Russia is a physically expansive country with great resource wealth, high regard for education, and high levels of achievement in basic science. However, it struggles with an aging and declining population, a high level of corruption in both governmental and industrial sectors, and most damaging, a culture that does not encourage the translation of its strong basic research capacity into globally competitive commercial products. The government is attempting to address this last problem by recruiting foreign talent and investment, facilitating trade, and encouraging entrepreneurship, but it is likely to be unsuccessful because its programs do not target the fundamental cultural changes that are required. However, Russia will continue to do well in those areas that benefit from a centralized, top-down approach and in which Russia has traditionally been strong, such as materials extraction, space, and nuclear development.
Although it is generally true that any country’s science and technology (S&T) strategy has to be viewed in the context of its specific circumstances, this seems to be especially instructive for Russia. Geographically, Russia is the largest country in the world, measuring 17.1 million square kilometers, and spans 11 time zones. Despite its enormous land size, Russia’s population is only about 140.3 million (2009), with almost 80 percent of its population living in Western Russia. Two-thirds of the population resides in cities (Curtis, 1996). Although the breakup of the Soviet Union occurred along national territories, the Russian federation is very multicultural with more than 100 distinct national minorities. Providing the appropriate infrastructure (e.g., transportation, communication, healthcare, government services, economic support) while dealing with urbanization and developing the remote regions of the country (where much of Russia’s natural resources are located) is of great importance to national development.
The Russian population has been declining for quite some time (decreasing by 0.5 percent in 2009, one of highest rates of population decline in the world). Approximately 23 percent of Russian citizens are above 65 years old, and almost one-quarter of the population is on a pension (ING, 2003). This reality has many longer-term social, political, and economic consequences, but it also highlights the immediate challenges for the country’s healthcare system and places a mounting financial burden on younger generations.
Russian politicians often refer to their political system as a “sovereign democracy,” not only to differentiate it from traditional Western democracies but also to disguise the fact that political power is in the hands of a very few
(Kuchins, 2006). Although it can be debated whether or not Russia’s political ambitions are imperial (Applebaum, 2008; Shevarnadze, 2009), it is generally clear that Russia is seeking to restore its past role as a major geopolitical force. One very important feature of this strategy is for Russia to become a global energy supplier, or “energy superpower.” Russia is eager to control the Western energy supply and leverage that power as a bargaining chip to advance national interests (HJS, 2008; Mityaev, 2009). This stance was recently made evident when it was reported that the leader of a Russian expedition to the Arctic claimed extensive rights to parts of the North Pole with major implications for the exploitation of energy resources (Zarakhovich, 2007). Although Moscow later distanced itself from these territorial claims, the fact that the Russians successfully completed a submersible journey at 14,000 feet beneath the Arctic ice emphasizes Russia’s determination and technical capabilities. The goal of becoming an energy superpower is also supported by Russia’s ambitious plans for a massive expansion of its nuclear power industry (Daly, 2009).
The Russian economy grew an average of more than 7 percent annually between 1998 and 2008 (Curtis, 1996). However, most of Russia’s recent economic success has been based on an excessive exploitation of its rich natural resources (e.g., oil and gas). Russia has more proven natural gas reserves than any other country, and it is the second largest oil exporter in the world (CRS, 2007). However, dependence on these commodity resources has in turn made Russia highly dependent on global prices (EIA, 2008). Most of Russia’s proven oil reserves are located in very remote regions such as Western Siberia, between the Ural Mountains and the Central Siberian Plateau, as well as on Sakhalin Island in the far eastern region of the country. Transportation of energy and the relatively high cost of energy production, exacerbated by aging and outdated infrastructure, present significant challenges. Russia has failed to become competitive in sectors of the economy that extend beyond the export of primary goods, such as the manufacturing sector. For example, productivity in manufacturing is only 50 percent of that of Poland and 40 percent of that of Brazil (Goldberg and Desai, 2006).
Other important factors hindering Russia’s economic progress are corruption, bureaucracy, and the lack of political transparency. All of these have a paralyzing effect on private and especially foreign investments. In almost any survey assessing fraud and political bribery, Russia can be found on the top of the list (PWC, 2009). In the most recent report by the World Trade Organization on global competitiveness, Russia was ranked 63rd out of 133 countries (World Economic Forum, 2009). Russia has the lowest score on global competitiveness among the BRIC countries (Brazil, Russia, India, and China) and fares especially badly on transparency of government policymaking and the burden of governmental regulation. Significant problems also exist with regard to property rights, real estate transactions, and land privatization.
Russia inherited a high-quality education system from the Soviet Union. Despite growing challenges since the breakup of the Soviet empire, the system has remained very good, producing a literacy rate of 99 percent (Data360, 2006). Education—especially higher education—is highly valued in Russian society (Eklof, 1996; MES, 2004). The Russian constitution grants the right to free basic education but access is provided on a competitive basis. More than 50 percent of the Russian population has a higher education, compared with 24 percent of the American population (Bauman and Graf, 2003).
