Research and analysis

Russia/economic – St Petersburg international economic forum

Published 1 June 2014

0.1 Detail

Putin’s plenary session

The St Petersburg International Economic Forum took place on 22-24 May. Putin used his speech at the centrepiece plenary session to address the international business community directly:

• criticising the West’s use of economic sanctions against Russia. These had “a boomerang effect” which hit business and the economy in the countries which issued them. He said that the US had pulled together a coalition by arguing “either you’re with us or against us”, whilst noting that trade with the US was only worth $27.8 billion while trade with Europe was worth $440 billion. He thanked the western companies which had attended the Forum for their “independent and responsible position that is free from short-term considerations of the moment”.

• admitting that the sanctions were having some limited economic impact. His inner circle of “friends” had been targeted “for God knows what”, and had sustained “some losses” as a result. More widely, he noted that Russian companies no longer had access to resources they had before the crisis But he argued there was not yet a “serious systemic impact”, and he hoped this would remain true in the future.

• highlighting Russia’s increasing economic links with eastern markets. He described the $400 billion Russia-China gas deal as the “largest construction project in the world”, and stressed that this was just the first step: the next stage would be to work with Chinese partners to connect Russia’s eastern and western gas infrastructure. China was already Russia’s biggest bilateral trading partner with annual turnover of $90 billion, but he expected that trade flows could reach $200 billion per year by 2020.

• stressing that Russia would continue to work closely with western partners. Putin hoped that “common sense and an understanding of their own interests will encourage our partners in Europe and the United States to continue working with Russia”. Europe was Russia’s largest trade and economic partner, and he hoped this would remain the case in the future. He stressed “we are not going to isolate ourselves”.

• setting out a range of measures to tackle Russia’s domestic economic slowdown, admitting that the slowdown was due to both external and internal factors. He called on Russia to export more and import less, setting a 6% target for annual growth of non-oil and gas exports, and calling for greater import substitution. However, he stressed that Russia’s actions should be in line with WTO rules, should treat Russian- and foreign-owned companies equally, and should target only those sectors where Russia was competitive. He also announced plans for the state to provide more capital to systemically important banks to enable them to offer more loans at lower interest rates.

• and complaining about Ukraine’s lack of payment for Russian gas. Putin described the situation as “ridiculous”, and asked businessmen in the audience “how many of you would deliver the same amount of goods in the same amount of time for no money?” If Ukraine wanted to discuss better terms, it should first repay its debt, “at least for the discount period”.

There were fewer senior international participants at the Forum this year. In a demonstration of Russia’s economic “pivot” to the East, Chinese Vice President Li Yuanchao gave the guest speech, a role undertaken by Chancellor Merkel last year.

Isolation debate

Other panel sessions demonstrated the debate underway in Russia between economic liberals, calling for continued integration with the global economy, and statists, calling for greater state intervention and protectionism. Anatoly Chubais, who drove many of Russia’s economic reforms in the 1990s, noted that some discussions at the Forum were similar to those he had in St Petersburg 30 years ago.

0.2 Disclaimer

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