Weekly 7 December 2020

Sputnik V in trouble

Hello! This week our top story is on Russia’s efforts to roll out its COVID-19 vaccine and ‘beat the West’ in Cold War-style one upmanship. We also look at political veteran Anatoly Chubais’ new role as the Kremlin’s international point-man on climate change, and the life story of colorful entrepreneur and dairy magnate Boris Alexandrov who died this week

Russia strives to ‘beat the West’ in vaccine rollout race

The U.K. this week became the first Western country to authorize the use of a COVID-19 vaccine. President Vladimir Putin immediately responded by demanding officials do the same with Russia’s counterpart, Sputnik V, which was registered in the summer but has proved difficult to produce on a mass scale. Officials stood smartly to attention when Putin ordered action, but it’s hard to see how they can actually meet his demands.

  • Putin told Deputy Prime Minister Tatyana Golikova on Wednesday to launch a mass COVID-19 vaccination campaign the following week. The relevant clip from the video meeting makes for instructive viewing: the feelings of all participants are apparent, and Golikova’s answer to Putin is a classic example of Russian bureaucratic jargon and evasion: “I hope – indeed I’m sure – that this week we will complete all the preparations needed to report to you about our readiness to start mass vaccinations next week,” she told Putin. In response, the president adopted his familiar ‘man of action’ pose, telling Golikova not to report, but to start actual work.
  • The Kremlin sees the development and production of COVID-19 vaccines as a political race with the West. The Russian Ministry of Health tried to steal ahead when it registered Sputnik V in August, long before the end of the third phase of trials. In reality, that stage three testing will be completed after the Pfizer, Moderna and AstraZeneca vaccine trials are due to wrap up. In October, when Pfizer announced a 94 percent success rate for its vaccine, Sputnik V’s developers followed up the next day with a press release claiming 95 percent effectiveness.
  • Despite the political games, specialists believe Russia’s vaccine is likely to be just as good as its Western rivals. The issue with Sputnik V, however, is not development, but how to successfully scale-up production to the required level. By the start of November, not one of the four companies licensed to make Sputnik V had managed to establish a stable production line for the vaccine.
  • Putin said Wednesday that 2 million doses of a Russian vaccine “are ready or will be ready in the next few days”. But this is obvious wishful thinking. A few days before, Golikova gave 2 million as a target for the end of 2020. And even that’s an inflated number. A source with knowledge of the situation told The Bell it was unlikely Russia could produce more than 500,000 doses by the end of the year. Independent media outlet Meduza published the same 500,000 figure Friday, also citing a source.

Why the world should care

The political fanfare over the Russian vaccine is another example of the Kremlin’s ‘catch up and overtake America’ mentality that dates to the early days of the Cold War. It’s hard not to be skeptical, but the Russian vaccine should not be totally discounted. In all probability, it will be an effective drug and, if mass production can be achieved, it will be a big win for Russia’s pharmaceutical industry.

Anatoly Chubais to re-invent himself as eco-warrior

Political veteran Anatoly Chubais, who recently lost his job as head of state technology company Rusnano, seems to have found an even bigger challenge. On Thursday, The Bell was the first to report that he will now be in charge of Russia’s plans to combat climate change. On Friday, Chubais was appointed Vladimir Putin’s special representative for liaison with int’l organizations on sustainable development. For years, global warming and climate change have been marginal issues in Russia, but this looks set to change with new European Union carbon taxes that could mean major losses for Russian companies.

