PONARS Eurasia Policy Memo No. 26

Russia and the Nanotechnology Revolution

Looking = Beyond the=20 Hype

PONARS Eurasia Policy Memo No. 26

Adam = N.=20 Stulberg
Georgia Institute of Technology
August 2008 =

In=20 April 2007, then Russian president Vladimir Putin extolled = nanotechnology=20 research as the key to establishing Russia=E2=80=99s competitive = advantage in the=20 high-tech world economy and the next round of the arms race. Ever since, = the=20 Kremlin has embraced nanotechnology as a strategic linchpin to its = long-term=20 global resurgence, asserting state stewardship and pouring billions into = boosting the sector. Inside Russia, the prospects for being at the = forefront of=20 the unfolding technological revolution are a source of national pride = and=20 presumed to augur well for diversifying the economy beyond the energy = crutch and=20 for establishing more favorable foreign ties. By contrast, outside = commentators=20 typically regard the bravado as a harbinger of more difficult times = ahead,=20 emblematic of a statist-nativist turn in the new Russia with = neo-imperialist=20 implications for forceful reintegration across Eurasia and mounting = geostrategic=20 competition.

Upon closer inspection, there seems to be both less = and=20 more to Russia=E2=80=99s nanotechnology exuberance. There is = =E2=80=9Cless=E2=80=9D in that there are=20 real technological uncertainties surrounding the significance of the=20 nanotechnology revolution, as well as deep-seated institutional = constraints on=20 the Russian leadership=E2=80=99s capacity to realize its grand visions. = Yet, there is=20 =E2=80=9Cmore=E2=80=9D in terms of greater potential for stimulating = political transparency and=20 decentralization within Russia and for advancing constructive engagement = than is=20 commonly appreciated. Accordingly, the next U.S. administration would be = well=20 advised to temper reaction to Moscow=E2=80=99s goading while forging = rules of the road=20 that encourage mutually beneficial innovation and foreign investment and = that=20 avoid precipitating an intense security dilemma. =

Russia=E2=80=99s=20 Nano-Hubris
Uncertainty surrounds the nanotechnology = revolution=E2=80=94the=20 study, creation, and manipulation of matter at the nano-scale, ranging = between=20 approximately one and 100 nanometers (1000 times smaller than the next = largest=20 unit, the micron). Although in its infancy and with the line between = science and=20 fiction blurred by futuristic hyperbole over self-replicating = =E2=80=9Cnano-bots=E2=80=9D and=20 =E2=80=9Cgrey goo,=E2=80=9D an increasing number of = nanotechnology-enabled commercial and=20 military applications have begun to appear, ranging from enhanced = sunscreen=20 protection to biomedical imaging, novel power sources, artificial = intelligence,=20 and smart sensor devices. With scientists already pushing convergence of = engineered systems with basic physical, chemical, biological, and human=20 processes, there is growing confidence among researchers, = industrialists, and=20 policymakers that nanotechnology represents the =E2=80=9Cnext = frontier=E2=80=9D of technological=20 advancement. Yet, the enthusiasm for mushrooming opportunities for = economic=20 development and defense is matched by concerns for unprecedented = environmental,=20 ethical/legal, public health, and security risks unleashed by = nanotechology=20 research and development. Uncertainty over technical substance and = direction=20 notwithstanding, global sales of nanotechnology-related products are = widely=20 expected to climb to one trillion dollars by 2015, with players such as = the=20 United States, Japan, China, the European Union, India, and Iran = scrambling to=20 implement respective national strategies to spearhead the revolution on=20 commercial and military fronts.

The potential has not been lost = on=20 Russia with its long tradition as a leader in basic science, including = early=20 research on nanostructures in the 1970s. The current Russian government = has=20 seized upon this legacy, as well as the promise of the nascent = nanotechnology=20 revolution to project Russia=E2=80=99s new self-image as a great power = and its visions=20 for strategic opportunism. The Kremlin now frames the leap into = nanotechnology=20 as integral to a high stakes global race, with potential for yielding = payoffs=20 greater than those in the nuclear and space fields combined for defining = Russia=E2=80=99s future as a superior =E2=80=9Cinnovative=E2=80=9D = economy and military. Breakthroughs=20 offer not only to erase the humiliation associated with the protracted=20 post-Soviet transition and Russia=E2=80=99s disappointing performance in = the computer=20 and biotechnology sectors, but to secure the country=E2=80=99s emergence = as one of the=20 world=E2=80=99s leading economies with conspicuous competitive = advantages. Inextricably=20 linked to the restoration of national self-confidence, the = nanotechnology=20 revolution has become a beacon for the Kremlin=E2=80=99s claims to = global leadership for=20 the foreseeable future.

