Russia and China get there act together
By Ralph T. Niemeyer
The first day of the 25th anniversary ST. Petersburg Economic Forum has confirmed the gloomiest Eurosceptic’s prognoses – Russia not in word but in deed claims a global turnaround of its economic policy to the East.
And it comes not so much to the resource trade, but to the technologies, which the Pacific countries are ready to provide. Russia needs them so much and it needs them right now and will need them in an unimaginable numbers in the nearest future. Russia as usual has great plans.
Vladimir Putin is used to think with global heads, and now, at the moment when the History offered him an opportunity to throw off the yoke of monetary economic policy, he is making great attempts to take full advantage of this situation. Arctic exploration, quantum technologies, enormous efforts to create the economic of self-deployed workers (is not it following the example of Germany?), developing the brand new infrastructure for a large-scale diverse tourism – all these are literally cutting-edge infrastructure projects, which are launched to restructure fundamentally the whole Russian Economics.
These transformations are intended not only to create new jobs and possibilities for Russia, but also to expand the market for industrial products. And this is a direct benefit for Germany industry. And it comes not only about direct trade, but also about building joint industry platforms.
There is still no information about the German companies work in the Forum, but it is known that Mangold Consulting GmbH was participating in the preparation of presentations for the Russian-German section. It is certainly an encouraging sign.
In the meantime China is ready for extensive work today, as appears from information center press releases.
There are 40 delegations of Chinese companies in Sant-Petersburg and 12 are staying offline. According to official figures, at least 10 of them have a capacity of over $20 billion a year.
But China is not the end of the deal. The forum was attended by emissaries from 127 countries. Egypt was surprisingly announced as a guest, and the most exotic delegation was Taliban. But no sarcasm is hardly appreciated here, Afghan fundamentalists are just like interested in the field development of their mountain country as well as China is interested in Russian foodstuff shipments. Against this background, even businessmen from Ethiopia and Mali do not look like something extraordinary.
The level of forum organizing cannot raise concerns even for the most demanding participants. Constant temperature control of the forum participants, lots of volunteers with good language skills (from Hindi to Arabic), excellent food courts. Russian organizers did their best to provide the most favourable atmosphere for negotiating. The main Forum moderator was selected Irada Zeinalova, famous not only for her smart mouth (not only in Russia) and her ability to bring to the table the most implacable enemies, but also for her loyalty to the public interests (as she imagines it to herself).
Monitors placed everywhere are demonstrating the quantum networks work in action, which have been created by Chinese engineers for ultra-high-speed communications between the Far East region and Europe. The work of the Forum is organized with the help of ICJJ technology which is designed to make the sections work more productive.
It is still too early to draw any specific conclusions, but everybody can see the main point: the things happening on the Forum platform reveal the best opportunity to realize that it is time for the world community to become accustomed to the new economic reality. And Europe cannot miss the chance to catch it.
Here the entire speech by President Putin:
I greet the participants and guests of the 25th International Economic Forum in St. Petersburg.
It comes at a difficult time for the entire world community, when the economy, markets and the very principles of the world economic system have come under attack. Many of the trade, manufacturing and logistics links previously disrupted by the pandemic are now going through new challenges. Moreover, fundamentals of business such as reputation, protection of property and confidence in global currencies have been thoroughly undermined. Unfortunately, they have been undermined by our Western partners, and they have been deliberately undermined in the interests of their own ambitions, to maintain outmoded geopolitical illusions.
Today I will present our – when I say “our”, I mean the Russian leadership – view of the situation in which the world economy finds itself. I will talk in detail about how Russia is acting in this environment and how it is planning its development in the dynamically changing situation.
A year and a half ago, at the forum in Davos, I emphasized once again that the era of the unipolar world order is over. I would like to start by saying, there is no getting around the fact that, despite all attempts to preserve it, to conserve it by any means necessary, it is over. Changes are the natural course of history, because the civilizational diversity of the planet, the richness of cultures is difficult to reconcile with political, economic and other templates. Templates that are roughly and without alternative imposed by a center do not work here.
The error lies in the very notion that there is a power – albeit a strong power with a limited circle of affiliated states – and that all the rules of economics and international relations are interpreted, if necessary, solely in the interests of that power. A world based on such dogma is, by definition, impermanent.
The United States, which proclaimed victory in the Cold War, proclaimed itself God’s ambassador on earth, having no duties but only interests, and those interests are thereby made sacred. They literally don’t realize that new powerful centers have sprung up on the planet over the last few decades, and they’re getting louder and louder. Each of them develops its own political systems and public institutions, implements its own models of economic growth and, of course, has the right to protect them and secure its national sovereignty.
We are talking about objective processes, about truly revolutionary, tectonic changes in geopolitics, in the world economy, in technology, in the whole system of international relations, in which the role of dynamic, promising states and regions whose interests can no longer be ignored , increases significantly.
I repeat: these changes are fundamental, crucial and unstoppable. And it is a mistake to believe that you can sit out the period of turbulent change and wait for everything to return to normal, that everything will be the same as it used to be. It won’t.
However, it seems that the ruling elites of some Western countries are harboring precisely these illusions. They don’t want to see the obvious and stubbornly cling to the shadows of the past. For example, they believe that Western dominance in world politics and economics is a constant, eternal value. Nothing is forever.
Our colleagues not only deny reality. They try to go against the flow of history. They think in terms of the last century. Prisoners of their own misconceptions about countries outside the so-called golden billion, they see everyone else as the periphery, their backyard. Because they consider themselves exceptional, they still regard others as colonies and the peoples living there as second-class citizens. If they are exceptional, then everyone else is second rate.
Hence the irrepressible desire to punish and economically destroy anyone who steps out of line, who does not want to obey blindly. What is more, they rudely and unscrupulously impose their ethics, their opinions on culture and history on everyone, sometimes questioning the sovereignty and integrity of states and threatening their very existence. One only has to remember the fate of Yugoslavia and Syria, Libya and Iraq.
If they fail to capture and pacify one of the recalcitrant, they attempt to isolate or, as we say today, “cancel” it. Everything is used, even sport, the Olympic movement, the banning of culture, of artistic masterpieces, just because their authors have the “wrong” origin.
