Putin about Moscow-Kazan HSR: “In principle, financing is possible, even from National Wealth Fund, but what will be a return?”
The president of the state tell about how national projects are being implemented and how projects are selected for the Russian National Wealth Fund at Russia Calling! Forum
Russian President Vladimir Putin and participants of Russian and foreign businesses discussed the prospects of foreign economic cooperation under the sanctions at Russia Calling! Forum. Assessing the impact of the withdrawal of US companies from Russian shelf projects, the head of the state called this decision of the United States “a shot in the foot”. However, the central place in the discussion was taken by the Russian agenda: what will be the impetus for economic growth and whether it was possible to return to the Central Bank’s key rate of 6,5% before the autumn? Suddenly, a question was raised about the effectiveness of Bashneft's management, on which the president laconically answered that he considered it fair to transfer the blocking stake to the authorities of Bashkiria. Read more in the material of Realnoe Vremya.
What foreigners concerned about in Russia
Before the arrival of the president at the plenary session Bridges Over the Waves of Deglobalization, the head of VTB Andrey Kostin invited well-known representatives of large foreign businesses working in Russia to a business conversation. Next to him, on his left hand, there was sitting a charming lady in a strict trouser suit — Emma Marcegaglia, the president of the Italian energy company Eni, then the Chinese colleague, Executive Director of the board of directors and president of the Silk Road Fund, Wang Yanzhi, and on the right hand — Chairman and CEO of the American investment Bank Moelis&Company Ken Moelis.
The moderator of the session asked them similar questions: are they experiencing difficulties doing business in Russia, what consequences for the world economy the sanctions against our country have and whether we should expect a real trade war between the US and China? The world community is seriously concerned about the latter because the volume of world trade is beginning to slow significantly. Thus, if at the end of 2018, the trade turnover between the countries increased by 5%, now it is expected to rise by only 1%, which will inevitably affect the economy of different states — such alarming notes sounded from representatives of foreign companies at Russia Calling! Forum.
Eni has had difficulty accessing government contracts
Emma Marcegaglia assessed the current global environment as “far from positive”, pointing out that the main risks for the industry arise from too many uncertainties in foreign trade during the confrontation of the giant countries. Global globalization, she said, significantly increases technological inequality between countries, and protectionism can become a dangerous weapon in protecting their markets. Therefore, she sees the need to maintain the openness of world markets for the exchange of technological innovations.
“I'm in favour of an open market, but I'm in favour of fair trade,” she said.
According to Marcegaglia, in these conditions, Russia needs to increase investments in technological development: hydraulics, microelectronics and other areas that will make it more competitive. Speaking about the activities of Eni in Russia, she reminded that in 2010 the production of stainless steel pipes was opened in Vladimir. Some time ago, the company, she said, began to experience difficulties in participating in tenders for government contracts. Subsequently, the situation began to improve, she admitted.
“We are glad and we will develop in Russia,” said Marcegaglia, adding that the Italians continue to work with all major oil companies in Russia, despite the unfavourable conditions due to sanctions. “We have become real friends.”
The last chord to the speech of the representative of the European business was the remark of Andrey Kostin. He recalled that the artistic director of the Mariinsky theatre, conductor Valery Gergiev, gave a charity concert at the Italian Embassy, which launched a fundraiser in support of Venice, which was affected by the floods. “Not the first time it sinks and not in the first time it will emerge,” the moderator of the forum noted.
China wants quality food from Russia
“What promising areas in the energy sector do you see for yourself in Russia?” Andrey Kostin asked the following question to the president of the Chinese Silk Road Fund Wang Yanzhi. Before that, he explained that the Chinese are the shareholders of the international flagship project Yamal-LNG of the Russian petrochemical company SIBUR and are developing a new investment project for laying the Northern sea route.
Mr. Wang Yanzhi immediately moved to specifics, saying that from energy projects China would like to move to investing in the construction of infrastructure (maritime transcontainer transport) and in agriculture. The last direction seems to be the most important. “China's agricultural imports reached $137 billion. And only 2 per cent comes from Russia,” he complained. According to him, now the demand for high-quality agricultural products has grown significantly in the country, so there is a high interest in studying the possibilities of Russia. Speaking about the possibilities of the Silk Road Fund itself, he noted that he is ready to invest in yuans and attract loans with partners from Russia.
“What will happen to a trade war between the US and China and can it be avoided?” the head of VTB asked the chairman and chief executive officer of Moelis&Company Mr. Ken Moelis a question that excites everyone.
The American banker avoided a direct answer but noted that “mistakes are made not only by investment strategists but also by politicians”, and deglobalization is in line with political trends. “Sixty years ago [big countries] went on the path of globalization, shifting production to third countries because of cheap electricity,” he reasoned about the causes of globalization. “And all of a sudden 10 years ago tariffs for transportation soared. But at the same time, digital technologies have evolved that can shorten production chains.” Moelis believes that politicians often follow the lead of national populists and market interests because of which the balance is off. Returning to the question, he diplomatically noted that world trade will not go into the negative but did not argue further because it became known about the arrival of the main guest of the forum, Vladimir Putin.
Disposable incomes of citizens are practically standing still
In his opening remarks, Vladimir Putin outlined the current situation and tasks in the light of national development. According to him, despite the decline in global growth, Russia remains positive economic dynamics:
“Last year, GDP growth was 2,3 per cent, and in the three quarters of this year it was more modest — 1,1 per cent.”
