Alexander Razuvayev: ‘Let’s make the summit in Kazan a forum like SPIEF but centred around the East’

The economist thinks that Russia should consider the possibility of more active cooperation with Muslim countries

About two weeks left to the opening of the 13th Russia — Islamic World: KazanSummit 2022 International Economic Summit. This year, sharing economy, Islamic finance and partner banking, the halal industry, export development, entrepreneurship and investments are key themes of the business agenda. “The idea of Islamic banking will become very topical soon. In 30 years, Russia will resemble the Golden Horde due to the Russian-Turkic component,” a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers Alexander Razuvayev is convinced. On the eve of the forum, in an op-ed column for Realnoe Vremya, the expert tells us about the problems of running a banking activity by Sharia principles in Russia and prospects of cooperation with Asian countries.

“The idea of Islamic banking will become very topical soon”

In fact, Islamic banking in Russia is underdeveloped. As far as I am concerned, one of Tatarstan banks, some other financial institutions offered an Islamic mortgage — simply as a gimmick, a speciality in the product line. Of course, the case is that we don’t have dedicated legislation yet.

Considering that our Central Bank and Moscow Exchange are actively consulting representatives of Iran, which has been imposed sanctions for a long time, I think the idea of Islamic banking will become very topical soon. Consequently, private financial companies that will be the first to deal with it will dominate the market. There is a lot of talk about the necessity of some elements of planned economy or non-traditional finances. I don’t think the economic system will dramatically change in Russia, but of course, the sector of Islamic finance should occupy its niche.

Western investment banks wrote as early as five years ago that from $10 billion to $15 billion could be attracted to this sector. Why not? First of all, Muslim republics — Tatarstan, Bashkortostan and North Caucasus regions — will be the recipients. But these services will be in demand not only among Muslims. In this case, Islam will be used for promotion. In other words, if you are a Muslim, all other things being equal, you will certainly use precisely Islamic products. But let’s say if I am not a Muslim but daily buy ayran in the grocery store, it reads halal. If I need pelmeni, if I have choice I will buy halal because I think this product is of better quality. Therefore I think Islamic banking will be popular among many people.

Now there is such a trend that the number of representatives of Turkic peoples, Muslims is growing. If we have a look at demographic figures, the state of affairs in Russia is better than in Europe but worse than in many other Asian countries. If we look at a breakdown, Turkic peoples have babies, Russians don’t. If we look at how the demography has changed in the last 30 years, after the dissolution of the USSR, Slavic republics — Belarus and Ukraine as well as Moldova, Baltic States — are at a disadvantage. All the Turkic republics, Central Asia are at an advantage.

I think that in 30 years Russia will resemble the Golden Horde very much due to the Russian-Turkic component. We will remain a multiethnic, multifaith country, and of course Islamic banking has very good prospects. Another thing is that some functionaries still see Islam not as a threat but something unclear related to terrorism. For instance, in Beijing, there are 70 mosques, in Moscow, there are just six. I think our federal authorities have missed this moment a bit, though there is still time.

“The economic potential of Islamic countries is huge and currently underestimated”

The main international economic forum in Petersburg (Saint Petersburg International Economic Forum) was traditionally held in May-June. This year, it is likely to be cancelled because it is clear that nobody will come. So let’s make the same economic forum from the summit in Kazan but centred around the East, Eurasia. I don’t understand why our main authorities aren’t launching such an initiative. And they should invite Russian blue-chips and, first of all, Turkey of course — ideally Erdoğan and Mr Aliyev, monarchs from the Near East. The organisation of such a big summit would show the world that there is no isolation of Russia.

Talking about the current situation, besides Islamic finance, Eastern countries can solve the problem of sanctioned products. Moreover, exports of course and first of all companies from Tatarstan to same Turkey or other Islamic countries. A lot of Westerners are exiting Russia, they put their businesses on sale. It is necessary to attract investors from Islamic countries from the Near East, Turkey, maybe even from Pakistan here because it is good investments. I will remind you about 1985-1986 when Americans easily suppressed Saudi Arabia and it took oil prices down. As I understand now they wanted this to repeat, but the Arabs didn’t give them way. So if they want to buy something, we should just welcome this. Again, there will be corresponding colour, moreover, the fast food niche is becoming free. For instance, there is a tea house on every corner in Moscow, but these are middle-class restaurants, perhaps, even for the upper stratum of the middle class. And it would be good to have something similar instead of McDonald’s.

