Notes from SPIEF 2023: Russia is still in business

Business as usual. But different. That was the sentiment at this year’s St. Petersburg International Economic Forum, which took place from June 14th-17th, one year after Russia launched its “special military operation” in Ukraine.

With aptly named panels such as “Investing in the New Reality” and “Updating Russia’s Long-Term Industrial Policy for the New Reality”, the forum was a display of Russia’s pivot to Asia, Southeast Asia and the Middle East. In turn, it was a platform for countries from those regions to showcase their ambitions, eager to fill the gap created by the exit of western companies.

Trade

According to statistics from Roscongress, 18% of US subsidiaries in Russia and 8.3% of European ones have wound down operations in the country. At SPIEF, this was presented as an advantage for Russian entrepreneurs, who can now purchase those subsidiaries below the market price, and as an opportunity to enhance the country’s “sovereignty,” a term that Russia frequently invokes to engage countries who “like Russia, value their national interests and are ready to determine their own future,” as Vladimir Putin stated during his address at the Plenary session.

Russia’s top trading partners for 2022 were China and Turkey. Sino-Russian trade turnover amounted to $190 billion, with Russia receiving $450 million from Chinese investment during the first eight months of the year. With Turkey, trade grew to $60.72 billion, an 84%-increase compared to 2021.

Advanced levels of cooperation can also be observed with the United Arab Emirates (UAE), which was honored as this year’s ‘guest country’ at the forum. Trade turnover with the UAE grew by 68% in 2022 relative to 2021. Around 700 Russian companies, from popular clothing retailers like Lichi, to Michelin restaurant alliances, like White Rabbit Family, have entered the UAE market.

It is no coincidence that Russians increasingly half-jokingly refer to the UAE’s most glamorous city as “Dubaisk.”

Impact of sanctions

While Russia tries to stay active at the forum and sell its vision for a multipolar world order with ‘de-dollarized’ transactions, and ‘sovereign’ technology, the EU is preparing to hit Russia with an 11th package of sanctions. The impact of sanctions has been mixed. The ruble is at a low, and while there are positive GDP growth forecasts, this could be offset by other challenges.

The topic of western sanctions was not one that was separately discussed at the forum, but one that was taken as a given, underpinning all conversations, and was colored as an opportunity to achieve Russia’s long-hoped for vision of a multipolar world instead of as a restriction.

With a long history of isolation during the USSR era and sanctions after the events in Crimea in 2014, Russia seems to have gotten accustomed to western restrictions, which it now sees as something to be expected and has hopes to grow its economy despite them. It remains to be seen if Russia’s optimism will outlive western sanctions.