Posts Tagged ‘Tech’

Net Impact

Monday, April 4th, 2011

Late on a snowy evening, Alexey Navalny, a lawyer and blogger known for his crusade against the corruption that pervades Russian business and government, sat in a radio studio in Moscow. Tall and blond, Navalny, who is thirty-four years old, cuts a striking figure, and in the past three years he has established himself as a kind of Russian Julian Assange or Lincoln Steffens. On his blog, he has uncovered criminal self-dealing in major Russian oil companies, banks, and government ministries, an activity he calls “poking them with a sharp stick.” Three months ago, he launched another site, RosPil, dedicated to exposing state corruption, where he invites readers to scrutinize public documents for evidence of malfeasance and post their findings. Since the site went up, government contracts worth nearly seven million dollars have been annulled after being found suspect by Navalny and his army. Most remarkably, Navalny has undertaken all this in a country where a number of reporters and lawyers investigating such matters have been beaten or murdered.

By now, Russia’s reputation for corruption is a cliché, but it is impossible to overstate how it defines public life at every level, all the way to the Kremlin. Russia is one of the few countries in the world to slip steadily in Transparency International’s annual rankings. Out of a hundred and seventy-eight countries surveyed in 2010, Russia ranks a hundred and fifty-fourth, a spot it shares with Cambodia, Guinea-Bissau, and the Central African Republic. Corruption has reached such extremes that businesses involved in preparing the Black Sea resort of Sochi for the Winter Olympics of 2014 report having to pay kickbacks of more than fifty per cent. The Russian edition of Esquire recently calculated that one road in Sochi cost so much that it could just as well have been paved with, say, nine inches of foie gras or three and a half inches of Louis Vuitton handbags. In October, President Dmitry Medvedev announced that a trillion rubles—thirty-three billion dollars—disappears annually on government contracts. This is three per cent of the country’s G.D.P.

In the studio, Navalny sat next to Evgeny Fedorov, a doughy, bespectacled member of the Duma and a fairly high-ranking member of United Russia, the political party led by Prime Minister Vladimir Putin, which today dominates Russia. Fedorov had been invited on the air to debate an assertion that Navalny had made in the same studio two weeks earlier. When asked by a radio host what he thought of United Russia, Navalny had said, “I think very poorly of United Russia. United Russia is the party of corruption, the party of crooks and thieves. And it is the duty of every patriot and citizen of our country to make sure that this party is destroyed.” United Russia announced its intention to file suit against Navalny for slander. Unfazed, Navalny responded with a poll on his blog asking readers whether they agreed with his assertion that United Russia was in fact a party of crooks and thieves. (Of forty thousand respondents, 96.6 per cent agreed with Navalny.) Then he announced a contest to design a poster using the “crooks and thieves” line as a slogan.

Sitting beside Navalny in the studio, Fedorov fumbled nervously with a stack of colored folders and a thicket of scribbled notes. Without looking at him, Navalny drew a sheet of paper from a slim file in front of him and began to read through a list of members of United Russia’s leadership council. He pointed out that one of them, the former governor of oil-rich Bashkortostan, had unified the region’s oil industry and installed his son as the chairman of the resultant conglomerate. Navalny then noted that the governor of the Krasnodar region, where Sochi is, had a twenty-two-year-old niece who had somehow come to own a major stake in a multimillion-dollar pipe factory, a poultry plant, and a number of other businesses. The governor of the Sverdlovsk region (Boris Yeltsin’s birthplace), Navalny said, has an eighteen-year-old daughter who owns a plywood mill and a dozen other local businesses. “How does all this wonderful entrepreneurial talent appear only in the children of United Russia members?” he asked. “What business schools did they attend?”

Fedorov dismissed this as meaningless invective. (All the officials have denied any wrongdoing.) He accused Navalny of terrorism and of working to undermine the country, implying that he was receiving financing either from the C.I.A. or from the U.S. State Department, if not both.

“Honestly, what you’ve just said is shocking,” Navalny said, perfectly deadpan. “I thought that, since you brought so many documents with you, you’d be able to raise substantive objections about the facts of corruption in United Russia, which, I think, are totally obvious.”

Fedorov also wanted to contest Navalny’s assertion, taken from the official property declarations posted on the Russian parliament’s Web site, that Fedorov, a career civil servant, is the owner of five apartments, a house, a summer cottage, and two cars, one of which is a Mercedes. The house is a wreck, Fedorov protested, flashing pictures to the host, and he owns only four apartments. As for Navalny’s assertion that United Russia provides political cover for the corrupt officials in its ranks, Fedorov had a simple bit of advice: “It’s pointless to discuss each of these examples on its own. There is a clear procedure. In instances where the law is broken, the procedure works,” he said. “Write to us. The President even said so himself: ‘Give us the facts!’ ”

“But I’ve been writing for many years,” Navalny burst out. “That’s the whole point!”

Three centuries ago, when Peter the Great was trying to turn feudal, agrarian Russia into a modern state, he encountered a major source of friction inside the system. “Corruption affected not only the finances of the state but its basic efficiency,” Robert Massie wrote in his biography of the Tsar. “Bribery and embezzlement were traditional in Russian public life, and public service was routinely looked upon as a means of gaining private profit. This practice was so accepted that Russian officials were paid little or no salary; it was taken for granted that they would make their living by accepting bribes.”

Despite the wild fluctuations of Russian history since the early eighteenth century, not much has changed in this regard. Almost anyone can be bribed—sometimes with horrific consequences. In August, 2004, two passenger planes fell out of the sky within three minutes of each other, killing eighty-nine people. It turned out that they were downed by two female suicide bombers who had bribed an airport security officer with five thousand rubles—around a hundred and seventy dollars—to let them onto the planes. Government officials don’t just accept bribes but actively solicit them: businesses have become used to approaches by officials who hint that a certain sum will prevent “problems.” It has not gone unnoticed that many civil servants live in luxury that doesn’t square with their modest official salaries. United Russia’s own survey of people who wanted to join the party showed that almost sixty per cent said they were motivated by a desire to solve personal problems, and nearly half were drawn by the opportunity to earn money on the side.

In recent years, Medvedev, eager to lure foreign investors back to Russia, has declared war on corruption. Nonetheless, according to the Interior Ministry’s Department of Economic Security, the size of the average bribe has quadrupled since Medvedev’s election, and many state projects are now undertaken simply to create a pool of money that can then be siphoned off by interested parties. Elena Panfilova, the head of Transparency International’s Russian operation, told me that there are two reasons for this: first, as the government fights corruption, bribery becomes more risky, and so the price goes up. “Second, is what is called the Last Day of Pompeii syndrome,” she said. “Everything’s about to collapse, so grab everything you possibly can.” This has led to such scenes as police pursuing the car of a federal official, who began to toss a million rubles out of the window for fear that the cops would catch him with the bribe money and arrest him.

Fighting corruption in Russia is a dangerous business. “Alexey is causing tangible harm to corrupt, criminal, crooked officials who are not used to people standing in their way,” the Internet entrepreneur and opposition blogger Anton Nossik said. “It’s more dangerous here now than it used to be. Corporations are clearly not into killing—they use P.R. and the courts—but some small official in the provinces whom Alexey deprived of his million dollars could easily send someone after him.” Such things have happened before. A lawyer named Sergei Magnitsky uncovered a scheme by which a group of Interior Ministry officers allegedly stole two hundred and thirty million dollars from the state. In 2008, those same officers had him arrested as he was seeing his children off to school. For nearly a year, Magnitsky was kept in Moscow jails, in conditions so filthy that his health rapidly deteriorated. Denied treatment, he died handcuffed and screaming in pain. He was thirty-seven. There is also the recent case of Mikhail Beketov, a journalist who published exposés of corruption and abuse of authority in the Moscow region and was beaten so badly that he is now crippled and unable to speak.

Navalny and his supporters are keenly aware of such brutal reprisals. “I have a lot of respect for what he’s doing, but I think they’ll arrest him,” I was told by a high-ranking employee at a state corporation that Navalny is investigating. “He’s taunting really big people and he’s doing it in an open way and showing them that he’s not afraid. In this country, people like that get crushed.” When I asked Navalny’s mother, Lyudmila, if she was afraid for her son, she melted into tears before I even got the question out. “I have forgotten what normal sleep is,” she said. “I believe in what he’s doing, he’s doing the right thing, but I’m not ready. I’m not ready for my son to become a martyr.”

Lyudmila and her husband, Anatoly, own a wicker factory, which they founded in the mid-nineties, southwest of Moscow. I met her in her office there, and she showed me a black-and-white photograph of two young parents holding a crying baby. “Here he is, with his mouth open, like always,” she said.

Alexey was born in June, 1976, near Moscow, in Butyn, a military town closed to the public. His father was a Red Army communications officer. Lyudmila was a young economist and a loyal Communist. Navalny’s paternal grandmother was a Ukrainian peasant, and Alexey spent the first nine summers of his life at her cottage, in the countryside just outside Chernobyl. In late April, 1986, when Navalny was ten, his uncle called Lyudmila, and told her she shouldn’t send Alexey that summer: there had been an explosion at Chernobyl’s nuclear power plant. As the Soviet government downplayed the disaster, Navalny’s entire paternal family was evacuated and resettled. Many of them suffer from thyroid and liver problems to this day. “Alexey doesn’t talk about it much, but Chernobyl had a very big influence on him,” Lyudmila says.

Navalny grew up in a series of military towns in the Moscow region. He was a capable but unexceptional student with a habit of telling his teachers what he thought of them. In 1993, he entered Peoples’ Friendship University, in Moscow, famous for educating students from the Soviet Union’s Third World allies, and decided to study law. He recalls finding his college education uninspiring and corrupt: slipping a fifty-dollar bill into your exam booklets insured a passing grade. He graduated in 1998.

While he was still in school, he went to work at a Moscow real-estate company. “Working there taught me how things are done on the inside, how intermediary companies are built, how money is shuttled around,” Navalny says. At the same time, he obtained a master’s in finance, and, in 2001, he quit real estate to be a full-time stock trader. He also married a young economist named Yulia Abrosinova, whom he met when they were both vacationing in Turkey.

