Russia bids to translate St. Petersburg meet of business leaders in to a Davos style forum showing the accent of Russian economy. With a dual aim of economic development and overshadowing mounting political dissent against Putin administration, Kremlin is putting its best foot forward to garner maximum advantage from the meet scheduled for next month.
Russian economy is booming for the first time in the post-Soviet era thanks to rising oil and gas prices throughout the world. The performance of steel, domestic automobiles and diamonds trade also add to Russia’s oil-driven economy. Eager to take full advantage of economic stability, the Putin administration is leaving no stone unturned to mark St. Petersburg meet as a sort of Davos for budding markets, with a stress on Russia.
Even the contour of economic growth is being used by Kremlin to cold shoulder the criticisms about worsening political environment between Russia and the United States and the European Union that might jolt investments. In stead, growth in Russia’s GDP has been 7.7 percent and foreign investment is up 150 percent more compared to the year before.
To carry on the momentum in Russian economy German O. Gref, trade and economic development minister of Russia, in an interview, expressed commitment to the liberal economic course and openness in global investment. He even assured the investors that property rights would continue intact in Russia and no significant changes are likely to happen in near future. Mr. Gref said,
The key thesis we would like to convey is that Russia underwent a very serious transformation. Now it has arrived at the stage of its modernization. This can only be done if the economy is open to foreign investment, with an auspicious investment climate, security for property rights and stable macroeconomics. Our action is geared toward those goals.
Economists, on the other hand have warned that definite hubris is sneaking into Russian economic policy. Too much spending of the oil windfall intimidates to whip inflation, undermining economic policies. The hard-line faction in the Kremlin is seen as advocating increased military spending and state control over economy. Even Putin himself advocated greater interventionist policy when he suggested spending government oil returns in the Russian stock market to prop up the lagging performance of state-owned companies.
This caused panic among the investors about the future of their stakes in Russia. Investment firm Goldman Sachs views,
Perhaps most worrying about this proposal is that it is a sign of the deterioration in the quality of economic policy advice received by the president as he approaches the end of his presidential term.
In recent years stateism has been seen more pronounced in Russian economy. The Kremlin now has unwavering control over the oil and gas industry, automobile sector and other major areas of economy. Gazprom, the natural gas monopoly established by the Government, acquired 50 % of Royal Dutch Shell development on Sakhalin Island in a forced sale last fall. Yukos, once Russia’s largest private company is now a nationalized major. And recently, officials have warned to revoke a key gas field license held by TNK-BP, a joint venture of BP in Russia.
This trend of increasing state control over the economy is perturbing the investors. To allay this, Mr. Gref branding these as temporary efforts by the government to refurbish ailing industries promised for 100 percent reprivatization in future. But, the coming Presidential elections towards the end of this year will decide the future course of economy in Russia though no substantial change looks viable.
Via:NY Times