This is the reason for the current Russophobia in the West and for the insane sanctions against Russia. They are insane and, I would say, brainless. Both their number and the speed with which they are stamped through are unprecedented.
The calculus was clear: the Russian economy was to be crushed by severing business ties, forcibly withdrawing Western companies from the Russian market, and freezing Russian assets to hit industry, finance, and people’s living standards.
That didn `t work. It’s obvious that didn’t work out, it didn’t happen. Russian entrepreneurs and the government cooperated professionally, people showed solidarity and responsibility.
Step by step we normalized the economic situation. First, we stabilized the financial markets, the banking system, and the trading network. Then we started infusing the economy with liquidity and working capital to keep businesses resilient and jobs going.
The gloomy forecasts about the prospects for the Russian economy, which were heard back in the spring, have not come true. At the same time, it is clear why this propaganda campaign was so inflated, where all this talk about the 200 ruble dollar exchange rate and about the collapse of our economy as a whole came from – all this was and is a tool in information warfare, a factor of psychological impact on Russian society, on the Russian entrepreneurs. (Translator’s note: Before the start of the intervention in Ukraine, the dollar exchange rate was around 80 rubles, but the ruble has not plummeted to 200 rubles per dollar, as predicted by Western experts, but is currently at 55 rubles per dollar one dollar)
Incidentally, some of our experts also bowed to this external pressure and in their forecasts also assumed an imminent collapse of the Russian economy and a critical weakening of the national currency, the ruble.
Life has contradicted these predictions. However, I would like to emphasize and emphasize: in order to continue to be successful, we must be very honest and realistic in our assessment of the situation and independent in our conclusions and of course believe in our own strength – this is very important. We are strong people and can master any challenge. Like our ancestors, we are up to any challenge. This is shown by the thousands of years of history of our country.
Only three months after the massive sanctions package, we have suppressed the surge in inflation. After peaking at 17.8 percent, inflation, as you know, is now at 16.7 percent and it’s still falling. Economic momentum is stabilizing and government finances are solid. I will later show comparisons with other regions of the world. Yes, 16.7 percent is of course a lot for us too, that’s a high inflation rate. We have to work on it and we will work on it and I am sure that we will get a positive result. (Translator’s note: Inflation came to a halt in Russia in mid-May. Inflation has been zero percent since mid-May, so annualized inflation is now declining.)
In the first five months of this year, the state budget shows a surplus of 1.5 trillion rubles, while the consolidated budget shows a surplus of 3.3 trillion rubles. In May alone, the surplus in the state budget was almost half a trillion rubles, more than four times as much as in May last year. (Translator’s note: the ruble-euro exchange rate is currently 60, which means that the Russian state will post a surplus of 55 billion euros in the first five months of 2022)
Our task now is to create the conditions for boosting production and increasing supply on the domestic market, balancing the expansion of supply with final demand and ensuring bank lending to the economy.
I have already said that we have taken special measures to replenish the companies’ working capital. In particular, companies in almost every industry have been given the right to defer social security payments for the second quarter of this year. In addition, companies in the manufacturing sector have broader opportunities: they can also benefit from the shift in the third quarter. Basically, it is an interest-free loan from the state.
Thereafter, the deferred contributions do not have to be paid in one go. This can be done in equal installments over a 12 month period beginning in June next year.
Continue. The interest rate for government-subsidized mortgages was lowered in May. The subsidized mortgage program was extended through the end of the year. As I said earlier, this measure aims to help people solve housing problems and support the construction and related industries, which employ millions of people.
After spring’s spike, interest rates in the Russian economy are gradually falling and the central bank is cutting interest rates. In this context, I think it is possible to lower the interest rate for state-subsidized mortgages again.
But what do I want to point out? The program is valid until the end of this year. This means that the people who want to improve their living conditions through this program should use it by the end of the year.
The maximum loan amounts also remain unchanged: 12 million rubles for Moscow and St. Petersburg and six million rubles for the rest of the regions.
I would like to add that in general it is important for us to increase the availability of long-term finance, credit for the economy. In the near future, the emphasis in supporting economic activity should shift from fiscal stimulus measures to market-based bank lending mechanisms.
We absolutely have to support this process. For example, we will allocate 120 billion rubles from the National Prosperity Fund to increase the capacity of Vnesheconombank’s project financing facility. This measure will provide additional credits for initiatives and projects in the amount of about half a trillion rubles.
I have already said that from the outset the economic blitzkrieg against Russia had no chance of succeeding. At the same time, as we know – and the practice of recent years has clearly shown this – sanctions are double-edged swords. They do comparable, if not greater, damage to their ideologues and constructors.
We’re not just talking about the currently obvious consequences. We know that the very worrying prospect is being discussed among European leaders at the level of informal talks that sanctions could be imposed not only on Russia but also on any other undesirable state, which sooner or later may affect everyone, also the members of the European Union themselves and European companies.
We are not there yet, but European politicians have already dealt a serious blow to their economy – with their own hands. We see how the social and economic problems in Europe and also in the USA have worsened, how the costs of goods, food, energy and petrol have risen, how the quality of life of Europeans has decreased and the competitiveness of companies has been weakened.
Experts estimate that the EU’s direct, “calculated” losses from the sanctions mania alone could exceed $400 billion in the coming year. This is the price of unrealistic decisions made contrary to common sense.
These costs are borne directly by the people and businesses of the European Union. Inflation has already risen to over 20 percent in some eurozone countries. I was talking about our inflation, but the countries of the eurozone do not conduct military operations, but inflation there has increased – up to 20 percent in some countries. The US also has unacceptable inflation, the highest in 40 years.
Yes, of course, even in Russia, inflation is still in the double digits. But we’ve already indexed benefits and pensions, raised the minimum wage and subsistence level, protecting the poorest people. In turn, high interest rates have allowed people to keep their savings in the Russian banking system.
This is of course understandable for companies: a high key interest rate puts pressure on the economy, that is clear. In most cases, however, this is an advantage for the people: they have returned considerable sums to the banks given the high interest rates.