In 1999, in the fading days of Boris Yeltsin’s Presidency, Navalny joined Yabloko (meaning “apple”), a party that had represented the liberals in government since soon after the fall of the Soviet Union. After Putin came to power, in 2000, Yabloko was increasingly marginalized. Navalny quickly became frustrated with the party dynamic and, as Sergei Mitrokhin, the current party head and Navalny’s political mentor, puts it, “made his presence known.” According to Navalny, “There was constant antagonism between the normal people in the party and some kind of hellish, insane, crazy mass of the leftovers and bread crusts of the democracy movement of the eighties.”

In 2005, Navalny teamed up with Maria Gaidar, the daughter of a legendary Yeltsin-era economic reformer, to create a movement called Da! (Yes!). Da! set out to engage an emerging generation of Russians who were too young to have experienced the end of Communism and had come of age in a wealthier, more apathetic time. Its aims were diffuse, but the movement spread to many Russian cities. One key component was the hosting of debates. “The idea was that, because there are no free debates and no free media, we decided we’re just going to rent a bar, invite two people, and they’re going to debate,” Navalny explains. “To our surprise, it was a super-popular project. The limiting factor was the size of the space.” Gaidar has described it as “an alternative way to socialize,” and this proved to be one of the project’s biggest legacies. Young Russians met older, more established politicians and journalists. The debates—witty, raucous, bawdy—gave a community of politically engaged Russians a chance to form the kinds of rivalries and allegiances that the Putin administration was working to dissolve. They ended when neo-Nazis and soccer hooligans started showing up and brawling. (Navalny was arrested for roughing up one of the intruders.)

By then, though, Navalny was deep in conflict with Yabloko’s leadership. The party had been excluded from the government in 2007, when it lost its last four seats in the Duma. After this disaster, Navalny publicly pushed for the ouster of Grigory Yavlinsky, a founder of the party and hero of the democracy movement in the nineteen-eighties. Navalny recalls being summoned to a meeting called by the party’s federal council (of which he was a member) to discuss his “membership in the party.” The stated reason was Navalny’s espousal of nationalist views. He had been photographed attending planning meetings for the Russian March, a hardline nationalist march that has coursed through Moscow, sometimes violently, every November since 2005, chanting such slogans as “Russia for Russians!” Liberal parties had reacted to the Russian March with horror, branding it a neo-Nazi parade. Navalny argued that the event attracted more “normal” participants than “sieg heilers,” and that liberals were making themselves irrelevant by failing to address an upswell of nationalism in a constructive way. At the meeting with Yabloko’s leadership, Navalny delivered a sarcastic speech, at the end of which he jumped up and yelled “Glory to Russia!” and stormed out of the room. The whole council, except for one member, voted for his expulsion.

Navalny works in a somewhat spartan office in downtown Moscow, where he runs a small corporate law firm. In the dead of the Russian winter, the radiators don’t always work, and Navalny’s secretary, delivering his tea, shivered in a puffy jacket.

Navalny has four employees and hires additional attorneys as needed. He claims that he takes on just enough work to pay salaries and to feed his family, devoting the rest of his efforts to anti-corruption initiatives. As his fame has grown, so have his fees. “For Moscow, they’re well above average,” he says. Navalny works at a doughnut-shaped conference table, behind drifts of paper and a laptop bristling with memory sticks. Propped up against one wall is a dry-erase board. When Navalny describes corruption, he covers the board in arrows and circles, explaining merrily as he draws, as if he were telling an amusing anecdote. He anthropomorphizes delinquent companies as “guys” and dismisses complex chains of shell companies as “utter trash” and “total hell.” At times he seems almost delighted at the sheer absurdity of it all.

Navalny’s campaign against corporate corruption began in late 2007, when he decided to acquire some stock in Russia’s big state companies. He figured that companies like Gazprom (the state gas monopoly), Rosneft (the state oil concern), and Transneft (the government’s oil-transport monopoly) should be safe and profitable investments. He was also curious to see what went on inside these notoriously opaque institutions. So he bought a few shares in each company, as well as in a couple of state-owned banks. All told, he spent about forty thousand dollars.

He quickly noticed that the companies, despite surging commodity prices and prime access to Russia’s vast natural resources, paid surprisingly small dividends. Then he learned, from a newspaper article, that Transneft had donated three hundred million dollars to charity in 2007 alone. The sum was more than ten per cent of its profits that year and more than it spent on maintaining its entire network of pipes, but Transneft did not disclose where the cash went. “No one had seen any traces of this charity,” Navalny told me. “I spoke to many managers and employees of the biggest charity organizations, and they said they’d never seen this money.” As the owner of two shares of Transneft, he wrote to the company’s president. “Please provide me with a list of organizations that received financial support in 2007,” he wrote, noting that “philanthropy is not one of the goals and objectives of the company.”

Transneft declined the request for information, so Navalny went to the Interior Ministry’s Economic Security Division and asked them to open a criminal investigation. This is how the investigation proceeded: A detective asked Transneft to give testimony regarding the charges. They didn’t, so he closed the case. (The state prosecutor’s office overruled this decision, and reopened the case.) Then the detective went to Transneft, but was unable to question anyone. He closed the case. (The prosecutor’s office overruled this, too.) Then the detective stopped doing anything at all. When Navalny appealed to the court, the detective claimed to have lost the case materials. (The court recognized Navalny’s claim of negligent inaction.)

The progress of the investigation was perhaps unsurprising. Transneft is one of the biggest companies in Russia, and transports ninety-three per cent of the country’s oil. More important, it is owned by the Kremlin, and the energy minister is the chairman of the board. “I can understand this cop,” Dmitry Volov, a soft-spoken young lawyer who takes all Navalny’s various cases to court, told me. “He’s some average detective in the Interior Ministry. Yesterday, he had an apartment robbery. This morning, he had a drunken brawl. And this afternoon he gets an allegation of a theft of seven billion rubles from Transneft. So he starts getting nervous. But, most likely, the case comes with a note from his superiors, saying, ‘Vasya, don’t make too much of a fuss. We’ll cover you on this. Just don’t make any sudden moves.’ ”

Nearly three years later, Transneft has refused to provide Navalny with the documents he requested, challenging his claim to be a shareholder of the company. The corporation also stalled in court, waiting for the result of an appeal by Rosneft to Russia’s Constitutional Court, arguing that a law giving broad access to shareholders is unconstitutional. In February, the Constitutional Court, to everyone’s surprise, rejected Rosneft’s reasoning, and a Moscow arbitration court ruled that Navalny was indeed a shareholder and that Transneft had to provide the documents he requested. Transneft is appealing the decision.

In the meantime, the press has tried to figure out where the three hundred million dollars could have gone. A report in Vedomosti, the Russian business daily, alleges that Transneft funnelled the money to two organizations: the Assistance Fund and the Kremlin-9 Fund. It was unclear what exactly the Assistance Fund did, as there were a hundred and forty-four establishments with the same generic name. The Kremlin-9 Fund, on the other hand, officially supports the Federal Protective Service (the Russian analogue of the Secret Service). When I asked the fund’s president what his organization does, he said, “Go look it up on the Internet,” adding “I’m not a pedagogue!” With some coaxing, he managed, “We help veterans and current employees. There are lots of unpredictable situations in life.” When I asked if their funding came from Transneft, he told me it was “an accounting secret.” When I asked a Transneft representative where the charity money went, he responded, angrily, “We don’t like to publicize such things. We don’t do charity for the P.R.” And he compared Navalny to Goebbels.

Navalny discovered similarly odd arrangements at other government companies in which he owned stock. Gazprom turned out to be buying gas from a small independent gas company, Novatek, through an intermediary, Transinvestgas. A police investigation discovered that only a few days before Gazprom bought the gas from Transinvestgas it had turned down an opportunity to buy exactly the same gas directly from Novatek for seventy per cent less. Transinvestgas then channelled at least ten million dollars of the difference in price to a consulting company, which, the police found, had been registered using two stolen passports.

One of Navalny’s favorite cases involves V.T.B., a major Russian bank, eighty-five per cent of which is owned by the government. (Russia’s finance minister is chairman of the board of directors.) Navalny discovered that V.T.B. purchased thirty oil-drilling rigs from a Chinese company. But, instead of buying them directly, it purchased them at a fifty-per-cent markup through an obscure intermediary, registered in Cyprus, which kept the difference—a hundred and fifty million dollars. Navalny’s face hovers between laughter and incredulity as he describes the setup. “I’ve been working on this for a long time, and I’ve been able to find almost all the documents,” he told me, digging around in his stacks of paper. The difficulty for V.T.B., he claimed, was that there were problems leasing the drilling installations. “You can’t hide drill rigs,” he said. “You can’t sink them, you can’t toss them out. It’s four and a half thousand train cars of equipment.” Navalny found out that the rigs were being stored in Yamal, a remote northern region. He went to see the rigs for himself and took a cameraman to film what he saw. “It’s literally a boundless snowy field which is sown with thousands of tons of metal,” he said.

Both cases are pending; Gazprom denies Navalny’s charges, and V.T.B. declined to comment. The investigations, meanwhile, have progressed slowly. The detective assigned to the Gazprom case has repeatedly summoned people to his office for questioning, only to reschedule their appointments when they arrive.

Navalny’s latest project is the Web site RosPil. Navalny often claims, with some irony, that RosPil is really just doing Medvedev’s work. The site would not be possible without Medvedev’s initiative, two years ago, to post online all government requests for tender—the documents whereby government entities announce their need for goods or services to potential bidders. Almost immediately, reports of strange deals started surfacing in the press. One regional governor arranged to buy thirty gold-and-diamond wristwatches; a spokesman explained that they were gifts to honor local teachers, but the deal was abruptly cancelled when the press got wind of it. The Interior Ministry ordered a hand-carved bed made of rare wood, gilded. St. Petersburg authorities ordered two million rubles’ worth of mink for seven hundred patients in a psychiatric institution. Medvedev’s own Presidential Administration was found to have ordered ten million dollars’ worth of BMWs; a representative explained that “we are not rich enough to buy cheap things.”

