Saint Petersburg — Foreign investors may be under arrest, Western sanctions may be hurting and economic growth slowing, but Russia is hoping to attract badly-needed investment at its annual Saint Petersburg International Economic Forum, which opens on Thursday.
Once dubbed the “Russian Davos” when the country’s economy was booming, the forum hosted by President Vladimir Putin has become a showpiece where Russia strives to show its openness to outside investment despite a tense business climate and a crisis in relations with the West.
Running until Saturday, the 2019 forum in Putin’s native city is expected to draw some 17,000 participants, according to the Kremlin, the same number as 2018.
Chinese President Xi Jinping and UN secretary-general Antonio Guterres are scheduled to give keynote speeches.
The event comes as the recovery of the Russian economy has slowed considerably since the beginning of 2019. After two years of recession — caused by a fall in oil prices and sanctions for its role in the Ukraine crisis — Russia returned to growth in 2017. But its economy grew by only 0.5% in the first quarter of 2019.
Searching for private investment
Moscow desperately needs investment if it is to fulfil the ambitious goals announced by Putin at the start of his fourth term in the Kremlin in 2018. These so-called “national projects” — ranging from health care to infrastructure — are scheduled to be completed by 2024 and will cost Russia $388bn.
Some $115bn of this has been earmarked from private — Russian or foreign — investment.
Russia is trying to increase its investment-to-output ratio, said Charles Robertson, chief economist at Renaissance Capital. “The government is raising taxes to finance more investment, but private investment should play its part,” he said.
Macro Advisory senior partner Chris Weafer said Moscow wanted to show that it has “successfully diversified its geopolitical focus away from Western exclusivity”. In particular, he said, Russia is keen to demonstrate that it now has investment, trade and political relations in Asia and the Middle East.
“The other message is that relations with Europe are improving and that the trade and investment relations with the US are now much less important,” Weafer said.
‘Elephants in the room’
Nevertheless, the arrest in February of US businessman Michael Calvey — the founder of one of the oldest private equity firms focusing on Russia — sent shockwaves through the investment community.
Calvey has since been placed under house arrest, while his French colleague Philippe Delpal remains in pre-trial detention. They were arrested along with four others on fraud charges but insist they are innocent, saying the case against them was fabricated and stemmed from a shareholder dispute.
US ambassador to Russia Jon Huntsman will boycott the forum in protest over Calvey’s arrest.
France, meanwhile, will send its ambassador but no minister. This is in contrast to 2018 when President Emmanuel Macron led a large French delegation at the forum.
Calvey’s case “will be the focal point of a lot of discussion” at the forum, said Weafer. It and another affair involving the bank, Baring Vostok, would be the “elephants in the room — uninvited and unwelcome but impossible to ignore”, he said.
This week, the Kremlin said it wished that Calvey could attend the forum and hoped that he and his French colleague Delpal would be released in the future. The comments by the Kremlin could mark a shift in the high-profile criminal case.
Charles Robertson said the Calvey case sent a “negative message about the business climate” and “ran against Russia’s investment interests”. But he added that the case is not the first for Russia, which “has been through these things” before.