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posted: 7/20/2013 7:07 AM

Tech center falters in Russian political turf war

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MOSCOW -- When Russian agents stormed the offices of the Skolkovo technology hub being built near Moscow, a startled Intel executive from the United States got caught up in the raid.

Dusty Robbins, 48, head of global programs for the world's largest chip maker, was allowed to leave the building escorted by officers only after Skolkovo officials appealed to investigators, said two people familiar with the matter, who asked not to be identified because the information is confidential. Robbins returned to the United States without holding a scheduled meeting with Skolkovo's billionaire president.

What happened to Robbins on April 18 was founded in a turf war between backers of Prime Minister Dmitry Medvedev, who had made a Russian version of Silicon Valley the cornerstone of his presidency, and allies of President Vladimir Putin who see the premier as a rival, said Masha Lipman, an analyst at the Moscow Carnegie Center.

"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 said.

Putin spokesman Dmitry Peskov said reports of Skolkovo being targeted for political reasons are "not true." Robbins and Medvedev's spokeswoman, Natalya Timakova, didn't respond to requests for comment.

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

But the pledges have become increasingly tenuous since last year, when Putin wrested back the Kremlin from his former protégé. Two criminal cases have been opened against Skolkovo executives. And Putin has overturned a Medvedev order directing state companies -- the biggest of which are run by Putin loyalists -- to contribute more than $900 million to the Skoltech institute that MIT 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, Medvedev's point man for Skolkovo. Surkov's departure in May came just days after he publicly criticized 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. IBM plans to invest almost $100 million in Skolkovo and move its Russian research and development center there by 2015.

"People need to feel that's it's backed by the government at large and not just by an individual," said Ian Simpson, who has run IBM's software center in Russia for more than five years.

In June 2010, Medvedev became the first Russian leader to visit Silicon Valley, touring the offices of Apple, Twitter and Cisco. Medvedev, 47, was one of Russia's first iPad owners and is an active Twitter user. Putin, 60, by contrast, is a former KGB colonel who said last year that he has no time to use social networking sites.

Medvedev was president from 2008 to 2012 while Putin, who was barred from serving a third-straight term, bided his time as prime minister.

The first public warning of 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 there next year.

"The idea of the project itself is anathema to the Russian leadership because of its special status and independence," said Gleb Pavlovsky, a former Kremlin adviser who heads the Moscow-based Effective Policy Foundation. "Without Medvedev there to protect it, it can't survive."

In February, a top law enforcement agency, the Investigative Committee, said it was looking into the possible misuse of $106 million of state funds for Skolkovo that had been deposited in a bank controlled by Skolkovo President Viktor Vekselberg. The committee also said it had opened a criminal case into two Skolkovo managers, including finance chief Kirill Lugovtsev, over the alleged theft of $720,000. Both Vekselberg and Lugovtsev declined to comment.

A day after the raid that involved Robbins, investigators opened a second case, accusing a vice president, Alexei Beltyukov, of making $750,000 of illegal payments to an opposition lawmaker, Ilya Ponomarev, for a series of lectures about Skolkovo. Beltyukov, a graduate of France's INSEAD business school, declined to discuss the case because it hasn't been resolved.

"It doesn't make sense to damage the project itself," Beltyukov said. "It would be a great loss for the country if it was shut or wound down."

Ponomarev said he spent more than 90 percent of the $750,000 in question on travel expenses and hiring experts, including from the New York Academy of Sciences, to help him with the lectures. Ponomarev helped organize protests in 2011 and 2012 that were the largest Putin faced since coming to power in 2000.

"The case is politically motivated, linked to the conflict between the Putin and Medvedev camps," Ponomarev said.

Last month Putin's chief of staff, Sergei Ivanov, met with Skolkovo investors at the annual St. Petersburg Economic Forum 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.

Medvedev's plan calls for the 400-hectare (1,000-acre) Skolkovo site to have 25,000 permanent residents, including employees and their families, by 2020, with $2.6 billion of a planned $4.3 billion in state funding approved so far. Investors still have the option to pull out.

Microsoft is continuing to "monitor the situation" and remains "committed" to the project, the world's biggest software maker said in an emailed reply to questions.

The German industrial group Siemens plans research and development at Skolkovo in energy efficiency, biomedicine, IT solutions and hardware development. The Munich-based company firmly believes in the tech hub as "an important milestone on the path of the country's modernization," said Dietrich Moeller, head of Siemens in Russia and Central Asia.

Global companies like 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," said Conor Lenihan, a former Irish science minister hired to promote the venture.

Intel is aware of "these fluctuations," Chuck Mulloy, a spokesman at Santa Clara, Calif.-based Intel, said in an email. Authorities need to "clearly define" the way forward for Skolkovo.

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