June 1, 2018 Special Dispatch No. 7501

Putin At St. Petersburg International Economic Forum: 'State Sovereignty And National Identity Have Unconditional Value' – Part I

June 1, 2018
Russia | Special Dispatch No. 7501

At the St. Petersburg International Economic Forum plenary session, Russian President Vladimir Putin stressed once again that national "sovereignty" is at the core of his policy. "State sovereignty and national identity have unconditional value," stated Putin.[1]

Putin underlined that Russia is a symbol and a leader in the battle for sovereignty vis-à-vis the U.S. At a time when Europe's relations with the U.S. are deteriorating due to the latter's steel and aluminum tariffs, Putin said, the U.S. is violating international rules by replacing open markets and fair competition with exemptions, restrictions, and sanctions. "Now, however, we are facing a new kind of protectionism. What is the purpose of all these far-fetched pretexts and references to national security interests? Their purpose is to suppress competition and extort concessions," he noted, in what appeared to be an indirect invitation to EU countries to retaliate against the U.S.'s decision to impose harsh tariffs.

Without directly mentioning the U.S., Putin went on to hint that the U.S. is driven by the logic of economic egotism, and added that this may set the global economy and trade back to the era of subsistence farming, when every household had to produce everything itself.

In conclusion, he stated that the World Trade Organization is not an ideal organization, but that it still remains an important element in the global trade system. However, he stressed, since the world is changing, institutions and rules should be changing with it.

Below are excerpts of Putin's speech at the 22nd St Petersburg International Economic Forum:[2]


'Open Markets And Fair Competition Are Gradually Replaced By All Kinds Of Exemptions, Restrictions And Sanctions'

President of Russia Vladimir Putin:

"… We will act primarily proceeding from our national interests. This is natural for any sovereign state.

"However, it is possible to pursue one's interests in different ways – either by ignoring others or respecting the position of one's partners based on the understanding that the modern world is interconnected and countries are mutually dependent, and every state, especially the world's major economies, bears an enormous responsibility for the common future.

"Russia is part of the global economy. We are taking an active part in integration processes and exerting serious influence on the energy, food and other markets. This country and our companies are deeply involved in international trade, financial and production ties.

"This is why we are attentively studying what strategies of economic, technological and social growth other countries are planning to carry out. Naturally, we are not indifferent to what global trends prevail in long-tern perspective.

"Until recently, global development was based on two most important, determining principles. The first is the freedom of business, trade and investment, which is recorded in the general rules adopted by the participants in international relations. "The second is sustainability and predictability of these rules, which is guaranteed by clear-cut legal mechanisms.

"Based on these values and principles, the world economy managed to achieve impressive results and put into the orbit of development the overwhelming majority of international players, the majority of countries.

"However, today we are witnessing not even erosion – and I say this with regret – but the undermining of these foundations. The system of multilateral cooperation that was built for decades is being crudely destroyed instead of undergoing natural and needed evolution. Violating rules is becoming a rule.

"Open markets and fair competition are gradually replaced by all kinds of exemptions, restrictions and sanctions. Different words can be used to describe these notions but the meaning remains the same. Many countries now use these approaches as their official trade policy tools. And some countries simply had to adapt to this environment, respond and come up with tit-for-tat measures.

"Let me highlight a fact that is quite telling. Until recently, a joint statement was issued following practically every leaders' meeting of the G20 or APEC with calls to refrain from creating new protectionist barriers. Of course, these statements were non-binding, since new barriers kept creeping up, unfortunately. Today, however, we are unable to agree even on symbolic steps.

"Let me give you another example: free trade agreements are losing momentum. This process started five or seven years ago. In 2010, the WTO was notified of more than 30 agreements of this kind, but last year this figure was down to just ten. There is a feeling that this downward trend can carry on.

"Finally, we used to face what we can refer to as traditional protectionist measures that were also regrettable, of course, and consisted of introducing import duties, technical requirements and covert subsidies. Now, however, we are facing a new kind of protectionism. What is the purpose of all these far-fetched pretexts and references to national security interests? Their purpose is to suppress competition and extort concessions.

"The spiral of sanctions and restrictions is only widening, harming more and more countries and companies, including those that never expected to face any trade restrictions or problems of this kind.

"Arbitrary action and lack of control inevitably create a temptation to use restrictions more and more at a much broader scale and in any circumstances, without regard for political loyalties, solidarity or pre-existing agreements or cooperation ties dating back many years.

