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Russia Digs in for Stagnation As Western Sanctions Bite RUSSIA INVESTMENT SUMMIT 2014 Russia digs in for stagnation as Western sanctions bite it by Western sanctions over Moscow’s creasing, some say Russia may use its resource wealth St.Basil’s Cathedral position in the Ukrainian crisis, Russia’s to prop up the economy. is illuminated during Halready slowing economy has weakened But where some see difficulties, President Vladi- a rehearsal for the further. The government has repeatedly reduced its mir Putin sees opportunity, saying the situation “Spasskaya Tower” growth forecasts and some analysts say the country could boost Russia’s attempts to become more self- international military music is on the brink of recession. sufficient and strengthen ties with its partners in the festival on Moscow’s Red Western companies, banks and investors are in- East. Square August 30, 2011. creasingly reluctant to commit funds to Russia, fear- The Reuters Russia Investment Summit brought REUTERS/SERGEI KARPUKHIN ful that the United States and European Union may together some of Russia’s most influential entrepre- impose more sanctions on the economy, and some neurs, executives and policy makers to offer a deep Russian companies say they are concerned over fu- insight into the country’s future direction and goals. ture growth. Covered by Reuters journalists, the summit gener- With capital flight accelerating and inflation in- ated exclusive stories and insights for Reuters clients. 1 RUSSIA INVESTMENT SUMMIT 2014 Russian business fears return to isolation during ‘evil empire’ BY ELIZABETH PIPER AND TIMOTHY HERITAGE country, when it was the Soviet Union, MOSCOW, SEPTEMBER 25, 2014 were seen differently; that because of isola- tion, there was an element of mistrust,” he ussian businessmen are backing said. Vladimir Putin over Ukraine but “This kind of external pressure ... con- Rfear the country is being forced tributes to consolidation and, on a personal down a path toward less democracy, more level, is deeply unfair because I don’t think central control of the economy and isola- the world will benefit from Russia becom- tion that recalls the Soviet “evil empire”. ing more isolated and I don’t think anyone Like many other business leaders, Vladi- can seriously believe that putting pressure mir Potanin, one of Russia’s richest men, on Russia in general and on Putin spe- says Western sanctions and attempts to cifically will bring a better result and not a force the president to change policy risk worse one.” opening a rift between Moscow and the Potanin, the chief executive of Norilsk West that will be difficult to repair. Nickel, the world’s biggest producer of “What is happening now, namely the nickel and palladium, chose his words care- isolation of our country from contacts with fully, saying he did not want to cast blame Europe, America and several other coun- on any side. tries, causes real regret,” Potanin, a metals But he concluded: “Now the country is magnate who built his empire soon after Vladimir Potanin, CEO and co-owner of Norilsk slowing down in terms of economic devel- the Soviet Union collapsed in 1991, said in Nickel, speaks as he attends the Reuters Russia opment. Yes we are going through difficult an interview at the Reuters Russia Invest- Investment Summit in Moscow September 23, times, but Russians have got used to tight- ment summit. 2014. REUTERS/MAXIM SHEMETOV ening their belts and we will survive this “Because, in a sense, we are returning to period. But those who leave the market will the days when Soviet people were regarded lose out ... It’s madness,” he said. as coming from ‘the evil empire’ and now mestic industry. UNITY people are starting to place this cloak on Many businessmen say the West has Russians’ shoulders again,” he said, using left Putin little choice but to continue on Russia’s economy was already slowing this the phrase coined by former U.S. President a path that appears to be steering Russia year when the United States and the Eu- Ronald Reagan during the Cold War. away from democracy and toward a more ropean Union started imposing sanctions There is broad agreement in business nationalized economy with fewer opportu- on leading companies, officials and banks circles that the Western sanctions, imposed nities for innovation and growth. to try to force Moscow to change policy in on Moscow over its policy on Ukraine, have Potanin, now 53 and estimated by Ukraine. had the opposite effect to the one intended. Forbes magazine to have a net worth of But Moscow did not change policy, Instead of undermining Putin, the sanc- $14.5 billion, recalls the Soviet Union of denied arming separatists in east Ukraine tions have - at least so far - united the busi- his childhood, when he was one of the priv- and refused to give up Crimea, annexed in ness and political elite. ileged few to see