Russian higher education is offered in three different ways (Johnstone, 2008). Universities (e.g., Moscow State University, Saint Petersburg State University, Moscow Institute of Physics and Technology, and Rostov State University) cover the broadest spectrum of disciplines, combining undergraduate and graduate teaching and research. Academies focus on a few selective branches of science (e.g., Academy of Mining, Academy of Architecture, Academy of Arts, and Academy of Sciences). Finally, institutes, which can be independent but are generally publicly owned, offer several professional education and selective research programs. Historically, the bulk of S&T research in Russia is conducted by the academies and institutes with minor research work at universities, which is in stark contrast with the U.S. system where the best researchers are not shielded from the “bubbling fervor of undergraduates” (Graham, 2010). Russia has a long and distinguished history in basic science. It has gained a global reputation with institutions such as the Russian Academy of Sciences and prides itself of its Nobel laureates in the sciences, especially in physics. Russia scores very well on certain Organisation of Economic Co-operation and Development (OECD) metrics (such as quality of its scientific research institutions, numbers of researchers, or numbers of science and engineering degrees), but it does very poorly on metrics of innovation output (INSEAD,
2009; IBM, 2009). Some of the reasons for this low rate of conversion of basic science to innovative technologies and products can be understood from the recent history of Russian S&T.
After the fall of the Soviet Union, Russian science encountered significant challenges. First, because of the easing of emigration and travel restrictions, many Russian scientists left the country, and this brain drain continues today. By 2002 it was reported that more than 500,000 scientists had left Russia (BBC, 2002). This trend includes in particular the most gifted, often middle-age scientists at the peak of their scientific productivity. This emigration not only causes substantial economic damage but also contributes to the aging of S&T personnel in an already aging society. Naturally, the more established, older S&T personnel are more likely to be rooted in the past traditions of the Russian S&T system, and they often oppose the necessary reforms that have occurred in other countries. Second, after the fall of the Soviet Union, Russia’s budget for science shrank, becoming three to four times smaller in 1992 than it had been in 1990 (Saltykov, 2007). Throughout the 1990s, many S&T institutions lost basic research capabilities (Graham, 2003; Goldberg, 2005). Finally, the central S&T planning approach of the Soviets, with clear thematic priorities for national security and military applications, had served as an effective framework and guide for Russian scientists. By contrast, the early days of the Russian Federation lacked larger thematic priorities, and until today S&T activities have been fragmented, not aligned to priority subjects, and have included little interaction between the S&T institutions.
Until very recently, S&T research was mostly conducted by publicly owned R&D institutions. The support for these institutions came mostly from “block funding,” which was the result of centrally made planning decisions. Little accountability was attached to these block funds, which were often handed out based on political influence. Competitive funding mechanisms, either through public-private partnerships or venture capital, were not available. During the Soviet era, application and transfer of S&T knowledge was part of a larger plan, which was driven solely by the central government. Without the government as a customer, there is no incentive for Russian scientists to drive basic research into innovative solutions and products. The lack of an entrepreneurial tradition has resulted in an S&T system that is very weak in commercializing new technology products.
The concept of intellectual property (IP) rights for individuals or non-public entities has little tradition in Russia. Often assignment of IP rights is not transparent; specifically, it is unclear if the IP belongs to an individual inventor, an employer, or a government R&D sponsor. Naturally, these uncertainties have hindered effective collaboration between private firms and public institutes, inhibited technology transfer, and severely impaired the generation of spinoff companies.
Russia is the largest country in the world, but its research policies and strategies still are predominately shaped and implemented at the federal level, with the Ministry of Education and Science playing the main role and the primary regional governments playing a minor role. However, the president, government, and legislature have recently founded new organizations that support the S&T priorities, underlining the fact that S&T strategy has gained special attention in Russia.
Modernization of State-Owned Industries
It is clear that major changes in the innovation ecosystem are required to modernize the inefficient state-owned enterprises. In fact, the public-sector share in Russia has never fallen below 40 percent, and during the recent financial crisis, it has increased. The Russian president stated in his November 12, 2009, address to the Russian Assembly that “this legal form of enterprise has no future overall in the modern world” (Medvedev, 2009c); he declared that by 2012 there will be a plan for determining an optimum level of participation by the government in the operation of commercial business.
The lack of activity in high-technology sectors, such as nanotechnology, by the private sector needs to be addressed. One approach is to organize a system of state orders for long-term procurement of innovative products. Other ideas include creating a “green corridor” or special trade arrangement to facilitate the export of hi-tech products, as well as instituting more favorable customs clearance procedures.
In November 2009 the president issued instructions for the prime minister to submit proposals to deal with reforming and privatizing state corporations (Medvedev, 2009c). These proposals, which the president asserted
should turn state companies into “organizations with a different organizational and legal status” and should have “legislative guarantees of the transparency of their activities,” were expected to be submitted by March 1, 2010 (Medvedev, 2009d).
