SPIEF: The state is everywhere

Hello! This week our top stories come from the St. Petersburg International Economic Forum (SPIEF), which returned last week after last year’s coronavirus hiatus. We look at the main talking points from the conference — the role of the state, plans for new taxes, Qatar’s missing delegates and President Vladimir Putin’s speech. We also discuss Belarusian dissident blogger Roman Protasevich’s “confession” interview on state TV and more announcements of Russian tech firms heading west.

SPIEF: The state is everywhere

St. Petersburg’s first economic forum since the pandemic wasn’t the most exciting. But it was honest — almost all the key discussions revolved around the Russian state’s role in the economy, with an unprecedentedly small focus on international matters. Businesses also learned a bit more about proposed new taxes and found out what Vladimir Putin thinks of Andrey Belousov’s plans to seize 100 billion rubles ($1.4 billion) from the metals sector.

The tone for the forum was set in the first major economic discussion —SPIEF’s opening session featuring key members of the economic bloc. It was President Vladimir Putin’s aide Maxim Oreshkin whose speech proved to be one of the most enlightening. “The role of governments and the scale of government budgets has increased significantly all over the world,” he said. Oreshkin was referencing countries’ economic crisis management policies in response to the pandemic, but his words would have been relevant at almost any session of the forum focusing on any other topic.

In contrast with 2019, there were no tense economic arguments among the key decision makers. Instead, officials stuck to the expected script, simply laying out their own policies and main talking points. For instance, Finance Minister Anton Siluanov highlighted the importance of reducing the surge in state spending which has been prompted by the coronavirus, while Central Bank Governor Elvira Nabiullina discussed the fight against inflation and getting back to a neutral monetary policy.

The relative calm could also be down to the fact that principal trouble-maker Alexei Kudrin was not given a big platform this year — neither at the main opening economic session, nor at Sberbank’s alternative ‘Business Breakfast’, when, once again, everything revolved around the role of the government. Sberbank CEO German Gref, who was the star of the show in the previous day’s discussion about the “client-centredness of the state,” alongside influential Kremlin éminence grise Sergei Kiriyenko, focused on what the state can do to support the economy. Even Andrei Makarov, head of the Duma’s tax committee and traditionally the highlight of the breakfasts, was unable to spice up the conversation. He repeated his trademark joke from SPIEF 2019 — “it’s the third day of the forum, and not one investor has been arrested” — although this time, instead of suggesting it was a sign of stability, he called it a first step.

Government regulation was also a main theme in the forum’s side events, forming the basis of most sessions with leading business figures. The most interesting of those featured sanctioned oligarch Oleg Deripaska (“The opposition has blown itself up, so let’s get down to business”) and small business envoy Anastasia Tatulova (“You spit at us, and we hate you”). Tigran Khudaverdyan, managing director of Yandex, discussed how to regulate ecosystems with Nabilullina at one session and then spent another debating regulations for self-employed couriers with labor minister Anton Kotyakov. Wildberries founder Tatiana Bakalchuk spoke of “getting tied up in red tape” while trying to obtain state subsidies for the rapidly-growing online retail giant.

New taxes

The big question on everyone’s lips was about possible new taxes for Russia’s largest businesses. This was triggered by First Deputy Prime Minister Andrey Belousov, who quite deliberately spoke on the eve of the forum about the need for the metallurgical sector to hand over the 100 billion rubles ($1.4 billion) that it had “siphoned from the state” since the start of the pandemic.

Belousov’s idea was widely debated in various sessions and interviews around the forum. He himself explained exactly how the state was supposedly squeezed out of the funds, while the metals industry defended itself by highlighting that it had already increased tax payments to the budget and insisted that the “greed” of entrepreneurs (as lamented by Prime Minister Mikhail Mishustin recently) was the engine of economic growth, advising that they should be judged not by greed but by their “conscience,” in Deripaska’s words.

The ultimate fate of Belousov’s proposal remains unclear. At a meeting a day before the forum with Industry Minister Denis Manturov, it emerged that the government is not unanimously behind the plan of a windfall tax on excess profits in the manner suggested by Belousov. Putin had the opportunity to weigh in in the situation publicly, when he was asked about it in his plenary session Friday, but he merely asked the metals bosses not to be offended by Belousov, adding that “on the one hand, it’s understandable” that businesses making large profits from exports also want to earn well at home, but on the other, this “creates certain imbalances” in the economy.

