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Don't smile in Russia!

Intrigue engulfs a major mining accident. A former PM testifies that Putin had Khodorkovsky arrested as political punishment. OECD predicts higher Russian growth. Medvedev courts US venture capitalists. And Jake Gyllenhaal explains why you should never, ever, laugh or smile in Russia.

 Top News: Two explosions at Russia’s biggest coalmine killed 67 people, including miners and rescuers. Twenty-three miners are still missing, three weeks after the May 9 accident.

Overshadowed by Russia’s massive Victory Day celebrations, domestic coverage of the event was further diminished because of an intense official effort to prevent reporters from accessing the site. The tragedy, which unfolded over several days, got nearly no coverage on television. The story only gets shadier from there. 

The director of the mine quit, and Russia’s Anti-Monopoly Service has launched an investigation into the pricing practices of Evraz, the company that owns the mine, insisting, however, that the move has nothing to do with the accident. Families of the dead each got $32,000 in compensation, and are now saying that local criminal gangs are shaking them down for the cash. Police say the accusation is “a hoax.”

Worst of all, police cracked down violently on a rally held after the accident calling for improved mining conditions. Twenty-eight people were arrested and six police officers were injured during the clashes. The region’s governor blamed the clashes on “drunk young people” and the mayor promised to prevent future unrest. From the secrecy surrounding the accident, to the authorities murky means of dealing with the aftermath, to the allegations of pressure on victims’ families, the incident, unfortunately, does a good job of summarizing the varied troubling aspects of life in Russia.

Mikhail Kasyanov, who served as prime minister for a large part of Vladimir Putin’s presidency, testified in the trial of fallen oligarch Mikhail Khodorkovsky. Kasyanov argued that Putin arrested Khodorkovsky as political punishment for funding opposition parties. Former Economy Minister German Gref, now head of state-run Sberbank, is also due to testify, though it is unlikely Putin will, despite Khodorkovsky’s lawyers’ attempts to have him appear. The FT’s Catherine Belton, Russia’s foremost Yukos expert, published a great blog post from the courtroom, highlighting the absurdity of the trial and prosecutors’ ineptness.

For more absurdity, let’s turn to the scandal that’s captivating the Russian elite – the future of the International Chess Federation (FIDE). It may not sound very exciting, but throw in a current FIDE president who thinks he was once visited by aliens, a Kremlin who supports him, and former world chess champion Anatoly Karpov and the tale becomes a lot more interesting. Karpov argues that the status of world chess has plummeted under current FIDE chief Kirsan Ilyumzhinov, leader of Russia’s Buddhist region of Kalmykia. It’s hard to argue with that. However Karpov, one of the greatest living chess legends, has to contend with Kremlin advisor Arkady Dvorkovoch, a US-educated relative liberal who comes from a chess-loving family. He’s thrown his support, and the weight of Russia’s security services, behind Ilyumzhinov. Even Gary Kasparov, whose rivalry with Karpov marked 1980s chess, has even thrown his support against his former enemy. The drama continues.

Money: The OECD joined the chorus of organizations raising growth forecasts for Russia, predicting that the economy would grow 5.5 percent this year (vs. earlier estimates of 4.9 percent). Yet the organization also warned that with its oil-driven recovery, the boom that follows could be disproportionate, creating risk for further boom-and-bust cycles.

President Dmitry Medvedev, hoping to follow through on long-standing pledges to diversify the economy away from natural resources, met this week with a handful of U.S. venture capitalists. The fund managers also met with Viktor Vekselberg, the oligarch chosen by Medevdev to lead the project in Skolkovo, outside Moscow, which ahs come to be known as Russia's Silicon Valley. Medvedev said that presence of venture capital in Russia was woefully low, with just 20 funds managing around $2 billion.

Yet those who have been burned by Russian business criticize anyone seeking to get involved. William Browder, once Russia’s largest portfolio investor, said investing in Russia was “complete insanity.” Those interested in learning about what Browder went through should watch his recent interview with CNN’s Fareed Zakaria.

Some Russian businessmen are also sceptical. Rare video of a meeting with Vladislav Surkov, the Kremlin's chief ideologist, emerged this week, in which he was challenged about the Kmrelin's relationship to business and its role in stifling innovation. Sergei Polonsky, a former real estate magnate who lost much of his wealth in the financial crisis, brought up the case of Evgeny Chichvarkin, the self-made millionaire who was forced to flee Russia two years ago amid trumped up criminal charges designed to make him give up his successul business. Polonsky says that as a result 80 to 85 percent of Russian businessmen live sitting on their suitcases, expecting their businesses will be stolen by the state or people close to it.

Elsewhere: The first non-Latin URLs debuted this week, with users registering domain names in Arabic and Cyrillic. The first sites registered in Russian, which will have an .рф (.rf, for Russian Federation) ending, translate as www.president.rf and www.government.rf. These were shortly followed by (the country's main search engine) and, unsurprisingly

Naomi Campbell celebrated her birthday in Russia this week, joining the event, supposedly, with the opening of her new charity to help underpriveledged children. The only problem is: the party cost $4 million to throw, while the charity is said to have brought in around $1 million. How does this make any sense?

If you really want to understand what life in Russia is like, make sure you watch Jake Gyllenhaal's recent appearance on David Letterman (video here). The actor was recently in Moscow to promote his latest film, Prince of Persia, and talks about the perception of smiles here, funny stuff.