The idea for RosPil came about when Navalny was tipped off that the Ministry of Health and Social Development was inviting bids to build a two-million-dollar network to connect doctors and patients. Whoever won the contract would have all of sixteen days to develop the site. Navalny wrote that “without a doubt” the site had already been designed for a much lower sum, leaving an ample margin for kickbacks. He asked his readers to send official complaints to the Federal Anti-Monopoly Agency, and nearly two thousand of them did, crippling the agency, which is obliged by law to respond to each complaint. The Health Ministry annulled the contract. Meanwhile, Navalny’s readers had found two more Ministry projects involving big sums of money for technology systems to be built in an impossibly short amount of time. Navalny blogged about them, and these, too, were quickly cancelled. At the same time, Navalny was waging a relentless smear campaign against the official who granted the contracts, whom he dubbed Mr. Unibrow. After the third deal was annulled, Mr. Unibrow resigned. “The time that passed between my first post and his resignation is a week,” Navalny told me, beaming.

The success of the Unibrow campaign brought a cascade of e-mail, all with links to similar contracts. But, Navalny explains, “I can’t, by myself, replace the Anti-Monopoly Agency and the state prosecutor’s office. And so the idea was born to make a site where people could do it themselves.” Any visitor to the site can submit a government request for tender to public scrutiny, and, if it is deemed suspicious enough, it is posted to the main page, where registered members discuss the merits of the complaint. An expert associated with the site evaluates whether the price, the parameters, and the schedule are reasonable; if not, Navalny trumpets the alleged fraud on his blog, often causing the agency responsible to be buried in hostile correspondence. In effect, RosPil is an attempt to crowdsource Navalny’s work, which, given the dangers inherent in such work, seems wise. RosPil spreads the risk involved in exposing corruption, and provides a kind of insurance: if anything happens to Navalny, RosPil can continue to function, and may embarrass the government into reforming itself.

One recent evening, as Navalny negotiated rush-hour traffic, he got a call from his younger brother, Oleg. Oleg was calling about a suspicious government contract that Navalny had blogged about that morning. The Ministry of Industry and Natural Resources of the Chelyabinsk region, in the Ural Mountains, was inviting bids for the “improvement, development, and expansion” of a software system. It was willing to pay twenty-five million rubles, or more than eight hundred thousand dollars. Oleg had found a programmer who could do the job for a million rubles, or thirty-five thousand dollars. “Yes!” Navalny exclaimed. Then, more calmly, “Good. O.K. Bid on it. And if they say no, then we’ll really destroy them.”

Navalny sifted through documents that said the work involved an obscure software system called Magellan, and that one of the goals of the “improvement” was to “eliminate routine work.” In his post, he tore into the dry documents with sarcastic glee. His tone has become his trademark and conveys a shared assumption with his readers: this is how things are done in Russia.

“These boys want to eliminate routine,” Navalny wrote. “This is, no doubt, a good goal. But exactly what part of the Chelyabinsk Ministry of Industry will be rid of routine by the expensive Magellan system?” He went on, “And here, by the way, is our hero, Valery Valentinovich Prudskoy, the minister of industry and natural resources, and the organizer of this request for tender.” Navalny added a picture of a grim-looking bureaucrat. “From Valery Valentinovich’s face, we can see that he desperately wants to eliminate routine.” Navalny had some questions for Valery Valentinovich. Why invent a new system for document processing when this is one of the most widely developed types of software products? “How much did Magellan cost if its improvement costs nearly a million dollars?” Navalny asked. “We really hope that, as a result of this post, V. V. Prudskoy will curb his appetites, will postpone the purchase of yet another apartment, and that the contract will be concluded based on the market price and the size of the project.” Instead, the ministry annulled the request for tender.

In February, Navalny announced that he was seeking contributions for RosPil. Within a week, he had collected more than a hundred and twenty thousand dollars. “People donating money is extremely significant, given Russians’ cynicism,” Aleh Tsyvinski, a Yale economist who has become a sort of mentor to Navalny, says. “Russia is a rich country, and people are now thinking about things other than basic necessities. Writing to Navalny is, in some ways, a way of exercising power. He is tapping into a huge demand for a grassroots movement.”

Since RosPil started, it has registered more than a thousand users and five hundred experts. According to a tally maintained on the site, the project has caused requests for tender worth 188.4 million rubles, or $6.6 million, to be annulled. The projects have ranged from strange data systems for the Russian military to a new, overpriced Web site for the Bolshoi Theatre. Most recently, Navalny highlighted the request for an Audi 8L, armored to the hubcaps, for the finance minister of the Russian Republic of Dagestan, at a cost of three hundred thousand dollars. “I’m positive that the presidents of many of the world’s countries get around in more modest cars,” Navalny wrote. Five hours after the post went up, the request was cancelled.

“Navalny is making stealing just as dangerous as it is now safe,” Anton Nossik, who is involved with the project, says. “He’s changing the public’s and the bureaucrats’ perception of the risks.”

Navalny has also managed to turn mere supporters into fellow-fighters. “Alexey gives people an opportunity to become civic activists without joining an N.G.O. or a political party,” Elena Panfilova told me. “He is galvanizing the grass roots, and he can change Russia.” On a recent Friday night, I watched Navalny debate the dean of an élite Moscow university closely tied to Medvedev. Hundreds of students pushed to get into a room crowded with photographers and TV cameramen. The debate itself was an esoteric affair, dealing with the legal details of legislation on government requests for tenders, and it went on for four hours. And yet almost no one left. The night seemed to upend the common assumption that young Russians are apathetic.

It was also evidence of Navalny’s growing star power. Last fall, when Moscow was waiting for the Kremlin to appoint its new mayor, Russia’s leading newspaper, Kommersant, held an informal online election for the post. Navalny won in a landslide, with forty-five per cent of the vote. (Second place went to “no one,” with fourteen per cent.) “This is a huge responsibility for me,” Navalny told me. He makes no secret of his political ambitions. “Without any doubt, I am striving for power,” he has said publicly. “He’s a natural-born politician,” Masha Lipman, a prominent Russian political analyst, says. “If Russia were a country with an open-field political competition, he’d be assured of a brilliant political career. He might even become a Presidential candidate.”

Part of Navalny’s appeal is his rejection of Russian liberalism, which he sees as being hopelessly out of touch with a country that is fundamentally conservative. His nationalism is unapologetic and even shocking. In a series of humorous videos on YouTube, he can be seen advocating the repatriation of illegals (while footage scrolls of people of Asian appearance moving swiftly through an airport) and the use of pistols against lawless undesirables. But he is adamant that he’s a pragmatist, not an ideologue. “There’s a huge number of questions that we should be discussing, and not handing over to the nationalists,” he says. Migration, for example, is a major issue in Russia, which has the most immigrants in the world after the U.S. Current estimates range from seven million to twelve million, many of them from the North Caucasus or former Soviet republics like Tajikistan. Most of them are undocumented. This, Navalny argues, keeps migrant laborers in the shadows and without basic rights, and is also a major source of friction. When Moscow exploded in ethnic riots in December, a poll showed that more than sixty per cent of Russians felt suspicious of or irritated by people of non-slavic nationality. “When we make these questions taboo and don’t discuss them, we hand over this extremely important agenda to the radicals,” Navalny says.

Vladimir Milov, another young opposition politician, told me that, while Navalny would make a fine Presidential candidate, the ingrained mistrust that Russians have of politics would make the transition difficult. “The big challenge ahead for him is that, as soon as he steps into big politics, he will lose the people who thought they were just writing letters.” Still, Navalny has always tried to remind his supporters and volunteers that what they’re doing is inherently political. Nossik says that Navalny “is the first person in the Russian opposition in a very long time who understands opposition not as a process of creating an alternative political nomenklatura but as one of real action.”

One evening, Navalny drove me to his apartment in one of Moscow’s far-flung bedroom communities. Even with light traffic, it’s an hour from the city center. His wife, Yulia, was waiting for us with dinner. We sat in the small but tastefully remodelled kitchen, eating a shrimp salad and a cheese platter. Navalny’s children—a blond, lanky nine-year-old daughter named Dasha and a toddler son named Zahar with hair the color of corn silk—periodically ran in, demanding helpings of shrimp.

Yulia trained in international economics, but seems to relish the role of a politician’s wife. “I support him. I read his blog. I read everything that’s written about him,” she told me. “He is doing something he loves, and it’s good for the country. I know that sounds pompous.” She spoke with evident pride, albeit in a sardonic style that echoes Navalny’s: she said she would be subject to undue pressure if she answered my questions in front of him. “He’s going to wink, and mouth the answers.”

Yulia supports her husband’s decision to keep guns in the house, shares his stance on nationalism, and, like him, has never considered leaving Russia, unlike an increasing number of Russians their age. Navalny recently held a six-month fellowship at Yale, but, despite his mother’s pleas, the Navalnys were determined to return to Moscow. Dasha loved American schools, and Zahar still speaks in a jumble of English and Russian, but Navalny had bought round-trip tickets. “I hate to say it,” he explained, “but, after the novelty wore off, I had this cliché moment of a Russian émigré abroad: I really missed black bread. I know it’s stupid, but I really missed it.”

Navalny took classes at the Yale business school, worked with law professors, and learned about the American political system. “I didn’t completely decipher it, but it’s still really interesting to see how these small groups are created and then begin to influence politics,” he said. “The Tea Party, for example. It’s an incredible thing: some old ladies got together and are now hammering at Obama from all sides.” He wanted to organize a similar movement in Russia.

At Yale, he maintained his blog and published his most startling leak to date—a dossier relating to the construction of Transneft’s East Siberia–Pacific Ocean pipeline, alleging graft on a colossal scale. Navalny estimated that as much as four billion dollars were being siphoned off, and the documents ignited a media storm in Russia. The Kremlin reacted with characteristic disdain—Putin took the opportunity to publicly praise Transneft a few days later—and Transneft’s president called Navalny “a village idiot.” A month later came a development that Navalny interprets as official retaliation: the prosecutor’s office in Kirov was reported to be investigating claims that Navalny had pressured a local official to sell timber on unfavorable terms. “I won’t say I’m not concerned at all,” he told me. “I could get seven years.”

