By Leonid Bershidsky
Two years ago, President Vladimir Putin decided to wait out Western attempts to isolate Russia economically and politically. This year’s St. Petersburg Economic Forum—an annual event informally known as Russia’s Davos—showed that his patience is gradually paying off, but business as usual still isn’t within reach.
The lineup at the forum was much more impressive than in 2014, when Western leaders and top chief executives stayed away because Russia was toxic in the aftermath of the Crimea annexation, or last year, soon after the Minsk peace accord suspended the fighting in eastern Ukraine. This year, the US State Department again warned American companies against attending the gathering because of “clear risks, both economic and reputational, associated with top-level engagement with a government that is flouting the most fundamental principles of international rule of law by intervening militarily in a neighboring country.” Yet Exxon Mobil Chief Executive Officer Rex Tillerson showed up.
So did foreign leaders: United Nations Secretary-General Ban Ki-moon, European Commission President Jean-Claude Juncker, Prime Minister Matteo Renzi of Italy, former President Nicolas Sarkozy of France. The presence of the leaders of occupied Crimea and Putin’s wealthy friends, who are under international sanctions, didn’t deter these foireign dignataries from attending and giving Putin’s ego a boost.
Reality, of course, is more complicated. Juncker made it clear that Russia would remain subject to sanctions until the Minsk deal is fully implemented and that the Crimea annexation was illegitimate. Renzi took care to confirm this in his speech, too. On Friday, the European Union reinforced the message by extending Crimea-related sanctions for another year (harsher eastern Ukraine-related ones probably will be extended for a shorter period).
Although Putin said Friday that 40 countries had expressed a desire to form free-trade zones with the Eurasian Union, the bloc is not a success—at least for now. Last year, its first in the current form, trade volumes within it declined. Kazakhstan’s trade with Russia, for example, dropped more than a quarter.
The resolve to maintain the Ukraine-related financial sanctions may be weakening in Europe—that’s why figures such as Juncker and Renzi are willing to talk to Putin on his home turf, but that doesn’t mean they’re ready to work with him on his terms.
Putin, meanwhile, makes no secret of wanting just that. “We don’t hold a grudge,” he told Europeans, reiterating a phrase he used at the same forum a year ago: “Russia did not initiate today’s discord, problems and the introduction of sanctions.”
Putin did his best to sound confident about the state of the Russian economy: Growth will pick up, Russia has kept its international reserves, inflation is lower and capital flight has dwindled. Armed with recent economic proposals from his liberal advisers, he talked of cutting Russia’s non-oil budget deficit by 50 percent within five years, creating more jobs in small and medium businesses and making law enforcement agencies weaken their grip on private business. These ideas and promises, however, have been voiced many times before, without much of an effect on Russia’s abysmal business climate.
It’s heartening that top Western executives and politicians are not giving up on Russia, but it’s also clear that Putin views their willingness to attend his forum as a sign of weakness. It’s not clear what the visitors gained by visiting St. Petersburg; they may have merely contributed to Putin’s already bloated sense of his own importance. The Russian regime is not thawing, and there’s no retreat from its geopolitical assertiveness or its dogged economic statism. If the Western visitors expected to see something different in St. Petersburg, they were naive. If they didn’t, they were no more than glorified tourists.
