Bashkortostan Has a Rich Cultural Heritage and Is Home to World Renown Dance Companies As Well As the Iconic Ballet Dancer Rudolph Nuryev

SPECIAL ADVERTISING SECTION Bashkortostan has a rich cultural heritage and is home to world renown dance companies as well as the iconic ballet dancer Rudolph Nuryev.

BASHKORTOSTAN

ready and more than capable of both attracting and absorbing as This Russian much as US$ 10 billion in investment.” President Rustem Khamitov has introduced policy changes that encouraged more than $6 billion of investment in Bashkortostan last Republic Is Ready year. Since then a wide range of other industries have also developed, particularly in the mining, machine building and, most importantly, the oil-refi ning sectors. As a result, the Republic established itself as For Take Oﬀ the engine room for the economic growth of all of Russia’s outlying As Russia re-emerges as an economic European territories and one of its largest industrial centers. superpower, much of the international This balanced industrial base has allowed Bashkortostan’s focus settles on the capital city of Moscow. economy to grow at a rate that would be the envy of many developed nations. Total foreign trade turnover, which was $12 billion for 2011, However, it is in its provinces that some of rose 50% between and 2009 and 2010. As a result, Bashkortostan the most dramatic changes and lucrative features among the Russian Federation’s Top Ten regions when ranked opportunities are emerging. by most economic and industrial criteria—and its success has not gone unnoticed by the international credit rating agencies either. Last year, Standard & Poor’s raised the Republic’s outlook from stable to he Republic of Bashkortostan is one of the richest within the Russian Federation in terms of mineral resource deposits and crude oil reserves. Its other natural resources include timber (one third of the republic’s land mass is covered in forests), natural gas, coal, and both Tferrous metal and iron ores. Little wonder then that Bashkortostan, with its key location between the Volga River and the Ural Mountains and its relative proximity to Moscow, has long been one of Russia’s most industrially developed regions. Appointed in 2010, Bashkir President Rustem Khamitov has set his sights on the republic becoming a player on the global stage—and a magnet for foreign investment as well as President Rustem Khamitov has introduced policy changes that have encouraged an engine room for the domestic economy. “My vision is to position billions of dollars of investment in Bashkortostan since his election in 2010. Bashkortostan as a Russian region with economic ﬂ exibility that is

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positive and gave it a BB+ rating on the assumption that the Repub- lic would “enjoy economic and budget revenue growth, and that in turn its continuing prudent financial and debt policies will enable it to preserve cash reserves.” Although this must have come as no surprise to President Khami- tov, it must have been music to his ears, as it is both a major boost to his plans to attract FDI and a vindication of the policies he has introduced to change the investment climate and business environ- ment. “We are committed to promoting political stability and freedom by taking the administrative pressure off civil society and by promoting a culture of openness and transparency,” he says. “The first thing my team and I did was to change the legislation in order to increase investment incentives.” Crucially, he moved to instill confidence in the foreign investment community by putting up some of Bashkortostan’s state property as security; subsidizing interest rates for bank credits; offering partial compensation for the purchasing of leasing items; and leasing state owned land plots on preferential terms to investors. He also changed the tax structure. “If you invest more than US$200 million you get 20% off your tax bill: if you invest more than US$30 million you get a 12%- BASHKORTOSTAN to-23% discount.” The sums clearly added up, because FDI in Bashkortostan shot up from $62 million in 2010 to $93 million a year later. This, President Khamitov believes is just the beginning. “There are plenty of opportunities for investors to put their technology and know-how to good use here,” he says, “and the returns on investment are obvious. All investors are equal in our eyes and we are ready to receive them.”

sexport,” leasing company “Forest Service,” and logging lumbering Bashles Growing enterprise “Bashlesprom.” The key output products of Ufa Plywood Mill are plywood, wood particle boards and fuel briquettes. More than 75% of mill production exports to various countries around Strong the world. Ufa Plywood Plates Combine manufactures plywood More than 30% of Bashkortostan is and wet-processed fibreboard. More than 60% of production is for export. The Amzinskiy Wood Working factory, which provides a covered in woods, and the Republic’s full-production cycle, from timber cutting to the mechanical and timber stock is estimated to stand at timber-chemical processing of wood: charcoal, activated charcoal, over 717 million square miles. acetic acid, and ethyl acetate. The trading house Bashlesexport deals with procurement of t is one of Bashkiria’s most prized environmental assets and all types of production, manufactured by Bashkir Timber Industry is both protected through a network of national parks and Company: forest products, saw timber, planed stock, plywood of I actively managed by a series of state-run initiatives. all types and thicknesses, fibreboard, particleboard, furniture, Historically, Bashkir timber has played an important role in the Re- charcoal, acetic acid, and others. public’s domestic economy and has been a consistent and reliable The vast majority of the group’s products are earmarked for source of raw materials for some of Bashkortostan’s home-grown export. Bashlesexport is now ready to enter into partnerships to construction industry and furniture manufacturing industries. both help it extend its reach and to keep it at the cutting edge Today, its charcoal and timber products are increasingly aimed at of the plywood market through its ongoing program of technical the export market. In ever growing volumes they are now shipped reconstruction and innovation. to more than 20 countries around the world, from China to Europe While the size of Bashkiria’s forests pales in comparison to the and the United States, as well as some markets closer to home vast woodlands of Siberia, the quality of Bashlesexport’s such as Iran and Kazakhstan. end products and service is second to none. And its proximity Bashkir Timber Industry Company is one of Russia’s lead- to the markets on Russia’s southern and western borders means ing producers and sellers of lumber products. The structure of it has guaranteed export markets for many decades the company comprises Ufa Plywood Mill, Ufa Plywood Plates to come. Combine, Amzinskiy woodworking factory, Trading House “Bashle- www.bashles.ru

