5/21/12 Home / Projects / WMD Expertise Redirection Project www PGS Printer Friendly Page   Nuclear Perestroika: Techno-Business in Russia's Atomic Cities By Glenn Schweitzer & Lev Tocheny MIIS-Center for Nonproliferation Studies February 23, 2001 J. Raphael Della Ratta This event summarized and discussed the findings of Schweitzer's two-year study of business development trends in three Russian cities: Obninsk, Snezhinsk, and Zarechny (in Sverdlovsk Region). Glenn Schweitzer Office of Central Europe and Eurasia National Academy of Sciences, National Research Council The study made the following findings: The cities must continue to earn their special privileges. Simply claiming they serve a national security role does not guarantee the continuation of their special status; Russian policies should be tailored to facilitate technological development; Innovating for profit is critical for future progress; The youth must become technology advocates; and International programs should be more collaborative. The study also found that the majority of successful research projects have two sponsors for the research, and more than two potential customers for any technology developed. This study was labeled a pilot study because when it was undertaken, there was some question whether studies of the closed cities could even be done. Lessons learned at each city appear to be transferable between cities. However, surveys of local populations must be careful, simple, and not very ambitious. Trends are not discernable, because the cities haven't changed much over time. The study format was selected to be a slim report, under the assumption that it will have a wider readership than a 300+ page book would. Since the study was completed, the following activities were undertaken: A survey was conducted of 28 industries within a 200 km radius of Snezhinsk and found: All industries claim they know what Snezhinsk has to offer; None had any contact with Snezhinsk; Roughly half thought that collaborative opportunities existed. So why has there been no contact? Snezhinsk is primarily interested in Ministry of Atomic Energy-funded work; They charge firms three times what they charge Minatom for work; They are interested only in one-shot deals, which will carry them until Minatom gets its defense orders back up to historical levels. A survey of small firms in Obninsk found: Their number one concern was finding customers, not whether or not they could do the job. Three-quarters of firms had a service function, and conducted some research and development work on the side. For example, an orthopedics treatment firm also was developing a project to manufacture orthopedic shoes. This provided for both an immediate income stream and a "delayed" income stream. The successful Obninsk firms conduct no business outside the Russian Federation. Their success is based on knowing how to work the Russian economic system, and, according to the study, do not wish to engage with companies outside of Russia. A study of Intellectual Property Rights (IPR) has been launched that will examine: Who owns federally funded research? How is enforcement of IPR handled? An Obninsk workshop is being planned through the U.S. Nuclear Cities Initiative to encourage business development and discuss problems at five Russian cities: Sarov, Snezhinsk, Zheleznogorsk, Obninsk and the Sverdlovsk region Zarechny. Clifford Gaddy Brookings Institution Gaddy's comments on the study focused on the economic environment of the cities. There has been one dramatic change in the Russian economy: the 1998 ruble devaluation. This devaluation has led to an increase in the number of highly competitive firms, provided a boost to the consumer goods sector, and has forced an inherent devaluation of the barter system. Recent increases in oil prices have helped, also. The perception of greater political stability under the Putin administration has made a difference to all defense-related firms. The pre-1998 economy suffered because of a lack of security on how to do business in Russia, the rise of organized crime, and the increasingly predatory role of the federal government. Many firms are simply biding their time until the defense sector funding goes back to "normal," and defense orders return to previous levels. Many see the Putin administration as that return to normalcy. Therefore there is a great unwillingness to break the cycle of reliance upon government orders. Russian companies are seeing an increase in the number of re-hires of workers who had quit their job, tried to succeed on their own for a few years, and ultimately went back to work for the company. It is important to realize there is no psychological commitment or link to the new jobs in Russia. In the U.S., once a person leaves a job, he focuses on the new opportunity, and the "old job" skills tend to be outmoded after a year. This is not so in the Russian Federation. A huge break needs to be made. We must get beyond defense firms using "temporary opportunities" to carry them while always looking for defense orders to return to previous high levels, Gaddy argued. Discussion Comments from participants included the following: The first element of transparency must come from the U.S., and objectives must be tied to the programs. If a rigorous nonproliferation agenda is adopted, you can stomach more than you could otherwise. Under a nonproliferation agenda, a weapons worker spending 50% of his time on non-weapons research is better than none of his time being spent on it. We should not raise the expectation that they will become capitalists. Capitol Hill would like to respond positively to the recommendations of the Cutler/Baker report on DOE nonproliferation programs, and increase by two or three times the funding for these programs. But is enough money on the table to make Minatom notice?

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