Neither Navalny’s home nor his office seems especially well protected, and when Navalny files a suit he frequently uses his home address. As I rode the metro back from his apartment, I wondered about the risks he was taking. When we first met, at a sushi restaurant near his office, he spoke about what he sees as the cowardice of liberal Russian businessmen—his natural constituency—who are too scared to stand up to government corruption. “I don’t understand this position,” he said. “First of all, it’s boring. Second of all, forgive me if this sounds pompous, but it’s better to die standing up than live on your knees.” He was similarly dismissive of the people who think that he or anyone else is fighting a well-oiled, repressive machine. “I disagree, because the people who work in business at a high enough level can tell you that there’s no machine at all,” he says. “It’s all a fiction. That is, they can destroy a single person, like Magnitsky or me or Khodorkovsky. But, if they try to do anything systemically against a huge number of people, there’s no machine. It’s a ragtag group of crooks unified under the portrait of Putin. There’s no super-repressive regime. There are no mythical Cheka agents that we need to be scared of. It’s just a bunch of crooks.” When things happened to opponents of the system, he said, it was because they showed up individually. “But if tomorrow ten businessmen spoke up directly and openly we’d live in a different country,” he said. “Starting tomorrow.”

Net Impact [TNY]

Facebook’s Russia Campaign

Monday, January 3rd, 2011

Facebook is the world’s largest social network site, with 500 million-plus members at last count. However, there are plenty of big markets where Mark Zuckerberg’s creation isn’t dominant. In Japan, Facebook doesn’t rank in the top three, and the site isn’t much of a force in Brazil or China, two populous countries where Internet usage is off the charts.

The outlook for Facebook in Russia may be more promising, despite the popularity of homegrown social network sites. Facebook officially launched its site in April and only ranks No. 5 so far, according to Internet tracker comScore, but its growth has been impressive. From January until August in 2010, its Russian operation has racked up a 376 percent increase in users, to 4.5 million, according to comScore data.

Early last year the company cut deals with Russian wireless carriers Beeline and Mobile TeleSystems, so that their subscribers could tap the mobile version of Facebook. To overcome the language barrier, Facebook allowed users to suggest translations for the name of features not easily understood in Russian such as “poke” (as in trying to get another Facebook user’s attention), and then let the site’s members vote them up or down. “Russian is a very complex language, so we allowed the users to translate the interface themselves so that it captures the complex grammar,” says Javier Olivan, a London-based Spaniard who holds the title Head of International Growth at Facebook.

Its founder has made no secret of his ambitions to thrive in Russia, a market where other Western players, including Google, have struggled to get their footing. Speaking at an Oct. 17 event at Stanford University, Zuckerberg said that if Facebook succeeded in penetrating the Russian market, it might have a shot at doing the same in China, the country with the largest number of Netizens. Russians’ heavy use of social network sites makes the country an ideal test-case. Russians spend 9.8 hours per visitor on a monthly basis on such sites—more than double the world average, according to comScore.

Why do Russians while away so many hours online? For one thing, there’s the climate: Staying indoors and socializing via the Internet is much more attractive when winter lasts a good six months. Then there’s the physical isolation, compounded by poor infrastructure, especially in cities like Murmansk, which lies north of the Arctic Circle.

Most importantly, though, there is a long tradition in Russia of relying on informal information networks for simple day-to-day survival. “In Russia, there is no sense that you can rely on the public or the system, so you’ve traditionally had to rely on a network of friends,” says Esther Dyson, a venture capitalist who has been investing in Russia’s tech sector for over a decade. In a country with weak institutions, “it’s very natural for people to network for what they want.” Even in these less oppressive, post-Soviet times, relationships are critical to everything from landing a job to wriggling out of a problem with authorities.

It’s no coincidence that the Russian love affair with the Internet has blossomed at a time when citizens are once again seeing their political and media freedoms dwindle. “[The Web] has become a place where you have absolute freedom of speech, where you can say whatever you want, good or bad,” says Ilya Krasilshchik, editor-in-chief of Afisha, a Russian lifestyle magazine and website. Afisha was one of the first Russian sites to incorporate the Facebook Like feature, which allows users to share content with friends on the site. Krasilshchik points out that Russia is different from China, where censorship prevails online. “We have this strange paradox where civil society is hemmed in, but its freedoms are limitless online.”

Not surprisingly, then, social networks have multiplied in Russia. Odnoklassniki.ru, a site modeled on Classmates.com with 17 million users, is the preferred destination for older, less tech-savvy users, along with being a popular dating site for Russians of all ages. Then there’s Moi Mir, similar to News Corp.’s (NWS) MySpace, with 20 million members.

The leader of the social networking pack is VKontakte, which is majority owned by Mail.Ru Group, a Russian investment fund specializing in Internet companies that also owns a small stake in Facebook. VKontakte, which has 28 million users, is inspired by Facebook. VKontakte has been dogged by claims that it has allowed the unauthorized posting of pirated music, movies, and other content free on its site. Mail.Ru declined to comment on allegations that VKontakte has engaged in such practices, though the company did disclose in a prospectus for a recent initial public offering in London that it is currently defending itself against several lawsuits. As for Facebook, the company “will not host any content that violates our terms of agreement,” says Olivan.

One thing Facebook does have over its Russian competitors is cachet. Whereas Odnoklassniki.ru has become the domain of the older generation, and VKontakte the hangout of young middle- and lower-class Russians, Facebook is the network of choice for the urban and the urbane. Facebook’s Russian users are generally of the wealthier, well-traveled, cosmopolitan variety, have foreign friends and tend to live in Moscow and St. Petersburg.

Facebook’s status received a boost in September, when the company hosted its first developers’ conference in Russia. The event, held in Winzavod, an up-and-coming art complex in Moscow, drew hundreds, including some prominent Russian Internet investors. The bulk of the crowd was made up of software developers hoping to transform their Facebook apps into riches.

Anton Nossik, the Russian Web guru who has a number of successful Web startups and used to run the company that owned the popular blogging platform LiveJournal, notes that in Russia sites such as Facebook and Google attract a particularly cosmopolitan set. Both are “for the global Russian, for the circle of people for whom the world doesn’t begin and end with Russia.”

Facebook’s Russia Campaign [BBW]

Business Trip

Friday, June 25th, 2010

“My goal is to see how everything works here,” Russian President Dmitry Medvedev said on his arrival in the United States this week, referring to his plans to build a Russian analog of Silicon Valley in Skolkovo, just outside of Moscow. “This is not a tour.”

It often seemed like one — like a delirious good-will mission. On arrival, Medvedev met with California’s action hero turned governor, Arnold Schwarzenegger. “Many residents of our country know you from an earlier stage of your career and of course it generates interest in you,” Medvedev told the governor in a looser version of his usual legalese. He had dinner with George Shultz, secretary of state under Ronald Reagan, who greeted a laughing, romping Medvedev on the tarmac in San Francisco, in Russian. He visited Cisco Systems, which waited for his visit to sign a $1 billion agreement to provide networking equipment to Skolkovo. He went to the headquarters of Twitter, where the founders, Evan Williams and Biz Stone, helped him set up his own Twitter feed. With the cameras rolling, he entered his first tweet: “Hello everyone! I am on Twitter, and this my first tweet.” The Russian had a typo in it, which, Williams said, made the tweet especially authentic. Everyone applauded.

Medevedev then went to the headquarters of Apple, where Steve Jobs gave him a personal tour — and the new iPhone, a day before it went on sale. (Back home, Russians joked that this was the sole purpose of the visit.) He visited the American outpost of Yandex, the biggest Russian search engine and darling of the Russian tech industry. He met with native Russians working in the Valley. With characteristically Russian largesse, he had oilman Viktor Vekselberg, head of Skolkovo, agree to pay the $1 million per year necessary for the upkeep of Fort Ross, an early 19th-century Russian fort that is now a state park north of the Bay Area. At Stanford, dressed in jeans, he read his warm remarks off an iPad. He sopped up the San Francisco scenery, tweeting a picture of the view from his hotel room and telling Schwarzenegger, “It’s hard to work in such a city.”

And the city welcomed him with open arms, applauding, toasting, and smiling at the Russian president. Even with the Belarus gas crisis unfolding in the background, the trip was a lovefest, and the coverage of it in Russia portrayed it as such. Russia Today, the Kremlin’s propaganda channel for Western consumption, which often takes a dim view of America, spoke of “the enduring nature of the U.S.-Russian relationship.”

The visit to Washington was equally delightful. The State Department sent an early welcome present, finally putting Chechen militant Doku Umarov — who claimed responsibility for the recent Moscow subway bombings — on its list of designated terrorists. “We stand in solidarity with the Russian people,” Daniel Benjamin, in charge of counterterrorism at the State Department, said in a statement. The two presidents agreed to speed along Russia’s long-stalled bid to join the World Trade Organization and closed a deal that would allow the United States to resume poultry exports to Russia. And Obama took Medvedev out for burgers, a testament to their vibrant relationship. (At this writing, Medvedev was only following three people on his new Twitter account: himself, the White House, and Obama.)

“The meeting of two presidents is always a big event,” says Masha Lipman, a longtime political observer with the Carnegie Center in Moscow. “But this one was planned and talked up in advance as a successful one. There are still lots of divisive issues, just as there are between any two countries, but they were not discussed.

So what, exactly, was the point of this three-day blitz?

One word: investment.

The trip’s laid-back tenor, the image of a laughing Russian president that struck such a contrast to his earlier, shyer self and to that of his slouching, snarling predecessor, and the swirl of news back home about an avalanche of new reforms, was there to show international investors one thing: that this was a new Russia. In fact, that’s exactly what Medvedev told thousands of Western and Russian business leaders who gathered last weekend for the St. Petersburg International Economic Forum, the Russian analog of Davos. “Russia has changed,” he said.

