Russia showed the West turn to the East in Davos

Russia showed the West turn to the East in Davos

DAVOS, 23 January /Corr. Margarita Shpylivs’ka, Gleb Bryanski/. Russia confirmed its reversal on East at the world economic forum in Davos, Switzerland this year, presenting investors with projects in the far East and telling about the life of the economy under sanctions in conditions of low oil prices.

The world economic forum, an annual meeting of influential representatives of political and business elite, was in a situation that one of the forum participants, the head of Credit Suisse Tidjan Thiam described as “the worst beginning of the year in the history of financial markets”.

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The opening of the forum coincided with the fall of oil prices below $30 per barrel, which caused another round of weakening of the ruble. The President of the Russian Federation Vladimir Putin on the eve of the forum joked that in such a situation Ministers should be “working at home”.

Vladimir Putin in the rank of Prime Minister himself headed the Russian delegation in Davos in 2009, also at the time of a sharp drop in oil prices. This year the delegation was headed by Deputy Prime Minister Yuri Trutnev, who is also the presidential representative in the far East.

“I need to promote investment space of the Russian Far East. We created it, it works, but the world knows not very much. Better place than Davos to speak about this, in my opinion, no. So skip the forum it would be strange,” said Trutnev.

Organizers said the main theme of the forum is the fourth industrial revolution, however, the participants mostly discussed the fall in oil prices, the problems of the Chinese economy and global security, in particular the worsening of relations between Iran and Saudi Arabia.

Arrange any investment

The head of the International monetary Fund (IMF), Christine Lagarde called the four basic risk for world economy: slowing growth in China, falling prices for raw materials, asinhronisations monetary policy of the Central banks and the situation in emerging markets.

The Chairman of the Bank of Russia Elvira Nabiullina, who was invited to the forum and stated in the discussion on the global debt dilemma, unexpectedly canceled his visit, remained in Moscow for participation in the Collegium of the Ministry of Finance, which discussed the situation on the currency market.

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The Russian pivot to the East was the result of worsening relations between Russia and the West over events in Ukraine in 2014 and the economic sanctions that have deprived a number of the largest Russian companies and banks the opportunity to borrow money on Western capital markets.

In the last two years Russia has actively explored new markets of the Asia-Pacific region (APR) and the Middle East, having signed a number of multibillion-dollar deals involving investments in infrastructure projects and agriculture.

One of these transactions was concluded at the Davos forum. The Russian direct investment Fund (RDIF) and one of the leading port operators in the world Dubai’s DP World has signed an agreement for the investment of $2 billion in Russian ports.

Speaking during the debate on the future of Russia, Trutnev said turning towards the East in the context of Russian policy should be seen as a reversal of the country to its Far East, which occupies 36% of the territory and needs investment.

“I’d like to argue the position is known to the Chinese leader, who said that no matter what color the cat is as long as it catches mice. Here we arrange any investment,” – said Trutnev.

Vladimir Dmitriev, head of VEB, which has already funded joint Russian-Chinese projects in the far East, the forum suddenly expressed scepticism about the overuse of the development of relations with China.

“We should not overestimate the desire of our Chinese partners to increase cooperation with Russia. They are quite pragmatic,” said Dmitriev, assuming that for Russia, this cooperation will not be “unlimited and free”.

Question the value of sanctions

Trutnev said that many official representatives of the European Union at the meetings during the forum, doubted the benefits of anti-Russian sanctions and signaled the possibility of their mitigation.

Speaking at the forum, U.S. Secretary of state John Kerry also said that the lifting of sanctions from Russia is achievable after executing arrangements “Norman Quartet” on the peaceful settlement in Eastern Ukraine.

“Opinions about the extension of sanctions is very inhomogeneous. Many of our colleagues say that sanctions are disadvantageous not only to Russia, sanctions are disadvantageous to the European community”, – said Trutnev.

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Former Finance Minister Alexei Kudrin said in an interview that, in his opinion, Western countries could soften sanctions early next year. Kudrin said that many Western businessmen and politicians in Davos in private conversations expressed hope for a speedy lifting of sanctions.

“Today, I have a more optimistic view of the easing of sanctions. They will not be cancelled, but this year or early next to begin the movement, that is, any penalties can be mitigated or eliminated,” Kudrin said on the sidelines of the world economic forum in Davos.

Two of the largest Russian Bank, Sberbank and VTB under Western sanctions, took part in the Davos forum, organizing thematic events on Russia, which their leaders tried to convince investors that Russia will be able to overcome the crisis.

“The crisis is when at 7 in the morning instead of a Cup of coffee you need a Cup of vodka. I’m still happy with my coffee in the morning, so I did not reach this stage”, – said the head of VTB Andrey Kostin, opening a traditional Breakfast VTB on the sidelines of the forum in Davos.

The rise in oil prices

His colleague, the head of Sberbank German Gref said in Davos about the “blockchain” technology that will simplify many of the processes associated with managing large amounts of data from tax to trade in agricultural products.

The Russian delegation also included other leading businessmen of the country, including the head of “LUKOIL” Vagit Alekperov and the owner of the aluminium company “RUSAL” Oleg Deripaska. Alekperov took part in the meeting with the heads of major oil companies in the world on the sidelines of the forum.

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“We discussed relevant topics, forecast of supply and demand. And all bowed to the fact that in the second half will still begin the growth trend of oil prices”, – said Alekperov was the only Russian representative at the meeting.

This view is also shared by Christine Lagarde, who said that the IMF observes the growth of demand for oil over recent months and predicted higher prices in the near future. On the third day of the forum the oil price began to rise, adding to the optimism and confidence of the Russian participants.

However, Kudrin, who held a series of meetings with experts of the oil market, called on the Russian authorities to refuse from the hopes that oil prices will rise once again and within 2-3 months to determine the long-term reform strategy.

“Russia should understand one thing. We must abandon hope for high oil prices and to do so unconditionally,” – said Kudrin.

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