This is the main difference from EU countries, where rising inflation is directly reducing people’s real income and eating away at their savings, and where the current consequences of the crisis are affecting mostly low-income people.
For European companies, the growth of outstanding debts and the loss of the Russian market also have serious long-term consequences. The result is obvious: the loss of global competitiveness and a systemic slowdown in the growth of the European economy for years to come.
All of this leads to an aggravation of the fundamental problems in Western societies. Of course we have enough problems of our own, but I have to talk about that now, because they are always pointing the finger at us, while they have enough problems of their own as well. I also spoke about this in Davos. The immediate consequence of the actions of European politicians and the events of this year will be a further deepening of inequality in these countries, which in turn will further divide their societies. It is not only about prosperity, but also about the values of the different groups in these societies.
Yes, these contradictions are suppressed and swept under the rug. Democratic procedures, elections in Europe… frankly, sometimes you look at what is happening there, what forces are coming to power – it all looks like a make-believe world when political parties that resemble each other like twins hold each other in power alternate. But nothing changes in the matter. The true interests of the people and the national economy are being marginalized more and more.
Such a turning away from reality, from the needs of society, will inevitably lead to the rise of populism and the rise of extreme, radical currents, serious socio-economic changes, degradation and, in the near future, a replacement of elites. As you can see, the traditional parties are losing more and more. Some new parties are emerging, but unless they are very different from the traditional ones, they don’t have much of a chance of surviving.
All attempts to put a good face on the bad game, all the talk about allegedly acceptable costs in the name of pseudo-unity cannot hide the essential point: the EU has finally lost its political sovereignty and its bureaucratic elites are dancing to the tune of others, accepting what they are commanded from above, harming their own people and their own economy, their own businesses.
What else is important here? The deterioration in the world economy is not a matter of the last few months – I will now focus on things that I think are extremely important – what is happening is not the result of the last few months, of course not. Especially not the result of the military operation that Russia is conducting in Donbass. Such claims are an open and deliberate distortion of the facts.
The sharp rise in inflation in commodity and commodity markets was a fact long before the events of this year. The world has been pushed into this situation by years of irresponsible macroeconomic policies by the so-called G7 countries, including uncontrolled emissions and the accumulation of unsecured debt. And these processes have accelerated, exacerbated by the outbreak of the coronavirus pandemic in 2020, when both the supply and demand for goods and services worldwide fell drastically.
One wonders: what does our military operation in the Donbass have to do with it? He has nothing to do with it at all.
Unable or unwilling to use any other formula, the governments of the leading western economies simply fired up the printing press. In this simple way, they began to cover unprecedented budget deficits.
I’ve already given the number: In the last two years, the money supply in the US has increased by more than 38 percent. It used to take decades to increase, but now it’s 38 percent in two years, or $5.9 trillion. In comparison: Only a few countries in the world have a higher gross domestic product than this sum.
The money supply in the EU also rose sharply during this period. It has grown by around 20 percent or 2.5 trillion euros.
Lately I’ve been hearing more and more about the so-called – forgive me, I don’t like to mention myself, but I have to say this – we all hear about the so-called “Putin inflation” in the West. When I see this, I always think: who is this nonsense intended for? For those who can’t read and write, that’s all. People who can at least read understand what’s really going on.
Russia and our actions to liberate Donbass have absolutely nothing to do with it. Today’s price hikes, inflation, food and fuel, gasoline and energy problems in general are the result of systemic economic policy failures of the current US administration and euro bureaucrats. There are the causes, and therein alone.
I’ll also say something about our operation: yes, it had a certain importance, but the roots are precisely there, in their flawed economic policy. For the West, the start of our operation in Donbass is a lifeline, allowing them to blame their own miscalculations on others, in this case Russia. But anyone with at least an elementary education understands the real reasons for the current situation.
Huge amounts of money were printed, and then what? Where did all the money go? It is obvious: among other things, in the purchase of goods and services outside the western countries – that is where this printed money went. They have literally started to “suck up” everything, to “suck up” the global markets. Of course, no one thought of the interests of other nations, including the poorest. They were left with the “leftovers”, and that too at astronomical prices.
At the end of 2019, imports into the United States were about $250 billion per month, and have since increased to $350 billion. Remarkably, the increase was 40 percent – proportional to the unbacked inflation of the dollar money supply in recent years. They printed it, distributed it, and used the money to siphon all the goods from other countries’ markets.
I’ll add something else: the United States has long been a major supplier of food to the world market, and they are rightly proud of their agriculture, of their tradition in agriculture, which is a model for many, including us, by the way. But today, America’s role has changed dramatically. The country has gone from being a net exporter of food to a net importer. Broadly speaking, they print money and attract commodity flows by buying up food around the world.
An even higher rate of increase in goods imports can be observed in the European Union. It is clear that this sharp increase in demand, unmatched by a corresponding supply of goods, has triggered the wave of deficits and global inflation. Hence global inflation. Almost everything in the world has become more expensive in recent years: raw materials, consumer goods and, above all, food.
Yes, of course, these countries, including the United States, continue to export, but the balance between exports and imports has already shifted in the other direction: there are already, I think, 17 billion more imports than exports. That’s what it’s all about.
According to the United Nations, the global food price index was 50 percent higher in February this year than in May 2020, and the combined commodity index has doubled over the same period.
In the conditions of this inflationary hurricane, many developing countries are asking themselves a valid question: Why are they trading commodities for dollars and euros that are depreciating before their eyes? The conclusion is that the economy of imaginary entities will inevitably be replaced by an economy of real values and assets.
According to the IMF, global foreign exchange reserves currently stand at $7.1 trillion and €2.5 trillion, and that money is depreciating at about 8 percent a year. And besides, it can be confiscated, stolen at any time if the US doesn’t like the policies of one country or another. This has become very real for many countries holding their foreign exchange reserves in these currencies.
According to experts – this is an objective analysis – in the coming years the process of converting world reserves – there is simply no other way with such deficits – into real resources – of course other countries will do that – such as food, energy and other raw materials take place. It is evident that this process will further fuel global dollar inflation.