Improved R&D Environment
Recently, Russia has been improving the basic elements of its innovative infrastructure through the development of the following (APEC, 2008):
55 technological parks
66 innovative-technological centers (ITCs)
80 business incubators
86 centers for technologies transfer
10 national information-analytical centers, that is, digital libraries (NIACs)
These efforts are to be further enhanced through a variety of measures directly targeted at improving the financial and human capital involved in innovation. In fact, a deadline of the first quarter of 2010 has been set for the government to make the organizational and financial decisions needed to attract foreign scientists and to increase new technology funding.
Of particular interest are foreign scientists and entrepreneurs with experience in commercializing new developments. To attract them, Russia would relax the rules for hiring these foreign specialists and for recognizing degrees and diplomas awarded by the world’s leading universities. In addition, visa requirements would be modified so that they can be obtained quickly and will allow long-term residence.
An immediate increase in grants is also planned for researchers who are creating new technology through development institutes. The grants will fund projects from throughout the country in collaboration with university-based incubators and private investors. In addition, major companies are being encouraged to fund research that will undergo an international expert evaluation and be carried out in partnership with foreign centers and industry.
To facilitate investment, an immediate deadline of January 2010 was given to the regional authorities to draw up proposals for new procedures for obtaining the approvals and permits needed to launch projects. The goal was to reduce the time to begin a new effort to 3 to 4 months from the current window of 18 to 24 months. Another supportive change was the introduction of laws establishing favorable conditions for innovative activity, including, but not limited to, the introduction of a five-year transition period limiting mandatory social insurance contributions.
“New Schools” Initiative
An initiative, which was called for by the president in 2008, has been drafted and has the high-level goal of providing an education system that addresses high-technology requirements. In addition, 2010 has been declared the “Year of the Teacher,” which indicates a national interest in improving and extending technical education (Medvedev, 2008).
Projects that will be implemented countrywide starting in 2011 involve the construction of new “smart” buildings with broadband Internet. New standards for physical education, nutrition, and support for those with disabilities will be included in these projects. Other reforms involve giving independence to high-performing schools and ensuring educational parity in remote areas through such techniques as distance learning and improved teacher training and certification.
Military investments in Russia are now moderate compared to Soviet-era levels. Nevertheless, by 2010 the transition of Russia’s armed forces to a “modern, efficient and mobile” army should be complete. Key among
these improvements is rearmament with advanced military equipment. Weapons that will be acquired in 2010 include more than 30 ballistic land- and sea-based missiles, 5 Iskander missile systems, about 300 modern armored vehicles, 30 helicopters, 28 combat aircraft, 3 nuclear-powered submarines, 1 corvette-class battleship, and 11 spacecraft. Also there will be a focus on improving the logistics of supplying and supporting these advanced arms.
Before 2012, modern automated control centers and information systems will be in place, which will replace outdated analog communications equipment with digital systems. Equipping the troops of the North Caucasus Military District with updated communications equipment is a priority.
Three new major military training centers are now being installed in Moscow, the greater Moscow Region, and Saint Petersburg. Seven presidential cadet schools will follow, one in the Volga Federal District and others opening through 2012, with the goal of providing the military with professional sergeants and highly qualified junior command personnel.
The Russian Ministry of Defense and other law enforcement agencies are responsible for the construction and purchase of apartments for their personnel, which include providing permanent housing in 2010 and service housing by 2012. Funds for military housing and pay with material incentives were increased by more than 1.5 times in 2009.
NET ASSESSMENT OF S&T INVESTMENT STRATEGY
Russian S&T planning processes and investment strategies are top-down and highly centralized with political leaders playing a dominant role. Russia’s strategies attempt to address the current weaknesses of the Russian S&T system, which include:
lack of entrepreneurship and experience in transferring basic research into innovative technologies and products
the overwhelming dominance of government S&T funding
obsolete (and often corrupt) top-down funding mechanisms
an insufficient system of IP rights to encourage entrepreneurship
an outdated higher education system with little research at universities
emigration of young talent, further exacerbated by Russia’s population decline, resulting in an aging S&T establishment that will resist culture change
Generally the strategies can be characterized as addressing the symptoms of Russian S&T weaknesses but not the root cause, which results when the federal government, with is self-defeating central planning approach, becomes over involved and consequently undercuts reforms by preventing more competition and entrepreneurship. Russia is not likely to be successful in its efforts to modernize through high-technology investment and to move the S&T culture toward one that fosters interaction between research and industry and participation of private commercial entities. However, in certain areas such as energy, nuclear, space and aircraft systems, which typically require large national investments, Russia’s current process is expected to be more effective. Advances in these areas will directly help Russia to expand its role as an energy superpower and major energy provider.