We can say the economic potential of Islamic countries is huge and currently underestimated in the world economy. There are 1,5 billion Muslims around the world. Of course, some countries are superrich, but some countries are promising from a perspective of development, improving the quality of life and increasing GDP. Here I single out Uzbekistan, they smartly make economic reforms, they don’t repeat Russian mistakes. The pandemic really hit them because world trade stalled, but the Uzbeks in general have great potential, and the possible accession of Uzbekistan to the UAEU is a big plus from the point of view of their development. Uzbekistan has a peculiarity — their labour market annually grows by 700,000 people a year. This is a lot. In 2019, The Economist recognised them as country of the year. I think that precisely Uzbekistan on the world map is the most economically interesting country.

“Hopefully, Azerbaijan and Turkey will join the EAEU”

The share of the oil and gas sector in Russia’s GDP is 20%. Consequently, if we’re talking about investments, it can be whatever. We sell a lot of products to Islamic countries, for instance, chicken eggs, ice cream but, above all, Turkey’s example shows it, it is weapons. Russian weapons are of high quality and cheap. Our country ranks second in weapon exports around the world, the average annual sales total $15 billion. Clearly, the States is first, but American allies have to buy weapons volundatorily, nobody asks them. While we work on market terms. We have extra-market supplies to Kazakhstan and Belarus, but it is The Collective Security Treaty Organization, our allies and so on. Perhaps, civil aviation will become the next export commodity in the future.

Talking about the countries, as I am an optimist I really hope that Azerbaijan and Turkey will finally join the EAEU and Russia will the Union of Turkic States. We have Turkic republics, while in fact Russians themselves have a strong Turkic components, the nobility consisted of representatives of the Golden Horde. Also, it is Azerbaijan, it is a transit country, moreover, the military operation overshadowed everything. But on 22 February, Putin and Aliyev signed dedicated documents in Moscow, there are a lot of interesting things there. Then, of course, it is the cooperation with Iran. Both they and we are under sanctions. With Uzbekistan because it is cheap and high-quality agricultural produce in our market, it will be in demand. It is migrants who, I think, will have equal rights here after Uzbekistan joins the EAEU. Also, Uzbekistan is tourism, considering that ours aren’t welcomed everywhere now, I suppose this republic can host Russian tourists. At the moment, Belarus is first in CIS countries, but I think Uzbeks can outrun them soon. Moreover, everything is cheap enough there.

“I don’t expect any devaluation”

The IMF thinks that Russia’s economy will plunge by 8%. I think it will fall by 3-5% in fact. It can be said to be a joke, or not, probably, the territory of Russia will be bigger by 1 January? I mean the Donetsk People’s Republic, Luhansk People’s Republic and some other territories, then if we calculate it, there will be no decline at all. But if we consider Russia now, 3-5% isn’t tragic.

I think Kudrin is right — the adaptation will take two years. Not only imports but also both inflation in general and social stability matter — many in the country look at the ruble rate. If the reserves are frozen, ours will lift all the restrictions. If not, we will be living in the regime that exists now. But I don’t expect any devaluation. 19 million private broker accounts at Moscow Exchange are a key moment. It is the savings of the middle-class. Money will devaluate, inflation costs real money. So to speak, one cal sell and get real money, though the stocks are cheap, of course.

It is a pity that there won’t be an international financial centre, but the savings of the middle class and consumers’ confidence are key now because if the savings didn’t perish, people understand they didn’t get poorer, they go and spend the money. If the savings perished, people understand they became poorer, they don’t spend the money, this is fraught with recession.

I think that brain drain is the only serious problem. IT specialists, engineers are leaving. And they are leaving Russia not because they aren’t patriots but because this is their employers’ requirement. But some of them will return sooner or later. Yes, we will have scarcer range of products, we will be similar to Belarus, but we will have parallel imports. In fact, there will be no catastrophe!

Alexander Razuvayev

The author’s opinion does not necessarily coincide with the position of Realnoe Vremya’s editorial board.