Russian day in Davos: sanctions, reform and a new business culture

Breakfast of Champions

The third day of the world economic forum in Davos (Thursday, 19 January) became the basis for the Russian delegation. He opened the business Breakfast of Sberbank, which started at 7:30 local time (9:30 GMT). The theme of the event, which was moderated by the head of the Bank German Gref, was “leadership in an era of technological revolution”.

Gref shared leadership skills into three parts: professional, soft skills (ability to solve problems and make decisions, ability to cooperate, empathy) and “digital” skills. The Chairman of the Board of “SIBUR” Dmitry Konov said that the current business model will be destroyed after five years. SIBUR operates in the industry, which will be under pressure, recognized laws. He refused to consider separate professional and IT skills, as they soon “merge”. Equally important, according to Konova, employees ‘ ability to work with people without them “can’t survive” by any one organization.

The Chairman of the Board of Directors “Severstal” Alexey Mordashov took the floor after the Gref’s remarks about the fact that 99% of the revenues of his company come from the “traditional ways” and only 1% from innovation. Severstal tried to print one of your product on a 3D printer, to understand how would work such a business model, but the final cost was a thousand times higher than the amount spent in the traditional Assembly, began his speech Mordashov. In General, the existing business model must change, said Mordashov: culture within the company “needs to be deployed to more people”, and now corporate culture is still hierarchical. This is due to the legacy of the industrial era because the digital era for the company has not yet come, he continued. Digital skills — a continuation of normal, he agreed with Konov. “Now people others. They’re not like they were 20-50 years ago — thought the head of “Severstal”. — For me, the need to develop human skills, skills of working with people is more important than “digital”.

At the end of the Breakfast Gref gave the floor to the Minister of economic development Maxim Oreshkin, calling him a representative of the millennial generation (Oreshkin 34). He asked the official whether it is easier to eliminate gaps in the skills of the employees. In response, the Minister pleaded “typical millennial” and said that he began to use a computer from childhood, and the Internet — with adolescence. … Remembered that when he was in school, the USSR collapsed, then came the crisis of 1998, during his work in the investment Bank, there was another crisis, and after coming to the government (. in 2013 he worked in the Ministry of Finance) has fallen oil prices and sanctions were imposed. “In fact, my generation is accustomed to change,” he said.

Oreshkin said that after his arrival in the Russian Ministry of economic development the Department began to use more technology to speed up processes, to move away from the bureaucracy, to abandon the “vertical” to “horizontal”. Gref, who headed the Ministry from 2000 to 2007 and was heard by the new Minister with a small smile.

Hoping for the best

The key to the Russian session was held on Thursday evening, the main speaker of the discussion “Russian world” became the first Vice-Premier Igor Shuvalov. 2017 from an economic point of view Russia would be better of 2016, he said: “the Main problems that accompanied us since the end of 2014, much developed during the first half of 2015. This whole phase is over, we has successfully coped with it”. GDP will grow by 1-2%, expressed hope Shuvalov (more than an official forecast of two to three times). He reminded about the recent decision not to spend the money from the sale of oil when the price is above $40, and send them to the reserves. “Overall, the situation looks quite healthy, and, frankly, we are now in a situation when there is no bubble in any market, < … > sterile situation. We are ready for what’s about to start a serious movement of foreign direct investment”, — said Shuvalov.

“It’s too bad that almost no legal framework for cooperation with Russia, which is clearly not normal, and neither party (neither the EU nor Russia. — ) did not show any initiative to change this situation,” — lamented the Minister of foreign Affairs of Slovakia Miroslav lajčák. This is not so, objected Shuvalov. Russia is committed to cooperation, Moscow and the European Union have always been joint formats if Brussels acted with such initiative — Russian authorities are ready for new forms of partnership, he told forum participants.

CEO of RDIF Kirill Dmitriev, who at the beginning of the Davos forum met with the Advisor of the elected President of the USA of Donald trump Anthony of Scaramouche in the first place spoke about the lack of harm to the Russian economy from sanctions. He was, but now he’s gone, explained Dmitriev, and contributed to this including the OPEC deal. Even if sanctions are not canceled (although Dmitriev and believes that this will happen), Russia, in his opinion, will still be in “very good position”. Speaking about the meeting with Scaramucci, Dmitriev said that he realized that sanctions only strengthen the unity of citizens around the President (Scaramucci said earlier that the sanctions “had the opposite effect because of the nature of the Russian people” who “would be ready to have snow to survive”).