A long-range planning document developed in 2006 and titled “Long-term Prognosis for the Development of S&T in the Russian Federation Till 2025” included the short-term (2-year), mid-term (5-year), and long-term (15-year) goals discussed below (ISTOK, 2008; Zashev, 2010).
These goals were even more specific for innovation-based economic activity, with targets for such items as revenue ($5.5 billion) and numbers of competitive technologies (127-136) and experts (20,00-23,500). Even the amount of innovation was dictated, with goals for such benchmarks as the number of new critical technologies in which the Russian Federation has global priority (5-8).
The mid-term goals were directed less to focus areas and more to increasing various generic metrics, such as the gross expenditure on R&D (GERD), the number of younger scientists, the amount of investment, and the number of patents. The overriding goal is to increase the number of “innovation” companies and the relative share of innovation products in the total sales volume of domestic production to 18 percent and exports to 15 percent by 2016.
These goals include the following:
Using S&T to improve defense and national security, to modernize education, healthcare, transportation, and the agro-cultural sector, and to rationally use environmental resources
Leveraging S&T to help Russia expand its leading role as an energy superpower and sole energy provider (nuclear, pipelines, energy infrastructure, etc.) (ISTOK, 2008; Zashev, 2010)
Using Russia’s well-developed research base to diversify the Russian economy beyond primary goods export (nanotechnologies, nuclear power, space and rockets, civil aircraft)
PROJECTED ADVANCES IN S&T PROFICIENCY
Generally, given Russia’s present political situation and top-down S&T innovation strategy, it is very unlikely that Russia will attain significant global leadership in new advanced technologies. In the absence of major reforms that fundamentally transform the Russian S&T culture, it is projected that Russia will continue to lose ground over the next decade and beyond. However, Russia is expected to stay competitive in a few selected areas such as energy systems and energy distribution technologies, including pipeline construction; nuclear power, including both fission and fusion; and space, rocket, and aircraft systems. The nature of these areas is such that central planning and large-scale government investment is advantageous. Furthermore, Russia is already strong in these areas, and in some cases has a natural advantage because of its resource supply.
In spite of these strengths, significant advances in new high-technology areas such as nanotechnology, life sciences, and information technology systems are less likely to occur. Experiences in other countries have shown that these technologies require the intense participation of private enterprise to provide the diversity and experience necessary to develop and determine the technologies that will ultimately have large impact. Due to the lack of an entrepreneurial tradition, Russian research institutions and government do not have the proper incentives and motivations to be able to identify the technology paths that will lead to the ultimate “winners” in the global marketplace.
For Russia to be successful, its government must fundamentally change the national S&T system, which would include decentralizing the S&T strategic decisionmaking and funding processes. An additional missing component of the current strategy is an effective plan for more international openness, collaboration, and personnel exchanges.
The committee’s analysis has shown that Russia’s strategy serves the following three objectives:
Leverage S&T to help Russia expand its leading role as an energy superpower and sole energy provider (nuclear, pipelines, energy infrastructure, etc.)
Use S&T to improve defense and national security and to modernize education, healthcare, transportation and the agricultural sector, and to rationally use environmental resources
Use Russia’s well-developed basic research base to diversify the Russian economy beyond primary goods export
It is quite conceivable that within 10 years Russia will achieve the first goal and part of the second as it relates to the aforementioned large-scale projects. However, without a substantial change in its current strategy, it seems
unlikely that Russia will be able to diversify its economy and modernize the country, which could have more serious consequences as it relates to U.S. strategic interests.
This negative situation could be further exacerbated by national budget shortfalls resulting from the global financial slowdown, which while particularly damaging to the nascent high-technology efforts will also affect the large-scale investment programs. For example, the Russian government recently had to cut R&D expenditures for its short-term programs by up to 30 percent of the initially planned allocations.
S&T INVESTMENTS OF INTEREST
Russia seeks to leverage its traditional strength in basic research and strong research institutions, and to diversify its economy beyond the export of primary goods. Even though these goals are supported at the top levels of the political hierarchy, it is expected that few developments in new high-technology areas, such as nanotechnology, will have global impact. However, those areas in which Russia has a natural advantage or historical leadership will continue to be important:
Space systems and rocket technology for satellites used in global telecommunications
Mining and extractive material-related technologies
Petroleum extraction and pipeline distribution
One promising sign for the future of Russia is that top politicians have seen the need to rejuvenate and support S&T talent and to encourage a new culture within Russian research institutions. This is critical for Russia in the face of an overall declining population and a tradition of isolating the academies from commercial applications of their research. Recent measures include an increased investment in the research university infrastructure, which is hoped will entice young Russian scientists to seek education and careers at home. Changes in immigration and visa requirements have been implemented to facilitate the residence of foreign researchers, and new incentives exist for universities and academies to engage with private enterprise. If successful, reform coupled with mobilization of the highly educated Russian population could be the foundation for a future renaissance in Russian S&T.