What is absolutely clear is that there will be a new tax on large profits — at least for those who pocket dividends and stash them abroad, rather than reinvesting them in Russia, as Putin demands support for the National Projects. Putin hinted at this in his speech to the Federal Assembly in April, and Mishustin later clarified that this meant a progressive tax on profits. Now, at SPIEF, we learned about the figures likely to be involved — Deputy Finance Minister Alexei Sazonov said that taxes on profits for those who “abuse” the system could jump from 20 percent to 25-30 percent.

Qatar, and the missing delegates

It’s not clear how much it was a side-effect of the coronavirus and how much was down to Russia’s growing international isolation, but there was little international presence at SPIEF this year. There weren’t many foreign guests on the stages, even via video link, and only one foriegn leader attended in person — the prime minister of one of Russia’s closest friends, the Central African Republic. Austrian Chancellor Sebastian Kurz and Qatar’s Emir Ahmed bin Nasser al Thani joined Putin at the plenary session via a video link. In 2019 the major guest was Chinese premier Xi Jinping, who spoke in person at the plenary session alongside Putin.

Qatar was named as the “guest nation” for SPIEF 2021 last year, meaning a sizeable delegation, presence on multiple panels and a special host-nation pavilion zone inside the forum. But, there seems to have been quite a bit of back-and-forth about the country’s exact role going on behind the scenes.  At the end of April, Qatar’s ambassador to Russia confirmed that Emir al Thani would come to St. Petersburg in person to lead the country’s sizable delegation. But in the end, the Emir only appeared via video link and Qatar’s delegation was half the size originally planned.

One source, close to the Qatari delegation, told The Bell that many delegates did not travel due to the coronavirus, citing fear of the pandemic’s spread in Russia. “Your situation is getting much worse, and decisions about the delegation were taken at the last moment,” they said. A second source said that around 200 of a planned 500 delegates stayed home, adding that the decision was not just about the coronavirus, but was also politically motivated. Two more sources added the details: apparently the Emir had demanded a personal meeting with Putin as a condition for travelling to St. Petersburg, and when this was refused, he and half of his delegates decided to stay at home.

Putin on Nord Stream and cheap mortgages

Putin’s speech at the plenary session Friday added the final touch to the nationalization of the supposedly “international economic forum.” It might be the first time that Putin has given a speech to SPIEF that was so focused on domestic issues that it could easily have been swapped with any of the president’s other big public appearances, such as the address to the Federal Assembly or his televised “Direct Line” call-in event. All the constituent parts were there — a big announcement about the completion of the first phase of Nord Stream 2, a promise of more social benefits in the shape of a year-long extension to the discount mortgage scheme (albeit with the subsidised rate increasing from 6 percent to 7 percent and the maximum loan size being halved), and plenty of Putin’s traditional jibes and jokes.

Lukashenko’s ‘Hunger Games’ 

On Aug. 3, Belarusian state TV channel ONT broadcast a 90-minute interview with Protasevich. Viewers compared it to George Orwell’s “Ministry of Love” featuring a character from the “Hunger Games,” who, under torture, was forced to denounce his comrades on television. 