On how he feels the business in the current Russian conditions, the moderator asked the co-owner of “Olmert” Dmitry Kosygina. He began to tell me how in 1988, buying jeans and reselling them, which makes it a criminal offence. “I have something to compare — admitted Costigan, mentioning that invested in Russia hundreds of millions of dollars. — You can, of course, fear of “black swans”, and you can search for “Golden swans”. On the question of what needs to change, Costigan said of the accounting system: in his view, we need to move from the company to the international standards and also to take this question from the sphere of authority of the Ministry of Finance. “Silicon valley is, in my opinion, is more about accounting than about the buildings and area.” The government has already started work in 2017, reporting on the size of dividends will be made only on the basis of IFRS, “therefore, the signals we are sending,” he responded Shuvalov.

Reform, sanctions, and China

Russia thinks about structural reforms and high oil prices, and after prices fell sharply, said Shuvalov. Preparing the official program of the government, and alternative approaches, the development of which involved independent experts, he mentioned. The government should not to make mistakes, that growth is not “tripped”. “It will be painful, but we will hold very firmly,” Shuvalov promised. The main problem of the Russian economy, according to first Deputy Prime Minister- human capital. The education system and the labour market needs to adapt to the global competition, but unless Russia loses, recognized Shuvalov. Structural reforms necessary “to verify that we are not swayed from side to side,” he added.

Miroslav Lajcak said that his country is not a fan of sanctions, but she will never go against the unity of the EU. Sanctions are no good, agreed Dmitriev and expressed confidence that discussions with the US on easing sanctions. Shuvalov, however, his optimism is not shared. Perhaps the market and hopes to improve relations with the United States, but the government assumes that the external environment may remain “quite tough”. “If they [sanctions] will be cancelled, it will improve the situation, but we are working on the assumption that the sanctions will continue”, — he said.

But Russia’s “unprecedented way” to develop relations with China, said Shuvalov. They were previously positive, but after the imposition of sanctions has greatly improved, he said: members of the governments of the two countries “is familiar up to families”, but private companies open a business in Russia without help from the authorities.

Shuvalov asked about the challenges for Russia — the problems with protection of property rights and governance. The official admitted that they have, however, Russia gradually improves its positions in world Bank rating on the ease of doing business. The moderator was interested in the problem of corruption — the question is about her, she sent Kostygina. He just said that his business is “relatively large scale”, so he “long ago” not encountered “some issues”. However, he noted that the scope of retail almost independent of any “licenses, permits, grants and other things.”

Shuvalov acknowledged that relations between Russia and the United States in the first place not an economic agenda, and the agenda of global security. And towards the end the discussion went farther and farther from economic issues. Russian Deputy Prime Minister said that Moscow did not turn in relations with the EU, and answered questions about the Minsk agreement, calling to ask them not only Russia but also Ukraine. In General, political issues, the official chose not to discuss it, although he was interested in and about the hackers, and the cruiser “Admiral Kuznetsov”. Shuvalov explained that the government he is responsible for the economic agenda.


… On Thursday made another panel discussion — “Forecast of the global energy market.” There he reaffirmed Russia’s commitment to the reduction of oil production by 300 thousand barrels. a day. According to the Minister, if we estimate the forward curve, then the excess supply of crude oil is gone, which indicates a stable market condition.

“In my opinion, the risks from the supply side is no more, we have to discuss the risks on the demand side, mainly in the context of what will happen to the global economy,” the official said. “My forecast for growth in global GDP in 2017, a 3.4% — said Oreshkin. This means that demand growth will be sustainable.” But if there’s a problem in the United States, China, this will affect the oil market, he added.

In his speech Oreshkin also said that the Russian economy is fully adapted to cheap oil and sanctions. “If you look at the results in 2016 with oil at $40 a barrel, we have a positive balance of payments, a small fiscal deficit, sustainable economy. It also means that we have adapted not only to cheap oil, but also to the sanctions”, — explained the Minister. “Now we prefer to concentrate on their problems, the structural domestic issues we don’t think about sanctions,” — said the head of Ministry of economic development.

Replica Minister twice caused laughter in the audience. Both times concerned the attempts of the moderator to force. to speak about trump. To the question, does he expect that trump will remove the sanctions with Russia after taking office. answered a question to a moderator: “what do you expect from trump?” — which caused laughter in the hall. The second question is about trump. even gave the moderator to finish — it was about the fact that Russia restores and strengthens relations with its strategic partners in the middle East — Turkey, Iran and Israel. “Again, you are a trump, we are talking about the energy market, not the trump. That’s another session,” what again caused laughter in the hall.