Russia’s Silicon Valley woos British investors

FT Tech Hub

A delegation from Russia’s proposed ‘Silicon Valley’ development, Skolkovo, came to the UK this week in an effort to persuade UK businesses to invest in the high-tech hub being built on the outskirts of Moscow.

They faced awkward questions, however, about the political landscape that companies might face if they transferred operations to Russia. Denis MacShane, Labour MP for Rotherham, wrote to Lord Green, the trade minister, criticising the UK’s Department of Trade and Industry for hosting the conference, and pointing to the difficulties that many UK companies had faced in Russia.

“I believe the Government should add…an official health and safety warning so British businesses seeking to be involved in Russia do so with their eyes open to the risks they run,” Mr MacShane wrote.
He cited the case of Hermitage Capital, a hedge fund which was forced to leave Russia, and whose lawyer, Sergei Magnitsky, died in jail after uncovering an alleged $230m corruption scheme by high-level officials.

Companies like Ikea, Telenor, BP and NewsCorp have also had difficulties in Russia, and Mr MacShane said the UK government had a duty to warn British businesses about the dangers they would face.

“A lot of companies would have their own political risk consultants looking into this. We haven’t had a lot of questions,” said Conor Lenihan, the former Irish minister who is now working with the Skolkovo Foundation to recruit businesses to the project.

“Companies have been asking us more about the political will to continue this project if there was a change of control in Russia,” he said.

In a small show of goodwill, the Skolkovo Foundation and BP – a company whose troubles in Russia are still continuing – announced a joint research project into making oil-refining more efficient, although a £9.3m investment might not be quite enough to wipe away memories of last summer’s armed raids on BP’s offices in Moscow.

Viktor Vekselberg, the billionaire oligarch who heads up the Skolkovo Foundation, was more straightforward.

“We understand the Russian problem, better than anyone, this is why we need your help” he said, and urged companies to invest in Russia in order to help create change. Just how a high-tech cluster might be able to solve endemic corruption was left a little unclear, however.

Still, the companies seem to be interested. Around 21 multinational businesses including Siemens, Nokia and SAP have signed up to create research and development facilities in Skolkovo.

“For many of them the draw is the market access, this is a great way to get access to things like Russia’s growing public procurement market,” Mr Lenihan said.

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