The depth of the world economic crisis has come as a massive shock to the Kremlin, which had been buoyed for years by high oil prices and cash from risk-tolerant foreign investors. Back in 2005, with oil prices at $60 a barrel, the Kremlin — and foreign investors — barely blinked at the troubling signs, such as when rogue elements inside the federal tax service forced William Browder and his Hermitage Fund, the biggest foreign investor in Russia, out of the country in a suspicious and violent campaign at the time There was simply too much money sloshing around. The Kremlin was drawing up budgets based on $160 barrels of oil and Russia, then President Vladimir Putin said, was “an island of stability” in a financial world that was already coming apart at the seams.

Those were different times. When world markets collapsed in the fall of 2008, so did oil prices and foreign investment in Russia. GDP growth went from 8 percent to nearly -10 percent. And though Russia managed to steer through the dark days of the crisis with impressive deftness, the depth of the fall — and the fact that oil still hasn’t bounced much above $70 a barrel — has left leaders in Moscow jittery. “The crisis really opened our eyes,” says Ivan Ivanchenko, the global head of investment strategy for VTB, a banking behemoth owned mostly by the Russian government. “It showed us that all these gains were the doing of external factors.”

In an effort to get foreign investment flowing again, modernization and innovation became the new buzzwords, and Medvedev’s speeches began to focus on diversifying the economy away from oil. But the projects that the Kremlin was dreaming of — a government search engine, nanotechnology, even a homegrown Silicon Valley — were all extremely capital intensive (industry insiders say that the $100 million the Kremlin wanted to dump into the search engine wouldn’t be nearly enough). “Russia needs a real investment boom” in order to achieve its modernization goals, Medvedev says, reflecting the new, frank tone when the Kremlin speaks to the West. But oil is still relatively cheap and the tens of billions of dollars of foreign capital that left the country in 2008 have yet to return. (In fact, foreign investment in Russia fell by over 40 percent last year alone.)

And so, for the last several months, the Kremlin has been trotting out its young liberals to speak frankly to foreigners about Russia’s challenges — the endemic corruption, the layers of bureaucracy, the government interference — as well as its potential and its human capital. At the St. Petersburg Forum, Anatoly Chubais, the man who privatized the Soviet Union’s massive holdings in the 1990s and now heads Rusnano, the state nanotechnology investment fund, exemplified the stance. “It’s well known that consistency, obedience, and aptitude for long and tedious work aren’t our strong points,” Chubais told the Wall Street Journal. “Maybe you find those qualities in Europe, in Germany or in China, but definitely not in Russia. Instead, we have creativity — the ability to think up and implement the most unlikely solutions in the most difficult situations. In that sense, I disagree with people who say that the Russian mentality means innovation can’t work here.”

At the conference, which in 2007 Putin had used to call for an alternate WTO, Medvedev and his young liberals announced a raft of changes: slashing the number of “strategic” — i.e., crucial to Russian economic security — companies by a factor of five. (Foreign companies have been reluctant to invest in sectors where the state is more likely to interfere. ) Finance Minister Alexei Kudrin suggested purging the bloated bureaucratic corps of 20 percent of its staff, a change he said would save the Kremlin nearly $1.2 billion annually. And, with the world financial system on firmer ground and the appetite for investment increasing, according to attendees, the foreign investors ate it up.

But while much of Medvedev’s modernization agenda is still in the planning phases and tangible changes are still scant, the atmosphere has become a bit freer. Arbitration has become more fair. The Kremlin has eased up on companies like Yandex, once seen as outsiders because of their fiercely apolitical stance. “I feel a thaw,” Arkady Volozh, Yandex’s CEO, told me. “They are finally proud of us.”

“Maybe I’m breathing the same pixie dust, but there’s real momentum for this,” says Esther Dyson, a longtime tech investor in Russia, and one-time member of the Skolkovo advisory board. She was present at some of the events in Silicon Valley and was struck by Medvedev’s level of engagement and bonhomie. “He is so sensible, he understands the issues,” she said. “He’s responsive, thoughtful, not at all bombastic. He gets the culture. You could stick him in a cubicle at Google, and no one would notice. But the issues persist, so the question is, can his mentality be expanded to everyone?”

And the issues are plentiful. There are no longer direct flights from Moscow to San Francsico, making cross-pollination difficult. The strict visa requirements that United States and Russia impose on each other’s travelers don’t help either. There is still rampant corruption, lack of transparency in both government and business, and the specter of businessmen ruined by the state, like jailed oil tycoon Mikhail Khodorkovsky and Evgeny Chichvarkin, the self-made cell phone king now hiding out in London whose mother was found beaten to death in Moscow on Easter morning.

There is also the question of whether a thriving sector based on human creativity can exist without an open political system, and whether Medvedev’s enthusiasm and competence can translate into real and effective decisions. He is, after all, still part of a diumvirate. “Medvedev is perfect for this [Silicon Valley] audience; Putin’s perfect for the old audience,” Dyson says. “But when the decisions are made, who makes them?” (Unfortunately for the Silicon Valley hopeful, most everyone is sure that, while decisions are made together, Putin still has final say.)

And can something like Silicon Valley and an innovation-based economy be copied, imported, and implemented from the top? Russians are deeply skeptical, seeing this as yet another boondoggle for the Kremlin elite. The Western and Russian press are no more optimistic about what is, in essence, a government campaign to change the worldview of its citizens.

“I think you’ll find a lot of skepticism because in Russia, every time they’ve taken on a project of this size, they’ve fucked it up,” says Ivanchenko, the banker, who got his MBA in London. “So often, it ended up with people just stealing dough, so there is little faith in this.”

But, he adds, that doesn’t mean that all hope is lost. “They’ve posed the right questions, found good people, they’re moving in the right direction,” Ivanchenko says. “Without a doubt, we will still have lots of Potemkin villages. We don’t know how do things efficiently in Russia, but maybe we’ll get some of it right. Peter the Great was a despot, and building St. Petersburg was a highly inefficient project. It was built on a swamp, on bones and blood. But it still became a global cultural capital. Even if Skolkovo is imperfect, even if we just learn how to build low quality cars for own citizens, or learn to produce substitute imports, that’s also modernization. It’s still moving the country forward.”

There is still a lot of defiant talk of Kremlin-led modernization as well as strident skepticism for much of the population, but more muted — and more informed — voices are starting to emerge, reminding the public that even with waste, graft, and inefficiency, the end result, however far from its quixotic goals, even if it is yet another incarnation of the old Russian archetype of reform-oriented and mild autocracy, it might still be a better alternative to the present.

In Callifornia, the doubts, if there were any, were kept far from the public cheeriness. Everyone was just too happy to have a friendly Russian president in town, a president who seemed as into their techie lifestyle as they were. When he bid Schwarzenegger a good night, Medvedev did so with the man’s own lines. “I’ll be back,” Medvedev laughed. “Hasta la vista.” He winked. “Baby,” he added. “Hasta la vista,” the governor replied, and promptly tweeted it.

Business Trip [FP]

Roulette Russian

Monday, May 17th, 2010

Andrey Ternovskiy, an eighteen-year-old high-school dropout from Moscow, has a variety of explanations for why he created the Web site Chatroulette.com. According to one story, he got bored talking to people he already knew on Skype; according to another, it was a fund-raising ploy for a bike trip from Moscow to Amsterdam. The most reliable version, however, centers on a shop called Russian Souvenirs. It is an upscale outfit owned by Ternovskiy’s uncle Sasha, who hired his nephew to work there as a salesman during the summer of 2008, five days a week, eleven hours a day. Ternovskiy was supposed to show foreign tourists around the shop, pulling various nesting dolls, lacquered boxes, and kitschy Soviet paraphernalia from the bright vitrines. The job was easy but exhilarating.

“I was really excited to work there, because I met, like, hundreds of different nations in a day,” Ternovskiy said recently at a coffee shop near his mother’s apartment, in the far reaches of northwestern Moscow. He is thin and nervous, with light sprays of acne on his cheeks and a fuzz of dark-blond hair. He has a hard time making eye contact and learned English by spending thousands of hours chatting online, but he says that his passion is talking with people and “exploring other cultures.”

Selling souvenirs to foreign tourists was an ideal job for Ternovskiy. He worked tirelessly, and began to learn German, Spanish, Italian, French, and even some Turkish. He memorized the numbers and some key phrases. By the second week, he could size up a customer’s nationality and address him in his own tongue. He didn’t, however, take quite as well to the business side of things. He would talk and joke with the tourists, but he didn’t push them to buy anything. If someone asked for a discount, he happily obliged. This rankled his uncle, but Ternovskiy didn’t see the problem. “I couldn’t just make people pay the money,” he says, laughing. “I just couldn’t feel the value of the money.” He was fired within a month.

The following summer, Ternovskiy holed up at home and began to toy with the code for a new site that would re-create the atmosphere of the store. It took him three days to construct a basic version. A few months later, it was one of the most talked-about social-networking sites in the world.
The idea is simple. When you log on to Chatroulette.com, you see a sparse white window with two boxes. One box shows your own image, courtesy of your Webcam; the other is for the face of what the site calls, somewhat ambiguously, a “partner.” When Partner appears, you can stay and talk using your voice or your keyboard, or you can click “Next,” which whips you on to someone new. The point is to introduce you to people you’d never otherwise meet and will never see again—the dancing Korean girls, the leopard-printed Catman, the naked man in Gdansk.

More than a million people, most of them from the United States, clog Chatroulette’s servers daily. To “next” someone has become a common transitive verb. Catman is an Internet celebrity, as is Merton the improvising pianist. Brooklyn bars throw Chatroulette parties, an indie band has used the site to début an album, and the Texas attorney general has warned parents to keep their children far, far away. Hundreds of articles and blog posts have asked whether Chatroulette is a fad or a good investment, and if it will change Internet culture forever. “The Daily Show” ’s Jon Stewart attempted to take his pants off for the NBC anchor Brian Williams while Chatrouletting on the air.
visit to Chatroulette usually begins with a few rushed clicks of the “Next” button, either out of a sense of danger—do you really want to engage with that empty-eyed guy lounging in bed?—or out of curiosity about what’s around the corner. The site can be especially hard on men. The majority of Chatroulette users are male and under thirty-five, and many of them are trolling for girls, so they “next” each other at barbaric rates. When you do decide to stop and engage, things can get a little awkward. On one of my first Chatrouletting attempts, I found myself talking to a man from Lyons, who had muted the sound. We watched each other typing and reacting to the words that scrolled next to our images, co-stars in a postmodern silent film.

