Business World

Friday 22 September 2017

Old-school Russian turf war being waged over Skolkovo hub scares off investors

Putin moves to temper influence of former protege but technology hub will suffer

Russia's PM Dmitry Medvedev with President Vladimir Putin
Russia's PM Dmitry Medvedev with President Vladimir Putin

Henry Meyer, Irina Reznik and Jason Corcoran

When Russian agents stormed the downtown offices of the Skolkovo technology hub being built near Moscow in April, a startled Intel executive got caught up in the raid.

Dusty Robbins, head of global programmes for the world's largest chipmaker, was forced to surrender his mobile phone and was only allowed to leave the building escorted by officers after Skolkovo officials appealed to investigators. Robbins flew back to the US without holding a planned meeting with Skolkovo's billionaire president, Viktor Vekselberg.

Most media organisations believe that what happened to the 48-year-old American had nothing to do with technology and everything to do with a turf war between backers of Prime Minister Dmitry Medvedev, who made crafting a Russian version of Silicon Valley the cornerstone of his presidency, and allies of President Vladimir Putin who see the premier as a rival and want him out, said Masha Lipman, an analyst at the Moscow Carnegie Centre.

"This group of influential people are doing what they can to accelerate a decision to dismiss Medvedev because he has encroached on their interests," Lipman told Bloomberg yesterday. Putin's spokesman, Dmitry Peskov, said reports of Skolkovo being targeted for political reasons are "not true." Medvedev's spokeswoman, Natalya Timakova, didn't respond to requests for comment on Skolkovo, nor did Intel's Robbins.

Former Irish junior minister Conor Lenihan told this newspaper last month that the Moscow agency, where he has served as a vice president since last year, will continue to operate as normal despite the probe.

"This project is a clear success with 30-plus global corporations choosing to invest, as well as nearly 1,000 ambitious Russian start-up companies," he told the Irish Independent. "My view is that this flagship technology project Skolkovo is strongly supported and President Putin has indicated his own personal support in recent weeks," he added.

Since announcing the creation of Skolkovo in 2010 as part of a drive to wean the economy off oil and gas, which account for half of state revenue, Medvedev has lured almost $500m of investment pledges from companies including Intel, Microsoft, Siemens and Samsung Electronics. He's also won a $1bn commitment for Russian technology projects, much of it in Skolkovo, from Cisco Systems, the world's biggest maker of networking equipment.

The pledges have become increasingly tenuous since Putin wrested back the Kremlin from his former protege last year. Two criminal cases against Skolkovo executives have been opened and Putin has overturned a Medvedev order directing state companies, the biggest of which are run by Putin loyalists, to contribute more than $900m to the Skoltech institute that the Massachusetts Institute of Technology is helping to establish.

Three of Medvedev's ministers were fired or forced out in the past nine months, including Deputy Prime Minister Vladislav Surkov, who was also Medvedev's point man for Skolkovo. Surkov's departure in May came just days after he publicly criticised probes into how state funds were being spent on the project.

IBM, the world's largest computer-services provider, wants the government to show that it's serious about building Skolkovo into a world-class technology park.

"People need to feel that's it's backed by the government at large and not just by an individual," said Ian Simpson, a Canadian who's run IBM's software center in Russia for more than five years. IBM, based in Armonk, New York, plans to invest almost $100 million in Skolkovo and move its Russian research and development center there by 2015.

Medvedev became the first Russian leader to visit Silicon Valley in June 2010. He toured the offices of Apple, Twitter and Cisco, where he secured the $1 billion investment pledge. The 47-year-old was one of Russia's first iPad owners and is an active Twitter user.

Global companies are attracted to Skolkovo because it offers an "alignment with a flagship project and a safe harbor where they can locate their R&D and receive protection for intellectual property," Conor Lenihan, a former Irish science minister hired to promote the venture, said in an interview.

The first public warning that Skolkovo was in trouble came in December, when Putin rejected Medvedev's plan to waive state building permits for the project. A week later, Putin told reporters that Skolkovo wasn't the only research center that deserved state support and spurned Medvedev's proposal to host the Group of Eight summit at Skolkovo in 2014.

Putin's chief of staff, Sergei Ivanov, met with Skolkovo investors at the annual St Petersburg Economic Forum last month in a bid to reassure them that the Kremlin supports the project.

Days later, the Vedomosti newspaper reported that Putin had rescinded Medvedev's funding directive to state companies for the Skoltech school.

For now, Intel and other investors say they're committed to Skolkovo, though the Russians need to do a better job of meeting their needs for the project to succeed.

Irish Independent

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