The Future of Technology Development in Russia

Some may say that U.S.-Russian relations are "estranged but leading toward alienation," reported Glenn Schweitzer at a Kennan Institute lecture on 22 February 1999. However, Schweitzer, Director of the Office for Central Europe and Eurasia, National Research Council in Washington, D.C., argued that the current situation is just another "bump in the road that we'll have to ride out."

Schweitzer conducted interviews and a structured survey of thirty research and development (R&D) institutes across Russia with teams doing case studies in three atomic cities--Obninsk, Zarechny, and Snezhinsk. The purpose of these studies was to assess the process and future of technology development in Russia.

Obninsk has managed to attain certain autonomy from Moscow in decisions concerning state-owned facilities in the city. As a result, federal, regional, and local governments work together to develop the industrial potential there.

Zarechny, Schweitzer argued, has a chance for success. It only has a small population to support. City managers also know how to operate in the international market system through their rare gas market. Finally, Zarechny has discovered a gold mine under the city.

Snezhinsk, on the other hand, is not in such a good position, remarked Schweitzer. The city has a larger population and is located several hours from any airport. According to Schweitzer, Russia will need to subsidize Snezhinsk for the next several decades because it is unlikely the city can commercialize its technologies without government money.

Building on these studies, Schweitzer developed four hypotheses for technology development. First, that in the foreseeable future, technological developments will have little effect on what happens in Russia. Second, the U.S. will need to be engaged in the national security area for a long time. Third, given that the Russian government invests roughly 4 percent of what the U.S. government does in R&D, federal investment will not make a difference. Finally, a market economy may not be the best avenue for technology development in Russia.

With regard to the legal framework, in most countries of the world, including the U.S., R&D receives certain tax breaks. In Russia, there is discussion of no tax breaks for anyone. However, a special relationship between R&D and taxes has been demonstrated for decades in countries that have done well in technology. In regard to intellectual property rights (IPR), in Russia the government retains rights to all technology developed using government funds. In the U.S. by law IPR rights automatically pass to universities, non-profits, and small businesses. The lack of such a law in Russia does not provide an incentive for R&D.

In addition, there is widespread feeling in Russia that the West has stolen their technology both physically and metaphorically via the "brain drain." Although there is a slow but steady exodus of some bright researchers, remarked Schweitzer, the brain drain-- going abroad--is not very great. However, the internal brain drain--researchers in Russia leaving the sciences-- is massive. The number of active researchers in Russia is a fraction of the number reported to be working in R&D.

Recently, schools have seen an increase in applications for science and engineering among Russia's youth. One possible explanation for this increase, Schweitzer explained, is that students are dissatisfied with the quality of instruction in the business schools and choose instead to follow the route of those bank presidents who studied physics instead of economics and business. This rationale explains why there is such a disparity between the number of graduates from science programs and those who continue to work in the field.

Schweitzer remarked that U.S. programs in Russia in the non-proliferation area are well-conceived but have had problems with implementation and need to be expanded. While many people involved have little knowledge about Russian culture or language, this is slowly improving. U.S. technology commercialization efforts, however, have been insignificant. Schweitzer argued that our role in that area may be "to cheer on the Russians as they look for their domestic customer base." According to Schweitzer, giving money to Russia should not be considered "assistance" as it protects U.S. interests.

There are a few things--none very popular with U.S. policy makers--which Russia should do to stimulate technological development, Schweitzer suggested. One is to develop a good regional customer base. Another is to adopt a "Buy Russian" law stating that Russian firms should buy Russian technology if government money is involved and that technology is reasonably competitive.

Schweitzer concluded with three hopeful signs for Russia. First, due to the economic crisis and scarcity of dollars, Russian companies can penetrate the domestic market because foreign imports are too expensive. Second, production sharing agreements which contain some "Buy Russian" clauses are moving through the parliament. According to Schweitzer, these agreements may resolve some concerns of Western companies and may attract the West to help Russian technologies move in a more productive way. Finally, Schweitzer argued, the First Deputy Minister of Atomic Energy's recent announcement of Russia's plans to downsize their nuclear complex demonstrates that Russia is headed in the right direction.