PALO ALTO — Visiting Silicon Valley one day late last month, Russian President Dmitry Medvedev promised that “Russia will continue to be a predictable international partner.”
He was true to his word. Back home that very same day, Gazprom, Russia’s gas company, reduced its flow of natural gas to Belarus by 60 percent because of a price dispute — at the same time cutting the supply of gas to other European countries farther down the pipeline, even though their bills were up to date.
That was certainly predictable. Russia has been pulling stunts like that for years. Ukraine was the victim of repeated gas wars with Russia.
Medvedev was hoping to encourage California technology executives to invest in his country. He said he was dazzled by what he saw. “It’s not by chance that I came here,” he admitted to an audience at Stanford University. “I wanted to see with my own eyes the origin of success.”
He met with executives at Cisco, Apple, Twitter, wearing jeans, a jacket and an open-collar shirt — the local uniform. Introducing him to the Stanford audience, provost John Etchemendy noted that he was among the first Russians to get an iPhone. Medvedev nodded and with a grin held up his iPad. He read his speech from that, swiping his finger up and down the screen to find his place.
Medvedev was a smiling salesman for his country. He said he wants to create a Russian Silicon Valley in a suburb of Moscow called Skolcovo. But then the stories from his homeland are so chilling that it’s hard to see why anyone would want to risk investing there. “Russia is trying to become an open country,” Medvedev averred.
If that is his intent, the first thing he should do is open Mikhail Khodorkovsky’s jail cell. He was the principal owner of the Yukos oil company, now defunct. Envious of its success, the state took over the company, alleging non-payment of taxes, broke it up and handed the parts over to a state-owned company. Then it threw Khodorkovsky in jail, sentenced to eight years in prison.
And then there’s William Browder, CEO of Hermitage Capital Management, who set up several investment firms in Russia that grew to be the nation’s largest foreign investor. Along the way, though, Russians were constantly demanding bribes.
“I was fighting with oligarchs who were trying to steal money from the companies. And I felt like the only way that I could responsibly be an investor in these companies was to fight the corruption,” he told a television interviewer in May. Well, that effort infuriated the government. Russia refused to let him back in the country, confiscated his company and threw his lawyer in jail, where he died because his jailers refused to treat his illness, pancreatitis.
“Russia really doesn't operate in the same legitimate manner that you would assume other countries to operate in,” Browder concluded.
Almost 20 years ago, Russia started life after communism as a rough-and-tumble democracy. But since then it has slid steadily back toward brutal authoritarianism. Marina Soboleva’s story, related to me by email last month, is a vivid illustration.
Her great grandfather was a general in the Royal Army early in the 20th century and “was awarded land for exemplary service to the nation,” she said. “This property has been in the family for nearly a hundred years,” since 1914.
Then in 2009, the family “received a phone call from a stranger purporting to have purchased the property and alleging he had the purchase documents to prove it,” Soboleva said. Six weeks ago, the stranger, who owned an auto dealership, began construction on the property. When challenged, he showed falsified documents asserting legal ownership of the parcel. “Trees are being cleared, and asphalt is being poured,” she said.
Soboleva sent me copies of deeds and other documents that seemed to validate her charge. But she added, “officials and lawyers contend that nothing can be done to stop it. So far, at least, money, influence, and dishonesty seem to have the upper hand. Who is going to risk their intellectual property in an environment where even real estate isn’t safe?”
The U.S. State Department says the Russian government remains a brutal, capricious bureaucracy guilty of “contract-style killings, continuing centralization of power in the executive branch, along with corruption and selectivity in enforcement of the law” and “continuing media restrictions" that "result in an erosion of the accountability of government leaders to the population.”
Meeting with Stanford officials before his speech his speech here, Medvedev was clearly aware of the troubles his initiatives face.
“Unfortunately for us,” he said, “venture capitalism is not going so well so far. No one wants to take the risk. It's a problem of culture, Steve Jobs told me today. We need to change the mentality.”