Financial Gathering - Russia prepares for sustained war-based economic system.
Putin, who leads the Kremlin, has promised to increase Russia's war economy following over two years of his attack on Ukraine. At the 27th St. Petersburg International Economic Forum (SPIEF), first deputy prime minister Denis Manturov announced that Putin had signed instructions to develop the defense sector, leading to the production of more weapons and ammunition.
During an event centered on defense matters, it was noted that Russia creates weapons and ammunition quicker and at a quarter of the cost in the West. The country is getting ready for a war economy that could last for decades. The number of businesses, including private sector companies, has significantly increased in the past two years of the ongoing war.
"There are now more than 850 of them," said Manturov. "The military-industrial complex is now the driving force of the economy," said economic expert Pyotr Fradkov, chairman of Promsvyazbank and the son of former prime minister and ex-director of the foreign intelligence service SVR, Mikhail Fradkov.
Putin has sped up the manufacturing of necessary defense items during his war to ensure that the West, which is dealing with its own shortages, cannot quickly provide the promised weapons and ammunition. The Russian leadership also forecasts economic growth of 2.8% this year as a result of the war economy.
For the Defense budget, the Kremlin has earmarked approximately 110 billion euros this year. Additionally, there are 34 billion euros set aside for national security and security agencies. In total, these two areas account for 38.6% of all Russian government expenditures or 8% of GDP. For the first time, Russia is investing more money in the military and security agencies than in social spending.
At the annual economic conference in St. Petersburg, which has been running since Wednesday and will end on Saturday, representatives and businesspeople from over 50 nations are attending, including the United States and numerous EU countries, China, and South America. Representatives from the Taliban are also present as Moscow announced that it would eliminate their status as a terrorist organization in Russia and cooperate with the rulers in Afghanistan.
Russia may soon openly arm enemies of the United States
In response to Western deliveries of weapons to Ukraine, which also plans to fire at Russian territory, Putin threatened at the forum with an "unconventional response." Moscow might provide Russian weapons to countries that oppose the United States and other NATO members. Putin said in St. Petersburg, "We're now considering our response to Western involvement in the Ukraine conflict."
The 71-year-old intends to talk about the economic situation in Russia and global politics during a speech and a question-and-answer session today. He has repeatedly expressed his desire to create a new world order without US dominance. The economic forum this year has the motto "Foundations of a multipolar world - creating new growth points."
Putin has made it clear that Russia is not bowing to Western expectations regarding the sanctions. The Western allies of Ukraine had initially expected the sanctions to stop Russia's war machine. Yet Russian troops have been progressing in eastern Ukraine for weeks. At the forum, Chinese entrepreneurs shared specific instances of how they are helping Russia complete projects interrupted by the sanctions.
Most Western companies continue to operate in Russia
Western experts state that the Russian economy, despite the pressure from the sanctions, is relatively durable. The Vienna Institute for International Economic Comparison (wiiw) found in an analysis that the majority of Western companies remain active on the Russian market despite the sanctions. Only 9.5% or 359 of the foreign enterprises had left the market in connection with Russia's invasion of Ukraine. However, these major players made up around 30% of the overall turnover of foreign companies in Russia.
Furthermore, 32.2% of the companies (1214) reduced their business activities, as per the study by the Vienna Institute for International Economic Comparison (wiiw). Many companies are undecided. Germany is slightly above average with 11% of companies leaving, and a share of around 37.5% in total turnover. These businesses still present in Russia include Metro, Globus, and Ritter Sport.
However, uncertainty among Western business circles has arisen due to the threat of confiscation or nationalization of their assets by the Russian government in retaliation for the freezing of Russian assets abroad. Putin recently signed a decree authorizing the seizure of US assets in Russia as a countermeasure to similar actions by Washington.