it from abroad as his father March after the Black Sea peninsula voted But there is no hiding the growing alarm worked for the Foreign Trade Ministry. in a referendum to leave Ukraine and join over the state of the economy and Russia’s “Unlike many of my peers, I had the Russia. increasing isolation from the West, despite possibility of comparing, of seeing, and that Now economic growth has stalled and attempts led by Putin to develop business really helped me. Those childhood impres- analysts say Russia faces years of stagna- and political ties with Asia and boost do- sions are still with me - that people in our tion, with even a government forecast of 2 RUSSIA INVESTMENT SUMMIT 2014 0.5 percent growth this year being seen as optimistic by some. It’s a far cry from when the country enjoyed annual growth rates of 7 percent at the beginning of the century. A sweeping ban on imports of dairy, meat, fruit and vegetables from many Western countries, imposed by Moscow in early August in retaliation to sanctions, has prompted food prices to edge higher, threatening inflation which is already at an annual rate of almost eight percent. But Agriculture Minister Nikolai Fy- odorov said most Russians understood why Moscow had to react and would stand firm. “There has been and is a consolidation of society, despite the threat of rising prices,” he told the summit. “People are saying ‘Yes, we understand, prices are rising, but there are sanctions against Russia and we, - I don’t want to say this but I hear it - we are surrounded by A September 12, 1990 file photo shows former U.S. President Ronald Reagan holding a hammer and enemies.” chisel next to the Berlin Wall on Poltsdammer Platz in East Berlin. Russian media, mostly controlled by the state, has whipped up nationalistic fervor, using references to Russia’s role in winning tushenkov, seen as a loyal businessman, was Russia’s eastern allies may not be as profit- World War Two and taking on shades of put under house arrest last week on mon- able as they initially thought. Soviet-era propaganda to show the West as ey-laundering charges over a deal that was Many are drawing up several plans based a morally corrupt aggressor. made five years ago, businessmen are draft- on different estimates of the big “unknown” While more than a quarter of Russians ing contingency plans for all eventualities. - how long sanctions will be in place on see colonization of their country by for- Some Western investors, who cannot Russia. eigners as the greatest threat to the nation easily quit Russia after starting up joint ven- Some businessmen say Yevtushenkov’s in polls, Putin’s popularity rating has stood tures with Russian companies, are adapting arrest shows a state hungry to fill its coffers at over 80 percent since Russia annexed their product lines to attract families who by reclaiming assets, sold off after the So- Crimea. may now have less money to spend. viet Union’s collapse, to ride out sanctions. “Ultimately, the only way out is for one Ted Cannis, CEO of Ford Sollers, a 50- “What is going now is a one-way ticket. side to back down,” said Fyodorov. “I’m 50 joint venture between Ford and Russian Unfortunately, there is no normal, demo- sorry, but this is like a Cold War, and in carmaker Sollers, said he saw no sign that cratic way out of this situation,” a senior this Cold War there are no grounds to see the auto market would improve in the next Russian businessman said. someone winning in the foreseeable future.” two years. “We will be lucky if this happens to us “A person who was going to buy a pre- more or less smoothly. When? In about 10 CONTINGENCY PLANS mium vehicle in the C segment (small fam- years. How are we going to move toward Analysts and businessmen do not see any ily cars) is now going to buy a cheaper ve- democracy? Through pain. The country is quick resolution to the crisis, with former hicle of the same size,” he told the summit. too big.” Finance Minister Alexei Kudrin predicting “We are definitely seeing a lot of that.” Russia would have an “exclusionary regime” Others see possibilities in forging closer Additional reporting by Darya Korsunskaya, for several years. ties with China and other Asian countries, Jason Bush, Polina Devitt, Lidia Kelly, Maria With little certainty over the future, although some warn that after the honey- Kiselyova, Anastasia Teterevleva, Gleb especially since billionaire Vladimir Yev- moon period, the reality of marriage with Stolyarov, Editing by Janet McBride 3 RUSSIA INVESTMENT SUMMIT 2014 Russia needs to work hard to meet tight budget: finance minister BY DARYA KORSUNSKAYA AND LIDIA KELLY MOSCOW, SEPTEMBER 26, 2014 ussia’s newly approved budget rests on optimistic GDP forecasts as Rwell as high oil prices, forcing the government to work hard to meet its pro- jected growth rates, Finance Minister An- ton Siluanov said.
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