The first St. Petersburg International Economic Forum (SPIEF) since the pandemic wasn’t the most exciting. But it was honest — almost all 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 President Vladimir Putin thinks of Deputy Prime Minister Andrei 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 government’s ‘economic bloc’. It was Putin 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 economic arguments among the key decision makers. Instead, officials stuck to the script, simply laying out their own policies and 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 trouble-making former finance minister 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 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 breakfast, was unable to spice up proceedings. 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 billionaire Oleg Deripaska and small business envoy Anastasia Tatulova (“You spit at us, and we hate you,” she said). Tigran Khudaverdyan, managing director of Yandex, discussed how to regulate ecosystems with Nabiullina at one session and then spent another debating regulations for self-employed couriers with Labor Minister Anton Kotyakov. The founder of online retail giant Wildberries, Tatiana Bakalchuk, spoke of “getting tied up in red tape” while trying to get subsidies for her company.
The big question on everyone’s lips was about possible new taxes for Russia’s largest businesses. This was triggered by Belousov, who deliberately spoke on the eve of the forum about the need for the metals sector to hand over 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 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 Trade and 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. 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 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.