Five priorities for the Russian Federation were clearly enunciated by President Medvedev in his November 2009 Presidential Address to the Federal Assembly and later supported by Prime Minister Putin (Medvedev 2009a,c,d; TI, 2010). The fact that the two top leaders appear to agree on these S&T priorities gives credibility to this plan as an official direction for the Russian S&T environment.
The five focus areas are as follows:
Medical technology, medical equipment, and pharmaceuticals
Energy efficiency, conservation, generation, and distribution
Applications of nuclear fission and fusion
Telecommunications and space technology
Computer and information technology
Related information about these focus areas and others from government actions, documents, and presentations beyond the prime minister’s and president’s speeches and articles are described in detail below.
Medical Technology, Medical Equipment, and Pharmaceuticals
Health care technology is designated as the area of top importance in large part because of Russia’s population decline. The healthcare initiative is a broad-based effort meant both to provide affordable quality treatment and to develop advanced technology for preventing and treating the most dangerous diseases.
Russia plans to produce more than 50 strategically important medicines, including the most expensive or frequently used treatments, with a particular focus on cardiovascular diseases and cancer. To address domestic market issues, a dramatic increase has been promised in the local production of pharmaceuticals to treat the most common illnesses such as influenza and the common cold.
Russia’s first priority appears to be the health of its people. However, Russia also hopes to become a significant supplier in the global market, which will be accomplished in part by developing partnerships with leading foreign developers and producers. As a byproduct of such partnerships, Russia will build its capacity to advance medical research by itself.
Capitalizing on existing procurement mechanisms, Russia expects that local production will supply at least a quarter of the domestic market within five years, expanding to more than half by 2020. A draft law has already been sent to the State Duma, which releases regulations for the supply, sale, and safety controls for medicines.
Energy Efficiency, Generation, and Distribution
Russian citizens are being called upon to take more responsibility for saving energy. Other measures that have been discussed for reducing energy consumption include the installation of individual meters, transition to energy-saving bulbs, and a change in the payment system to reflect consumption and income levels (made possible by the individual-use meters). This initiative is similar to projects envisioned in the United States, in which energy consumption will be managed using “smart” meters. There is also a call for rapid action to stop the waste of natural gas, which is released during oil extraction.
Russian scientific research and production organizations have been called upon to develop innovative technology that will allow the use of bio-resources such as timber, peat, and industrial waste for energy production. Interestingly, the use of alternative sources such as photovoltaics, fuel cells, and wind power are not mentioned.
In a country as large as Russia (or the United States), the transmission of energy to population centers is a major issue. One particularly innovative technology considered by Russia involves the exploitation of superconductor technology to provide long-distance, low-loss power transmission. A program similar to this is currently underway in Western Europe (Jha, 2008).
Applications of Nuclear Fission and Fusion
There is a major focus on the use of nuclear energy as another part of the solution to Russia’s future energy needs as well as an additional product to be sold into foreign markets. Russia has established the goal of developing next-generation reactors and nuclear fuel by 2014. Innovations in the nuclear field will also be applied in other areas, including hydrogen fuel, propellant devices capable of inter-planetary space flights, and medical technology. The President has stated that he believes that the real future of energy is in the exploitation of thermonuclear fusion and has expressed interest in working with other countries involved in the development of this technology (Medvedev, 2009c).
Telecommunications and Space Technology
Russia’s communication infrastructure has suffered significant degradation, to the extent that Russia is now well behind the rest of the industrialized world. To remedy this situation, Russia plans to establish national broadband Internet access over the next five years through the use of a nationwide fiber optic network. This is quite a commitment given Russia’s land mass and number of rural settlements. The most remote areas (e.g., Siberia and the Far East) will receive a pricing subsidy. In addition, the Russian government plans to transition to digital television and fourth-generation mobile phone communications—which means skipping over the third-generation mobile phone technology now used in most of the rest of the world. In addition to expanding broadband and mobile phone access, Russia plans to develop a unified emergency service, which works across all communication resources and is fully connected to the global communication infrastructure.
One important application of space technology is the upgrading of the GLONASS system, a radio-based satellite navigation system, which is now operated by the Russian Space Forces. Since it was completed in 1995, this unique system has fallen into disrepair, and a substantially different approach is now being developed, which will be compatible with the United States’ global positioning system and the European Union’s Galileo system.
A new “social GLONASS project,” called Emergency Reaction to Accidents (ERA), is under development and will extend the use of the navigation system to a number of emergency response applications (Blinkova, 2009). This will include use in car navigation, transport safety, security, and digital mapping and will improve coordination in natural and man-induced disaster relief.
Plans call for a new generation of spacecraft to be developed by 2015, which will enable Russia to have worldwide reconnaissance and state-of-the-art telecommunication satellites. Russia expects to offer these capabilities to foreign countries for scientific research and for extending existing worldwide communications networks.