www.fortune.com/adsections S2 RIDING HIGH ON A SEA OF BLACK GOLD It is boom time again for the world’s oil producers. With the economies of Brazil, Russia, India, and China on a seemingly endless upward trajectory, demand for this vital source of hydrocarbons is also rising remorselessly.

HILE ANY CONCERNS grown into an operation enjoying year- ON the supply side have on-year double-digit growth; employs Giniyat Ishbaev W done nothing but favor 1,300 scientists and engineers; owns CEO of Burintekh those countries sitting on secure reserves major state-of-the-art production and of the Black Gold, political unrest in servicing facilities, and whose intellec- the Middle East in the wake of the Arab tual property assets include a portfolio 4/1 Yubileynaya Str., Ufa, Republic of Bashkortostan, Russia 450029 Spring and tensions in relations between of patents, customized software, and Tel: +7 347 246 0872, Fax: +7 347 291 2533, e-Mail: [email protected], www.burintekh.com the U.S. and Iran have served to push proprietary databases. Now Burintekh is prices upwards, with the result that the looking for partners to extend its global The second secret to Burintekh’s recent years, it has worked in cooperation cost of a barrel of Brent crude was 12% franchise, and there’s not at to be a success: the solid scientifi c and industrial with the state-run petroleum concerns higher in the fi rst quarter of 2012 than it shortage of interested parties. expertise that underlies all its activities of—among others—Oman, and had been a year earlier. and which has earned it a reputation for Saudi Arabia. History suggests that there will almost WHAT MAKES quality and innovation and a client base certainly be a series of short-term correc- BURINTEKH’S far beyond Russia’s domestic oil industry. ONE OF tions in oil prices in the months and years SUCCESS EVEN Emblematic of this is its ongoing relation- BURINTEKH’S to come. Still, with the world’s real income MORE REMARKABLE ship with Shell through the multinational’s OTHER ENDURING forecast to double over the next 20 years, is the fact that —unlike many other Russian JV Salym Petroleum Development STRENGTHS has been its the production and consumption of energy Russian private sector companies now (SPD). SPD was set up in 1996 to develop ability to develop customized products for will also surely rise—good news indeed making their presence felt on the world the oilfi elds in Western Siberia, and these its clients. It is signifi cant that Halliburton for Russia’s oil industry and the army stage—its roots do not lie in the old days almost all its wells rely on Burintekh (one of the world’s largest providers of of secondary suppliers that have been Soviet Union’s nationalized industries. drill bits. “Its equipment was fi rst tested products and services to the energy created to service it. It was instead started from scratch by in 2005 with astonishing results,” SPD industry) naturally turned to Burintekh One such company is the Burintekh a team of like-minded specialists who CEO Simon Durkin recalls. “The average when it needed help in developing a new Research and Production Enterprise, saw a gap in the market for a range rate of penetration with Burintekh’s type of bit for its rotary steerable system whose innovative technologies have of ever-evolving, high-quality drilling drill bits was twice as high as we were on the Russian drilling market —and revolutionized attitudes to drilling across equipment and who have not looked getting from the foreign equivalent.” That Burintekh came away with yet another the industry and whose (literally) ground- back since. proved to be just the beginning of a highly satisfi ed customer. breaking range of PDC and roller-cone “We are growing very fast,” says Bur- constructive partnership. Burintekh’s Burintekh’s unswerving focus on bits, core heads, and reamers have intekh’s CEO Giniyat Ishbaev, “and I put engineers soon began working on the customer service has allowed it to ride captured a 55% share of the Russian this down to two fundamental factors. drilling rigs on a permanent basis, and in the recent fi nancial storms with relative market, not to mention a global presence On the one hand, we have a strong team the process helped add a further 20% to ease. “The last fi nancial crisis had that stretches from British Columbia to and excellent human resources. Our the rate of penetration. no signifi cant impact on our activities Kazakhstan and from Texas to UAE. employees are fully aware of the fact Nor is Burintekh’s partnership program because we were ready for it,” recalls Mr. It is a remarkable success story for that we are a service provider, which confi ned to its domestic market; the Ishbaev. “In fact, we actually increased a company that started out in 1999 as means we constantly strive to cater to company has been courted by companies production.” Even when the current boom a 12-person research team with little our customer’s needs. We have worked across the world, including that most comes to an end, there is no reason to production experience or capacity. From hard to foster a culture of achievement advanced and competitive center of believe that Burintekh will not continue to those modest beginnings, Burintekh has and our team is very success driven.” upstream activity, the Middle East. In go from strength to strength.