"There are many businesspeople in the audience, and you know all too well that when one of the parties to a contract withdraws from the legal framework, the breakdown of agreements always creates substantial risks and losses. This is a fundamental truth for any business. On a global scale, when entire countries and centers of gravity act this way, this may pave the way to the most destructive consequences. This rings especially true today, when disregard for the existing norms and the loss of mutual trust may overlap with the unpredictable nature and turbulence of the ongoing radical technology transformation.

"This combination of factors may trigger a system-wide crisis that the world has never faced or has not faced for a long time. It will affect all participants in the world economic relations without exception.

"Global mistrust is calling into question the prospects of global growth. The logic of economic egotism does not fit in well with the current specialization of countries and companies and the building of complicated global production chains. In effect, this may throw the global economy and trade far back into the past, into the era of subsistence farming when every household had to produce everything itself. This inevitably reduces economic efficiency, lowers labor productivity and wastes scientific and technological achievements that can change life for the better.

"We are already witnessing alarming trends. The stability of business ties is undermined. Disintegration processes are gaining in strength. Forms of multilateral cooperation are devalued and the efficiency of international institutions and agreements is reduced.

"Thus, the international community has so far failed to find acceptable solutions in the World Trade Organisation (WTO), which despite all difficulties and contradictions remains a key link in the global trade system and a major universal venue for resolving disputes and conducting dialogue on the issues that concern all economic actors without exception.

"Needless to say, the WTO is not ideal. At the same time, there are no insoluble problems in its system. Giving it up without any replacement means destroying the established balance. In this case there will be neither complainants nor defendants in trade disputes. Force alone will decide who is right.

"Naturally, the aim is not to freeze or mothball the existing order and turn into dogma the ideas that have outlived themselves and are no longer viable. Naturally, the world is changing and institutions and rules should be changing with it.

"But one thing is clear: these rules must be transparent and uniform for all and should be observed by all international economic players.

"It is very important for us to draft and introduce together a legitimate mechanism of changes, which will allow the international community to get rid of obsolete and sometimes inefficient and archaic norms, preserving all the best practices and creating new instruments that meet the requirements of the time.

"For example, the spheres where multilateral 'rules of the game' are still being formed are of particular importance for the global trade agenda. I am primarily referring to the development of new technological markets, such as e-commerce, access to information and transparency, protection of intellectual property and the rights of consumers of new, digital services.

"Talks on the majority of these subjects have been launched. Much painstaking work, patience and perseverance will be needed. But let me repeat that there is no alternative to the joint development of rules in the global economy and mechanisms capable of guaranteeing their enforcement.

"What we need today is a full-scale trade peace rather than trade wars or even temporary trade armistices. The theme of this year's St Petersburg forum is Creating an Economy of Trust. I am convinced that experience shows that the role of trust as a development factor will grow.

"Look at how hi-tech companies, start-ups, science, advanced innovative spheres are outgrowing existing traditional legal, corporate regulations. The work being done by partners, even if relations between them are complicated, is largely based on mutual trust. I know that this subject was repeatedly broached in discussions at this forum and on different venues.

"Of course, we are not trying to idealize the situation. There has always been rivalry and clashes of interests; there still is and, of course, there will continue to be in the future. But it is important to maintain respect for each other. The guarantee of progress, the source of progress is in the ability to deal with differences and in fair competition rather than its restriction. This is the basis for each country's confident, sustainable development and for tapping the huge scientific and technological potential that has been accumulated in the world as a whole.

'Russia Favors Trade Freedom'

"Russia favors trade freedom, economic integration, and constructive partner-to-partner dialogue and calls on our partners from Europe, from America, from Asia and other regions to advance together towards the sustainable development goals and the development of a growth model that would provide the most fitting response to modern challenges.

"What I mean is overcoming inequality of opportunity, solving demographic and environmental problems, preserving national cultures and identities, improving people's wellbeing, and using the advantages of the new technological wave on a broad scale.

"All countries run into such challenges one way or another. However, we are faced with all of them at once. For us to remain who we are, Russia, we must address all these challenges at the same time.

"For us, state sovereignty and national identity have unconditional value. However, we need to make a major breakthrough in our development, to join the advanced countries in terms of life expectancy and quality of life, and to become a global technology leader.

"Our vision of the country's future is based on four key principles.

"First, we plan to build our policy around people, their well-being, interests and needs. I am convinced that the only way for our country to be strong and successful is to make sure that our people can fully realize their potential.

"To do so, we will continue to modernize our economy and create modern jobs, to support wage growth, and to make our healthcare and education systems among the world's best.

"We plan to use best practices in planning our cities and villages, organizing comfortable spaces for life, work, and recreation, to significantly boost housing construction and to make housing affordable primarily for middle-income households and families with children. Improving the environment is critical, and will be another of Russia's contributions to resolving global environmental issues.