As for Europe, the failed energy policies, blind faith in renewable energy and natural gas exchange trading that have led to the sharp rise in energy costs have further contributed to the sudden sharp rise in prices we have been witnessing since the third quarter of last year could – again long before our operation in the Donbass began. We have absolutely nothing to do with it. They messed that up themselves, prices have skyrocketed, and they’re looking for culprits again.
The West’s miscalculations have not only made many goods and services more expensive, but also reduced the production of fertilizers, particularly nitrogen fertilizers made from natural gas. Overall, from the middle of last year to February of this year alone, fertilizer prices rose by more than 70 percent worldwide.
Unfortunately, there is currently no sign of a reversal of this trend. On the contrary: Against this background, they have blocked the work of their companies and the logistics of fertilizer deliveries from Russia and Belarus. In doing so, they have led the situation even further into a dead end.
It is not difficult to predict further developments. A lack of fertilizer means lower yields and thus the risk of food shortages on the world market, which will lead to even higher prices, putting the poorest countries in particular at risk of starvation. And that will rest squarely on the conscience of the US government and the euro bureaucrats.
I would like to emphasize once again: this problem did not arise today, not in the last three or four months, and it was definitely not Russia’s fault, as some demagogues are now explaining, taking responsibility for everything that is going on in the world economy going to try to pass it on to our country.
Of course we could be happy to hear that we are so powerful and omnipotent: The inflation that is skyrocketing in the West, in the USA and in Europe, and whatever else we are doing that makes everyone tremble. Perhaps we would be happy to feel such power, but that has nothing to do with reality. The situation has been brewing for years, fueled by the short-sighted actions of those accustomed to solving their problems at the expense of others, who have relied and still rely on the money issuance mechanism to overbuy, to attract trade flows thereby exacerbating deficits and provoking humanitarian catastrophes in certain parts of the world. I would like to add: it is essentially the same predatory colonial politics of the past, but of course in a new form, in a new edition, much more subtle and sophisticated. You don’t immediately understand what’s going on.
The most important task of the world community is now to improve the supply of food to the world market, while also meeting the needs of countries where the food situation is particularly precarious.
Once it has secured its domestic food and domestic market, Russia can significantly increase food and fertilizer exports. Our grain stocks, for example, may increase to 50 million tons next season.
We will prioritize our shipments to countries where food needs are greatest and where there is a risk of growing hunger. First of all, this is about African countries and the Middle East.
However, there are difficulties here, which also arise through no fault of our own. Yes, formally, Russian grain, food and fertilizers are not subject to sanctions… By the way, the Americans imposed sanctions on our fertilizers, the Europeans followed them. Then the Americans picked them up and realized what they had gotten themselves into. But the Europeans don’t do that. Your bureaucracy works like millstones in an 18th-century mill. That’s why everyone knows that they did something stupid, but somehow turning it back is difficult for bureaucratic reasons.
So, I repeat, Russia is ready to help balance global agricultural markets, and we certainly welcome the openness of our colleagues at the UN, who understand the urgency of the global food problem, to dialogue on this issue. The topic of such a conversation could be the creation of normal conditions – logistically and financially – for increasing Russian food and fertilizer exports.
As for Ukrainian food exports to world markets – and I cannot help but mention that unfortunately there is a lot of speculation here too – we do not hinder anything. We are not the ones who mined the Ukrainian Black Sea ports. Should they clear the mines and export it. We will ensure the safety of the merchant ships. That’s not a question at all.
But what are we talking about? The US Department of Agriculture estimates that Ukraine has about six million tons of wheat, we estimate it at about five million tons. And another seven million tons of corn. That’s it. And if you consider that the world produces 800 million tons of wheat, then five million tons, as you understand, makes no difference at all for the world market.
Nevertheless, they have opportunities for export, and not only through the Black Sea ports. There you go, export it via Belarus – by the way, that’s the cheapest way. About Poland, Romania – as much as you want. There are five or six ways to export.
It’s not about us, it’s about the sanity of the people in power in Kyiv. Let them decide what they want to do, and in this case they at least don’t look to their masters from abroad, from overseas.
But there is also a risk that this grain will be used to pay for the weapons supplied. That would be pretty sad then.
As I have already said, the modern world is in a period of dramatic change. The international institutions collapse and fail. The security guarantees are devalued. The West has refused on principle to fulfill its earlier commitments. Reaching any new agreements with the West has proved simply impossible.
In this situation, against the background of increasing risks and threats to us, Russia’s decision to conduct the military operation was a forced decision. A difficult decision, of course, but a compelling and necessary one.
This is the decision of a sovereign country that has the absolute right, based, incidentally, on the UN Charter, to vouch for its security. It was a decision aimed at protecting our citizens and residents of the People’s Republics of Donbass, which for eight years have been subjected to genocide by the Kiev regime and neo-Nazis, who have the full protection of the West.
The West not only tried to implement the “anti-Russia” scenario, but also actively participated in the military development of Ukrainian territory, literally pumping Ukraine full of weapons and military advisers. He continues to do so today. To be honest, nobody in the West cares about the development of Ukraine’s economy or the well-being of the people living there; they don’t give a damn, but they never skimped on money to create an anti-Russian NATO bridgehead in the east to feed aggression, hatred and Russophobia, and they still don’t today.
Today our soldiers and officers, Donbass militia fight to protect their people. They defend Russia’s right to develop freely and securely as a great multi-ethnic country, making its own decisions, determining its own future, drawing on its own history, culture and traditions, and refusing all attempts to tamper with it from outside to impose the pseudo-values of dehumanization and moral degradation.
All the tasks of the military operation will undoubtedly be accomplished. The key to this is the courage and heroism of our soldiers, the consolidation of Russian society, the support of which gives strength and confidence to the Russian Army and Navy, and a deep understanding of the rightness and historical justice of our cause – building and strengthening a strong one sovereign Russia.
What do I want to emphasize? Sovereignty in the 21st century cannot be partial, fragmentary. All of its elements are equally important, they reinforce and complement each other.