  • Thursday was Chubais’ last working day at Rusnano. As part of a reform of Russia’s development agencies, Rusnano is being absorbed into state development bank VEB.RF under former deputy prime minister Igor Shuvalov. This loss of independence meant Chubais wanted to leave, according to one of his colleagues. His replacement at Rusnano is Sergei Kulikov, an executive with close ties to powerful state defense conglomerate Rostec and its influential head, Sergei Chemezov.
  • There was much speculation about where Chubais — a man who has walked the corridors of power since the early 1990s — would end up. The Kremlin stonewalled any queries about his future for days, but announced Friday that he would become a special representative for the president, and responsible for working with international organizations on sustainable development.
  • This is a new role, specially created for Chubais, and it is not clear exactly what it will involve. But two of Chubais’ acquaintances told The Bell that he will be working on climate change. The assumption is Chubais will be put in charge of a range of issues, from formulating a plan to meet Russia’s obligations under the Paris Climate Agreement to attracting ‘green investments’ like climate bonds.
  • Climate change is a minor political issue in Russia, even though global warming is having a greater effect here than in most European countries and energy inefficiency is far higher. Russia signed up to the Paris Climate Agreement last year, but has still not put in place any mechanisms to implement its obligations.
  • One of the big topics for Chubais in his new job could be developing a response to the EU carbon tax that is due to be introduced in 2022. Last week, Russia’s Central Bank listed the tax as a risk for the financial systems, estimating that it could cost exporters up to $4.8 billion a year. Several sectors — for example the production of nitrogen-based fertilizers — could lose access to European markets altogether.

Why the world should care

Chubais is a deeply controversial figure in Russia thanks to his role designing privatization in the 1990s. However, there is no doubt he is one of the most energetic and determined post-Soviet politicians around. Watching how he tackles climate change promises to be interesting, at the very least. Furthermore, this is a topic that could — if it becomes the basis for a rare dialogue between the U.S. and Russia — allow Chubais to wield significant influence.

Colorful dairy entrepreneur dead at 73

One of Russia’s most vivid entrepreneurs, Boris Alexandrov, died Monday of COVID-19. His career began in the 1970s, and he served time in a Soviet jail for flouting laws against private enterprise. After the fall of Communism, Alexandrov built a business empire out of chocolate coated curd snacks, an iconic Soviet product that bemuses most foreigners.

  • Alexandrov graduated from medical school in Moscow in 1970, and went on to work in the Far East as a naval doctor for a few years. At that time, sailors could earn a bit of money by illegally trading consumer goods they bought in foreign ports and Alexandrov did well in this business, investing his profits in a small Moscow artisan vodka distillery. However, this kind of activity was a criminal offense in the Soviet Union, and Alexandrov served four years in jail on private entrepreneurship charges.
  • In the late 1980s, business activity was legalized, and enterprising Russians set-up one company after another. At first, Alexandrov sought his fortune selling medicine, then he traded books from a truck in downtown Moscow. Later, he set up a confectioner. After several disappointments, he struck gold in 1995 when he moved into dairy products and developed his chocolate curd snack.
  • These curd snacks — ‘syrki’ in Russian — are hard to imagine on the shelves of any country outside the former Soviet Union. They first appeared in the 1950s and were a bar of tvorog – Russian curd cheese – sweetened with vanilla flavoring and coated in a thin layer of cheap, synthetic chocolate. It was one of the few widely available sweet treats in the Soviet era, a staple of school dinners and kindergarten lunches. For the post-Soviet generation, the taste of the curd snacks was one of pure nostalgia.
  • The bankruptcy of the big Soviet dairy producers in the 1990s gave Alexandrov an opportunity, and he quickly captured about half of the market. His RostAgroExport company evoked the familiar, if clumsy, title of a Soviet state enterprise and his sweet snacks were affordable for a country stricken with economic turmoil.
  • Competition intensified in the 2000s as international brands like Danone and PepsiCo, established themselves and realized they needed to localize their product lines. RostAgroExport began to struggle. Alexandrov’s response in 2006 was to launch his own B.Y. Alexandrov brand, complete with elaborate packaging and real chocolate instead of cheap glaze — and at three times the market price. The innovation worked: salaries were rising on the back of the oil boom and the curd snacks were repositioned as a healthy option (healthy eating was becoming fashionable in Russia).
  • By 2010, the B. Y. Alexandrov curd snacks were popular even among those too young to remember their cheap Soviet forerunners. The brand’s fame was secured thanks to a series of widely-shared internet memes.

Why the world should care

Alexandrov was a type of Russian business person that is fast disappearing. Willing to do business regardless of the consequences, tenacious and inventive, he built a company that successfully competed against multinational giants in post-Soviet Russia.