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Economic Forum: Russia is preparing for decades of war economy

Economic Forum: Russia is preparing for decades of war economy

At the economic forum in St. Petersburg, Kremlin chief Putin presented Russia as a strong nation despite unprecedented sanctions. Above all, he is relying on flourishing arms production.

After more than two years of his war of aggression against Ukraine, Kremlin chief Vladimir Putin is pledging his country to expand its war economy. Like the Russian economy as a whole, the country’s armed forces in particular must be technologically renewed at a rapid pace, Putin said on Friday at the 27th St. Petersburg International Economic Forum (SPIEF). Despite Western sanctions, Russia’s economy is doing well, plays a key role in world trade despite all the obstacles, and is on the road to victory in the war, he said.

According to Deputy Prime Minister Denis Manturov, Putin has signed a whole list of instructions for the development of the defense sector in order to produce even more weapons and ammunition. At an event devoted to defense issues, participants stressed that Russia produces weapons and ammunition faster and at a quarter of the cost of the West.

The country is preparing for a decades-long war economy, it was said. The number of companies – including in the private sector – has risen explosively in the past two years of the war. “There are now more than 850 of them,” said Manturov. “Today the military-industrial complex is the locomotive of the economy,” said economist Pyotr Fradkov, chairman of Promsvyazbank and son of Mikhail Fradkov, the former head of government and director of the foreign intelligence service SVR, in view of the large business deals.

Russia relies on growth through arms production

Putin had urged the country to produce the necessary military equipment in a timely manner for his war, as long as the West could not quickly deliver the promised weapons and ammunition to Ukraine due to its own shortages. Thanks in part to the war economy, the Russian leadership expects economic growth of around 2.8 percent this year.

This year, the Kremlin is spending the equivalent of around 110 billion euros on the defense budget alone. An additional 34 billion euros are being spent on national security and security agencies. In total, this amounts to 38.6 percent of all Russian budget expenditures or 8 percent of gross domestic product. For the first time, Russia is investing more money in the military and security agencies than in social spending.

Representatives and entrepreneurs from dozens of countries, including the USA and many EU countries, China and South America, are taking part in the annual business meeting in St. Petersburg, which has been running since Wednesday and ends this Saturday. Taliban representatives are also present after Moscow announced that it would end their status as a terrorist organization in Russia – and cooperate with the rulers in Afghanistan.

Russia could soon openly supply weapons to US enemies

In view of Western arms deliveries to Ukraine, which also intends to use them to attack Russian territory, Putin threatened at the forum with an “asymmetric response”. Moscow could therefore in future supply Russian weapons to those countries that are in conflict with the USA and other NATO members. Putin said in St. Petersburg that Moscow is now considering its response to Western involvement in the conflict in Ukraine.

In a speech, the 71-year-old once again called for the creation of a new world order – without US supremacy. This year’s economic forum is held under the motto “Foundations of the multipolar world – the creation of new positions for growth”.

Putin also made it clear that, contrary to the expectations of many, Russia has so far held its own against the Western sanctions. Ukraine’s allies, including Germany, had originally aimed to use the sanctions to stop Russia’s war machine. Instead, Russian troops have been advancing in eastern Ukraine for weeks. At the forum, Chinese entrepreneurs also reported on specific examples of how they are helping Russia to complete projects disrupted by the sanctions.

Many Western companies continue to operate in Russia

Western experts confirm that the Russian economy is comparatively robust despite the pressure from the sanctions. The Vienna-based economic institute wiiw found in an analysis that the majority of Western companies are still present on the Russian market despite the sanctions. Only 9.5 percent or 359 of the foreign companies left the market in the wake of the Russian invasion of Ukraine. However, these major players accounted for around 30 percent of the turnover of foreign companies in Russia.

A further 32.2 percent of companies (1,214) have reduced their business activities, according to the study by the Vienna Institute for International Economic Studies (wiiw). Many companies are still undecided. Germany is slightly above average, with 11 percent of companies moving away and around 37.5 percent of total sales, it said. Companies such as Metro, Globus and Ritter Sport are still present in Russia.

Meanwhile, the threat of confiscation or nationalization of their assets by the power apparatus in Moscow – in return for the frozen Russian assets abroad – is causing uncertainty in Western business circles. Putin recently signed a decree that provides for the confiscation of US assets in Russia in response to corresponding steps by Washington.

Source: Stern

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