As the war in Ukraine drags on, taking a heavy toll on both sides of the frontline, Russia, faced with the biggest standoff with the West in its modern history, keeps looking for alternative economic and geopolitical partnerships to navigate the “challenging times”. At the 26th edition of the St. Petersburg International Economic Forum (SPIEF), held last week in Russia’s second-largest city and former imperial capital, the Kremlin made its message clear to the entire world: the economy is holding up despite unprecedented Western sanctions.
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This year’s “wartime” SPIEF turned out less international and lavish than its past editions, for obvious reasons, even though organisers claimed the participation of over 17,000 people from 130 countries, including high-ranking officials from the UAE, Algeria, Armenia, Cuba and delegations from China, India and Brazil.
Russian President Vladimir Putin speaks at a plenary session of the St. Petersburg International Economic Forum in St. Petersburg, Russia, on June 16, 2023. | Photo Credit: AFP PHOTO / Host photo agency RIA Novosti
Elite gathering
The SPIEF used to be called “Russian Davos” as it was probably the only such elite gathering of global business community leaders in this part of the world. At different times, Russian President Vladimir Putin had shared the stage with different world leaders including Prime Minister Narendra Modi, Federal Chancellor of Austria Christian Kern, and President of Moldova Igor Dodon (2017); French President Emmanuel Macron and Prime Minister of Japan Shinzo Abe (2018); Chinese President Xi Jinping, President of Bulgaria Rumen Radev and Prime Ministers of Armenia and Slovakia Nikol Pashinyan and Peter Pellegrini as well as UN Secretary-General António Guterres (2019).
Except Hungarian Foreign Minister Péter Szijjártó, who made his appearance at the forum and addressed one of the key sessions on energy security, calling on countries to stop politicising it and return to rational decision-making, high-ranking delegates and CEOs from the West were missing at SPIEF. So were the international media.
Correspondents of foreign outlets still operating in Russia were denied accreditation. The Kremlin spokesperson confirmed the decision to not provide accreditation to media from “unfriendly countries” (those which have imposed sanctions against Russia — altogether over 20 countries, including the United States, European Union countries, Canada, South Korea, Japan and others).
According to people close to the organisers, international media outlets were given “special attention” even as recently as last year, when the SPIEF was conducted for the first time since Russia invaded Ukraine, but the decision to not allow them to cover the event was taken for the first time in the forum’s history. Many related this to the incident earlier this year when Russian journalists from Foreign Minister Sergey Lavrov’s delegation were denied U.S. visas to travel to the UN Security Council meeting in New York.
International leaders
This year, the only international leader addressing the plenary session on the stage was Algerian President Abdelmadjid Tebboune. Mr. Putin praised his decision to attend the forum and share the stage with him. “Everyone in this audience understands what it means to come to Russia at this time and, in particular, to attend this event and to be together with us. This is proof of one’s leadership qualities, character and respect for one’s own national interests,” Mr. Putin said during the plenary session.
Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates, with HE Denis Manturov, Deputy Prime Minister and Minster of Industry and Trade of Russia, visits the UAE Pavilion at the SPIEF in Saint Petersburg, Russia, on June 16, 2023. UAE was the forum’s guest country, and has even promoted its participation back home. | Photo Credit: Mohamed Al Hammadi / UAE Presidential Court
Sitting in the audience was the President of the UAE, Sheikh Mohammed bin Zayed Al Nahyan, who had a personal meeting with the Russian leader on the sidelines of the SPIEF. The UAE was the forum’s guest country, and has even promoted its participation back home — Dubai skies lit up with drones forming an SPIEF ’23 sign — which didn’t go down well with pro-Ukrainian commentators on the social media, who called for boycotting the UAE and its companies.
While the war in Ukraine was not directly mentioned at the forum’s sessions, speakers choosing to allude to it as “the difficult situation” or “the challenging reality”, it took the central place at SPIEF’s traditionally lengthy plenary session, addressed by Mr. Putin and Mr. Tebboune and moderated by Dimitri Simes, a U.S. political scientist of Soviet origin and president of the Washington-based Centre for the National Interest think tank.