"Everyone should have a chance to excel in social and volunteer activities, in manufacturing, business, and public service, and have a good start for a successful life and career. Social mobility and improving human capital are the cornerstones of our country's progress.

"We launched a whole series of projects to support and promote talented and goal-oriented schoolchildren and students, as well as established professionals, and also projects to expand the mentoring movement.

"To make this work part of the system, an autonomous non-profit organization, Russia – Land of Opportunity, is being created. Many in this audience are aware that a corresponding executive order has been signed. Along with existing agencies, such as the ASI, we will coordinate this work between the two organizations and work on the goals which I just mentioned.

"Second, we will expand the space of freedom. This is something we talk about all the time, but these are critically important things. For this reason, I believe that it is my duty to say this once again, since it is essential for the emergence of an empowered civil society, for promoting economic, social, scientific and cultural development.

"The policy of removing barriers and liberalizing laws is primarily designed to meet the interests and aspirations of our citizens. We will seek to create a business climate for operating in Russia that would meet the highest standards. This includes supporting business initiatives.

"One year ago, in my remarks here in St Petersburg, I stressed the need to make active use of project financing mechanisms. Today, we see that a new mechanism was put in place to create a project financing factory of sorts, which, of course, is a positive development. Agreements to fund new investment projects worth more than 700 billion rubles will be signed at this forum, while the annual amount is expected to exceed 1 trillion rubles.

"The Bank of Russia, the financial and economic ministries and agencies within the Government, and Vnesheconombank worked together on this program. We have been able to break up some of the bottlenecks related to bank oversight, guaranteeing investor interests, which enabled us to attract a substantial amount of private investment with minimal budget spending. Let me emphasize that we relied on a market-based, transparent mechanism when we took decisions to fund projects.

"It will depend to a large extent on the regions, their efforts and effectiveness, whether our plans and projects to promote economic, social and infrastructure development plans succeed. I believe in the importance of continuing the policy of bringing new people into regional teams. It is at this level that the new governance culture is taking shape alongside modern approaches to attaining economic and social objectives. It is at this level that inclusive interaction between the state and the society can be promoted so that people become actively involved in local governance and are able to overcome challenges they face in their everyday lives. As you know, a number of successful governors joined the newly appointed Government of the Russian Federation.

"Today, regions are competing against one another to provide the best business environment. They are competing for investors and for the best human resources. What this means is that we have been able to launch a mechanism of continual change. The National Investment Climate Ranking played a major role in achieving this result.

"As always, I would like to congratulate this year's winners: the Tyumen Region, Moscow and the Republic of Tatarstan. The top five also includes the Tula Region, and for the first time ever St Petersburg, my hometown, which is particularly pleasing for me. Let me note the positive momentum in Russia's Far East, as well as in Buryatia, Kaliningrad, Pskov, Novgorod and Yaroslavl regions. I strongly believe that all our regions will keep up their efforts.

"Third, for a technological breakthrough, and in order to be competitive in today's dynamic world, we must be receptive to innovative ideas and technologies that make a difference in people's lives and determine the future of the country and the world.

"We adopted a major comprehensive digital development program which will be among our priorities for the coming years. Above all, it is about developing and using end-to-end digital solutions in public administration, the economy, housing and utilities, and the social sphere, as well as energy, industry and transport. We are open to working with all stakeholders, making use of advantages together and responding to the risks of the digital age.

"I would like to take this opportunity and invite everyone to take part in the Second Global Manufacturing and Industrialization Summit to be held next year in the city of Yekaterinburg, in Russia's Urals, which will focus on the use of advanced and prospective technologies in the economy, industry and other areas.

"The fourth and final key principle behind our development includes our country's openness and focus on participation in global processes and integration projects. This, in particular, includes the implementation of major infrastructure projects which are an important part of our national agenda.

"Developing Russia's transport, energy and digital backbone, we plan to effectively integrate it into the global infrastructure and thus open up more opportunities for our citizens, domestic and foreign businesses in Russia, and to improve our country's role in the global transport and information and communication system.

"Colleagues, friends,

"I have already mentioned how the modern world is interdependent. Working on the tasks at hand and achieving breakthroughs across all areas, we will create technologies and solutions which will not only improve the quality of life of Russian citizens, but also be used in other countries and benefit their development. Of course, as we move toward our goals, we plan to use and borrow best practices and achievements from other countries who are our partners.

"A prosperous future cannot be created by working in isolation. Indeed, only cooperation and combined efforts can open up unlimited possibilities. Russia is committed to this kind of interaction. I am sure we will certainly be successful if we strengthen mutual trust and the spirit of partnership."


[2], May 25, 2018.

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