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URALTECHNOSTROY: AT THE CUTTING EDGE OF ENERGY INNOVATION Just how long the world’s oil and gas supplies are going to last is turning out to be quite literally the trillion-dollar question of the 21st century.

ARLIER THIS YEAR, two THIS COMMITMENT leading academics published TO INNOVATION E a paper arguing that oil MADE THE COMPANY supply reached a ceiling of economi- the partner of choice for gas-to-liquid cally affordable rates as long as ago as pioneer Metaprocess when it was looking 450065, Russia, Ufa city, 2005. In other words, although there are to build an on-site gas-to-methanol unit Oleg N. Aminov Svobody st., 61 still ample reserves of oil left below the at the Yurkharovskye gas condensate Corporate President of Uraltechnostroy e-Mail: [email protected] earth’s surface, they felt it is getting too fi eld deep within the Arctic Circle Tel: +7 (347) 279-20-61, 279-20-63 expensive to extract it. fi ve years ago. Metaprocess General Fax: +7 (347) 263-02-59 Nobody disputes that the world’s oil Director Kirill Lyats had nothing but www. uralts.ru supplies are fi nite, but in Bashkortostan praise for its work. “We have to work in alone there is now a critical mass of some extreme conditions—sometimes plant and equipment manufacturers like with temperatures as low as minus 60 appointed Ultratechnostroy to be part of end. Russian petroleum giant Rosneft Corporation Ultratechnostroy, which are degrees,” he explains. “That requires the team tasked with the redevelop- has signed a multi-billion dollar deal on a mission to prove that it is possible specialized equipment, all of which ment of one of its vast underground with U.S. multinational Exxon Mobil to increase the productivity and price was replenished by Uraltechnostroy, gas storage facilities. to explore the Russian Arctic, which effi ciency of oil and gas extraction and and we were very satisfi ed with itsStanding at 111Although meters the it was Victoria originally Falls are established one of the mostcould spectacular hold up sights to 30% on the of Africanthe planet’s continent. Located on the Zambezi River, bordering Zambia and Zimbabwe. The falls are described by the local Kololo storage to a point that it remains com- performance.” to service Bashkortostan’s thriving undiscovered natural gas reserves people as ‘Mosi-oa-Tunya’ meaning ‘the Smoke that Thunders’ mercially viable. All in a day’s work, according to energy sector, Ultratechnostroy has long and 13% of its undiscovered oil (that Uraltechnostroy’s Corporate President since spread its wings to other regions equates to approximately 160 billion ULTRATECHNOSTROY Oleg Aminov. “Our service-oriented of the Russian Federation and beyond. barrels and would add around 12% WAS FOUNDED IN focus has always enabled us to deliver “We are involved in a number of to current estimates for the world’s 1994 in the city of Ufa, capital what we promise,” he says. “We have projects outside Russian territory,” Mr. proven oil reserves. In 2010, the of Bashkortostan and the center of oil been in the market for almost 18 years Aminov says. “We are now positioning Russian Government announced that science and engineering for the whole and have proved our stability. That is ourselves as an international company Rosneft had discovered a large new of Russia. Its goal in life sounds simple why we are a key service provider to and we have opened representative deposit with estimated reserves of enough—to deliver bespoke solutions Russia’s largest energy companies.” offi ces in Austria, Turkmenistan, Kaza- an additional 1.1 billion barrels in around all aspects of the development of Ultratechnostroy’s client base does khstan—where we are already working Northern Siberia. oil and gas fi elds in everything from pre- indeed read like a roll of honor of the with PetroKazakhstan—and Jordan. We Demand for the services and project development work and technical Russian oil and gas industry. It includes are constantly and actively looking for products that Utlratechnostroy and other documentation to the manufacture and Lukoil, Russia’s largest oil business new partners and we want to bring out companies based in Bashkortostan’s oil procurement of equipment on behalf of group that sits on 1% of total global oil products to new markets worldwide.” cluster can only grow and makes it the its clients. Its founders recognized that reserves and is responsible for 2.2% natural destination for anyone looking no two projects were identical and that of global oil production; Rosneft, which IN THE MEANTIME, for a piece of the action. “Bashkortostan any number of variables—such as the earlier this year awarded the company a ULTRATECHNOSTROY holds great potential for foreign inves- levels of gas content and viscosity in a contract to manufacture a modular- IS NOT ABOUT TO tors,” Mr. Aminov believes. “We have an given oil fi eld—had to be factored in. To execution group pumping station for RUN OUT OF excellent education system, especially in meet this challenge, new technologies are its Yuganskneftegaz subsidiary, which DOMESTIC CLIENTS the technical fi eld, an ideal geographic continually been tried and tested in its operates the second largest oil produc- any time soon as Russia leads the way location, and a population that is open to own laboratories to ensure that it remains tion complex in the country; and—last in trying to disprove those academics new ideas. Foreign companies can grow at the cutting edge of the industry. but not least—Gazprom, which just who think the age of oil is coming to an quickly here.”