It is therefore important for us not only to defend our political sovereignty and our national identity, but also to strengthen everything that makes up the country’s economic independence, its financial, human and technological autonomy and independence.
Western sanctions are based on the false thesis that Russia is not economically sovereign and highly vulnerable. They have been so busy spreading myths about Russia’s backwardness and weak position in the world economy and trade that they seem to have believed it themselves.
When planning their economic blitzkrieg, they didn’t realize, they simply ignored the real facts, that our country has changed in recent years.
And these changes are the result of our planned work on creating a sustainable macroeconomic structure, ensuring food security, implementing import substitution programs, building our own payment system and so on.
Of course, the sanctions have presented the country with many difficult challenges. Some companies still have problems with outsourced parts. A whole range of technological solutions are no longer available for our companies. The logistics are disrupted.
On the other hand, all of this opens up new possibilities for us, we often say that, but it really is like that. All of this is an incentive to build an economy that has full – and not just partial – technological, productive, human and scientific potential and sovereignty.
Of course, such a complex task cannot, as they say, be solved in an instant. One must continue the work systematically and with an eye to the future. This is exactly how Russia works, implementing long-term plans for the development of economic sectors and strengthening the social sphere. The current challenges only lead to adjustments and refinements of these plans, but not to a change in their strategic orientation.
Today I want to focus on the main principles that will guide the development of our country and economy.
The first is openness. Truly sovereign nations are always ready to work together as equals and in partnership to make their own contribution to global development. On the other hand, those who are weak and dependent usually look for enemies, stir up xenophobia or eventually lose their identity, their independence, by blindly following their overlord.
Despite the fact that our Western friends literally dream of it, Russia will never go down the path of self-isolation and self-sufficiency. What’s more, we are and will continue to develop cooperation with all those who are interested and want to work with us. There are many of them, I won’t list them all. They are the vast majority of people on Earth. I won’t list all these countries now, everyone knows them.
I am not saying anything new in recalling that anyone who wants to continue working and working with Russia faces undisguised pressure from the United States and Europe, sometimes even direct threats. But that blackmail means little when it comes to countries run by real leaders who know exactly where the interests of others lie and where national, their own, and their people’s interests lie.
Russia will expand economic cooperation with these states and promote joint projects. At the same time, of course, we will also work with Western companies that, despite the unprecedented “turning their arms behind their backs”, continue to successfully operate in the Russian market. There are.
We see the development of a convenient and independent payment infrastructure in national currencies as a solid, predictable basis for deepening international cooperation. And to help the companies of our countries to build logistic and cooperative relations, we are developing transport corridors, increasing the capacity of railways and transshipment capacities of ports in the Arctic, East, South and other directions. In the Azov and Black Seas and the Caspian Basin in particular, they will become the most important stretch of the North-South Corridor, which will offer sustainable channels with the Middle East and South Asia. We assume that freight traffic there will steadily increase in the near future.
But not only international trade is important. Russia intends to increase scientific, technological, cultural, humanitarian and sports cooperation based on equality and respect for partners. At the same time, our country will strive to assume responsible leadership in all these areas.
The second principle of our long-term development is our trust in entrepreneurial freedom. Any private initiative intended to benefit Russia must be given maximum support and space for its implementation.
The pandemic and current events have confirmed the importance of flexibility and freedom in business. It is the private sector that, in the difficult environment and amid attempts to stifle our development by any means necessary, has proven its ability to compete in global markets. Adapting to the rapidly changing external environment also works because of the private sector. We must ensure dynamic economic development, naturally relying on the private sector.
We will further reduce the administrative burden. For example, from 2016 to 2018 there was a moratorium on routine checks on small businesses. It was subsequently extended to the end of 2022. Since 2020, this moratorium has also included medium-sized companies. In addition, the number of unscheduled controls has fallen to almost a quarter.
But we went even further and in March this year we waived planned controls on all entrepreneurs, regardless of their size, only on one condition: as long as their activities do not involve a high risk for people and the environment. As a result, the number of planned controls has reduced to one sixth compared to the previous year.
Why am I talking about this in such detail now? The point is that after the introduction of the moratorium on controls – this is the result – the number of violations by entrepreneurs has not increased, but decreased, the number of violations has decreased. This shows the maturity and responsibility of the Russian economy. She must be motivated and not forced to meet norms and requirements.
This means that there is every reason to take another crucial step forward: to end forever most controls on all Russian companies whose activities are not associated with high risks. It has long been clear to everyone: There is no reason to control everyone. There has to be a risk-based approach. I call on the government to set concrete parameters for such a reform in the coming months.
And here is another issue that is very sensitive to the economy, and today it is also an issue of our national security and economic sustainability. In order to limit and minimize all kinds of abuses and loopholes for exerting pressure on entrepreneurs, we consistently eliminate unclear criminal law provisions on so-called commercial criminal law.
In March, a law was signed that allows criminal proceedings against entrepreneurs for tax offenses to be instituted only on the initiative of the tax authority – and in no other way. A bill to shorten the statute of limitations for tax crimes and to discourage criminal proceedings after tax arrears have been fully paid should be passed soon.
(Translator’s note: Controls and criminal prosecutions are an old problem in Russia that Putin has railed against for years, but so far not with complete success. This is because prosecutors used to have plans for how many crimes they had to bring to justice, which is why public prosecutors have repeatedly overshot the mark. That has long since been abolished, but changing the habits of officials is not easy in Russia either. Putin keeps putting pressure on the issue, and that is what is also about in this part of his speech)
Overall, a cautious but thorough approach is needed to decriminalize a number of so-called white-collar crimes. For example, those related to working without a license or accreditation. This is a very sensitive issue today, since our western partners, for example, refuse to grant such licenses.
In such cases, our authorities should not, as they say, punish the Russian economy with their own hands, especially since our entrepreneurs are not really to blame here. You know what I mean. Those who work in small businesses understand this very well. A license has expired, our western partners are not renewing it, what can they do? Should they go out of business? Of course, the state has to keep everything under control, but it shouldn’t prevent them from working.