Computer and Information Technology
Russia plans to develop networks of supercomputers within five years to use in the design and simulation of new planes and spacecraft, cars, and nuclear reactors. A modern technological center, similar to Silicon Valley, will offer attractive working conditions for leading researchers, engineers, designers, software programmers, managers, and financial specialists.
Systems that provide Russian state services over the Internet are in development, and within two years more than 60 key state services will be electronically accessible. A pilot project will provide citizens with a “social card” for access to state services and medical and social insurance programs. In addition, Russia plans to combine these cards with electronic cards that provide access to banking services, which will be useful for making both obligatory and voluntary payments. It is hoped that this technology will combat the widespread corruption in Russia today.
In the meantime, an “Electronic Government” project due to launch in 2010 will allow Russians to access 300 federal services on one Internet portal. This includes applications for passports, social aid, treatment and recreation documents, and pensions. It will also contain data about transport, land, and property taxes of citizens as well as traffic fines. The director of this effort claims that the first socially important part of the effort has been implemented and now the focus is to ensure consolidation of regional, federal, and sectoral data (Tatar-inform, 2009). Another example of this project is the involvement of IBM to overhaul the Russian railways infrastructure using information technology (Upson, 2010).
Nanotechnology to Support Priority Areas
The Russian president has made it clear that nanotechnology is one of the major program thrusts that will support the five priorities (Ioffe, 2009; Medvedev, 2009b; Mokhoff, 2009). According to his estimates, there is a global nanotechnology market on the order of $250 billion, growing to $2 trillion to $3 trillion by 2015.
President Medvedev claims that Russia has the largest public investment program in the field of nanotechnology, which by 2015 will have allocated $1.1 billion for these purposes. He emphasizes the public nature of the investment, because it is well below the level of private investment in many countries. In fact, investment by the Russian private sector in nanotechnology is quite small at only $150 million. However, the president believes that by 2015, total sales by Russia’s nanotechnology industry can be expected to reach about $30 billion, and a quarter of this amount will be the result of exports.
Rosnanotech, a state-owned and -funded venture capital fund, was formed in 2007 with a budget of $5.5 billion to facilitate growth in nanotechnology innovation. Scientists with a nanotechnology-related proposal apply to the company, and a panel of international experts selects projects for funding. Rosnanotech then acquires a minority stake with a goal of $8.5 million in sales by the fifth year and provides assistance in finding private investors and properly structuring debt, with the plan of an early exit. Public funding for Rosnanotech is set to expire by 2015.
An important component of the president’s nanotechnology plan is to learn from and work with foreign companies. Craig Barrett of Intel Corporation signed an agreement with Rosnanotech in June 2008 to conduct joint research in several nanotechnology areas, including the development of new materials for the production of sub-45 nanometer integrated circuits (ICs). Additionally, Intel and Rosnanotech plan to collaborate on research in multi-processor and multicore systems, as well as in software for modeling nanomaterials. Training in management and technology commercialization are also part of this agreement. Although this is clearly an important development
for Russian S&T, it is uncertain that the results of this research will have an impact on new Russian commercial products. The primary focus appears to be on advanced IT manufacturing, an area in which Russia has had no significant past involvement. Because of the costs involved in setting up such a capability (a single production line now costs more than $1 billion), it is unlikely that Russia will develop a significant role in this sector.
NATION-SPECIFIC INDICATORS OF S&T ADVANCEMENT
To understand Russia’s progress in S&T beyond the short term, there should be careful monitoring of the amount of nongovernmental funding, the level of foreign investments, the education and age profile of Russian S&T personnel, and the entry of Russian products into international markets.
Demographic data about Russian S&T researchers, such as age and education distributions and the numbers working in design and engineering versus basic research, are the most important indicators of progress in potential S&T. Additionally, to evaluate research conditions, the number of foreign researchers in Russia and the number of Russian researchers leaving permanently should be tracked.
Population decline is one of the most damaging indicators of Russian living conditions, and it should be carefully monitored using statistics that go beyond those that are given for political expediency.
The growing percentage of energy exports from Russia clearly indicates that it is making progress toward its goal of becoming an energy superpower. Crucial to this effort is the installation and control of pipelines and related energy distribution systems.
Russia’s S&T prospects might be more uncertain than those of other countries discussed in this report. On the one hand, under the strict Soviet rule, Russian scientists have shown that they can develop complex technologies such as sophisticated (nuclear) weapon systems and can lead in space technologies. Their ranks include world-famous physicists and mathematicians and Nobel Prize winners. On the other hand, Russia suffers from a weak innovation environment, a situation which has drastically worsened since the fall of the Soviet Union. Today’s problems include a weakness in translating basic research into innovative technologies, the overwhelming dominance of the government with few advanced S&T activities in private enterprise, obsolete (and often corrupt) top-down funding mechanisms, an insufficient system of IP rights, an outdated higher education system with little research at universities, and the significant emigration of young talent, leaving an aging S&T establishment without appropriate background or experience.
