership to the Institute in recognition of its role in funding the discovery. But as the discovery was funded by the State actually the property belongs to the Ministry of State Property. And that is where the black hole starts and continues into infinite nothingness. The Ministry cannot take ownership in private companies and certainly not in ones that are created in Delaware. It cannot transfer its ownership back to the Institute but continues to insist on its ownership rights. So this would appear to be circular black hole where we continually arrive back at the starting point.

Given what would very likely be a legal opinion that would focus on the inherent negative in financing a company which probably does not own its invention another disruptive technology will probably stay on the shelf.

Nothing differentiates people more than what they eat for breakfast. Northern Europeans are keen on cold meats and cheese on brown and rye bread. My own homeland is rightly famous for the heart attack inducing fry up. Russian's however, are partial to pickled garlic (in brine in case you are curious.) Each to their own. Except that pickled garlic is not to its own. Everyone gets a piece of it.

If you are now to understand that I am on a full plane to London from Moscow you will understand that my aversion to Pickled Garlic has risen to the top of my current hate list.

I am not Catholic; I have no truck with organized religion. As Jared Diamond points out in "Guns, Germs and Steel" organized religion is a necessary pre-condition for inter-community/state organized violence.

To the extent that I have a Church, I am a Scottish presbyterian who was always led to believe that the Papists were actually the Devil's form on earth. Actually it had more to do with the football team that you supported. So the Pope as the head of the Devil's church was never really top of my Christmas card list.

Whatever his views on marriage, contraception and the other half of the population (women) he had the guts, political strength and following to tell Poles;

"You are men. You have dignity. Don't crawl on your bellies."

It was the start of the end of Communism.