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Russia courts global businesses

Boeing vice president Scott Carson, right, holds a model of an airplane as Aeroflot chief executive Valery Okulov, left, looks at him and Russian First Vice Prime Minister Sergei Ivanov smiles during the signing of a pact at the 11th St. Petersburg International Economic Forum on Saturday. PHOTO: AFP

Russian leaders courted international capital and talked up the resurgent country at a business forum on Saturday, combining ambitious economic projections with promises of an open investment climate.

A top official seen as a potential Kremlin favorite to succeed President Vladimir Putin next year said that Russia would transform itself into a high-technology and industrial powerhouse and enter the top five world economies by 2020.

The showcase of the gathering was a multibillion-dollar deal for flag-carrier Aeroflot to buy passenger jets from US planemaker Boeing, an agreement that appeared to have stalled last year amid deepening disputes between Moscow and Washington.

Putin shrugged off political tension with the West.

"Russia is gradually integrating with the world economy" and spotlighting burgeoning business ties, he said.

"The very fact that you are participating in today's event is evidence that your cooperation in Russia is developing successfully. I am sure we have good prospects for the future," Putin told scores of top executives from foreign corporations.

On the list of attendees were the chief executives of Motorola, ConocoPhilips, PepsiCo, Siemens and China's Sinopec.

First Deputy Prime Minister Sergei Ivanov, viewed as a front-runner in the struggle for Putin's support in next March's presidential vote, said Russia was taking steps to diversify an economy heavily dependent on oil and gas exports and further open it to investment.

"Our human capital is the foundation for diversifying our economy," Ivanov said.

The two-day forum is one of the final high-profile opportunities for Putin to boast of Russia's oil-driven economic growth during his presidency and to dispel fears the nation is becoming an increasingly risky investment because of its growing political estrangement from Europe and the US.

In recent weeks, Moscow has raised the specter of a new arms race in response to US plans for a missile shield in Europe, rejected Britain's demand to extradite the suspect in the radiation poisoning of former Soviet agent Alexander Litvinenko and increased the pressure on a BP PLC venture developing the Kovykta gas field.

Russia's benchmark RTS stock index is up just 2 percent in the past three months, the worst performer among emerging markets. That compares to a 70 percent rise last year, when it turned in the best performance after China.

Ivanov said the multibillion dollar Boeing-Aeroflot deal "visibly demonstrates" foreign companies' interest in Russia. He said foreign investment in the first half of this year will reach US$60 billion. Aeroflot will acquire 22 Boeing 787 Dreamliner jets from the US company, with deliveries staring in 2014.

Russian officials had said some US$3.3 billion in deals were expected to be signed at the forum, including a US$135 million agreement with Japan's Suzuki Motor Corp to build a car plant outside the city.

Russian news agencies said France's PSA Peugeot-Citroen signed a 250 million euros (US$334 million) deal to build an auto plant in Russia, and Sweden's AB Volvo agreed to invest 100 million euros in a factory to produce 15,000 trucks a year.

Ivanov sought to allay fears that Russia was taking a more authoritarian path under Putin, who has been criticized for muzzling the media and backtracking on democracy.

"What will Russia be like in 2020? It will be democratic, based on the rule of law, and it will respect the rights of the individual," he said.

Ivanov also predicted Russia would control at least 10 percent of world production in nuclear energy, aviation, space industry, shipbuilding, software and nanotechnology. While Russia is creating state holding companies to oversee these sectors, they would work in close cooperation with foreign corporations, he said.

Former World Bank chief James Wolfensohn welcomed Ivanov's pledges.

"To many of us, the Kremlin still looks like an unapproachable place, but the strides you are making in terms of opening up have been tremendous," he said.

The scale of the forum reflected a desire to make an impression. Organizers raised the forum's budget nearly 70 percent to 500 million rubles (US$19 million) this year, and an exhibition center on the Gulf of Finland was expanded for the occasion.
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