IGP Postcard from Russia:
Takeaways from Russia’s “Summer Davos” –
The 2016 St. Petersburg International Economic Forum (SPIEF)
Kesarev Consulting, a member of the Interel Global Partnership (IGP), and Interel participated in Russia’s flagship economic forum in St. Petersburg on June 16-18. The SPIEF is an annual event that attracts global government and business leaders for three days of discussions and deal-making. Here’s our report from the city of the midnight summer sun:
Signs of Economic Rapprochement with Russia?
After two years of economic sanctions, the forum – which attracted 12,000 participants from 133 countries according to its newly unveiled international conference center – showed signs of re-emerging engagement between Russia and international business community.
Some of the high-level international attendees included EU Commission President Jean-Claude Juncker (whose last-minute decision to attend ruffled political feathers in Brussels), Italian Prime Minister Matteo Renzi, UN Secretary General Ban Ki-moon, and former French President Nicolas Sarkozy. (Juncker’s remarks here.)
China and India were well-represented and hosted special side-line events and a long list of growth markets – including Iran – sent high-level government delegations.
Global businesses were warmer to the northern forum this year with more than 300 foreign C-suite executives and board members in attendance, including CEOs from the oil majors Exxon, Shell, Total and BP; global Chinese companies Alibaba and Huawei; European food companies Nestlé and Danone; and international consultancies McKinsey and PWC (click here for a full list of C-suite participants).
It was also rumored that many U.S. and European multinationals “unofficially” attended the forum under the political radar to meet with Russian government officials in restaurants and hotel lobbies in town, while telling their home country governments they did not “officially” participate in order to keep in good grace.
According to organizers of SPIEF, investment and trade deals concluded at the forum totaled $15 billion, with $1.3 billion specifically in agreements between Russian and Italian businesses (including a major contract between Rosneft and Italian ship builder Fincatieri).
Looking west, but staring east
The eastward-facing head of Russia’s double-headed eagle set a heavy gaze this year with an increased focus on business relations with Asia. In fact, the attention to China was immediately noticeable at St. Petersburg’s international airport where the flight arrivals and departures board alternated between screens of Russian, English, and Chinese.
Jack Ma of Alibaba was the headlining participant from China. Driven by a traditionally robust consumer culture and tech savvy population, Russia’s e-commerce market is currently estimated at valued at $10 billion. This growing market makes Russia particularly appealing e-commerce companies in China, which is the already the source of 80% of its cross-border parcels.
Several sessions in the program were dedicated to China, including a day 2 discussion on “Transforming the Chinese Economic Model” which focused on strategies to stimulate economic growth policies and the future of Russian-Chinese economic ties. Strengthening infrastructure links between the two countries including roads (OBOR – “One Belt, One Road”) and pipelines (adding a second line to the ESPO – East Siberia-Pacific Ocean – to deliver an estimated $270 billion worth of crude of the next 25 years) was another key topic of Russian-Chinese cooperation.
However, one of the biggest announcements was Putin’s proposal at the forum to China and India to partner with the fledgling Eurasian Economic Union (EEU), a single economic space comparable to the EU which consists of Russia, Kazakhstan, Kyrgyzstan, Armenia and Belarus.
Although to critics the EEU expansion proposal seemed rhetorical, the announcement at SPIEF was immediately followed by Putin’s subsequent state visit to China to meet Xi Jinping, and the visit of both leaders to Tashkent, Uzbekistan, for the summit of the expanding Shanghai Cooperation Organization (SCO) at which India and Pakistan were officially admitted.
Two other notable oriental events at SPIEF came in the form of an official delegation from Iran to the forum, and open discussions of offering a 19.5% stake in Rosneft to China and India.
While there was noticeable “sanction fatigue” amongst attending Russian and foreign businessmen, there also seemed to be a sober acceptance of working in the “new reality” and that the current sanctions will not be lifted anytime soon.
At the same time, Putin’s remarks at the SPIEF plenary struck a more conciliatory tone and expressed a desire to resolve differences with the EU and build a new focus on cooperation. There were also signs of longer term optimism from Western executives who, by their very presence (official or unofficial), demonstrated continued interest in Russia and who also seemed to share – off the record – the opinion that the sanctions will not be in place forever. It was clear that to them, being well-positioned in advance of the sanctions being lifted will undoubtedly be an advantage.
IGP Tips for Public Affairs in Russia:
Even with the current sanctions, a majority of Fortune 500 companies continue to do business – and do well – in Russia. A good public affairs strategy is key to their success. Here are our 5 tips on public affairs in this dynamic market:
- Be proactive about stakeholder mapping and engagement. Russia is an ‘economy of relationships’, and investing in them wisely yields long-term benefit.
- Work with associations and business chambers. While it’s important to maintain bilateral relations with key government officials and other stakeholders, business association voices are respected and heard in Russia – and are often a better option than direct lobbying. Not being engaged with key associations may make your business the odd man out and a target if unlucky.
- Be sure to focus on engagement beyond Moscow and build local ties with regional and municipal officials. Russia is an enormous country of 11 time zones. Working in Moscow to solve a problem in Russia’s far east will not be effective.
- Do not overlook opportunities in CSR to build good will with national and local governments. The Russian government puts a heavy focus on social development programs and is often open to private sector collaboration.
- Invest for the long term. Russia is a dynamic growth market with ups and downs. But with abundant natural resources, a highly-skilled workforce, and robust consumer culture, Russia is a market not to be ignored.
Want to know more about building a successful public affairs strategies in Russia? Click here to contact Jason Jarrell, global practice director of Interel, and Evgeniy Roshkov, managing partner of Kesarev Consulting, a member