Trump Is No Help to Putin in Making Glitzy Forum Great Again

(Bloomberg) -- With an admirer now in the White House and Russia's longest recession in two decades finally over, Vladimir Putin's annual investment showcase in his native St. Petersburg was supposed to be different this year.

Modeled on the World Economic Forum, the St. Petersburg conference, which starts Thursday, has yet to recover from 2014, when the heads of major Wall Street banks like Citigroup Inc. and Goldman Sachs Group Inc. were pressured by the Obama administration to cancel over Putin's annexation of Crimea.

Under Donald Trump, the U.S. ambassador plans to show up this year and the forum is restoring its U.S.-Russia business panel. But attendance by top American executives will still be weak, more because of tepid economic growth than concerns over Ukraine-related sanctions or the probes into possible Kremlin collusion with Trump's presidential campaign.

“Positions have morphed from ‘don't go' to ‘don't get photographed' to ‘we don't care,”' said Chris Weafer, a forum veteran and partner at Macro Advisory in Moscow. “The economic case for companies to attend just isn't there.”

While Putin has restored the Kremlin's geopolitical swagger with military forays into Syria and Ukraine, his economic record has been less impressive of late. Russia's economy has slowed every year since 2010, even before the crash in global oil prices triggered a recession that lasted almost two years, and it's only recently limped back to growth.

The main event of this year's forum, aside from Putin's keynote speech, will be the panel discussion that he and Indian Prime Minister Narendra Modi will participate in. The moderator will be NBC News television journalist Megyn Kelly, in what's become a tradition of selecting Americans for that role.

No Relief

Any initial hopes of sanctions relief from the Trump administration have been buried in the swirl of revelations that have led to a federal probe of alleged links between the U.S. billionaire-turned politician's election campaign and Russia that now threatens to engulf his son-in-law, Jared Kushner.

For now, the Kremlin will have to be satisfied with incremental progress, such as U.S. Ambassador John Tefft's plan to attend, according to Alexis Rodzianko, who runs the American Chamber of Commerce in Moscow.

Leaders of foreign banks, which once dominated in Russian Eurobonds, continue to avoid the event. The government last week hired state-run VTB Group for the country's first Eurobond sale of the year. In 2016, Goldman Sachs and at least five other U.S. lenders that were approached by Russia dropped out of the bidding to organize a bond sale after Washington warned them off.

“The banks will be there in some form, but will keep it low key,” Rodzianko said. “This matches a survey we did after Trump's victory. The expectations of businesses with feet on the ground in Russia were for no significant improvements. I'd be very surprised if senior executives from oil majors aren't there -- and just as surprised if they tell journalists their plans.”

Tillerson, Woods

Among the roughly 200 accredited representatives of U.S. companies, most are regionally based and only a handful are chief executives. And one of the most prominent CEOs expected to attend isn't even listed on the program: Exxon Mobil Corp's Darren Woods is planning to make the trip, Kremlin aide Yuri Ushakov told reporters in Moscow Wednesday. Woods' former boss, Secretary of State Rex Tillerson, ignored the Obama administration's advice last year and resumed attending the conference.

The heads of several European oil companies, including Total SA, Royal Dutch Shell Plc and BP Plc, are listed as panelists on the forum's schedule, unlike their American counterparts. 

Russian organizers say there's significant interest in the event. There will be 8,000 guests at the forum, up from 7,500 last year, according to a Kremlin statement. Over 500 foreign companies will be represented, it said.

The American delegation will be one of the largest contingents, Ushakov said.
Still, even politically, the forum has less firepower than in years past. The main speakers at the plenary session, aside from Putin and Modi, will be Austrian Chancellor Christian Kern and, according to organizers, the pro-Kremlin president of Moldova, Igor Dodon. Putin will hold talks with Bavarian Prime Minister Horst Seehofer, and the opening ceremony will feature United Nations Secretary-General Antonio Guterres.

Fewer corporate leaders may mean more substance, said Dan Russell, head of the Washington-based U.S.-Russia Business Council.

‘Let's See'

“It may be better to have a key decision maker for emerging markets attend than a CEO,” Russell said by phone. “Everyone loves to see well-known, Davos-level participants attend the forum, but if you want to get practical stuff done, give me someone who focuses on business in Russia.”

With Putin widely expected to run virtually unopposed for another term next year, foreign investors may be taking a wait-and-see approach to whether the Kremlin plans to shift from geopolitical concerns to prioritizing economic development. There are currently competing reform proposals prepared by former Finance Minister Alexei Kudrin, Economy Minister Maxim Oreshkin and the Kremlin's business ombudsmen, Boris Titov, vying for Putin's blessing.

“Actions speak louder than words,” Macro Advisory's Weafer said. “The prevailing attitude is let's see what reform policies will be implemented after the elections and, perhaps more importantly, who will implement them.”

--With assistance from Ilya Arkhipov and Olga Tanas

To contact the reporter on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Torrey Clark at tclark8@bloomberg.net, Brad Cook, Gregory L. White