In addition, we should also consider raising the penalty threshold for non-payment of duties and other obligatory payments. In addition, we have not changed the parameters for defining large and particularly large claims for a long time, despite the inflation that has accumulated. This incompatibility of the law with the reality of life must be corrected. From 2016 to now, inflation has accumulated to 50 percent, but these parameters have not changed – they obviously need to be changed.
Finally, the reasons for the pre-trial detention of businessmen and the extension of investigations must be examined. It is no secret that these provisions are very often applied without there being any objective need for them.
As a result, companies are being forced to suspend their operations or close down altogether while investigations are ongoing. In this case, in addition to the direct losses and the loss of market share and jobs, the reputation of the companies and their managers is also at stake.
I am alerting law enforcement to the need to end this practice. I urge the government to work with the Supreme Court to prepare appropriate legislative changes. I ask that this work be completed by October 1st of this year.
In addition, the Security Council has given a special mandate to analyze situations where criminal proceedings are instituted but no trial occurs. The number of such cases has increased significantly in recent years. It is clear to everyone what is behind it. Proceedings are often initiated without sufficient justification or used to put pressure on companies or individuals. We will discuss this issue separately in the fall and make further decisions related to legislation and the organization of law enforcement work.
Of course, the regional management teams play an important role in creating a modern business environment. At the St. Petersburg forum, I traditionally point to the regions that have made significant progress in the National Investment Climate Rating conducted by the Agency for Strategic Initiatives.
There are changes in the first three places. In addition to Moscow and Tatarstan, which are still at the top, the region around Moscow has also been added this year. Over the year, it has advanced from eighth place to the top-3. Tula, Nizhny Novgorod, Tyumen, Novgorod, Sakhalin, St. Petersburg and Bashkortostan regions are also at the top of the rating.
Separately, I would like to mention the regions with the greatest progress: the Kurgan region with a rise of 36 places, the Perm and Altai regions with a rise of 26 places, Ingushetia with 24 places and the Ivanovo region with a rise of 17 places.
I thank and congratulate our colleagues in the regions for this work.
And, of course, government and regional and local teams need to pay special attention to supporting the entrepreneurial initiatives of citizens in small towns and remote communities. We also have successful examples of this. Among other things, it is about the creation of popular software, the nationwide sale of organic food and goods from our own production via Russian Internet platforms.
It is important to create new opportunities here, to introduce modern trading formats, including electronic platforms, as I said earlier, to reduce the cost of logistics, transport and others, including using modernized Russian post offices.
We also need to help small business employees, the self-employed and young entrepreneurs to acquire additional skills and competencies. I ask that these measures, which are specifically aimed at small towns, rural areas and remote regions, be included as a special point in the national project for the development of small and medium-sized enterprises.
I would also like to address our leaders and owners of large companies, our large businessmen and managers.
Dear colleagues, dear friends!
Real, lasting success, a sense of dignity and self-confidence can only come from connecting your future and the future of your children to your homeland. We have longstanding relationships with many people and I know the sentiment of many of our corporate leaders and owners. I’ve heard you say many times that running a business is about much more than just making a profit, and that’s true, it’s about making a difference in life around you, contributing to the development of your hometown, the region and the whole country, it is extremely important for self-realization, serving people and society, nothing can replace that. This is the meaning of life, the meaning of work.
Recent events have only confirmed what I’ve always said: it’s safer at home. Those who didn’t want to hear this obvious message have lost hundreds of millions, if not billions, of dollars in the West – such a safe haven for capital has proven.
(Translator’s note: In fact, this is what Putin has been preaching for years, urging rich Russians to bring their wealth and capital back to Russia, even giving them amnesties and exempting them from paying taxes evaded on capital flight As the blanket freeze on Russian private assets in the West is showing, Putin was correct in his warning)
I would like to say once again to my colleagues, including those in the audience and those who are not here today: please do not fall into old traps. Our country has enormous potential and there are still many tasks to be accomplished. Invest here, invest in the creation of new businesses and jobs, develop tourism infrastructure, support schools, universities, health and social sphere, culture and sports. I know many do, I know I just want to reiterate.
The Bakhrushins and Morozovs, Shchukins and Ryabushins, Akchurins and Galeevs, Apanaevs and Matsievs, Mamontovs, Tretyakovs, Arsanovs, Dadashevs and Hajievs understood their mission in this way. Many Russian, Tatar, Buryat, Chechen, Dagestani, Yakut, Ossetian, Jewish, Armenian and other families of merchants and entrepreneurs left no heirs, but wrote their names forever in the history of our country.
By the way, I would like to emphasize something else. No one yet knows what is more important to the heirs, the potential heirs of capital: the money and property they inherited, or the good reputation of their ancestors and their service to their country. No one can take that away from them, excuse my language, no one can drink that.
And what will stay with future generations is their good name, it will stay with them forever. And that they will surely inherit, from generation to generation, will help them, support them in life, make them even stronger than any money or property they can inherit.
The third principle of our long-term development is a responsible and balanced macroeconomic policy. It is precisely this policy that has enabled us to withstand the unprecedented pressure of sanctions to a large extent. But I repeat: for us, this policy is important not only to respond to the current challenges, but also in the long term. We will not repeat the unfortunate experiences of our Western colleagues who have started spiraling inflation and thrown their finances out of balance.
Our goal is to steadily develop the economy over the coming years, to reduce the inflation burden on citizens and businesses, and to achieve our inflation target of four percent in the medium and long term. I started with inflation today, and now I want to say it: four percent remains our target.
I have already commissioned the government to draw up proposals for new rules for the state budget. They are intended to ensure the predictability of financial policy and create the conditions for optimal use to be made of the foreign trade situation. All this is necessary to strengthen the basis of economic growth and solve infrastructure and technology problems, which is the basis for improving the welfare of citizens.
Yes, some of the world’s reserve currencies are committing suicide, that’s obvious, certainly their suicidal tendencies are obvious. Of course, it makes no sense to “sterilize” our money supply today with this. But the most important principle – only spend as much as we earn – remains, nobody has abolished it.
