Putin says Russia weathering sanctions, lectures West

Russia’s President Vladimir Putin attends a meeting with members of the international expert council of the Russian Direct Investment Fund and representatives of the international investment community, part of the St. Petersburg International Economic Forum 2015

St. Petersburg, Russia (Reuters): President Vladimir Putin boasted on Friday that Russia had found the “inner strength” to prevent sanctions causing a deep economic crisis, and told the West to stop using “the language of ultimatums”.

Investment in Russia has slowed to a trickle, capital flight has risen and the economy has been sliding into recession since oil prices tumbled last year and the West imposed economic sanctions on Moscow over the Ukraine crisis.

But in a 29-minute speech to a business forum and a question-and-answer session that lasted more than an hour, Putin ignored calls by many investors to unveil new plans to end the downturn.

Instead, he warned the West not to meddle in Moscow’s affairs and shifted blame for the conflict in Ukraine onto the West, primarily the United States.

“I would like to point out that at the end of last year we were warned - and you know this well - that there would be a deep crisis,” Putin said in the speech in the former imperial capital of St Petersburg.

“It has not happened. We have stabilised the situation ... mainly because the Russian economy piled up a sufficient supply of inner strength,” he told an audience including rows of foreign and Russian businessmen and much of the Russian government.

Russia’s central bank reduced its main interest rate by a percentage point to 11.5% on Monday, inflation has slowed from 16.9% in April to 15.8% in May, and the rouble has risen to around 54 to the dollar after briefly hitting 80 in December.

Even though the bank expects the economy to contract by 3.2% in 2015, Putin said: “With us are businessmen, people and new leaders prepared to work for Russia and its development. For this reason we are absolutely certain of success.”

State Department spokesman John Kirby disagreed with Putin’s assessment, telling a regular news briefing in Washington, D.C.: “We know otherwise. We know that the costs have remained high on him and the economy, and that they will continue to do so.”

Many US investors stay away

Despite Putin’s optimism, relations with the West are at their lowest ebb since the Cold War and former finance minister Alexei Kudrin said on Thursday Russia was still in the “eye of the storm”. He recommended bringing forward the 2018 presidential election to give Putin a stronger mandate to reform the economy.

The chief executives of many Western companies which would usually have attended Russia’s annual showpiece economic forum stayed away for the second successive year, though the heads of some major oil companies were present.

The U.S. government urged U.S. companies to shun last year’s forum, soon after Russia annexed the Crimea peninsula from Ukraine, but refrained from doing so this year.

“There is some wariness (about attending) but I think overall, Western companies want to continue working with the Russians because ... the opportunity space is very large,” said Hans-Paul Buerkner, Chairman of Boston Consulting Group.

Ian Colebourne, Chief Executive Officer of Deloitte CIS, said: “Some of the anxieties perhaps that we were seeing last year have reduced. I mean certainly not gone away by any means, but the tension has been reduced.”

Putin has turned to Asia to drum up business since the Western sanctions started biting, and he shared the platform with representatives of several Asian countries.

Another guest was Greek Prime Minister Alexis Tsipras, whose country is building ties with Russia as it tussles with its European Union partners over its debt crisis.

The two countries signed a memorandum deepening energy ties and one Russian official said Moscow might consider offering Greece financial aid if it requested it.

Putin said he did not intend better ties with Asia and Greece to upset other countries, but made clear he believes it is up to the West, not Russia, to change its behaviour if it wants a better geopolitical climate. “We will not be talked to in the language of ultimatums,” he said.