Russia: St Petersburg Economic Forum: UKTI CEO Visit – June 2012

British Consulate General St Petersburg

Summary

President Putin addresses local and international business at the St Petersburg Economic Forum. He calls for better leadership from Eurozone policy makers, sets out Russian G20 priorities, and reiterates his approach to Russia’s modernisation. Participant reactions are mixed, and the falling oil price provides an uncertain backdrop. British scientist Rodney Allam receives the Global Energy Prize for his energy efficiency work. UKTI CEO Nick Baird meets senior British and Russian business. Russian state corporations (Skolkovo, Rusnano and Russian Railways) are looking to the UK for further high-tech, high-value solutions.

Detail

The 14th St Petersburg Economic Forum took place from 21-23 June, with around 5,000 Russian and international business participants.  The energy sector was well represented as usual.  The main themes were: growing BRIC economic strength and leadership; high-tech innovation as a driver for growth; and emphasis on the priority attached to improving the Russian investment climate.

President Putin spoke for an hour in direct and confident fashion to the plenary. There were no major new announcements.  Putin majored on the threats to the global economy from the eurozone crisis calling for for ‘strong decisions, not half measures’ from the next European Council.  He also covered the growing role of the BRICS in the G20, with Russia’s priorities as chair in 2013 to pursue IMF reform, trade flows and energy security; and economic modernisation in Russia.  Putin underlined Russia’s ‘responsible’ economic management, low debt, balanced budgets and strong reserves.  He said that Russia was prepared for the next phase of the crisis, with fiscal stimulus and new budget rules ready to be implemented.  He announced the appointment of a new business ombudsman, and committed to implement privatisation and fight corruption. He hoped Russia would join the OECD in 2014.  

There were mixed reactions to Putin’s speech.  Some welcomed his explicit recommitment to privatisation and controlling budget spending to reduce oil dependence.  But others thought there was little evidence of delivery mechanisms, and too much complacency.  Speaking 2 days later, Finance Minister Siluanov conceded that this year’s budget was based on an unrealistic $115 oil price, and there was widespread apprehension that, at $90, oil prices have reached levels which could, if sustained, cause Russia serious problems.  Behind the confident talk about Russia’s preparedness to confront another crisis, the government is taking the downward price pressure, and the potential impact of continuing eurozone problems, extremely seriously.  

Global Energy Prize

British scientist Rodney Allam MBE received the prestigious Global Energy Prize (alongside 2 Russian scientists).  Presented by Rosneft President (and effectively Russia’s energy Tsar) Sechin, Russia sees this as an ‘Energy Nobel Prize’.  Professor Allam (who was part of the International Panel on Climate Change, has developed gas liquefaction and carbon capture techniques.  It is significant that the Russians have recognised him and his efforts to make fossil fuels cleaner.   

Nick Baird business bilaterals

UKTI CEO Nick Baird heard from UK companies, including BP and Shell, about the challenges and opportunities of the Russian energy sector.  BP emphasised strongly their continuing commitment to the Russian market.  Rolls Royce are working hard to realise the MoU which they signed with Rosatom during the Prime Minister’s visit to Moscow last September.  They see huge potential in providing technology for the 30 new Russian nuclear power stations on order in Russia and Asia. 

Nick Baird also met Russian state corporations including: Skolkovo innovation hub, which has already launched projects with UK partners on energy efficiency, satellites and gas flaring; Rusnano technology fund which has 6 projects with the UK so far (second only to the US) worth $3bn (of which $1bn Russian Government money); Russian Railways, where UK companies are involved in reconstructing 11 major stations; VTB Russia’s second largest bank with a major London presence, focused on infrastructure financing.  All expressed interest in deepening co-operation on specific issues.

Nick Baird met a selection of small and large UK companies in the Russian market. In contrast to those engaged on energy issues, those focused on the growing consumer market had less political concerns and more day to day business challenges:  Rexam beverage cans are planning their 4th factory in Russia to cover the geography of the market; MDM Print is planning to acquire a Moscow factory to add to its St Petersburg operation and win market share; European Metal Recycling are seeking to expand their exports of scrap metal from Russia to Asian markets.  The general consensus was that economic activity levels has recovered to pre-2008 crisis highs, but there was some uncertainty about prospects for the second half of the year.  The companies saw some signs that the business environment and investment climate were improving, but the picture varied from region to region. 

Comment

As at the recent G20 Summit in Los Cabos, Putin was keen to portray Russia as one of the world’s stronger economies which, with its BRIC partners, deserved greater influence in running the world economy  He recognises that with over 50% of Russian exports going to the EU, Russia stands to lose badly from any further eurozone deterioration.

Disclaimer

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