Russia's former finance minister has warned that the economy could show weak growth in the coming years, as Russian and foreign business leaders gathered at the country's premier investment forum.
The St. Petersburg International Economic Forum, which opened in the northern Russian city on June 6, drew thousands of attendees looking to cut deals and hear about Kremlin and Russian business investment pitches.
The annual gathering attracts Russia's elite as well as executives and leaders from around the world. China's Xi Jinping was the honorary guest at this year’s show as Russia seeks more investment from its economically powerful eastern neighbor amid sanctions by western states.
On the forum's first day, Aleksei Kudrin, who served as President Vladimir Putin's finance minister from 2000 to 2011, tossed cold water on growth outlook, saying it is not likely to exceed global growth in the coming years.
"Unfortunately, in my opinion, our potential growth rate in the coming years is around 2 percent or less. I assume that we will not reach the 3 percent threshold or higher to surpass global growth," he told the forum.
Kudrin said he expects this year’s growth to be less than 1 percent, lower than the government’s own forecast and the slowest expansion in three years. The World Bank on June 4 cut its outlook for the Russian economy.
In an interview with Current Time, Sergei Belyakov, a former deputy economy minister, agreed with Kudrin, saying growth was being held back by factors that included the weak investment climate and a lack of consumer spending among ordinary Russians.
"The services or goods produced need to be sold, but the population doesn't have the money to buy them," he said.
Russia’s economy is being affected by Western sanctions, which are impeding new investments, as well as a cut in oil output and an increase in value-added tax, which took effect on January 1.
Also dampening investors' enthusiasm is the arrest of prominent American investor Michael Calvey. The founder of private equity firm Baring Vostok Equity Partners was detained in February on charges of financial fraud and remains under house arrest.
U.S. Ambassador Jon Huntsman and other U.S. officials are boycotting the forum to protest his detention.
Calvey denies the charges and said his Russian partners are trying to use law enforcement to settle a commercial dispute.
Though Kremlin spokesman Dmitry Peskov said earlier this week that he would like to see Calvey at the forum, the American businessman has not been given permission to attend.
Kudrin told the audience that Calvey’s arrest has hurt the investment climate and led to an outflow of capital, a claim current Finance Minister Anton Silyuanov denied.
Putin, who is scheduled to appear before the forum on June 7, told a gathering of Russian and foreign business leaders that the economy has "overcome the difficulties" of Western sanctions and lower oil prices and is now on a path toward higher growth.
Putin also pitched his new economic program -- known as National Projects-- which he said will drive the growth and boost living standards.
The Kremlin is seeking private investment as it aims to pour $400 billion into projects such as health care, education, transportation, and telecommunications over the next six years.
The National Projects effort comes as a growing number of Russians express dissatisfaction with stagnating wages, and living standards more broadly, and have increasingly taken to the streets to protest.
The head of Russia's largest state-owned oil company used his attendance at the forum to bash the United States for using energy as a "political weapon."
Rosneft chief executive Igor Sechin claimed that the United States was imposing oil sanctions against countries like Iran and Venezuela to make room on global markets for rising Texas production.
Sechin also claimed that U.S. sanctions against Russia are essentially giving Washington control over its largest aluminum producer Rusal as well as other metals.
The St. Petersburg International Economic Forum was established in 1997 and has been formally organized by the Russian presidential administration since 2006.