But since the second half of the year, according to the ministry of economic development, there has been a certain acceleration in growth, the president stressed. The key task of economic development he named the growth of incomes: “It is known that today wages in Russia are growing in nominal and real terms, but at the same time, the disposable incomes of citizens are practically standing still. Of course, we need to change this situation.”
For an hour and a half, the president was answering various complimentary questions from businessmen about the foreign economic situation and the opportunities for economic growth in Russia, but it turned out that Russian questions are sharper than those asked by foreign guests. “Why Russians ask bad questions and foreigners ask good questions,” Andrei Kostin jokingly exclaimed at one point. “There are no good or bad questions,” the president corrected him.
Foreigners were more interested in how national projects work in the country, what the National Welfare Fund’s funds will be spent on, why the Central Bank has been pursuing a tight monetary policy for so long, which may have affected the dynamics of economic growth, and what are the consequences of the rupture of relations with the United States in the energy field. Speaking about the incomplete financing of national projects, Putin acknowledged that 64 per cent of the allocated funds from the Russian budget this year have been disbursed. “The problem is that the money is allocated from the federal budget but spent in the regions. More attention should be paid to cooperation,” Vladimir Putin explained. At the same time, he pointed out that “there is no purpose to spend money at all costs,” but it is important that the funds are spent efficiently.
How to “print” NWF and whether there is a chance for Moscow-Kazan HSR
American investment analysts asked how the National Wealth Fund (NWF), which has reached the capitalization limit, would be spent. The president agreed that the NWF exceeded the mark of 7 per cent on the free part of savings, after which it can begin investing in projects on a returnable basis.
“Projects are being selected, we will look. It should be, of course, first of all, infrastructure projects that give returns for the entire economy,” Putin explained, adding that no one is going to waste money. “They are exhaustible but can push the development of the economy.”
According to him, when selecting projects, it is necessary to think about such an important socio-economic component as the real incomes of the country's citizens. Later, answering a similar question, the зresident assured that the аund was not going to spend money on energy. To another question, whether it is possible to direct the funds of the NWF for the construction of the Moscow-Kazan HSR, the president replied as follows:
“The relation [to the project] purely market one — it is necessary to take into account. It is clear that they have long believed, but nevertheless. We know how high-speed rail traffic is developing in many countries and what the economic results of this type of transport are. We need to understand, to make a final decision about what is optimal for us. High-speed traffic or just high-speed. What is more effective for us? The freight turnover, the passenger turnover is to be calculated. The funds allocated to us, it [the funding] is, in principle, possible, even from the same SWF. What will be the return — that's what is important. Not in the long term, but at least in the medium term. We proceed only from this,” said Vladimir Putin.
Has Bashneft under the wing of Rosneft reduced production?
Against the background of the macroeconomic agenda, the question of the effectiveness of Bashneft's management was unexpectedly raised. One of the Russian participants of the forum asked what the head of the state thinks about the decline in oil production of the company after the transition to the control of Rosneft. The questioner said that four and a half years ago, a decree was signed on the transfer of a blocking stake in Bashneft to the Republic of Bashkortostan, and 60 per cent went to Rosneft. During this time, еру production fell by 13 per cent, settlement conditions with counterparties deteriorated, and dividend payments decreased from 50 to 27 per cent.
Vladimir Putin immediately said that he considered it fair to transfer the stake to Bashkortostan and that the head of the republic should actively participate in the management of the oil company, as his predecessor did. But referring to operational activities, the president said that the state does not interfere in the work of Rosneft and it operates on market conditions.
“Although Rosneft is a company with mainly state participation, it operates in the market. And it is subject to decisions that are made by shareholders. The state does not interfere in the current activities of the company,” Putin said.
The president noted that Bashneft has always had good processing capacity but had problems with production. “The fact that production there has fallen, apparently, is an old problem that is associated with difficulties in the field of production. Everything else related to the company's finances should be considered,” Putin said. Rosneft later denied claims of cutting the production and lowering the dividends after the change of ownership.
Maybe the 6,5 per cent rate could have been reached sooner?
The Russian leader also put an end to the question of how long it was necessary to keep the Central Bank's key rate at a high level. One of the guests of the forum noted that stability in the country is based on a tight monetary policy, but then what can contribute to economic growth?
“Probably, it could be done, probably, it would affect growth rates, but the Bank of Russia carries out an independent policy. I cannot but agree with the Bank of Russia that we have a lot of unpredictable risks. The Central Bank acted conservatively, maybe excessively conservatively in some ways, but maybe not,” Putin opined, adding that “everyone is strong with the benefit of hindsight” when they say that “6,5 per cent could have been reached earlier”.
In general, the president assessed the work of the Central Bank satisfactorily. The head of VTB asked about the system of assessment? “Three-point — it will be excellent,” the president answered him.
In conclusion, the president answered the question about the consequences of severing relations with the United States in the field of shelf projects. Putin was laconic: “They shot themselves in the foot.” According to him, when the US authorities banned American companies from working on the shelf, they had to leave with financial losses. “Who was punished? Themselves!” Putin is convinced. At the same time, he noted that the United States is a great country, but Russia's trade with this country is growing slowly. “Under Trump, it grew by $25 billion, while with Turkey — by $25 billion is not enough, of course,” the head of the state concluded.