Moscow=E2=80=99s visions are backed by = action. With its=20 sights set on jumpstarting a national nanotechnology program that will = lay claim=20 to 3-4 percent (over 20 billion dollars) of the market by 2015, the = Kremlin has=20 pledged nearly eight billion dollars in state support for related = research and=20 production, with annual outlays slated to exceed those in China and on = par with=20 the United States. As distinguished from the private sector-driven = approach to=20 research and development adopted by others, Russian authorities have = again=20 looked to the state to be the locomotive for its national nanotechnology = strategy and development. This is embodied by the formation of a = government=20 council for nanotechnologies, headed by First Deputy Prime Minister = Sergei=20 Ivanov, as well as by the creation of the tax-exempt state corporation=20 Rosnanotekh. The latter, supervised by state appointees with pledged = government=20 holdings of six billion dollars for future investment, is authorized to = set=20 national priorities, identify and coordinate =E2=80=9Cpromising=E2=80=9D = research and=20 development, and commercialize specific nanotechnology projects. Intent = on=20 spreading the magic of the energy sector to nanotechnology, the = government=20 enlisted managerial and financial wizards from the electrical power=20 administration, designated the Kurchatov Institute as a national lab to = oversee=20 related scientific research, allocated funds derived from the forced = sale of=20 Yukos assets, and identified the fuel and energy complex as the main = customer=20 for initial products. By employing financial and administrative = incentives to=20 attract private capital, Rosnanotekh is expected to sustain and guide = the=20 country=E2=80=99s research and industry towards meeting national = objectives, while=20 earning profits for the state in the process.

Similarly, Moscow = has=20 seemingly staked out a competitive and ambitious trajectory for its = strategic=20 nanotechnology pursuits. While other states have generally downplayed=20 prospective military applications (or trumpeted development of = =E2=80=9Cdefensive=E2=80=9D human=20 sensor and protective gear), Russian scientists and officials have = proclaimed=20 that future warfare will be premised on an offensive-dominated,=20 nanotechnology-driven arms race. Putin has struck an especially ominous = tone by=20 declaring that Russia will =E2=80=9Cspare no expense=E2=80=9D at = developing =E2=80=9Csuper-effective=E2=80=9D=20 offensive military applications. This rhetoric took on new meaning in = September=20 2007 with the testing of the =E2=80=9Cfather of all bombs.=E2=80=9D = Notwithstanding the crude=20 nano-link to this fuel air explosive, Russian officials and the high = command=20 heralded the device as comparable to a nuclear bomb (without the same=20 environmental impact), marking the onset of the nanotech revolution in = military=20 affairs.

At the same time, Moscow actively seeks opportunities = to corral=20 international pursuits. Reminiscent of calls for a Russian-dominated = =E2=80=9Cgas OPEC,=E2=80=9D=20 President Dmitry Medvedev champions the creation of an = =E2=80=9Cintegrated=20 nano-industry=E2=80=9D of the Commonwealth of Independent States (CIS) = to avert=20 unnecessary rivalry, restore valuable regional scientific ties, and = reclaim the=20 rightful place of Eurasia atop the global high-tech economy. To date, = Russia has=20 inked deals with Astana to jointly sponsor Kazakh nanotechnology = projects, and=20 with Ukraine to develop a joint =E2=80=9Cseed corporation=E2=80=9D to = help shepherd Kyiv=E2=80=99s=20 long-term nanotech aspirations. Moscow=E2=80=99s = =E2=80=9Cnano-pursuits=E2=80=9D are not confined to the=20 post-Soviet space, as it openly covets cooperative national ventures = with China,=20 South Korea, and Hungary, among others.

Gaps Between=20 Centralization and Control
Notwithstanding the promise for = reviving=20 Russian science and industry, the nanotechnology revolution presents = fundamental=20 challenges that both render questionable the appropriateness of state=20 centralization and spotlight the government=E2=80=99s institutional = weakness. Since=20 nanotechnology represents a revolution =E2=80=9Cat the bottom=E2=80=9D = of matter that holds out=20 advances for numerous fields, applications, and techniques, its = properties=20 inherently assume an intersectoral dimension that places a premium on = the=20 cross-fertilization of information and knowledge among a wide range of = small,=20 medium, and large-sized research institutions. This poses acute problems = for=20 hierarchical systems of innovation, especially in states (such as = Russia) with a=20 legacy of imposing self-contained, secretive, risk-averse, and = sector-specific=20 R&D silos. Given repeated problems with interdepartmental = coordination=20 within the government and preferential designation of the = nuclear-centric=20 Kurchatov Institute as the technical gatekeeper to state-sponsored = research, it=20 seems that old habits may die hard in the new Russia. This is compounded = by the=20 appointment of state administrators with little experience at managing = diffuse=20 scientific research, let alone with expertise in nano-science and = =E2=80=93engineering.=20