Positive trends
In his opening speech, Mr. Putin didn’t mention Ukraine even once, instead focussing on Russia’s economic growth despite all odds — the economy contracted 2.1% in 2022, which was way less than the 7-10% decline projected by the Ministry of Economic Development and the Bank of Russia, and is forecast to grow by 0.8-1.2% this year.
“Today, we can say in all confidence that the strategy chosen at the time by both the state and Russian businesses [has] proved its worth. Positive macroeconomic trends are gaining momentum and becoming increasingly apparent,” Mr. Putin said. “I agree with our analysts who argued that the Russian economy would achieve an even higher growth rate of about 1.5%, or maybe even 2%. This will enable our country to retain its place among the world’s leading economies,” he added.
The following Q&A session, however, revolved around the conflict, with the moderator theatrically pushing the Russian leader to speak on NATO’s involvement in the war and Russia’s possible nuclear response, as well the role of Nazism in Ukrainian politics. Responding to the latter, in what was made look like an impromptu, Mr. Putin asked to show an archive film footage describing Nazi crimes against Jews, including the scenes of the Volhynian massacre, one of many anti-Polish ethnic cleansing conducted by Ukrainian nationalists during the Second World War. Probably for the first time in SPIEF’s history, the elite delegates were made to watch horrific scenes of mutilated bodies of women and children being thrown into pits.
The resilience of the Russian economy and the ways to mitigate external factors such as disruption in logistics and exclusion from the global financial system remained the key topics of discussion at the forum, with policymakers and businesses engaged in sometimes heated debates of the ways to go forward.
Alternative routes
Payments and logistics indeed remain the key obstacles for Russia’s trade with what it sees as friendly countries, many of which are located outside already developed land and maritime routes. Moscow is pushing the development of the Northern Sea route, which takes off at Russia’s Murmansk and leads to Shanghai, and the International North-South Transport Corridor (INSTC), a 7,200 km–long multimodal transport route connecting Russia’s north with Iran and India via the Caspian Sea. According to Oleg Belozerov, CEO of the Russian Railways, the transit of goods via INSTC could reach over 100 million tonnes in the next seven years if it grows at the same pace as in the past year. In 2022, around 9 million tonnes of cargo were transported along the corridor — a 60% increase from the previous year.
But developing new routes requires immense investments in the infrastructure, something that could be a problem given Russia’s resources are streamlined elsewhere and its ability to borrow money is very limited. For the Arctic route, for instance, Russia is planning to construct more than 50 icebreakers and ice-class vessels, ports and terminals, emergency and rescue centres, as well as building an orbital group of satellites. This would require a total investment of 2 trillion roubles ($24 billion) over the next 13 years.
Investing in growth
According to Iranian Minister of Transport and Urban Development Mehrdad Bazrpash, who spoke at the SPIEF session on the INSTC, both Russia and India are now considering investments in the infrastructure, ranging from railway, roads and ports to logistics centres as well as robust digital infrastructure.
Nonetheless, to be able to sustain economic growth and increase its range of exports beyond hydrocarbons, Russia needs to boost its domestic production across industries. Whether 400 agreements worth nearly 3.8 trillion roubles ($45 billion) concluded at SPIEF will help the country achieve this remains to be seen. As the governor of Kurgan region in southern Russia noted, the effects “from trillions-worth contracts” signed are not clearly visible in the real economy, with the forum being full of “big talks” and “mystifications”.
“[We need] more real projects and real solutions, for a real economy, with results feasible to the real people living in a real country. And for rapid growth, the economy needs cheap money, cheap and fast transportation of goods, quick access to inexpensive energy, trained personnel, flexible modern planning and just common sense,” he said, adding that most of this was discussed at the forum — and now needs implementation.
