Russian authorities nervous as nation faces financial challenges

[ad_1] Steve Rosenberg Russia Editor

<img sizes="(min-width: 1280px) 50vw, (min-width: 1008px) 66vw, 96vw" srcset="https://ichef.bbci.co.uk/news/240/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 240w,https://ichef.bbci.co.uk/news/320/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 320w,https://ichef.bbci.co.uk/news/480/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 480w,https://ichef.bbci.co.uk/news/640/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 640w,https://ichef.bbci.co.uk/news/800/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 800w,https://ichef.bbci.co.uk/news/1024/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 1024w,https://ichef.bbci.co.uk/news/1536/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp 1536w" src="https://ichef.bbci.co.uk/news/480/cpsprodpb/f417/live/7a47b610-4ee6-11f0-8312-950dad3e6b11.jpg.webp" loading="eager" alt="Getty Images Russian President Vladimir Putin speaks during the plenary session of the 28th Saint Petersburg International Economic Forum SPIEF 2025" class="sc-d1200759-0 dvfjxj"/> Getty Pictures On the St Petersburg Worldwide Financial Discussion board, a Russian MP got here as much as me.

"Are you going to bomb Iran?" he requested.

"I am not planning to bomb anybody!" I replied.

"I imply you, the British…"

"Do not you imply Donald Trump?"

"He is advised what to do by Britain," the person smiled. "And by the deep state."

It was a quick, weird dialog. Nevertheless it confirmed that in St Petersburg this week there was extra on folks's minds than simply the financial system.

Take President Vladimir Putin.

On Friday, the Kremlin chief delivered the keynote speech on the discussion board's plenary session. It targeted on the financial system.

Nevertheless it's what the Kremlin chief mentioned within the panel dialogue afterwards that made headlines.

"Now we have an previous rule," Putin declared. "The place the foot of a Russian soldier steps, that is ours."

Think about you are the chief of a rustic that is internet hosting an financial discussion board, in search of overseas funding and cooperation. Boasting about your military seizing overseas lands would not look like the simplest solution to obtain this.

However that is the purpose. Since Russia's full-scale invasion of Ukraine in February 2022, the state of the financial system has been secondary to the objective of successful the struggle in opposition to Ukraine. That's the Kremlin's overarching precedence. True, Russia's financial system has been rising, however largely as a result of large state spending on the defence sector and military-industrial advanced.

And even this war-related development is now tapering off.

Putin did not sound overly involved.

"So far as the 'homicide' of the Russian financial system is worried, as a well-known author as soon as mentioned - 'rumours of my loss of life are tremendously exaggerated,'" the Russian president declared.

However the Russian authorities is clearly nervous.

On the discussion board, Russia's Minister for Financial Growth, Maxim Reshetnikov, warned that the nation's financial system was teetering "getting ready to recession".

"We grew for 2 years at a reasonably excessive tempo as a result of unused assets had been activated," mentioned Russian Central Financial institution Governor Elvira Nabiullina. "We have to perceive that a lot of these assets have actually been exhausted."

The St Petersburg Worldwide Financial Discussion board was conceived as a shiny showcase for the Russian financial system. A number of that shine has light as a result of 1000's of worldwide sanctions imposed on Russia over the struggle in Ukraine. Many Western corporations pulled out of Russia.

<img sizes="(min-width: 1280px) 50vw, (min-width: 1008px) 66vw, 96vw" srcset="https://ichef.bbci.co.uk/news/240/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 240w,https://ichef.bbci.co.uk/news/320/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 320w,https://ichef.bbci.co.uk/news/480/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 480w,https://ichef.bbci.co.uk/news/640/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 640w,https://ichef.bbci.co.uk/news/800/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 800w,https://ichef.bbci.co.uk/news/1024/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 1024w,https://ichef.bbci.co.uk/news/1536/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp 1536w" src="https://ichef.bbci.co.uk/news/480/cpsprodpb/2efc/live/d930c9b0-4ed1-11f0-a466-d54f65b60deb.jpg.webp" loading="lazy" alt="EPA Russian President Vladimir Putin (L) speaks with Chinese Vice Premier Ding Xuexiang (R) during their meeting on the sidelines of the St. Petersburg International Economic Forum in St. Petersburg, Russia" class="sc-d1200759-0 dvfjxj"/> EPA May they return?

In any case, US President Donald Trump has made it clear he desires higher relations with Moscow.

"Right this moment we had breakfast with the American Chamber of Commerce and plenty of traders got here from the US. We get a way that plenty of American corporations need to come again," Kirill Dmitriev, President Putin's envoy on overseas funding, advised me. We spoke on the sidelines of the St Petersburg discussion board.

"I believe the American administration understands that dialogue and joint cooperation is healthier than sanctions that don't work and harm your companies."

Western companies, although, are unlikely to return in massive numbers whereas Russia is waging struggle on Ukraine.

"I believe it is clear you need to have some type of an finish to the battle earlier than American corporations are going to significantly take into account going again," mentioned Robert Agee, president of the American Chamber of Commerce in Russia.

"Have you ever requested the Trump administration to take away some sanctions from Russia?" I requested him.

"We have been to Washington," he replied. "Now we have made an evaluation of the affect of American sanctions on American companies. We handed that on to the administration."

"Do you settle for that the thought of Western companies returning is controversial in gentle of the struggle in Ukraine?" I requested.

"Western companies have made choices based mostly on what occurred three or 4 years in the past," replied Mr Agee. "And it is as much as them to resolve whether or not it is the proper time to return."

After greater than three years of struggle and mass sanctions, Russia faces powerful financial challenges: excessive inflation, excessive rates of interest, studies of stagnation, recession. The issues within the financial system at the moment are overtly mentioned and debated.