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AP Worldstream: Bankers and ballet: CEOs descend on St. Petersburg for economic forum

ALEX NICHOLSON,
Published: Jun 07, 2007

After tense talks with Western leaders at the Group of Eight summit, President Vladimir Putin will turn genial host this weekend, showing off Russia’s economic transformation to some of the world’s top executives and trying to soothe the concerns of foreign investors.

The St. Petersburg Economic Forum will bring together a list of corporate heavyweights, testimony to the investment potential of Russia’s booming economy despite Moscow’s increasingly strained diplomatic and political ties with the West.

Some US$3.3 billion worth of deals are expected to be signed, including a A100 million (US$135 million) agreement with Japan’s Suzuki Motor Corp. to build a car plant outside the city, the economy ministry said Thursday.

The gathering will be one of the last high-profile opportunities for Putin to boast of Russia’s oil-driven economic growth during his two terms as president and to dispel fears the nation is becoming an increasingly risky investment because of its growing political estrangement from Europe and the United States.

Just in the past few weeks, Moscow has raised the specter of a new arms race in response to U.S. plans for a missile shield in Europe, rejected Britain’s demand to extradite a key suspect in the radiation poisoning of former Soviet agent Alexander Litvinenko and increased the pressure on a BP PLC venture developing a giant gas field.

The nation’s benchmark RTS stock index is up just 2 percent in the past three months, the worst performer among emerging markets, said Peter Westin, economist at MDM bank in Moscow. That compares to a 70 percent rise in 2006, when it turned in the best performance after China.

“Russia is seen as increasingly risky,” Westin said. “There’s been a lot of bad press, some justified, some not. The forum is an opportunity for Putin to calm some of the concerns of the investment community and try to give a positive spin on Russia’s image. Clearly there is a bit of an image problem right now.”

Organizers have raised the forum’s budget nearly 70 percent to 500 million rubles (US$19 million; A14 million) this year, said deputy economics and trade minister Kirill Androsov. Six thousand participants are expected and an exhibition center on the Gulf of Finland has been expanded for the occasion.

They are splashing out on entertainment as well; rock band the Scorpions and Robin Gibb of the Bee Gees will perform Friday night; participants can catch the ballet Swan Lake on Saturday at the famed Mariinsky Theater.

The meeting will be packed with exhibitions and roundtables touting government-backed investment projects _ including Russia’s bid to host the 2014 Winter Olympics near the city of Sochi, on the Black Sea coast. But three discussions are likely to be the focus.

Putin will field questions from executives in a session Saturday evening chaired by Klaus Schwab _ founder and executive chairman of the World Economic Forum, which organizes the annual political and economic session in Davos, Switzerland.

On Sunday, First Deputy Prime Ministers Sergei Ivanov and Dmitry Medvedev will speak at separate panels, Ivanov at one on energy and Medvedev at another on diversifying Russia’s economy. Analysts say the Kremlin is grooming the pair as the top candidates to succeed Putin when his second term ends next year.

Under the constitution, Putin cannot seek a third consecutive term. But his approval ratings have hovered above 70 percent for years, and whomever he endorses will instantly become the odds-on favorite to win.

Westin said one theme of the forum will be that Kremlin policies aren’t likely to change. Putin, he said, “will make the point that even though there are elections, its going to be a smooth transition.”

The guest list is a who’s who of the world’s business aristocracy.

Among those slated to attend are Jeroen van der Veer, CEO of Royal Dutch Shell PLC; Coca-Cola Co. COO Muhtar Kent; BP CEO Tony Hayward; ArcelorMittal CEO Lakshmi Mittal; Siemens AG CEO Klaus Kleinfeld; and PepsiCo Inc.’s Vice Chairman Michael White.

The biggest delegation will be from China, which is sending 168 executives.

Economic and political ties between the former Cold War rivals are strengthening as both seek to build a counterweight to the dominance of the United States in world affairs.

Russia plans to build oil and gas pipelines to China, while Beijing sees Russia as a key export market for its goods. Chinese economic heft can be seen at a sprawling site in the St. Petersburg suburbs, where construction of the “Baltic Pearl,” a US$1.5 billion (A1.1 billion) residential and commercial complex is under way.

An informal summit of leaders from former Soviet republics _ including oil-rich Kazakhstan _ will also held on the sidelines of the forum.

The Commonwealth of Independent States, however, has proven incapable of resolving the long-running conflicts between its members.

Talks are expected between President Ilham Aliev of Azerbaijan and Armenian President Robert Kocharian on control of the territory of Nagorno-Karabakh. Russia has imposed economic sanctions against Georgia, and briefly shut off oil supplies to its closest ally in the group, Belarus, at the start of the year amid a pricing dispute.

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