The Russian government has recognized these weaknesses and has developed a number of targets, plans, timelines, and goals to address them, including the passage of targeted measures and laws. Whether these actions will be effective and whether Russia has the management expertise and long-term stamina to execute them are discussed further below. Because of the nature of Russia’s S&T weakness, any of the traditional indicators, such as public/private share and absolute level of S&T funding, patent activity, and venture capital investment, might provide useful insights into Russia’s progression. Among them this committee rated the share of private, nongovernmental S&T funding the highest. Other high-priority indicators include the level of foreign S&T investment, the education and age of S&T personnel, and the export of high-technology products, which are discussed in more detail below. Indicators of average and below average priority include quality of scientific research institutions and numbers of scientific papers.
Share of Nongovernmental Funding
One of the main challenges facing Russia is its notorious weakness in translating fundamental research into industrial technologies. The share of government S&T funding should provide a meaningful measure of whether Russia is indeed making progress toward more entrepreneurship and private participation in S&T. In 2009 the share of government S&T in Russia was 72.9 percent, compared to 11.1 percent in the United States (Zashev, 2010). As long as the government share remains high, the approach to technology development remains top-down, and commercial and private entities remain marginally involved, it is unlikely that Russia will make real progress in overcoming its current weaknesses, especially its poor conversion rate of basic research into commercially or militarily viable technologies.
Level of Foreign S&T Investments
The level of foreign investments from multinational high-technology companies (e.g., Cisco or Intel) might be another very important gauge of Russia’s progress in S&T, because it reflects not only Russia’s international S&T competitiveness but also its general economic conditions and prospects. Multinational corporations will vigilantly monitor the Russian economy and innovation environment and will carefully weigh their options in Russia against those in other countries. Cisco recently established a venture fund in Russia, and even though its investment is relatively small ($60 million), it provides an example of foreign investment opportunities (Cisco, 2008). Naturally, Russia’s economic health will determine whether it will be able to fund its ambitious transformation plans. If Russia continues to attract foreign S&T investments, then it is inevitable that pockets of functional S&T centers will be created, which will catalyze reform of the Russian S&T system. In addition, these investments (as in the case of Intel; see above) will usher in managerial skills and modern corporate practices, which Russia is lacking. Finally, foreign investments create partnerships and linkages to domestic companies and help to intensify competition, which could further accelerate Russia’s progress. When monitoring the level of these investments, it is important to consider whether the foreign investors promote the development of innovative technologies in Russia or prefer other centers for R&D.
Other insightful indicators of S&T potential in Russia are the number, age, and level of education of its S&T personnel. Such metrics capture the extent to which Russia has been able to maintain and attract S&T talent through successful immigration policies and by providing desirable conditions for living and working. If the Russian brain drain continues and the overall Russian population continues to decrease or even remain static, there will not be personnel to staff the S&T institutions. It is also important that young scientists receive international exposure, either by attending foreign universities (and then returning) or by increasing the presence of foreign students and faculty in Russian universities. Without new ideas and greater involvement in the international S&T establishment, it seems unlikely that the Russian transformation effort will be successful.
Export of High-Technology Products
In the self-proclaimed target areas of medical, pharmaceutical, and information technologies, the international impact of Russian products is almost nonexistent. For example, Swiss exports of high-technology goods are worth several times more than Russian exports (Graham, 2010). The monitoring of such high-technology exports indicates the maturity and competitiveness of their technology and is not colored by the subsidies of state-funded programs to buy domestic goods.
FINDINGS AND RECOMMENDATIONS
It is expected that Russia will not succeed in developing a high-technology base to modernize the country and diversify its economy. This failure will create additional stress on the country and will foster Russia’s increasing dependence on supplying and controlling energy technologies (e.g., nuclear power generation, pipelines, and raw materials), which will have implications for U.S. national security. It can be expected that, as one of the world’s largest energy suppliers, Russia will fully leverage these technologies to advance its interests. More obviously, Russia’s continued activities in space and nuclear technologies have implications for U.S. national security, in particular as Russia seeks to commercialize these technologies for sale to countries that are hostile to the United States.
Finding 7-1. Russia has a top-down approach to S&T innovation, which benefits a few areas that require large centralized investments and in which Russia has been historically strong, such as extractive industries, space, and
nuclear systems. However the top-down approach to S&T innovation is self-defeating with respect to achieving goals in high-technology areas, which require a high degree of entrepreneurial innovation.
Finding 7-2. Due to its overreliance on a top-down approach, Russia is unlikely to be successful in modernizing the country and in diversifying its economy. Without globally competitive, high-technology products to sell, Russia is expected to be even more dependent on its role as one of the world’s largest energy suppliers and providers of raw materials, and it will attempt to increase its control in this sector. Russia will potentially also exploit its nuclear and space capabilities to achieve its global political goals.