There are some unsavory things on Chatroulette: copulating couples, masturbators, a man who has hanged himself (it’s fake). When the actor Ashton Kutcher was in Moscow in February, as part of a U.S. State Department technology delegation, he berated Ternovskiy for what his stepdaughter had seen on the site. “You’ve got to clean this up!” he said. (Within twenty-four hours, Ternovskiy made it vastly easier for the site to cut off offensive users.) But the YouTube videos that people have recorded of their trips through the Chatroulette vortex also show a lot of joy. There is, for example, the video of the dancing banana, crudely drawn on lined paper, exhorting people to “Dance or gtfo!” (Dance or get the fuck out.) The banana’s partners usually respond with wiggling delight. There’s also something liberating in the protection that the “Next” button provides. Striking up a conversation with the person next to you on the subway is risky, and potentially time-consuming. On Chatroulette you can always just disappear.

“People are, from a gut, instinctual level, so interested in finding each other. You see the lonely in people,” says Scott Heiferman, the founder of Meetup, a site that facilitates in-person meetings for people with common interests. His site is the antithesis of Chatroulette, yet he finds something deeply compelling in the idea of a blank screen, behind which lies a crowd of strangers waiting to talk to you. “It’s really strange,” Heiferman says. “I have employees I’ve never had a conversation with, but there I am sitting in my office, dicking around with Chatroulette.”

The technology behind Chatroulette is fairly basic and not particularly new. But by combining video-chatting technology and randomization Ternovskiy has bucked a decade-long trend that has made the Internet feel progressively more organized, pleasant, and safe. Google (founded in 1998) makes sure you pull up less flotsam when you search. Social networks like Friendster (2002), MySpace (2003), and Facebook (2004) let you stay in touch with a network of people you already know. Privacy settings keep out the ones you don’t. Twitter (2006) feeds you information from sources you choose to follow. Now Chatroulette has come along and showed us that we want chaos, too.

The best way to talk to Ternovskiy is through some kind of digital intermediary. Shy and evasive in person, he fills with a wry swagger when he is just a stream of text. “They have no business no money blablablabla,” he typed to me one afternoon, feigning phlegmatic unconcern with the financial woes of an advertiser he’d been negotiating with—his only one. Like much of his generation, Ternovskiy has an online persona far more developed than his real one.

He was born on April 22, 1992, less than four months after the collapse of the Soviet Union, and grew up in a tidy apartment in a typically dingy Moscow high-rise. His mother, Elena, is a talented mathematician who works on differential equations at the élite Moscow State University. His father, Vladimir, is an associate professor of mathematics at the same university, and dabbles in cybernetics. Their household was loving but turbulent. The couple fought and frequently separated, and Vladimir started a parallel family, an issue that was never openly discussed. (“It’s a little game we play,” Elena said of the arrangement.) Andrey retreated to his room, where, thanks to Vladimir’s belief that “the future would have something to do with computers,” there was always a machine, as up to date as the family could afford. Vladimir invested great effort in Andrey’s upbringing, engaging a Chinese tutor, a weight-lifting coach, and a chess teacher. But most of Andrey’s learning occurred alone, with his computer. He started with games, usually of the reality-simulating variety. By fourth grade, he was writing code.

Like many young Russians with programming skills, Ternovskiy turned to hacking. When he was eleven, he came upon zloy.org (which translates as angry.org), a hacker forum led by a young man named Sergey (a.k.a. Terminator), who trained his followers in cyber warfare. Using the handle Flashboy, Ternovskiy soon mastered the art of the denial-of-service attack, wherein a target system is paralyzed by a mass of incoming communication requests. Next came Web-site and e-mail hacking, a service he gladly performed for girls who asked nicely. By 2007, at the age of fifteen, Ternovskiy had learned about what hackers call “social engineering”—getting what one wants through deceit or manipulation. Posing as a teacher, Ternovskiy got access to some practice tests before they were delivered to his school.

As Ternovskiy spent more and more time on the computer, his grades tumbled. Vladimir, concerned by his son’s academic languor, hired a graduate student as a math tutor. But Ternovskiy was often late to the sessions, and, worse, he seemed either unable or unwilling to solve the most basic problems. “I just don’t understand how someone can code and have such big blank spots in math,” the tutor, Fedor Puchkov, said. He soon realized, however, that, despite Ternovskiy’s inability to crack simple problems, the more unusual and visual the problem the more elegant Ternovskiy’s answer. Two robots parachute onto an infinite checkered strip; how do you make them track each other down? “Andrey found the optimal solution,” Puchkov said. How do you cut a square into convex pentagons? “Here’s how Andrey solved it,” Puchkov said, and sketched a square with two abutting pentagons in the center and lines radiating out cleanly to the perimeter. It was the simplest solution—and Ternovskiy had come to it far more quickly than Puchkov had.

“I don’t know,” Ternovskiy says of the way he thinks. “I quickly get the scheme of how it should work in my head. I just write out the remaining details, and that’s all the work. It’s probably weird.” Puchkov’s explanation is “He’s not stupid—he’s lazy.”

The math sessions with Puchkov had no impact on Ternovskiy’s classroom performance. The deputy chief of security at his school has a thick file on Ternovskiy’s delinquencies, including chronic truancy and correcting the English of his English teacher. His mother recently tried to make peace with the school authorities, but they waved her off, dismissing Ternovskiy as an unwelcome “millionaire.” Ternovskiy, meanwhile, sees school—and college—as a waste of time. “The last three years at school, I haven’t done anything,” he says. “I just can’t make myself. There’s so much interesting stuff in the world, and I have to sit there with textbooks?”

By “the world,” of course, Ternovskiy means the Internet, which is also where most of his friends are. His closest confidant is a Russian immigrant named Kirill Gura, who lives in Charleston, West Virginia. Every night for the past five years, Ternovskiy has turned on his computer, found Kirill on MSN Messenger, and talked to him until one of them fell asleep. “He’s a real friend,” Ternovskiy says.
Sitting in his carefully engineered workspace—a comfortable chair and two giant monitors placed at the precise distance that Wikipedia says prevents eyestrain and a humped posture—Ternovskiy says that he sees the computer as “one hundred per cent my window into the world.” He doesn’t seek much else. “I always believed that computer might be that thing that I only need, that I only need that thing to survive,” he says. “It might replace everything.”

hatroulette.com was originally called Head-to-Head.org, and it came online on August 2, 2009. Ternovskiy’s friends didn’t like it, so he advertised on Web forums. Users trickled in, but the site had glitches, and the name seemed off. So on November 16th, having recently watched the Russian-roulette scene in “The Deer Hunter,” Ternovskiy bought the domain name Chatroulette.com, for seven dollars, and revamped the code. The site took off when a Brazilian soccer fan posted a notice inviting kindred spirits to mill around and talk about the sport. Hundreds of them showed up—at their peak, they constituted half of Chatroulette users—but they didn’t talk about soccer; instead, they took off their clothes.

During the next few months, Ternovskiy introduced an array of features, most of which missed the mark: one-on-one chats in “rooms” organized by subject (this was done away with because users kept encountering the same people) and a short-lived bulletin board called Lost & Found, which quickly filled up with men whose hearts had been crushed by the “Next” button and the people who mocked them. There was talk of having a reverse button (for those who regretted a decision to “next”) and of allowing three-way conversations, but the ideas were quickly scrapped for fear of upsetting the already fragile dynamics. After each mistake, Ternovskiy would move on, and traffic would increase. In the past three months, Chatroulette had nearly forty-eight million unique visitors.
When I talked to Ternovskiy in Moscow, he was content to see his success as sheer luck. He had got about ten thousand dollars in investments, mostly from his father, and he was now making fifteen hundred dollars a day in advertising from a Russian dating service called Mamba. He had to use part of that money to pay for fourteen servers in Germany and five programmers in Belarus. He seemed to maintain the same indifferent attitude toward finances that he had demonstrated in his uncle’s store. “I don’t know. I haven’t counted,” he said, once he figured out that I had asked him a question about profit rather than revenue. “It’s not important,” he added, saying that his costs were covered by the advertising. At one point, he seemed to sense that he was making the wrong impression on a Western journalist who he reckoned might be keen to find the next Facebook. So he quickly began to talk of future secret projects and an umbrella company that would encompass all such future secret projects.

Ternovskiy sucked down a glass of fresh-squeezed grapefruit juice and pattered on about happiness and the intersection between virtual reality and real reality. But he was clearly distracted. Earlier that day, he had been approved for an American tourist visa, which had been fast-tracked by a letter from Fred Wilson, who runs Union Square Ventures, one of the largest venture-capital firms in New York.

“I felt like a kid getting a present,” Ternovskiy told me. “I screamed in the street.”

Ternovskiy was already being courted by Yuri Milner, the C.E.O. of Digital Sky Technologies, a Moscow-based Internet investment company that has reportedly acquired a stake of nearly ten per cent in Facebook. But Ternovskiy was not interested. “I am not planning anything with him,” he said, flapping his fingers against his thumb to imitate Milner talking. “I want to meet with American investors.” He was going to the States for three weeks, first to New York, to meet investors, and then to “San Francisco, then maybe California.”

The Ternovskiys are proud of their Russian ethnic background, but they have a complicated relationship with the motherland. Andrey’s great-great-grandfather was a teacher of ancient languages and a representative in the local parliament of Tobolsk, a small city in Siberia. During the Civil War, the advancing Bolsheviks drowned him in an ice hole in a river. Ternovskiy’s grandfather was an engineer who learned to be neutral and obliging toward the state. For his devotion, he ended up in the secret city of Sarov—the Soviet Los Alamos—where he worked on developing nuclear weapons with the physicist (and later dissident) Andrei Sakharov. “We never had much good will toward the Soviet state, I can bear witness to that,” Vladimir Ternovskiy says. But he adds that he also saw no reason to emigrate “just because I don’t like the government.”

