Russian authorities nervous as nation faces financial challenges

On the St Petersburg Worldwide Financial Discussion board, a Russian MP got here as much as me.

“Are you going to bomb Iran?” he requested.

“I am not planning to bomb anybody!” I replied.

“I imply you, the British…”

“Do not you imply Donald Trump?”

“He is advised what to do by Britain,” the person smiled. “And by the deep state.”

It was a quick, weird dialog. But it surely confirmed that in St Petersburg this week there was extra on individuals’s minds than simply the economic system.

Take President Vladimir Putin.

On Friday, the Kremlin chief delivered the keynote speech on the discussion board’s plenary session. It centered on the economic system.

But it surely’s what the Kremlin chief mentioned within the panel dialogue afterwards that made headlines.

“Now we have an previous rule,” Putin declared. “The place the foot of a Russian soldier steps, that is ours.”

Think about you are the chief of a rustic that is internet hosting an financial discussion board, in search of overseas funding and cooperation. Boasting about your military seizing overseas lands would not seem like the simplest method to obtain this.

However that is the purpose. Since Russia’s full-scale invasion of Ukraine in February 2022, the state of the economic system has been secondary to the aim of profitable the battle in opposition to Ukraine. That’s the Kremlin’s overarching precedence. True, Russia’s economic system has been rising, however largely as a result of huge state spending on the defence sector and military-industrial advanced.

And even this war-related progress is now tapering off.

Putin did not sound overly involved.

“So far as the ‘homicide’ of the Russian economic system is worried, as a well-known author as soon as mentioned – ‘rumours of my dying are significantly exaggerated,'” the Russian president declared.

However the Russian authorities is clearly nervous.

On the discussion board, Russia’s Minister for Financial Growth, Maxim Reshetnikov, warned that the nation’s economic system was teetering “on the point of recession”.

“We grew for 2 years at a reasonably excessive tempo as a result of unused sources had been activated,” mentioned Russian Central Financial institution Governor Elvira Nabiullina. “We have to perceive that lots of these sources have actually been exhausted.”

The St Petersburg Worldwide Financial Discussion board was conceived as a shiny showcase for the Russian economic system. Plenty of that shine has light as a result of hundreds of worldwide sanctions imposed on Russia over the battle in Ukraine. Many Western firms pulled out of Russia.

May they return?

In any case, US President Donald Trump has made it clear he needs higher relations with Moscow.

“At the moment we had breakfast with the American Chamber of Commerce and many buyers got here from the US. We get a way that a lot of American firms wish to come again,” Kirill Dmitriev, President Putin’s envoy on overseas funding, advised me. We spoke on the sidelines of the St Petersburg discussion board.

“I believe the American administration understands that dialogue and joint cooperation is healthier than sanctions that don’t work and harm your companies.”

Western companies, although, are unlikely to return in giant numbers whereas Russia is waging battle on Ukraine.

“I believe it is clear you need to have some form of an finish to the battle earlier than American firms are going to noticeably take into account going again,” mentioned Robert Agee, president of the American Chamber of Commerce in Russia.

“Have you ever requested the Trump administration to take away some sanctions from Russia?” I requested him.

“We have been to Washington,” he replied. “Now we have made an evaluation of the influence of American sanctions on American companies. We handed that on to the administration.”

“Do you settle for that the concept of Western companies returning is controversial in mild of the battle in Ukraine?” I requested.

“Western companies have made choices primarily based on what occurred three or 4 years in the past,” replied Mr Agee. “And it is as much as them to resolve whether or not it is the proper time to return.”

After greater than three years of battle and mass sanctions, Russia faces powerful financial challenges: excessive inflation, excessive rates of interest, studies of stagnation, recession. The issues within the economic system at the moment are brazenly mentioned and debated.

It is unclear how quickly they are going to be resolved.