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“Where are all the foreign investors? I don’t see anyone here.” That’s how one fund manager, based in the US, greeted me at one of Russia’s main economic conferences, hosted by state bank VTB, on Tuesday.
Russia has rolled out the red carpet recently, hoping to lure foreign investors to its broken economy, following years of politicized disputes and uncontrolled corruption (see: Shell, TNK-BP, Ikea and on and on). The red carpet includes measures — for one, Russia seems close to finally joining the WTO after nearly 20 years — and lots of rhetoric, which was out in full force today.
Russia brought out its liberal best — Finance Minister Alexei Kudrin and presidential economic advisor Arkady Dvorkovich, long darlings of the West — but the star of the show, as ever, was Prime Minister Vladimir Putin.
“He looked nicer in person, more at ease,” the fund manager said, admitting that the reason he showed up to the event at all was the chance, despite over a decade of investing in Russia, to finally lay eyes on the country’s most powerful man.
And powerful he is, expressing confidence even with his manner of sitting (legs spread wider than the width of his shoulders). The fashionable words of the day rolled quickly, if uneasily, off Putin’s tongue: modernization, innovation, diversification. “I’d like to stress that the global economic crisis was a serious lesson for Russia,” he said. And later: “All of our strength is focused on this —modernization.”
Yet try as he might, Putin simply can’t seem to lose the tough guy image. The first hiccup came during the Q&A when an investor asked Putin about Yukos, the private oil company dismantled by the state. “There’s no meeting that goes by where investors haven’t asked about it,” she said. Putin thundered a response (read about it in full here), managing to dampen the investor-friendly mood with the image of corpses hanging from the jailed bodies of former Yukos employees. Putin was clearly none too pleased – and a transcript of the day’s speech and Q&A on his official website entirely excluded his excited ramblings on the subject.
And then there’s poor Ukraine. Poor, poor Ukraine. Ukrainian Deputy Prime Minister Sergei Tigipko tried to ingratiate himself with his powerful neighbor, saying: “Our markets are so interrelated, so close to each other and, thank God, we don’t have any real trade problems now, that for Ukrainian companies to invest in the Russian market doesn’t make much sense.” He meant it as a compliment, I think, but a sound strategy it is not. “Let me disagree with my colleague and say there is still a point of investing in Russia — and not just in the oil and gas sector — so I’d ask you to rethink that,” Putin said. Tigipko began to cower. Putin went on. And on. And Tigipko mumbled a quick “yes, you’re right” at the end.
Kudrin then stepped in to disparage the Ukrainian economy and when asked if he had any closing remarks to make, Putin began by saying: “Ukraine is a huge borrower from the IMF, while we give the IMF money.” Ouch. Following the election of a Russia-friendly government in Ukraine earlier this year, I guess we now know how relations work.
I always find the most interesting thing at these conferences the fact that China, despite its powerful economy and territorial closeness to Russia, plays absolutely no role in officials’ discussions. The only guy to bring it up at the conference was Ruchir Sharma, head of emerging markets at Morgan Stanley. At the very least, Putin was seen taking notes.