The retrenchment towards statism also inflates structural = disincentives=20 to pushing the frontiers of the nanotechnology revolution. The expressed = objectives of Rosnanotekh including facilitating R&D and converting = such=20 advances into strategically important production=E2=80=94two hallmark = problems with the=20 Soviet system of vertically integrated science and production = associations. At=20 this stage, most scientists agree that material behavior that takes = place on the=20 nano-scale is more accurately captured by quantum, not classical, = mechanics, and=20 the real payoffs rest with invention and molecular manipulation, leaving = tremendous uncertainty over specific applications. Accordingly, with the = current=20 emphasis placed on commercialization and production, Rosnanotekh risks = diverting=20 qualified scientific cadres from making their mark on innovative = research. By=20 targeting three times more spending to nanotechnology than to other = areas of=20 research, the state is poised to crowd out traditional sponsors of basic = research and to exacerbate Russia=E2=80=99s brain drain from research to = production in=20 this growing field of science. Moreover, as a state corporation, = Rosnanotekh has=20 a strong motive to earn profits on government money via successful=20 commercialization of specific nano-based projects and other avenues of = financial=20 investment, both of which can come at the expense of cultivating = innovative=20 research with unpredictable or indirect profit streams. There is a = similar=20 dynamic in the military sphere, as aggregate shares of expenditures for = basic=20 and applied R&D are projected to decline through 2010 relative to = the=20 increase in procurement. With rising prices of new weapons, this trend = may=20 understate the real constraints on fielding cutting-edge nanotechnology = systems=20 in the future, thus hampering the military=E2=80=99s role as a = prospective steward of=20 the national effort.

By the same token, the nanotechnology = revolution=20 threatens to hit Russia=E2=80=99s institutions of vertical control where = they are=20 weakest. As Russian officials openly acknowledge, the keys to both = sustaining=20 nanotechnology and earning state profits will rest with attracting = private=20 sector investment. However, the persistence of opaque and selectively = enforced=20 property rights is likely to frustrate these objectives. In particular, = weak=20 patent laws and the precedents set by the state=E2=80=99s discretionary = revision of the=20 rules of the game in other sectors not only damage the general business = climate,=20 but especially discourage the venture capitalism needed to advance = Russia=E2=80=99s=20 nanotechnology ambitions. Not surprisingly, and potentially a harbinger = of=20 things to come, the first project funded by Rosnanotekh was awarded to a = company=20 with Dutch jurisdiction of ownership. Similarly, the pervasive = corruption=20 throughout the Russian government has discouraged many scientists, who = are=20 highly skeptical that state earmarks and budgetary promises will trickle = down to=20 support =E2=80=9Ctrue=E2=80=9D research and projects. That there are = questions about how leaders=20 of Rosnanotekh made their riches and that the state = corporation=E2=80=99s six billion=20 dollar holdings will be deposited with eight banks seems to feed this = anxiety.=20

Strategic Implications
Russia=E2=80=99s = grandiose=20 aspirations for nanotechnology present both challenges and opportunities = for the=20 United States. On the one hand, the intrinsic scientific and technical=20 uncertainty of the field makes it difficult to predict constructive = avenues for=20 competition, cooperation, and/or regulation. This is especially = challenging in=20 the military sphere, as we are only at the edge of appreciating the = range of=20 prospective applications and with little understanding of how = nanotechnology is=20 likely to affect either the distinguishability or the relative = advantages of=20 future offensive or defensive systems. Furthermore, this uncertainty = creates a=20 situation ripe for states, such as Russia, that are in the course of = projecting=20 their self-image on the unfolding landscape and can elevate certain = directions=20 of research at the expense of other equally promising directions. By = allowing=20 Moscow=E2=80=99s rhetoric and ambitions to drive external reaction, = Washington risks=20 misperceiving its intentions and prematurely locking in on strategic=20 competition, thus converting the promise of nanotechnology into a new = realm of=20 costly commercial rivalry and arms racing.

On the other hand, = political=20 enthusiasm and deep-seated constraints on Russia=E2=80=99s capacity to = embrace the=20 nanotechnology revolution create new openings for reviving the = U.S.-Russian=20 strategic partnership. As the fruits of the nanotechnology revolution = are=20 uncertain and diffuse, the risks are global, and each state brings = comparative=20 advantages to related research and production, there are both common = interests=20 and aversions that impel states to establish international best = practices.=20 Russia=E2=80=99s commitment to the field will require that it play a = constructive role=20 in this process. Yet, as the realization of Moscow=E2=80=99s lofty = ambitions and future=20 geostrategic identity are constrained by self-imposed structural = features,=20 Russia also has a strong stake in making hard choices to decentralize=20 decisionmaking and to strengthen political and economic transparency = without=20 active international prodding. As such, the nanotechnology revolution = will=20 likely introduce a new playing field for engaging a Russia stripped of = the=20 defensiveness and insecurity that imbued the asymmetrical relationship = of the=20 early post-Soviet agenda, and ripe for forging mutually beneficial and=20 reciprocal interaction. In this respect, nanotechnology=E2=80=99s very = nature will=20 likely present new opportunities =E2=80=9Cat the bottom=E2=80=9D for = re-grounding the=20 U.S.-Russian strategic partnership.

PONARS Eurasia = publications are=20 funded through the International Program of Carnegie Corporation of New = York.=20 The views expressed in these publications are those of the author alone; = publication does not imply endorsement by PONARS Eurasia, Georgetown = University,=20 or the Carnegie Corporation.

=C2=A9 PONARS Eurasia 2008=20

Eurasian Strategy=20 Project

PONARS Eurasia Policy Memo No. 26