Analysts agree that the International Economic Forum in St. Petersburg seems to have become a kind of Davos in Russian version. It was an impressive demonstration of international interest in the Russian economy. But, it was also, in the words of one Russian participant, “distinctly reminiscent of a Communist party congress, where the only speakers were chosen by the ruling bureaucracy”. Opening Russia’s annual economic forum in St Petersburg attended by hundreds of global chief executives, President Medvedev said: „What had seemed untouchable has collapsed. The bubbles that created the illusion of flourishing economies have burst. And this requires an economic paradigm shift for all countries”. He blamed the US and its banks in large part for provoking today’s financial crisis – and pushed for a role for Russia in finding a way out of the turmoil. But, in the same time, Russia needs desperately foreign investors, including American investors and bankers.
Speech by President Medvedev was dissected and examined, challenged and praised by numerous political and economic analysts and politicians. I will try to focus on several main directions.
- Respect for law is in Russia’s interest.
But what is the law to referred President Medvedev? The bureaucracy law that stifles economic environment in Russia? Or the corruption that has caused foreign investors to flee towards the country more attractive ? Such bleating, however, tends to be the stock response of western businesses when they run into nastiness in Russia. At the recent meeting with U.S. investors (in the visit to the White House) Medvedev and his speech on reducing taxes and improving the business environment in Russia has been reluctant. However, even if interest shown by Boeing has received a generous contract, Google‘s father not rushes to invest in the country of his origin.
- Emerging market equities outperform west.
Of course, President Medvedev is right when he argues that the resurgence of emerging markets this year has reignited a belief in decoupling – the theory that these economies can continue to grow strongly in spite of a sharp slowdown in the developed world. Russia is an emergent economy with full affirmation. And SCO Summit (in which activates China, but also Brazil) of Tashkent showed that the organization is serious steps to an important role in building the new world order. Change Shanghai Cooperation Organization status to allow India and Pakistan to become observer members went almost unnoticed, although significant changes will follow from here in South Asia’s economic strategy.
- Ruble to be one of the world’s reserve currencies
Medvedev warned that growing ”economic egoism” had contributed to global problems including rising food prices, but singled out the US for particular criticism for its role in triggering a global economic slowdown. Much more, the Russian president, said this year’s renewed interest in Russia was a sign of a changing world in which the institutions of the western-dominated world order had had their day amid corporate defaults and the threat of sovereign defaults. This is the context in that Russia wants the ruble to be one of the world’s reserve currencies and to reduce the dollar’s dominance and make Moscow a global financial hub. “The world may need as many as six reserve currencies. It’s something that’s obviously needed” said Medvedev at the St. Petersburg International Economic Forum. Note that Medvedev has announced this ruble-reserve push with great fanfare in advance of the latest G20 meeting. I think that this statement is no accident and may have as much to do with the euro‘s struggles as it does with Medvedev’s wish to replace the dollar with the ruble. In the near term, he seems to see a world of numerous reserve currencies, including the ruble. Maybe such talk gives the staggering euro a credibility boost as well. But is this realistic ?