Despite the "business as usual" message in St. Petersburg, investors are
waiting to see how the Kremlin will act after Ukraine's poll, says
CNN's John Defterios.
ALL AMANPOUR »
THIS WEEKEND
PUTIN'S 'DAVOS'
THIS WEEKEND
PUTIN'S 'DAVOS'
Despite the "business as usual" message in St. Petersburg, investors are
waiting to see how the Kremlin will act after Ukraine's poll, says
CNN's John Defterios.
Ukrainian protesters look back and remember exactly how the unrest started.
Putin's 48 hours in St. Petersburg
May 24, 2014 -- Updated 1627 GMT (0027 HKT)
Putin behind Igor Sechin (R), the CEO of Rosneft, and Marco Tronchetti Provera of Italian tire manufacturer Pirelli.
STORY HIGHLIGHTS
- Russia has been hosting the May 22-24 St. Petersburg International Economic Forum
- Russian President Vladimir Putin spent 48 hours at the business gathering
- He gave the impression of an engaged leader aiding dealmaking, John Defterios says
- But Defterios says the annexing of Crimea has not helped Putin's standing in global business
Editor's note: John Defterios is
CNN's Emerging Markets Editor and anchor of Global Exchange, CNN's
business show focused on the emerging and BRIC markets. Follow John on Twitter.
St. Petersburg, Russia (CNN) -- Vladimir Putin was
on out on a mission here in his hometown to re-boot his languishing
economy after political moves involving Ukraine scared off investors in
the past half year.
While voters were readying for an election this weekend in Ukraine, the Russian president spent 48 hours at the St. Petersburg International Economic Forum to convey a message to those in attendance, his domestic constituency and investors watching our coverage from abroad.
The images showed an engaged leader in constant dialogue with corporate titans and one helping to support dealmaking.
I suggest we don't discuss the sanctions anymore because it is counterproductive.
Rosneft CEO Igor Sechin
Rosneft CEO Igor Sechin
Putin stood proudly
behind Igor Sechin, the CEO of his energy giant Rosneft, as he finalized
a recent agreement with his counterpart Marco Tronchetti Provera of
Italian tire manufacturer Pirelli.
The signing of seven
agreements on Saturday capped off a week where Putin orchestrated a
$400bn, 30-year agreement with China to export natural gas.
To underscore that
moment, he invited a Chinese vice-premier to his annual roundtable.
Bringing him here reinforced the new partnership and illustrates to the
world Russia is moving east to Asia to capture business.
Alexey Ulyukaev, Russia
Economic Development Minister and a member of "Team Putin" told a CNN
emerging markets roundtable here at SPIEF. "This is our message: nothing
personal, nothing political, just business."
Impact of Crimea
But politics and business have clashed over Ukraine.
President Putin's move
to annex Crimea may have boosted his poll ratings at home, but it
certainly has not helped his standing in global business. U.S. and EU
sanctions prompted capital flight of $60bn in the first quarter. More
worrying, cabinet ministers and business leaders told me, it's holding
back decision making.
Big names ditch Putin's party
Russia, China reach landmark energy deal
Russian oil giant looks east
Expert: Energy deal a big win for Russia
"This problem is not the
sanctions themselves which are in place at the moment," said Dmitry
Konov, CEO of the Russian natural gas and petro-chemical group Sibur,
"but rather that most of our partners don't know what to expect if
anything."
That uncertainty is
hitting an economy already in decline. Russia was growing 4% back in
2010, but it has taken a staircase lower to just over 1% last year. It
is projected to barely expand this year, according to the International Monetary Fund.
There is also the potential danger of global contagion by trying to isolate a near $2 trillion economy like Russia.
"It's very difficult to
solve the problem without engagement, "said Mustafa Abdel-Wadood,
Chairman of the Executive Committee at private equity firm Abraaj Group.
"I don't think we'll
find solution without engagement. And I would apply it to both:
commercial and political decisions," he added.
After the final event of the forum, Sechin of Rosneft told me constant questions on sanctions don't help matters.
He has been the target of U.S. sanctions limiting his ability to travel there for business with partners such as Exxon-Mobil.
"I suggest we don't
discuss the sanctions anymore because it is counterproductive," he said,
adding, "The increased attention to sanctions and discussion of
sanctions significantly increase their importance."
Corporate leaders
understand that Putin and his team want to turn the page on Ukraine, but
there is another reality. Beyond all the efforts to convey a message of
"business as usual," investors who attended the forum said they want to
see how the Kremlin responds to events after the Ukraine election.
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An optimistic view of a supremely difficult election
May 23rd, 2014
02:30 PM ET
There are difficult elections, and then there is Ukraine's election:
This Sunday, voters will seek to legitimize their post-Yanukovych era by electing a new president. But unbearable pressure from Russia has come very close to scuppering it – first annexing Crimea and then encouraging pro-Russian separatists to destabilize eastern Ukraine by declaring independence, and shedding blood in some parts.
Nine hundred observers from the OSCE (Organization for Security and Co-operation in Europe) will be overseeing the election, because a truly free and fair poll will be vital for peace and stability.
“I expect elections in Ukraine to be largely okay in the overwhelming number of districts,” Wolfgang Ischinger, representative of the OSCE for Ukraine, told CNN’s Christiane Amanpour in an interview that aired Friday.
“But there are huge obstacles in the east, principally in two of the districts. And I expect that voting there will be either patchy or maybe impossible for many citizens. So we will not have a totally perfect vote.”
Despite imperfection, he said, the election of a new president represents an enormous opportunity.
“If he or she reaches out to those living in the east and explains to them that he wants to be their president also, I believe that that can change things in a significant way.”
Just weeks ago, there were significant concerns that Russia could launch a full-scale invasion of eastern Ukraine. Now, Ischinger said, he is buoyed by attempts to calm the situation.
“I am extremely excited about the fact that some of the so-called oligarchs in the country are now also finally, you know, waking up and dispatching their workers and using some of their financial resources to help create an atmosphere of calm, an atmosphere that will allow people to go to vote without being intimidated. Intimidation is a big problem here.”
Ukraine remains a very divided country, and chaotic, country. Just this week 16 people were killed on an attack on soldiers in the country’s eastern Donetsk region.
But there is no indication, Ischinger said, that eastern parts of the country genuinely want to break off – a claim backed up by public opinion polls.
“I traveled myself to Donetsk to speak to the mayor and to local oligarchs and other people,” Ischinger said. “I can tell you that I have not found a single responsible person in Ukraine who advocates, who really advocates as a serious plan, a division, a carving of Ukraine. I have only found people who wish to keep Ukraine together.”
“What people in the east are so tremendously unhappy about is that they feel left alone by Kiev. They want a different government. They want different leadership.”
“But I don't believe that people in the east, at least not those that I have had a chance to meet, really want to leave Ukraine.”
What will be critical for the country, he told Amanpour, is that the country’s governance is reformed.
“Constitutional reform in Ukraine, including in particular this item of decentralization, is the key, the principle job for post-election Ukraine.”
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