Recommendation 7-1. Russia’s failure to achieve its modernization goals is not in the best strategic interest of the United States. It is recommended that the United States assist Russia in becoming a partner in the international S&T community by strengthening and increasing the number of long-term exchange programs and targeted international meetings, and increasing funding for joint research. In particular, those programs that provide exposure to the culture of U.S. universities, which have strong relationships with industry, would be advantageous.
Recommendation 7-2. The United States should develop an S&T strategy that moves toward energy independence, because Russia has a goal to become an energy superpower and has the potential to exploit this position to further its geopolitical ambitions.
Need for Transformation
Russia clearly has potential to become a world-class leader in S&T. However, as elucidated in this chapter, Russia must undergo major reforms to transform its S&T environment and fully leverage its potential. Some of these reforms extend beyond appropriating sufficient funding and establishing new policies or the usual governmental initiatives to transforming the economic sector on a major scale.
The Russian government recognizes these problems. In response it has developed detailed plans with clearly defined goals for the short, medium, and long term. However, there are several reasons to be skeptical of Russia’s plan (Zashev, 2010). First, the proposed level of funding does not seem to be adequate. Budget shortfalls forced the Russian government to cut R&D expenditures for its short-term programs by up to 30 percent of the initially planned allocations. The current global financial crisis and decreasing demand for Russian natural commodities will intensify budget constraints.
Second and more important, Russia’s S&T strategy is inconsistent and somewhat naive. Although the effectiveness of a top-down S&T approach can be debated, it is clear that the overwhelming dominance of the Russian government will not help the country achieve some of its main goals, namely increasing private participation and improving technology transfer from basic science to marketable products. For example, Russia’s S&T plans and ambitions are constantly undermined by the tendency of the government to support large (i.e., government-controlled) companies and initiatives and the assumption that its top-level commissions and political managers have the expertise to select the correct “winners” in which to invest. Additionally, it is in engineering and manufacturing that Russia is most behind, and until it develops advanced manufacturing capabilities or at least determines a way to access them through international cooperation, Russia will not have significant impact in global markets. An approach that shields domestic companies from international competition will in the long run prevent industry from developing viable technologies.
Lack of Qualified Leadership
The nanotechnology initiative in Russia, which is the most important high-technology initiative, or at least thought to be so by the top political leaders, suffers as a result of leadership that lacks significant high-technology experience. Previous privatization schemes have placed the Russian economy in the hands of oligarchies
with little experience. The list of projects that are being undertaken in the nanoscience endeavor does not indicate that Russian leaders understand what is involved in commercializing nanoscience advances; their approach neither improves the competitive environment nor encourages entrepreneurship. Those who are best able to recommend which technologies to pursue are not making the decisions. With the current political philosophy, it appears to be improbable that a more bottom-up S&T system with strong entrepreneurial elements can be created any time soon.
Rejection of International Partnerships
In strong contrast to the other BRIC countries, Russia maintains a hostile attitude toward foreign collaboration, which clearly is counterproductive to Russia’s S&T goals. Although globalization of high-technology manufacturing and design has occurred in the other BRIC countries, certainly in Japan and Singapore, Russia is currently not engaged with the international community in any significant way. As the rest of the advanced industrialized world progresses (particularly in the areas of biotechnology and semiconductor development), Russia is falling further behind. The initiatives that Russia has chosen to close this gap will most likely have no positive impact on this situation. In fact, some of Russia’s stated targets indicate that leaders do not understand the present state of the art. For example, one target for 2015 is to produce integrated circuit transistors of a size that was in volume production in the United States in 2009.
It is expected that Russia will be more successful in certain areas than others. The higher probability areas include nuclear power, space, and rocket systems, as well as energy distribution technologies involving the construction and exploitation of pipelines. These are all areas in which Russia is already quite strong. In fact these cases may be successful because a dominant governmental involvement with a central planning approach is advantageous and quite typical in other countries. However, Russia’s goals in the areas of nanotechnology, life sciences, and information technology systems are certainly less likely to be accomplished. Experiences in other countries worldwide have shown that these high technologies require the intense participation of private enterprise.
In summary, even if Russia is able to meet the funding targets to support its current ambitious plans, it is improbable that Russia will succeed in developing a high-technology base to modernize the country and diversify its economy. This failure will create additional stress on the country and will foster Russia’s increasing dependence on supplying and controlling energy technologies (e.g., nuclear power generation, pipelines, and raw materials), which will have implications for U.S. national security. It can be expected that, as one of the world’s largest energy suppliers, Russia will fully leverage these technologies to advance its interests. Undoubtedly, this will have implications for the United States as the world’s energy resources will be possibly controlled by Moscow. In order to monitor Russia’s progress in S&T beyond the short term, there should be careful monitoring of the amount of nongovernmental funding, level of foreign investments, the education and age profiles of the Russian S&T personnel, and the entry of Russian products into international markets.
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