Like his grandfather, Andrey Ternovskiy knows when to toe the pro-Russian line; for example, when reporters from state television call. In private, however, he gripes, albeit cautiously, about his country and his countrymen. He doesn’t like his peers’ increasingly anti-Western attitudes, which he says make him “uncomfortable” because most of his virtual friends happen to be in the U.S. He is puzzled by Russia’s hypersensitive self-absorption. He has also been worried about getting drafted into the Russian Army, which has become infamous for hazing so brutal that it kills dozens of draftees every year. As a self-described happy nerd—a word he loves to drop in English—he cringes at the anger and frustration that he sees in his compatriots. When I asked him where he got his optimism, he said, simply, “Dad is happy, Mom is Russian.”

One might think that this would be an ideal time for the Ternovskiy family. “Modernization” has been the buzzword of Dmitry Medvedev’s Presidency, and he has begun a major initiative to turn the Russian economy away from the extraction of natural resources (which now funds nearly two-thirds of the federal budget) and toward one based on innovation and technology. The Kremlin has poured more than five billion dollars into Rusnano, a state corporation meant to modernize Russia through nanotechnology. And, in February, Medvedev, in typically top-down Russian governmental fashion, announced plans to build a high-tech zone inspired by Silicon Valley. Ternovskiy, however, cares little about all these plans. When the Russian media finally caught on to his rise, Ternovskiy found their attention and patriotic questions distasteful. “I don’t want to make it a Russian thing,” he told me. “The whole point is to have no borders.”

Ternovskiy also has reason to be skeptical of the Kremlin’s recent interest in grooming intellectual talent, given the exodus of scientists from the country—by 2002, more than half a million had left—and the pitiful state of Russia’s intelligentsia since the fall of Communism. Andrey’s parents are exactly the kind of people Russia might be cultivating in its modernization drive, yet Vladimir makes only five hundred dollars a month and Elena three hundred. Official talk of modernization and innovation rankles Vladimir, who supplements his income with work for Russian Souvenirs. “It’s demagoguery,” he says. Recently, he sent a project proposal to Rusnano: no response. “These projects don’t interest them. The Internet doesn’t interest them. If I proposed something else, like cutting down some forest in the Far East, that would instantly interest them. There’s no support from the government. It’s completely absent. And Andrey knows that if he stays here no one will support him. The country doesn’t need people like him.”

Andrey, in turn, feels that he doesn’t need the country, and declares that he does not want to run a Russian company, which might be forced to pay “dirty,” under-the-table salaries to avoid a crushing tax burden, or to deal with extortion from corrupt tax and fire-code inspectors. “My perfect plan is that I don’t ever return to Moscow,” he told me. He would figure out the permanent-visa thing once he got to New York; for now, he was just eager to get out. “I don’t want to come back,” he said. “I want to live in America.”

Ternovskiy had been planning to leave in mid-March, but he accelerated his plans in a moment of adolescent rage. VestiFM, a state-owned radio station, had invited him into its studios for an interview; he asked to do it over the phone, and never heard from them again. Then, the day after we met at the café, Ternovskiy’s mother heard VestiFM moderators mocking her son as she streamed the program on her computer. “Do you hear that, Andrey Ternovskiy?” one of them said, laughing, and wished him a speedy failure. Ternovskiy had just got his U.S. visa, and the taunts, with ill-timed clarity, seemed to confirm his father’s point about Russian hostility toward the successful. Ternovskiy ripped out the speakers’ power cord and booked the first flight west.

Ternovskiy spent the evening before his departure at his Uncle Sasha’s, where his relatives had assembled, and it was tense. Ternovskiy broke the news that he was not coming back. He had already told Elena, who loudly blamed Vladimir for instilling the migratory spirit in her son and stayed away from the gathering. At Sasha’s, Andrey mumbled something sarcastic about being fired from Russian Souvenirs. Sasha, who had hitherto been happy for Andrey, asking me if I could get Andrey American citizenship, now exploded, wondering if his nephew could really be so ungrateful. Andrey’s grandmother, in the best tradition of Russian optimism, warned him that his success was surely fleeting. And earlier that evening his talks with Mamba, his lone advertiser, had gone awry; the company was pulling its ads. On the eve of his meeting with Fred Wilson, Chatroulette had virtually no revenue.

The next morning, Sunday, March 7th, the Ternovskiys were catastrophically late leaving for the airport. Andrey had been glued to his monitor until the last minute, and once the family had set out he realized that he’d forgotten all his passwords and they had to go back. Then they got stuck in one of Moscow’s famous traffic jams. In desperation, Ternovskiy and his mother jumped out of Vladimir’s car, climbed over guardrails to a neighboring highway, and caught a gypsy cab, only to realize that they didn’t know which terminal they were going to. They arrived with less than half an hour to check in.

At the airport, Ternovskiy was a wreck. Dressed in a tan corduroy jacket—Elena was convinced that it was warm in New York—he struggled to fill out the customs forms for the nine thousand dollars in cash he was bringing with him. “How many unaccompanied minors are accompanying me?” he asked. Elena tried to help but was rebuffed by growls from her son. She settled instead on trying to thrust a bag of rolls and fruit into his hands, and reminded him several times not to leave his backpack sitting on the ground or on a subway seat in New York. Ternovskiy ignored her. When Vladimir eventually arrived, he began to bark at Elena to “leave the person alone.” Amid his parents’ squabbling, Ternovskiy messed up his customs form, and the customs officer, looking it over suspiciously, sent him back, twice. “No extraneous marks,” he said. “And two copies.”

When Ternovskiy was finally allowed to proceed, he almost forgot his luggage—two backpacks that were sitting on the conveyor belt of the X-ray machine. With two minutes to spare, vibrating with nerves, he made it through check-in. He went through passport control, turned around, and flashed his parents a giant grin, his first that morning. He lurched left, was directed to the right, waved once more, and was gone.

Ternovskiy had told no one he was taking the Sunday-afternoon flight out of Moscow’s Sheremetyevo airport. But when he arrived in New York he found a car from Digital Sky Technologies, the Russian company, waiting for him at the airport. From the driver, he learned that an associate of Yuri Milner was already on his way to New York to talk to him. Back in Moscow, Milner repeatedly called Vladimir, a contemporary of his in college, and urged him to get his son to coöperate.

Andrey, ensconced in a New York hotel, was scornful. “Is that even appropriate for an investor?” he asked me. “Harassing and hounding are the only words which come to mind.” He talked about his first impressions of the United States. The hotel, with its complex shower and light fixtures, made him feel like Borat. He didn’t like New York—too much like Moscow—and his excitement was turning into anxiety that Chatroulette would fail and he would be sent back into the waiting arms of the Russian Army.

When he travelled to San Francisco, the following week, he found the America he had imagined for himself. The sunshine was “heaven,” and he was able to work poolside at his hotel. He soon moved into his own apartment in downtown Palo Alto. He missed his mother’s “sailor’s spaghetti,” a Russian classic, subsisting as he was on a diet of Banana Nut Cheerios. But he was happy, and busy. Shervin Pishevar, the founder of Social Gaming Network and an informal investor in Chatroulette, had taken Andrey under his wing. He helped him navigate meetings with investors, took him to visit Ashton Kutcher and Demi Moore, and set him up with lawyers to get him an O-1 visa, for exceptional persons, which might allow him to stay in the U.S. Ternovskiy planned a trip to Las Vegas and bought a bike, a nice one, for twenty-four hundred dollars. It was stolen the next day.
He also travelled to West Virginia to meet Kirill Gura, the friend he had chatted with on MSN Messenger every night for years, but whom he’d never actually met. The transition was bumpy. “It was a little weird, you know,” Ternovskiy told me later. “We was just looking at each other without having much to say.” ♦

Roulette Russian [The New Yorker]

High Note

Tuesday, March 2nd, 2010

Alexei Semin lives in a billowing four-story red-brick “cottage,” which is locked into a gated community of other lower-upper-class cottages, about 20 kilometers due south of Moscow. It is a nice place to live and, when it snows, it is very quiet.

And that’s nice, because Alexei Semin builds stereos in his basement — by hand, from scratch — using antique vacuum tubes he finds scattered throughout the Internet tube sound aficionado universe.

He is part of the renaissance of tube sound, or sound systems based not around solid-state transistors – tiny, cheap, plastic things in your home stereo – but around vacuum tubes, known as “lamps” in Russian, because that’s what they look like.

Unlike transistor amplifiers, which replaced tubes commercially in the late 1960s, tube-based amps are bulky, fragile black holes of energy that are hard to build and are therefore very, very expensive.
Famed for their fidelity to the original recording – and, according to enthusiasts, for the warmth of their sound – the tube amplifiers have surprisingly low wattage. The amps on Semin’s sound systems max out at five watts, which doesn’t seem like much, but actually is.

“What do you want to hear?” Semin asks. “Katy Perry?”

He pops in the pink-flecked disc into a gutted CD changer that he has retooled and hooked up to the half-built stereo in his basement. Two simply curving wooden speakers with home-cooked, rice-paper drivers are each just under five feet tall and are just for vocals. In the background, partially finished transformers sit on workbenches. They are stuffed with condensers from 1955 and studded with even older vacuum tubes. (“This is the famous Hitachi 5Y3-GT,” Semin says, showing me a thumb-sized Japanese glass tube he bought online for $100. He also showed me an even smaller and more expensive GE tube from 1953, as well as crates with giant forearm-length tubes from the American military – spare parts from 1937.)

All this takes up a good quarter of the room, and it is only half the system, his largest and most expensive yet: Semin’s finger-in-the-wind estimate puts it at $150,000, not including labor, and he’s worked on it for four months. Tuning the thing may take up to another month. (When it’s finished, it will get a small metal plate that says “SALabs, Inc.,” which stands for Sound Analyzing, but it also conveniently coincidences with his initials.)

Semin turns a metal knob still dangling from a wire (he gets the metal from Germany and then polishes them into a sleek, matte-chrome knobs) to 1.1 watts. Katy Perry starts to strum her guitar at a decent volume.

“The idea is just to turn it on,” says Semin of the lack of displays and buttons and such. “You don’t have to do anything but adjust the volume.”

He turns it to 2.5 watts.

Katy Perry, pouting through an acoustic number — “you’re so gay and you don’t even like boys” — is approaching deafening.