• Everything about the interview, which more closely resembled an interrogation, was off. For starters, it wasn’t filmed in the studio normally used for shows starring the head of ONT Marat Markov — a former deputy head of Lukashenko’s ideology department. In place of the usual studio, we saw an anonymous space shrouded in black curtains. It’s possible that this was even filmed directly in the detention center where Protasevich has been held since the end of May. For the past five days, Protasevich has not been allowed to meet his lawyer.
• There are serious doubts that Protasevich was speaking of his own free will. There are signs of bruises around his wrists and he is clearly under colossal stress. At the end of the video, Protasevich breaks down in tears, while the cameras linger and zoom in from various angles as he struggles to regain his composure. Nexta founder Roman Putilo considers Protasevich’s words to be “the result of unbearable torture.” Protasevich’s father agreed. He believes his son is engaging in a constant internal struggle in the video and that the marks on his wrists are evidence of the use of handcuffs. During the interview, Protasevich said “nobody did my make up before filming.”
• Barely holding back tears, the former editor-in-chief of the Nexta protest channel said that he “accepted full responsibility” for organizing the Belarusian protests that “left Minsk in chaos for three days.” He also said that as he became more involved in politics, he realized that “many of the things for which Alexander Grigorievich [Lukashenko] is criticized are just attempts to put pressure on him” and that the president “behaved like a man with balls of steel.”
• Protasevich also said that Nexta, one of the top Russian-language channels on Telegram and the mouthpiece of the Belarusian revolution, is funded by a businessman “connected with the Urals and mining” and a “direct competitor of another well-known Russian businessman, Mikhail Gutseriev.”
• That description perfectly matches Dmitry Mazepin, who attended Putin’s address at the St. Petersburg International Economic Forum. Mazepin, a Minsk native, owns Uralchem and Uralkali and has repeatedly spoken out in support of the protests in Belarus. In August 2020, he proposed creating a”‘national salvation committee” in his homeland to arbitrate talks between Lukashenko and the opposition.
• Uralkali is a rival of Belalkali, one of the country’s biggest exporters. Up until 2013, they worked together on the export market as a single trader, the Belarusian Potash Company, which accounted for more than 40 percent of the global market. Then the alliance broke us. Gutseriev, mentioned by Protasevich, still has a potash business in Belarus, but his main business is in oil. Gutseriev is known to be very close to Lukashenko.
• Russia is clearly taking a position of tacit approval. Putin, who was asked about Protasevich at SPIEF, said: “I don’t know him and I don’t want to know him. Let him do what he wants and struggle against Lukashenko’s regime.”

Why the world should care It’s frightening to think about what Protasevich, his girlfriend and their families are going through right now. But one thing he said in his interview is undeniable: the Belarusian protests are most likely to succeed in the event of an economic collapse. And the biggest problems facing the economy, as several Belarusian economists told The Bell, would only stem from sanctions on Belarus’ key export sectors — oil and potash. This is what the world should care about. 

From Russia with groceries

Foreigners who come to Russia are amazed by two things: first, that even a tip or a charitable donation can be made by card with a couple of clicks, and second that in Moscow or St. Petersburg nobody sees anything odd in ordering a single loaf of bread or an ice cream to be delivered to your home – and have it arrive within 15 minutes. This week, one of the main Russian services behind the express grocery boom, hyperlocal delivery outfit Samokat, unveiled its ambitions to take the industry global. They are not the first of their kind to try to succeed outside of Russia.

• Referencing sources, The Bell reported this week that Samokat plans to launch in the U.S. in the near future, under a different name. The plans were later confirmed by the company, which said the service will launch in New York this summer.
• In Russia, Samokat was the first of its kind. It was founded by former senior managers of the Russian postal service, Pochta Rossii, in 2018. Sergei Gordeyev’s PIK group was the first big investor, putting $10 million into Samokat in 2019. In May 2020, a 75.6 percent controlling stake in Samokat was purchased by Sber and Mail.Ru’s joint venture for an undisclosed fee.
• Meanwhile, Tigran Khudaverdyan, managing director of Yandex, a direct rival to Sber and Mail.Ru’s ecosystem ambitions, told The Bell Yandex also plans to enter the European market. During SPIEF, he named Paris and London as the first cities being targeted.
• In Paris, Yandex’s ultra-fast grocery service has already established a company and assembled a team. The service won’t operate under its Russian name (Yandex.Lavka) but as an international brand, Yango Deli. It’s another front in the battle between the two online ecosystems: Sber’s Samokat vs Yandex.
• The American market already has some express delivery services with Russian roots. New York start-up Fridge No More was launched in 2020 by Pavel Danilov, one of Samokat’s investors, and Anton Gladkoborodov, co-founder of Coub. In March, the project attracted $15.4 million from the Insight Partners fund and other investors.
• This year also saw Vitaly Alexandrov’s Food Rocket service launch along the U.S. East Coast. In April, funds Baring Vostok and AltaIR Capital led a pool of investors contributing $2 million to the project.

Why the world should care Several Russian tech services — surprisingly — work more effectively than their foreign counterparts (after all, not many top banks in the U.S. or U.K. offer cutting-edge apps that match the standards of those on the Russian market). It’s possible that the secret of this success is due to the fact that these companies are relatively young: even state-owned Sber is less than 30 years old, a mere child compared with the likes of Barclays or HSBC.