Good News for Small London Crowd

EventicaAlfa Bank president Pyotr Aven, who missed last year's event, addressing the investment roadshow on Monday.
LONDON -- Speaker after speaker tried to outdo one another in praising Russia on Monday as an annual economic forum in London sought to get back on its feet following last year's no-show by Russian government officials and many business leaders.

Speaking to a half-empty hall, the speakers praised Russia as "an island of stability" and "a rainbow in the storm" amid the global financial crisis. As expected, Deputy Finance Minister Dmitry Pankin was the highest-ranking Russian official in attendance, and John Hutton, British secretary of state for business, enterprise and regulatory reform, briefly addressed the forum.

After many participants pulled out from the forum following reports that the Kremlin had actively discouraged Russians from attending last year, it was unclear for months who would show up for the two-day event, which opened Monday. Forum organizers have rebranded the annual London Economic Forum into the Russia Investment Roadshow, seeking to target primarily the financial and business community.

Hutton's presence is a sign that Russian and British authorities "at the very high level" are working to mend fences amid a year-long diplomatic dispute, said Roger Munnings, president and CEO of KPMG Russia/CIS, who moderated the plenary session.

Hutton said both London and Moscow needed each other and welcomed Russian companies to invest and work in Britain. He also said he planned to visit Russia in October.

British Petroleum has run into a series of problems in Russia in the past few months, including an employee being investigated for industrial espionage. Hutton didn't mention any such problems in his speech, calling only for "clear, fair rules" for British companies operating in Russia. "I remain convinced that Russia is open for business," he said.

Reading from notes, Hutton called the forum the largest Russian economic conference outside Russia, but he spoke to a sparsely filled hall that has been packed to overflowing in previous years.

In contrast with Hutton's speech, Pankin eschewed any political comments, focusing solely on the Finance Ministry's attempts to handle the country's accumulated oil wealth. "It is difficult when there is no money. It is even more difficult when there is a lot of money," he said.

One of his ministry's primary concerns is the high level of inflation, said Pankin, chalking it up to "the overheating of the economy and an extremely high pace of budgetary spending." Budgetary spending stood at 12 percent of GDP in 2006 and almost 25 percent last year, he said, calling that a "very serious figure."

The most optimistic presentations came perhaps from Hans-JЪrg Rudloff, chairman of Barclays Capital, and Pyotr Aven, president of Alfa Bank and a permanent fixture at the forum, with the exception of last year, when he canceled.

Aven praised the country's progress under President Vladimir Putin, using a PowerPoint presentation to showcase improvements over the past eight years. With nearly $500 billion in reserves, the country's wealth is enough to weather any crisis, Aven said. (Alexei Gurin, president and CEO of CentreInvest Group, later took issue with that comment, saying inflation in Russia was so serious that it could wipe out even that large amount.)

Aven cautioned, however, that private pension funds needed to be set up in the next few years or the average pension would end up amounting to 17 percent to 20 percent of the average salary. "Socially, this would be an extremely dangerous figure," Aven said. The figure now stands at 26 percent, while 30 percent is considered acceptable.

Rudloff called journalists "detractors" for critical coverage of Russia and described Putin as a "great" leader. "History will give him a well-deserved place," he said." I think it is clear that Russia does not need much more advice, it does not need lectures from anyone."

Rudloff chose not to dwell too long on his wish list of improvements but did say that it included "more industrial logic and not the logic of control and empire," self-criticism and an improved infrastructure.

Oleg Tinkov, chairman at Tinkoff Credit Systems, declared that Russia's consumer market was the best in the world. "Russian consumers continue to spend. Russians never save at all," he said. That attitude has allowed his new bank to distribute 120,000 credit cards since July, capturing an incredible 2 percent of the market in less than a year, he said.

Russia's boom has made it impossible to hire a financial director for ?150,000 a year, or about $300,000, Tinkov complained, asking whether any forum participants might want to move to Moscow.

Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, a big business lobby group, extolled predictability in Russian politics, saying that, if there was debate over the country's long-term course, it was not between Putin and President-elect Dmitry Medvedev but among businessmen. In comparison, the European Union has a hard time reaching decisions, and unpredictability is hanging over the U.S. presidential election, he said.

Simon Joseph, director of the forum, said the gathering this year was "a metaphor for what's happening between the West and Russia. You can interpret it any way," meaning some choose to focus on the bright side, while others see only the negative side.

Big Changes Under Putin
Budget surplus (% GDP)1.5%5.5%
Central Bank reserves$28 billion$476 billion
Net capital flows-$24.8 billion$81.2 billion
Foreign currency retail deposits (% total)32.5%13%
State foreign debt$128.6 billion$46.4 billion
(% GDP)51.2%3.6%
S&P ratingCCC-BBB+
Source: Alfa Bank

Participants praised the new format but noticed the empty seats. "What a difference," said John Bamford, owner of International Business Management and Computer Consultancy. "Usually, you can't get a seat 10 [minutes] after nine."

Bamford said he expected the forum to meet again next year. "It's acceptable to Putin," he said.

As the speakers took to the stage, many in the audience leafed through complimentary copies of the Financial Times and Vedomosti left on their seats. Former Central Bank chief Viktor Gerashchenko sat by himself in about the seventh row, chewing gum and inspecting the contents of the free satchels handed out to participants. After glancing through a splashy brochure for Russia Today television, he read carefully through the program for the event.

At the speakers' table at the front of the room, Alfa Bank's Aven seemed more interested in his black-rimmed glasses than in Shokhin at the lectern. Aven held his glasses up to the glaring lights several times, then polished them energetically with a large, blue handkerchief. Later, he noisily unfolded a newspaper and placed it on the table, bending over it intently.