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    Russian Press - Behind the Headlines, February 15

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    Why Moscow and London should bury the hatchet / “Silver economy” new source of economic growth / On track: railroad linking Scandinavia and the Indian Ocean

    Why Moscow and London should bury the hatchet

    On Monday, Russian Foreign Minister Sergei Lavrov travelled to London on a state visit. The real purpose of the trip is to de-frost relations between the two countries. But the process will be a long one.

    Relations between Russia and Britain first clouded several years ago. The chill worsened until diplomatic relations sank below freezing point.
    Britain is strong on traditions. One is that Russia is better off dealing with a Conservative government, rather than with Labour. It was thought that this pattern followed that of the United States: talking with a Democrat president is more complicated than with a Republican.

    Tony Blair, who kicked the Conservatives out of 10 Downing Street after 18 years in office, initially looked like a leader capable of acting as the middle man between Russia and the rest of Europe. He was the first Western head of state to meet with Vladimir Putin before he was made president and experts expected them to become firm friends. Under Blair, relations with Russia reached an all-time high since 1945 only to slide to the brink of a new Cold War.

    It all began with differences over Iraq. Exasperation deepened as cases of Boris Berezovsky, Ahmed Zakayev and other “refugees” who all faced criminal charges in Russia cropped up. The energy issue triggered the next wave of disputes. London was insulted by the “spy rock” story of January 2006. Finally, the death of former security services officer Alexander Litvinenko sparked hysteria on both sides. Gordon Brown’s anti-Russian moves merely sealed the divorce.

    But none of Europe’s key capital cities followed suit. The United States was the only remaining hope, but on becoming president Barack Obama unveiled his “reset” policy.

    In the absence of their prim “islander” neighbors, EU leaders enthusiastically set about building relations with Russia, garnering significant political benefit for themselves. Nor did British business stay away – Britain remained Russia’s fourth largest trade and economic partner.

    The presence of Moscow on all key diplomatic tracks, be it energy, the Middle East, Iran, Afghanistan, the anti-missile shield,  or nuclear non-proliferation, made the game even less winnable for Britain. A novice, President Obama, and his Secretary of State Hillary Clinton re-wrote the rules of the diplomatic game, when the revelation of Russian spies operating under deep cover in the United States failed to have any dramatic repercussions for bilateral relations.

    Then came a surprising development: a coalition government took office in Britain led by David Cameron (Conservative Party) and Nick Clegg (Liberal Democrats). William Hague took over the Foreign Office.

    Last year, for the first time since the 1990s, the government proposed a new foreign policy. Hague, the Tory party’s No.2 man, wrote it and will implement it. An open-door policy was introduced for Russia. Experts believe British diplomacy can address all high-profile issues, but only if Moscow also compromises.

    Leaving is easy, but staging a comeback will be a slow process.

    “Silver economy” new source of economic growth
    Having an ageing population is not a problem per se. In fact, it is an untapped growth resource, creating jobs as well as boosting consumption and production, according to a report by two leading global consultancies.

    The global population is aging. In 10 years time, around 20% of western Europe’s population will be over 65, and 16.6% in the United States. But Accenture and Oxford Economics described the “silver economy” in their New Waves of Growth report as a powerful resource with the potential to create millions of jobs and boost GDP 2%-2.5%.

    Older people are becoming more productive, retiring later and remaining active consumers of goods and services ranging from healthcare and wellness products to financial services, educational programs and new technology. Giving people the opportunity to extend their working lives will increase consumption as well as their contribution to the economy, said Mark Spelman, who leads Accenture's strategic think tank, the Institute for High Performance.

    Therefore, workplaces need to be adapted to the needs of older people, enabling them to work as productively as before and share their experiences. They also need to be trained to use new technology.

    The structure of consumption will also change as the demand for healthcare, social and entertainment services grows.
    Some companies are already drafting development strategies embracing these new demographic realities. Major pharmaceuticals producer Novartis last year took over Alcon to gain access to the fast growing eye-care market, while Pfizer focused on stem cell research aimed at fighting 20 age-related disorders. IT giants such as Cisco, Intel and Microsoft are concentrating on manufacturing remote health monitoring equipment. MegaFon is now producing cellphones with larger keys and louder ringtones.

    Unemployable older people can be a burden on the economy. Extending their active life is important, said Yevsei Gurvich, head of Moscow-based Economic Expert Group. The “silver economy” encourages businesses to expand their ranges of products and services. However, it should be remembered that most Russian pensioners have very low incomes, said Philippe Peters, partner and managing director with BCG’s Moscow office.
    An economy can be refocused on a different demand structure if it is flexible enough to make that change. The Russian economy isn’t, and there are several reasons for that, said Vladimir Gimpelson from Russia’s Higher School of Economics.

    The “silver economy” requires radical restructuring, said Vladimir Mau, rector of the Academy of National Economy. “The government will have to invest not only in boosting older people’s incomes, but also in increasing their life expectancy and creating jobs. The retirement age will have to be cancelled because it will become a matter of personal choice. Pensions will have to be privatized to ensure everyone makes their own decision about where to invest, while the state’s safety net will only exist for those in poverty or with disabilities,” he added.

    Nezavisimaya Gazeta
    On track: railroad linking Scandinavia and the Indian Ocean

    Despite the economic sanctions imposed on Iran, Russia and Azerbaijan show no signs of breaking off joint projects with the country. One such project involves building a railroad as part of the North-South International Transport Corridor.

    If implemented, this high-profile project will create transport routes leading from Scandinavia to the Indian Ocean by extending the Helsinki – St. Petersburg – Moscow transport corridor to Iran, India and the Gulf states through Azerbaijan.

    Russia, Azerbaijan and Iran have already been negotiating about this for a decade and have agreed to jointly modernize their sections of the route. Tehran recently hosted another meeting of the three partners. Three documents were signed that will add a fresh impetus to the project.
    For example, the countries agreed to work together on a railroad line from the Iranian town of Rasht to Astara in Azerbaijan via Astara in Iran. Russia, Azerbaijan and Iran will take equal stakes in the expected $3 million authorized stock in a joint venture that will be set up to design, build and operate the line.

    Experts say the North-South Transport Corridor promises to benefit not only the participating countries but other states as well. First, it means the land route from Europe to the Indian Ocean will shrink by 800 km, allowing cargo traffic to increase to 20 million metric tons per year.
    Second, transporting goods by rail will be 10% to 15% cheaper and 20 days faster than via the Suez Canal. Third, the North-South Transport Corridor will certainly have a geopolitical and geo-economic impact. This is why the countries involved are eager to start work on the project as soon as possible.

    Most of the construction work will take place in Iran. Azerbaijan is to modernize a more than 500-km long line from its border with Russia to its border with Iran and build several railroad facilities, including a 101-meter bridge. The project is estimated at $400 million but rising prices mean the figure is likely to increase.
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