Conversation: St. Petersburg International Economic Forum

7 MINS READMay 21, 2014 | 13:59 GMT

David Judson: Hi, I'm David Judson, Editor-in-Chief of Stratfor. Joining me today is Lauren Goodrich, Chief Eurasia Analyst. Thank you for joining me.

Lauren Goodrich: Thank you.

David: The topic today is the upcoming St. Petersburg International Economic Forum. We have got President Putin of Russia doing a fast pivot from China, where he is today, to catch up to this summit of sorts, economic summit of sorts — which is particularly interesting, I understand, because of the nature of the guest list, who is coming and who is not. But before we get into that maybe you could explain to us and our viewers what this forum is about. Is this Russia's Davos or is this one of those summits you read about in the airline magazine?

Lauren: It is a lot like Russia's Davos. St. Petersburg International Economic Forum is a place in which the Russian leadership has tried to rally investment and rally the symbolic nature of showing that the world is interested in Russia and that Russia has a lot to offer to the world. Each year the economic forum has shifted in terms of what its goals are, what its tasks are and what the importance of that investment in Russia is. For example, in 2008 and 2010 it was really about can we get companies in here can we get companies to invest in the privatization of the Russian economy, because that was where Russia was focused. This year is a little different. This year is about who are our friends still with everything that has been happening between the West and Russia.

David: With Putin coming off the meeting in China where — we were talking just before we came into the studio — there may even be a play involving investment from China in Rosneft, where BP is already. That would be an interesting three people in the party.

Lauren: Very much so. This week for Russia is all about showing that it is still an economic powerhouse; it is still a good place to invest. Whether you are from the East or from the West. So we have Putin in China on Tuesday and Wednesday, in which he's striking these unbelievably enormous energy deals that would not only bring Russian energy to China, but would bring China with a stake inside of Russia. So, it is Russia turning east but now with the St. Petersburg International Economic Forum yes there is going to be a lot of Asian interest at the economic forum, but it is really about who from the West is still willing to be friends with Russia.

David: Right, this is the RSVP list — who is in, who is out — as an indicator of who is on board with the American posture versus the more reticent European sanctions posture. What does that look like? How is the guest list shaping up?

Lauren: Well the guest list has changed as things have been developing over the last few days. It is very interesting that when the guest list was first announced on who accepted their invitation from Russia to come to the St. Petersburg International Economic Forum, a lot of U.S. firms outright rejected coming to the St. Petersburg International Economic Forum, such as Visa, PepsiCo, ConocoPhillips, Alcoa — all rejected coming. But it was only U.S. firms that were rejecting. Whereas with the Europeans, I mean the guest list was a mile long with so many of the largest European firms still willing to come. That has changed as of this week. We have had a pullout of invitations with people who have initially said that they were coming now saying that they are not coming. The largest one is E.On, the German energy powerhouse.

David: But I mean, there is a bit of a debate there. Is that a sincere pullout or is that something like the minimum gesture that you can take if you want to keep business as usual with Russia?

Lauren: That is a very good point. For the Germans I would say that it is the minimum symbolic gesture that they can take. E.On cannot break with Russia. Germany cannot break with Russia. But they still need to show that they are not going to condone and support all of Russia's moves especially when it comes to what is happening in the borderlands. And so this is a really good place where Germany really can make a symbolic gesture. It is a little different for the American companies. For the American firms that are pulling out I think that there is a little bit more sincerity because actually have real pressure on them from the U.S. government to not do business with Russia. So we had Goldman Sachs and Morgan Stanley officially pull out from the St. Petersburg International Economic Forum. But then we had someone like Boeing just happen to disappear off the guest list without formally pulling out. And so the U.S. firms I think are a little more under pressure and it really does mean a lot more for real business than it does for the Europeans.

David: So, Goldman Sachs out —

Lauren: — and Morgan Stanley. And Boeing has disappeared off the list.

David: Who is in?

Lauren: As far as the United States, not much. Caterpillar is the main big U.S. firm that is still going. The U.S. oil services firm National Oilwell Varco (NOV) is still going. There is not a lot from the United States. For the Europeans there is still quite a bit. The largest contingent is from France, which is very interesting play of having Germany make the symbolic gesture while France has all their big firms, especially Total and GDF, still going to the economic forum. And remember France is kind of in an awkward position at this moment, because they have all those military deals with Russia in which they have stated outright that they are not going to be pulling out of those military deals. So they are still willing to do military business and energy business and investment business with Russia, whereas Germany is the one playing the bad guy at least at the forum.

David: Okay, so a little tag-team wrestling from the Europeans. Now back on the American front, how about Visa. We have been hearing a lot about Visa and the credit cards pulling out, back in. What is the latest on that?

Lauren: Well Visa was one of the first firms to come out and say that they would not be going and that is very important to the Russians because out of all of the Russian vulnerabilities, Russia is vulnerable on only a handful of sectors in which they are open to the international market. Energy, of course, is one and we have seen the European energy firms saying that they are still going to go and deal with Russia. But Russia is very vulnerable on the credit front in that it does not have its own domestic credit processing system and it uses Visa and MasterCard for 95 percent of their credit processing. So if there are further U.S. sanctions on Russia, Visa and MasterCard are going to be hit hard, which means that Russia is not going to have a credit processing system. So, for Visa to not show up to the St. Petersburg International Economic Forum is something that really worries the Kremlin and is one of the reasons why Russia is now fast-tracking setting up their own system just in case the United States does put increased pressure on Visa and MasterCard.

David: A lot of moving parts.

Lauren: Very much.

David: Well, thank you very much I think we are out of time. Thank you for joining us here at Stratfor. Thank you Lauren.

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