VZCZCXRO7487
PP RUEHHM RUEHLN RUEHMA RUEHPB
DE RUEHMO #0645/01 0451217
ZNR UUUUU ZZH
P 141217Z FEB 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 7443
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHDIR/IRAN RPO DUBAI 0001
RUEHZN/EST COLLECTIVE
RUEHRL/AMEMBASSY BERLIN 1890

UNCLAS SECTION 01 OF 02 MOSCOW 000645 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EB/CIP/MA (GIBBS), EUR/RUS (GUHA), OES/STC 
(DAUGHARTY), EUR/ACE (YOUTH), NEA/ARPI 
 
COMMERCE FOR UNDERSECRETARY CRESANTI AND (BISNIS) ELLEN HOUSE 
 
BERLIN FOR ROBERT HAGEN 
 
E.O. 12958:  N/A 
TAGS: ECON EINT ETRD TNGD TSPL IR RS
SUBJECT: MOSCOW FORUM OFFERS INNOVATION CORNUCOPIA 
 
REF: 06 MOSCOW 02255 
 
MOSCOW 00000645  001.2 OF 002 
 
 
¶1.  (U) SUMMARY: Moscow's Seventh International Salon of Innovations 
and Investments, February 5-8, offered a cornucopia of products, 
services and financial programs for the developing innovation 
economy.  In contrast to last year's Salon (REFTEL), there were 
significantly more exhibitors, and they had many more products 
already in production and on the market.  While several exhibitors 
were Moscow-based, the vast majority were from the regions, 
representing the breadth of Russian innovation activity.  Investment 
funds offered money and advice to innovative enterprises that were 
looking for sponsors.  Reflecting its solid ties to the Russian 
economy, Iran had the largest contingent among the foreign 
exhibitors. END SUMMARY 
 
¶2.  (U) From February 5 to 8, more than 500 enterprises showcased 
their wares at the All-Russian Exhibition Center.  Forty regions of 
Russia represented the spread of technology beyond the center. The 
well-attended Salon was sponsored by the Ministry of Education and 
Science, the Ministry of Economic Development and Trade and the City 
of Moscow. 
 
¶3.  (U) Exhibitors from the regions included the innovation 
technology firm Monocrystal PLC, based in Stavropol, which produces 
synthetic sapphires for computers, optical electronic devices and 
laser diodes.  Representatives of Monocrystal told us they had 
captured 15 percent of the world market for synthetic sapphires used 
in high technology applications.  Synthetic sapphire substrates are 
used in LED displays.  Monocrystal's customers include Microsoft and 
Intel in the U.S. market, where it has a 3 percent market share. 
The company employs 600 people in Stavropol and exports 85 percent 
of its products to markets in Asia -- primarily, China, Taiwan and 
South Korea-- and the European Union.   Its revenues are 
approximately $60 million per year. 
 
¶4.  (U) Another typical regional technology company is the biotech 
firm Cellular Technologies that produces an anti-wrinkle beauty 
cream using stem cells extracted from animals.  A company 
representative told us the firm was created in 2005 and has granted 
a license to Dow-Corning for production in the U.S.  In its first 
year of operation in the Southern Federal District, Cellular 
Technologies produced approximately 12,000 units of the cream, which 
it sells through distributors in Eastern Europe for 30 euros each. 
The product Silky Touch is registered in Russia and the European 
Union.  Cellular Technologies has started a European operation in 
Prague to sell to Russia in order to take advantage of favorable 
export financing. 
 
¶5.  (U) This year's salon was distinguished by the number of 
investment funds that offer financing for regional start-up 
technology companies.  The Foundation for Assistance to Small 
Innovative Enterprises (FASIE) has been operating since 1994.  FASIE 
assists small enterprises on a highly selective basis with seed 
money closely tied to annual performance reviews.  (COMMENT: We 
visited FASIE's Moscow offices last year and were impressed with the 
professional business approach of its Director General Professor 
Ivan Bortnik. END COMMENT)   The Moscow Center for Entrepreneurship 
has been operating for two years to help science students 
commercialize their inventions and new processes.  The Center sets 
up clusters of student projects organized by a manager who takes an 
equity interest in lieu of salary.  The Center has a current annual 
budget of 30 million rubles (about $1.1 million) provided by an Alfa 
Group fund. 
 
¶6.  (U) The largest fund is the Russian Venture Company created 
under the Ministry of Economic Development and Trade as a collection 
of venture funds with $550 million for investment.  Its targets are 
defined as early stage companies having capitalization under 150 
million rubles or less than $5.5 million in sales in the past 12 
months.  Since July 2006, 15 such venture funds have been selected 
on a competitive basis to receive 49 percent of their start-up 
capital.  Each fund is required to invest in at least eight entities 
over five years, but not longer than 10 years.  Eligible investments 
are nanotechnology, information and telecommunications systems, 
sustainable development, renewable energy, transportation and 
aerospace systems, and counterterrorism.  Ineligible investments, 
except when based on new technologies, are natural resources, 
consumer goods, retail goods, real estate, construction and energy 
generation, and vice industries, such as alcohol, tobacco, gambling 
and weapons. 
 
¶7.  (U) The Salon program included several roundtable discussions on 
issues related to the expansion of Russian innovation.  Several 
 
MOSCOW 00000645  002.2 OF 002 
 
 
speakers focused on the need to clarify the intellectual property 
dimensions of innovations.  The confusion as to who "owns" an 
invention is slowing investment, according to the speakers.  This 
year, the Federal Agency for Science and Innovations stationed 
personnel at the entrance to the roundtables to invite people to 
fill out an extensive survey on innovation in Russia.  The survey 
solicited input on the main obstacles to innovation and opinions on 
how to spur it onward. 
 
¶8.  (SBU) Among the approximately 20 foreign exhibitors, Iran had 
the largest exhibition with 8 to 10 representatives present.  Their 
products, which were described in English and Russian brochures, 
included a solar boiler for heating, a voltage regulator for 
automobile wiring and an electricity generator from wave action. 
One brochure written only in university-level Russian described a 
futuristic land-sea-space vehicle.  However, the English brochures 
were generally written in grammatically-fractured form.  For so 
little product, the number of Iranian representatives was 
disproportionate compared to the other exhibitions. 
 
¶9.  (U) COMMENT:  The 2007 Salon represents tangible evidence of the 
spread of innovation technology and commercial sophistication to the 
regions.  The exhibitors have developed and brought products to 
market and are now looking to expand their output and their 
geographical reach.  There were more investment sources than the 
previous year, with real money in their pockets.  These developments 
presage the eventual diversification of the economy, but they also 
emphasize how gargantuan the task remains. 
 
BURNS