At five watts, she gets there, but her throaty hatred is clear, pure – warm, even. No distortion, just Katy Perry ragging on some poor young man who wears scarves and likes his Hemingway.

Semin began playing with radio and acoustic constructions when he was 15 years old, a lonely army brat who grew up in 15 different places spanning the Soviet Union, from Sakhalin to Belarus. After graduating from the military academy, he followed his father into the GRU (the Soviet CIA-NSA amalgam) as a radio engineer.

“I never built anything for them,” he said when I asked him what he did for the GRU. He reached the rank of lieutenant colonel but never elaborated what he did for the agency in the last decade of the Cold War.

After serving for 15 years, he quit the GRU in 1995. The pay was small, the country was in chaos, and, Semin says, “I don’t like doing what no one needs.”

So he got a job as a trade representative with Mars, just after the first Mars candy bar produced in Russia rolled off the conveyer belt. He worked at some of the big Western companies doing business in Russia – Bristol Meyers Squibb, Dannon – until January, when he finally quit, left his Moscow apartment to his daughter, and moved permanently into the suburban cottage to devote himself to his hobby, investing tens of thousands of dollars (his own) into stereo systems he makes no money on. His friends have encouraged him to go into business but the artist within him has so far resisted the idea.

His wife, the marketing director for Dannon, has been largely supportive, he says.

“It’s a good think my wife gets me,” he says. “What if she didn’t?”

“When you talk to someone, you hear the emotion in their voice,” Semin tells me as we sip coffee in his kitchen. He is a quiet, inconspicuous-looking man with a softly bulging belly and wire-rimmed glasses hovering on a small, bulbous nose. “In a normal recording” – say, Katy Perry – “these emotions are erased, leveled,” he goes on, sounding misty. “I once put on a recording from the furry years of God knows when, of Ella Fitzgerald performing live at the Savoy. You can hear her mastery of her voice, how the saxophone player gathers breath and passes it through the instrument, how the guests are moving their forks. When I heard it on a lamp system, I thought, ‘holy moly!’”

But to Semin, those furry years were the golden years of audio. “Humanity has been racing ahead, leaving everything – even the good things – behind,” he says. “Everything is premised that it needs to be made in huge volumes, and cheaply. And faster, faster, faster.” Without, that is, the care and patience required to assemble one of Semin’s elaborate constructions.

“There’s a nostalgic aspect to this movement,” says Jeff Snyder, the technical director of the Princeton University electronic music studios. “It recalls a time when technology was taken a little more seriously. And a lot of the nostalgia about old technology is because it is so well-made by today’s standards.”

A return to that quality is exactly what Semin is after. In fact, one of the reasons he won’t go into business is he doesn’t want quantity to overwhelm his quest for the sublime. “He is uncompromising, which is his advantage, but it’s hard to go into a business with this mindset,” says Dmitry Mozhaev, a friend who recently hooked up a set of SALabs amps that Semin had given him as a gift. “He sees it as an act of creation. He thinks least of business; he’s focused on achieving perfection.” (That said, Mozhaev says the quality of Semin’s system has “reawakened” his long-latent love of music.)

Semin also doesn’t have a regular output. He can make twenty systems a year, or he can make three. They can cost $20,000 or $40,000 or $150,000, depending on what the customer – or he – feels like. (And this is often right up the alley of an elite – and showy – clientele. A construction magnate put an SALabs system in his office, and when his equally wealthy friend saw it, he came to Semin asking for a system that was even better and more expensive than that guy’s.)

“The idea,” says Semin – and it’s always an idea, “is to never make anything twice. Stradivarius never made anything twice. If you put an assembly line of wood parts together that came out as a violin, that wouldn’t be Stradivarius.”

Only one store in Moscow has an SALabs system in stock. It’s small – six blocks — and not even for sale. It is the property of an unnamed businessman who allowed the store, Nota Plus, in Moscow’s historic center, to exhibit it while his apartment is renovated. It has Class A, single-ended triode amps, and each of the two channels has a six-watt power output. This one has an 8 ohm impedance, though Semin is flexible: his work has spanned the full gamut, from four to eight to 16. And like all of Semin’s uncompromising work, this system is a power suck. For optimal sound, the system needs 1 kilowatt hour.

Nota Plus estimates its value at around $25,000.

“It’s happened more than once that people have circled in front of the store windows saying, ‘I’m gonna buy it, I’m gonna buy it,’” says Mikhail Dimitreev, a sound specialist at Nota Plus. “But many of them aren’t satisfied with the price, and everyone wants a foreign brand because they think it’s better than a Russian product.”

The closest comparison, Dimitreev says, are Kondo systems, manufactured by hand in Japan and sold for astronomical prices.

Dimitreev, who has been working in sound engineering for forty years, says that he’s never heard anything like a Semin.

“I’ve never heard anything of better quality,” he says. “Our Kondo is Alexei.”

High Note [RUSSIA!]

Getting Punk’d in Russia

Wednesday, February 24th, 2010

Ashton Kutcher was not prepared for this. When he arrived with a U.S. State Department technology delegation last week, he expected the screaming teenage girls, the journalists fighting for interviews, heck, he even expected the cold. But sitting with a group of Russian technology executives on Sunday night, the Punk’d star let loose. “When you get into a room without the Russian government controlling the room, the room becomes so vibrant!” he said. “We’ve had to fight to get people to talk openly.”

Kutcher was here, along with a handful of high profile tech execs — eBay (EBAY) CEO John Donahoe (who just launched a Russian version of the site), Cisco (CSCO) CTO Padmasree Warrior, Mozilla Foundation head Mitchell Baker, Twitter co-founder Jack Dorsey, and venture capitalist Esther Dyson — as part of a week-long diplomatic trip to get start ups, students, NGOs and even Kremlin advisors to exchange ideas on the wider uses of social networking technology. In one week, the group set out to help their Russian counterparts figure out new uses for social media, open source browsers, and online garage sales that can help modernize an economy, build a stronger civil society, and help President Dmitry Medvedev with his plans to build a Russian Silicon Valley near Moscow.

Instead, the techies, business people (and a movie star), discovered that sunny Silicon Valley-style optimism and the belief that knowledge conquers all, is a hard brand to franchise in Russia.

The Kremlin is in the midst of a much-publicized innovation push: Its top brass traveled to MIT recently to ask scientists how to build up Russia’s innovation economy. But, as chief strategist Vladislav Surkov recently made clear in an interview with a Russian newspaper, modernization will be “authoritarian modernization.” That is, it will have a distinctly Russian flavor, and it would bring none of the political reforms that would create the kind of breathing space so crucial to Silicon Valley.

So what would it bring? Well, beer pong, which Howcast CEO Jason Liebman taught to high schoolers in Novosibirsk. And altered expectations. “My image of ‘being in Siberia’ is forever changed by this trip … this place has real potential,” tweeted eBay CEO John Donahoe, who had just been cajoled by fellow delegate and Twitter co-founder Jack Dorsey into starting his own Twitter account.

Such connection-building and knowledge-sharing with Russian counterparts are all part of Secretary of State Hillary Clinton’s hazily defined notion of 21st-century statecraft, according to Jared Cohen, a member of Clinton’s planning staff who put together this trip and others like it. (Cohen described the trip in a tweet as: “facilitating peeps-2-peeps”). And when the delegation met with Surkov and Arkady Dvorkovich, another Kremlin advisor on modernization, they talked excitedly about e-governance and transparency. “By no means are we perfect on these issues, and there was no posturing, or lecturing, or badgering of any kind,” White House CTO Aneesh Chopra told me. “Russia is not an aid project,” Cohen says. Instead, this was one more push of the reset button.

But the delegates quickly discovered that Russia’s famous technological talent often finds few outlets at home. Because of the twin heritage of the Soviet criminalization of independent commercial activity and the brazen plunder of the 1990s, businessmen are reviled to this day and entrepreneurship isn’t mythologized in Russia as it is in the United States.

So when Shervin Pishevar, CEO of Social Gaming Networks, asked a group of high schoolers in Novosibirsk how many of them wanted to start businesses, very few hands went up. “It’s as if they thought it was impossible,” he says. And because Russian society has traditionally been very atomized, the strong mentorship community of Silicon Valley is missing, too.

Social atomization – and, consequently, a cementing of old mentalities — was something the group struggled with so frequently as to make it cliché. At the Sunday night meeting with Russian tech leaders, Cohen and Kutcher were baffled to hear that the tech companies had never sat down with Russian NGOs – most of them antediluvian operations – to explain what technological tools were available to them. The problem was lost in translation: Cohen and Kutcher were there to help Russians build a civil society, while everything in Russia was designed to break it down. The Russian techies in the room instantly protested that sitting down with NGOs would compromise the neutrality of their technologies, a banner behind which they hide from the ever-encroaching hand of the state.

And, by the end of the trip, the delegates who had not yet done business in Russia ran up against the full reality of the state of corruption in Russia — a recent study showed that one in three Russians had paid bribes, totaling as much as $318 billion annually, and Transparency International ranked the country 146th out of 180 in its corruption ranking — in their last meeting of the trip, with anti-corruption NGOs. The corruption fighters painted a grim picture of bribe-taking, wanton arrests, and intimidation. Kutcher, who had been broadcasting the panel live from his iPhone, was apparently not expecting such darkness. As he shut off the live stream, you could hear him groan, “That was the most brutal meeting…”

Esther Dyson, who has been a prolific investor in Russia for a decade, was one of the few not surprised, though she says she tried to let the more optimistic delegates form their own views. “They kept saying I was so negative. But I’m as idealistic as anyone. I’m just realistic about the challenges,” she told me. (“You have to be an optimist to keep investing here for 20 years,” she added.)

As a final illustration of Russian reality, the group went from the horror show of the anti-corruption meeting to a lavish farewell dinner sponsored by Digital Sky Technologies, an investor in Facebook and Zynga, which is widely believed to have close ties to the Kremlin. Everyone sat at different tables and, for the first time the whole trip, there was no substantive discussion.

“Well,” says Dyson, hesitating. “The fish was delicious.”

Getting Punk’d in Russia [FORTUNE]