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U.S.: Rich In Technology, Entities From Former Soviet Union Seek Western Partners (Part 2)

At the Partnerships for Prosperity and Security exhibition in Philadelphia last week, U.S. investors got a closer look at technological innovations from Russia, Ukraine, and Kazakhstan. World-class scientists and engineers unveiled more than 100 technological products, many of which have never before been available to U.S. companies. But in spite of heavy promotion of the event by the U.S. Department of Energy, initial interest from U.S. parties in joint ventures appeared mixed. In the second of a two-part series on nonproliferation and business, RFE/RL talked with experts from the former Soviet Union about their efforts to find business partners.

Philadelphia, 13 November 2003 (RFE/RL) -- Yuri Belinskii, an investment manager in a venture capital firm, stood in front of a huge promotional poster titled "Ukraine: The New Silicon Valley."

Belinskii's firm, AVentures, was among scores of companies attending an exhibition in the northeastern U.S. city of Philadelphia last week sponsored by the U.S. Department of Energy.

The aim was to bring together American investors with experts from the former Soviet Union to assure that their expertise, once used for manufacturing weapons of mass destruction, could be put to more benign uses today.

AVentures, like other participants in the exhibition, was eager to secure financing for its projects, but found less interest than it had hoped for.

Belinskii told RFE/RL that AVentures has been in the Ukrainian market nine years and is now trying to promote Ukrainian technologies in markets in North America, Europe, and Asia.

"We fill this gap between Ukrainian scientists and [Research and Development] people, and Western markets. We know the Ukrainian market very well, we are very well connected in Ukraine, we have very good marketing and [Research and Development] expertise 'in house,' so we can provide for specific needs. [We need] a partner who has expertise and connections in the Western markets who can promote Ukrainian technologies. We can provide both finances and management on the Ukrainian part of this equation," Belinskii said.

Belinskii says that in the countries of the former Soviet Union, venture capital firms are still a rarity. Lack of funds and underdeveloped markets are the main stumbling block. That's why AVentures is looking for outside partners. Oleg Pavlovski of the Moscow-based Nuclear Safety Institute gave a cautious assessment of the practical value of the Philadelphia expo.

"There was a hope, but I think that the opportunity to find a [U.S.] partner is not really high. First of all, I see that there is not much activity in the exhibit hall -- well, maybe it is still early. The second issue is that it is difficult to find a partner in the computer technology business at the development stage instead of the [stage where you are already dealing with the] practical application of a finished product. It is especially difficult in our particular industry," Pavlovski said.

Pavlovski's laboratory is engaged in the development of computer-enhanced models dealing with the consequences of so-called 'radioactive terrorism.' He says that the essence of its work puts it in an awkward position for finding a commercial partner in the United States. There is too much sensitive information, he says, that cannot not be publicly disclosed without running the risk of attracting potential terrorists.

Although not very optimistic about the possibility of securing a joint venture with a U.S. partner on the heels of the exhibition, Pavlovski said since the collapse of the Soviet Union their institute has relied more and more on contractual work with outside partners.

"In reality, we do a lot of contractual work with the Americans -- and not only with them. We are developing certain parts of [U.S. Nuclear Regulatory Commission] programs, [the U.S. Department of Energy], [the U.S. Department of Defense,] and many others in the U.S. We are working with particular laboratories in the U.S. But all this is contractual work, we are just doing a part of the project within an overall framework," Pavlovski said.

Pavlovski says that this year only about 15 percent of the Nuclear Safety Institute's budget has come from state coffers. The rest of the financing is secured through commercial contracts. He says compensation for the scientists employed in developing such contracts is very good by Russian standards, in the range of "several thousand" U.S. dollars a month.

Manat Tolymbekov is director of the Karaganda Chemical Metallurgical Institute in Kazakhstan. He says that his research and development team last year developed three major innovations, among them a cheaper and more efficient way to extract metals from ore. He told RFE/RL that Karaganda is eager to bring its products to Western markets.

"We are mostly interested in the marketing of our products. We know that we have customers in Russia, Kazakhstan, and in the former Soviet Union. We would like [to sell] our products in Western Europe and America for the production of steel and iron alloys. And we are interested in [foreign] investment," Tolymbekov said.

Tolymbekov says that foreign investment will be doubly beneficial for Karaganda because it will allow for the construction of additional technological facilities and speed up the firm's production, allowing it to satisfy both domestic markets and export demand.

Like other conference participants, Tolymbekov says the Philadelphia exposition is more a chance to explore potential business opportunities than a direct route to a lucrative contract with an American partner:

"It seems the visitors [at the exhibit] are more interested in [nuclear] technologies. If it was a metallurgical expo then the interest [in Karaganda] would be higher. As it is, we kind of don't fit in the overall picture. Realistically speaking, we didn't find interested [U.S.] parties. Some of the visitors took our advertising brochures and business cards and told us that if there is an interest they will contact us. When we initially saw the outline of the expo and were invited, we realized that our [products] were different. I had the gut feeling that our stuff would not be very much in demand here," Tolymbekov said.

Among the few partnerships forged at the exhibition was an agreement between Fuelco, a Midwest-based utilities service company, and Optima, a Moscow-based systems integrator and software development firm.

The initial agreement will lead to development of fuel accounting software designed to help track procurement of nuclear fuel products. This partnership aims to help U.S. utilities lower costs to their customers.

Another joint venture announced by the U.S. and Russian energy ministers at the exhibition will employ former Russian nuclear scientists to manufacture medical components in the formerly closed city of Snezhinsk.