The fourth principle of our development is social justice. The growth of the country’s economy, entrepreneurship, industrial opportunities and scientific and technological potential must have a strong social component. This development must lead to a reduction in inequality and not to an increase in it, as is the case in some other countries. And frankly, we are not champions when it comes to solving this task either, we still have many questions and problems here.
Reducing poverty and inequality requires demand for domestic products across the country, which means narrowing the gap in regional potential, creating new jobs where they are most needed, and universally the conditions for further economic development are created.
I would like to emphasize: positive dynamics of people’s real incomes and poverty reduction are the main indicators of the efficiency of government, agencies and the state as a whole. Despite all the objective difficulties, this year we must achieve tangible results, and the government has set this goal.
I repeat, we give special support to the most vulnerable groups of the population: pensioners, families with children and people in difficult situations.
Every year the pensions are increased above the rate of inflation. They were increased twice this year, including a further ten percent on June 1.
The minimum wage was also raised by 10 percent, as were pensions and the living wage associated with many other benefits and allowances; accordingly, these must also be increased, which directly affects the incomes of about 15 million people.
In recent years we have built up a comprehensive support system for needy families with children. Women can receive state support from the beginning of pregnancy until the child reaches the age of 17. (Translator’s note: I will write a separate article on this in the next few days, because I was surprised to learn how massively families with children are supported in Russia)
The well-being and prosperity of people are the most important factors of demographic development, and here the situation is extremely difficult in the face of negative demographic waves. Fewer than 100,000 children were born in Russia in April, almost 13 percent fewer than in April 2020.
I ask the government to constantly review the development of additional support measures for families with children. They must be radical and proportionate to the extreme demographic challenge we face.
The future of Russia is a family with two, three or more children. Therefore, we should not only talk about direct financial support, but also make targeted adjustments to the health and education system and all areas that determine the quality of life of families with children.
This is one of the goals of the national social initiative that the regional teams and the Agency for Strategic Investments are working on together. In the autumn we will evaluate the results of this work and summarize the assessment of the quality of life in the regions in order to make the best practices and experiences available nationally.
Another, the fifth principle on which Russia bases its economic policy is the rapid development of infrastructure.
We have already increased direct government spending on expanding the arterial roads. A large-scale plan to construct and rehabilitate the network of national and regional roads will be launched next year. At least 85 percent must be updated within five years.
We are actively using new instruments such as budget loans for infrastructure. Such loans are granted for 15 years at an interest rate of three percent. I have already said that the demand for this is much greater than we originally planned. There are many well-established, promising projects in the regions that we must not delay in launching. We are still thinking about what to do with this funding measure. We discussed this last night. In any case, all I can say now is that this instrument works reliably.
Another topic is the modernization of the municipal infrastructure. A lot of problems have accumulated here. The industry is chronically underinvested, estimated at 4.5 trillion rubles. More than 40 percent of the nets have to be replaced. This leads to low efficiency and high losses. At the same time, about three percent of nets decay each year while only two percent are replaced with new ones, meaning that the problem is getting worse every year. (Translator’s note: Here we are talking about water and heating pipes and the like)
I propose pooling funds and embarking on a comprehensive program of modernization of the housing and utilities sectors, coordinated with other infrastructure development plans and with the overhaul of the housing stock. The goal is to fundamentally change the situation, to consistently reduce the proportion of outdated networks, just as we are doing with resettlement from shelters and repairing roads. We will discuss housing and construction issues in detail with the governors at next week’s meeting of the Presidium of the State Council.
Also, I propose separately to increase funding for projects to create a pleasant urban environment in small towns and historical settlements. This program works well. I propose to allocate an additional ten billion rubles a year for these projects in 2023 and 2024.
Additional funds will be made available for urban regeneration in the Far East. I call on the government to provide separate caps for infrastructure and housing and utility sector modernization and other development programs in budget loans.
Comprehensive rural development is our top priority. The people who work in the countryside, who feed our country and, as is now evident, much of the world, must live in comfortable and decent conditions. In this regard, I call on the government to provide additional funds for the relevant program. The export duties from the sale of agricultural products can become a source of finance here. This is a permanent source. Of course, it can fluctuate, but it is permanent.
At the same time, I propose to expand the programs for the renovation and modernization of rural cultural houses, as well as regional and municipal theaters and museums, allocating 6 billion rubles each for them in 2023 and 2024.
What I just said in the area of culture is extremely important for people. Let me give you a very recent example: when the Order of Hero of Labor was awarded, one of the honorees, Vladimir Afrikanovich Mikhailov from Yakutia, asked directly for help in building a cultural center in his native village. Of course we will definitely do that. But the fact that it is being talked about at all levels shows that there is a lot of demand.
I’ll digress a bit, which is appropriate now, with the onset of summer – the traditional holiday season in Russia.
Every year, more and more tourists want to visit the most beautiful natural landscapes in our country: national parks, wildlife sanctuaries, nature reserves. It is estimated that the flow of tourists this year will exceed 12 million people. It is important that the authorities, business and tourists know what is and is not allowed in these areas, where tourist facilities can be built and where it is strictly forbidden, where it poses risks to the unique and delicate ecosystems.
The State Duma is already deliberating on a bill that would regulate tourism in specially protected areas and create a civilized framework for these activities.
In this connection I would like to point out the following: all the decisions that are taken here have to be calculated and weighed up, we have to take that seriously.
I would particularly like to mention the task of protecting and preserving Lake Baikal. In particular, a unique project is aimed at developing the Baikalsk urban complex, which should become a model of thoughtful, ecologically oriented management.
The task is not only to eliminate the damage to nature caused by the activities of the Baikalsk Pulp and Paper Mill, but also to bring the city to a fundamentally different level of living and make it a hallmark of Russian ecotourism. The project must be carried out using the most advanced technologies and environmentally friendly energy sources.
More generally, we will develop clean technologies to achieve our goals of greening our businesses and reducing emissions of pollutants into the atmosphere, particularly in large industrial centers. We will also continue to work on circular economy, environmental protection and climate protection projects, which I spoke about extensively here at the forum last year.
Therefore, the sixth, in my opinion, overarching and unifying principle of our development work is to achieve real technological sovereignty by creating an integral system of economic development, independent of foreign institutions for important components. We must build all spheres of life on a qualitatively new level of technology, while not only being users of others’ solutions, but possessing the technological keys to create next-generation goods and services.
In recent years, we have paid a lot of attention to import substitution and achieved success in a number of areas: agriculture, manufacturing of pharmaceuticals and medical devices, defense industry and a number of other areas.
But, and I would like to emphasize that we have a lot of discussions in society about it, import substitution is not a panacea, not a radical solution. If we only imitate others, if we try to substitute others’ products, even if they are the highest quality copies, then we run the risk of constantly lagging behind while we have to be one step ahead in order to develop our own competitive technologies, products and services To create services that can become new global standards.
I would like to remind you that Sergey Korolev did not go down the path of copying and partially improving captured rockets, but looked to the future and proposed a unique package for building the R-7 rocket, which opened the way for mankind into space , yes he set a standard for the whole world and for the coming decades.
The founders of many Soviet scientific programs worked proactively in this way, and even today our designers lead with dignity, relying on this foundation. Thanks to them, Russia has hypersonic weapons that have no analogy in the world. Rosatom is a leader in nuclear technology and develops the nuclear icebreaker fleet. Many Russian solutions in the field of artificial intelligence and big data processing are the best in the world.
I repeat: technological development is an overarching trend that will determine not only the current decade but the entire 21st century. We will discuss in depth the issue of building a new technological economy – the techno-economy – at the next session of the Strategic Development Council. There are many topics for discussion and, above all, for decisions. I am thinking of the development of engineering education and the transfer of scientific developments to the real economy by providing finance for fast-growing high-tech companies. We will also discuss the development of end-to-end technologies and the progress of digital transformation projects in individual industries.
I would like to emphasize that it is of course impossible to produce everything and everyone, and it is not necessary. However, we must have all the important technologies in order to be able to set up our own production for each product in a short time if necessary. We did that when we quickly secured the production of vaccines against the coronavirus, and now we’ve kicked off the production of many other products and services.
For example, after the unfriendly partners of the truck manufacturer KAMAZ left the Russian market, their niche is now being occupied by domestic companies. And we are talking about the supply of components not only for the factory’s traditional models, but also for future series of long-distance, transport and heavy-duty vehicles.
I would also like to mention the Mir card payment system, which has successfully replaced Visa and MasterCard in the domestic market and is now expanding its geographic reach, gradually gaining international recognition.
Another example is the St. Petersburg Tractor Works. The former foreign partner refused to sell engines and provide warranty service. Who took over? The engine builders from Yaroslavl and Tutaev: they began to supply their own engines. As a result, the production of agricultural machinery at the St. Petersburg Tractor Plant in March and April of this year was a record for the enterprise – not a decrease, but a record increase.
I’m sure there will be more and more positive practices and success stories like this one.
I repeat: Russia has the human, scientific and technological reserves to develop products that are particularly in demand today, including household and construction equipment, industrial and service equipment.
Today’s task is to increase the capacity and set up the necessary production lines in a short time. And one of the most important points is a comfortable environment for business, as well as the availability of prepared production facilities.
I am asking the government to present the benchmarks for the new functioning of the industrial clusters by the autumn. What is important here?
First, the funding. The projects launched in these clusters must receive long-term, affordable loans with a term of up to ten years and an annual interest rate of no more than seven percent in rubles. We have discussed all of these issues, including with business. Everyone agrees and we will do it.
The second point is taxation. In the clusters we need to ensure a low level of presumptive taxes, including social security premiums.
Third, early-stage production needs to be supported by putting together a package of orders, including granting subsidies for the purchase of finished goods from these companies. The problem is not easy, but I think that subsidies will be necessary. They are necessary to secure the market. We just have to work on it calmly.
Fourth, we need simplified administration, including minimal or no controls, and convenient and non-burdensome tax and customs controls for businesses.
Fifth, and perhaps most importantly, mechanisms must be put in place to ensure long-term demand for new innovative products that are just entering the market. I would like to draw the government’s attention to the fact that this preferential treatment and the corresponding industrial clusters are scheduled to be introduced as early as January 1, 2023.
What I want to say in this context. Both new and existing industrial growth points are expected to attract small businesses. At the same time, it is important for the entrepreneur, for small organizations, to see the horizon, to understand the perspectives.
In this context, I would of course like to ask the government to create an instrument for long-term agreements between state-owned companies and small and medium-sized enterprises together with the Association of Small and Medium-Sized Enterprises and our large companies. In this way, demand for these companies’ products is assured for years to come, and suppliers can confidently commit to creating new or expanding existing production to fulfill that mandate.
I would add that we have already significantly reduced the time it takes to build industrial plants and eliminated unnecessarily burdensome procedures, but much remains to be done and there is room for improvement. For example, it still takes one and a half to three years to build a manufacturing facility from the ground up, and buying developed land is still made difficult by high borrowing rates.
In this regard, I propose to introduce a fundamentally new tool – the industrial mortgage – to allow domestic companies to quickly introduce the necessary products. I’m talking about long-term concessionary loans with an annual interest rate of five percent. Companies planning to purchase ready-made space for production are eligible for such loans. I call on the government to immediately work out all the details with the Russian banking sector in order for the industrial mortgages to be fully operational in the near future.
The speed and magnitude of changes in the world economy, finance and international relations are increasing. The rejection of globalization in favor of a multipolar growth model is becoming increasingly clear. Of course, the formation, the birth of the new world order is a difficult process. We will still face many challenges, risks and factors that are difficult to predict and foresee today.
However, it is clear that the substantive rules of the new world order will be set by strong, sovereign states – that is, by those who do not follow the path already laid out by others. Only strong and sovereign states have any say in this emerging world order, or they are doomed to become, or remain, a powerless colony.
One must strive to move forward, change, feel the breath of the times and show the national will and determination to do so. Russia enters the coming era as a powerful, sovereign country. We are confident that we will make the most of the tremendous new opportunities that this time is opening up and grow even stronger.
Thank you for your attention.