MOSCOW, December 8. /TASS/. Russian President Vladimir Putin talks up the global economic paradigm shift toward a multipolar world at a major business forum; Iran may become a full member of the Eurasian Economic Union (EAEU) in the coming years; and Chinese President Xi Jinping welcomes a high-level EU delegation to the first in-person EU-China summit since 2019. These stories topped Friday’s newspaper headlines across Russia.
The world economic system is currently undergoing a paradigm shift that is ushering in fundamental, permanent changes as top-down globalization gives way to a fairer multipolar model, Russian President Vladimir Putin said at the 14th VTB Investment Forum "Russia Calling!" According to him, entire countries and regions of the world are facing significant changes and challenges. Experts interviewed by Vedomosti believe that Russia offers significant potential for broad international economic cooperation and that a number of current domestic problems may be resolved in the coming year.
The president noted in particular that growth in Russia’s domestic market and expansion of contacts with countries in the Middle East, Asia, Africa and Latin America have the potential to open up additional opportunities for the Russian economy and for virtually any business. At the same time, the Russian economy is coping effectively with outside attempts to hamper its development and is, in fact, outpacing the economies of certain EU member states in terms of growth rates, he added, forecasting that Russia’s final GDP growth for this year will stand at 3.5%.
According to Vladimir Klimanov, Chairman of the Center for Regional Policy at the Russian Presidential Academy of National Economy and Public Administration (RANEPA), the potential for expanded cooperation between Russia and the countries of the Global South, especially such heavyweight economies as China and India, is far from reaching its limit. The Russian business community has only recently begun to connect with partners in these markets, including in the areas of developing product supply chains and fostering a system for interacting in scientific and technological fields. The expert predicts that these areas have ample room for further expansion and development. However, adequate financial support is needed, he added. In addition to China and India, Klimanov believes that Russia's interaction with the BRICS countries and the Arab world will also intensify.
Some of Russia’s current issues may be resolved next year, according to Mikhail Avtukhov, deputy board chairman of Sovcombank. In a realistically optimistic scenario, labor market constraints will ease with a new workforce balance emerging between various sectors of the economy while wage increases "cool down," he said. According to the expert, this could happen faster than the market or the Central Bank of Russia are expecting.
The Russian economy is unlikely to see GDP grow next year at the same rate as in 2023, but the key performance indicator will be more balanced and less dependent on household consumption. "If the [key interest] rate goes below 10% by the end of the year and the population enjoys only moderate wage growth, Russia will be able to show 1.5-2% real GDP growth [in 2024]," Avtukhov said.
Iran could become a full member of the Eurasian Economic Union (EAEU) in the coming years, experts believe. A free trade agreement between the EAEU and the Islamic Republic of Iran is now being negotiated, according to Vladimir Putin, who met with his Iranian counterpart, Ebrahim Raisi, on December 7 in Moscow. Relations between Moscow and Tehran are also on a stable development path, with Putin noting that trade turnover grew by 20% last year to almost $5 bln. According to experts interviewed by Izvestia, Moscow places significant emphasis on Russia's relations in the Middle East.
Boris Dolgov, a leading researcher at the Center for Arab and Islamic Studies at the Russian Academy of Sciences’ Institute of Eastern Studies, believes that building ties with the Arab-Muslim world is a potentially new trend in contemporary Russian foreign policy. "These visits and negotiations confirm the expansion of Russia's cooperation with these countries and the increase of its influence and weight in the region, as well as the image of Russia as a great power," he said.
Experts noted that economic relations between Russia and Iran have long been based on a residual basis, and the potential for bilateral economic cooperation is far from reaching a ceiling. According to Sergey Katyrin, head of the Russian Chamber of Commerce and Industry, economic turnover between Russia and Iran could reach $40 bln per year in the near future.
Rajab Safarov, director general of the Center for the Study of Modern Iran, says the Islamic republic is interested in becoming a full member of the EAEU. "Iran has signed a free trade agreement with the Eurasian Economic Union, but this is not full membership. We have talked with the Iranian leadership, and they understand the need to move in this direction. I believe that Iran will join the EAEU in two or three years, if not sooner. This will increase the republic's exports by at least 30%, and up to 40% to some countries," he told the newspaper. According to the expert, greater sanctions pressure from the West is only helping to facilitate an economic convergence between Russia and Iran.
Chinese President Xi Jinping welcomed a high-level EU delegation to Beijing for the first in-person EU-China summit since 2019. A wide range of topics were covered with Xi stating that China is prepared to make the EU a major economic partner as well as a collaborator in science and technology, including in the key area of artificial intelligence. At the same time, he stated that the EU should not view China as an adversary due to differences in political systems. In turn, European Commission President Ursula von der Leyen said that Beijing should use its influence on Moscow to compel the latter to withdraw Russian troops from Ukraine. According to experts interviewed by Nezavisimaya Gazeta, no significant agreements will be reached, although communication between the parties may improve.
Brussels is also concerned about the imbalance in trade relations with China given that the EU's trade deficit with China exceeds 400 bln euros. One of the reasons for this is Beijing's restrictions on European companies. Europe responded by launching an investigation into how China subsidizes its exports of electric vehicles to the EU.
"China has made up its mind about Ukraine. It's quite obvious," Alexander Lomanov, deputy director of the Institute of World Economy and International Relations, told the newspaper. "China will not support sanctions against Russia because it values its sovereignty and does not accept the policies of the Western bloc. Moreover, the West is not ready to abandon the 'contain China' policy. As a result, China has no motivation to lose such a critical partner as Russia," he added.
According to the expert, Brussels' complaints about electric cars are weak. The EU probe has little chance of proving that China heavily subsidizes exports.
Sergey Goncharov, senior expert at the Institute of Asian Studies of the Russian Academy of Sciences, believes that "the period of turbulence in relations with Europe and relations with the United States is passing." At the same time, he added that China and Russia have very close military and military-technical relations, but China believes that these ties should not be directed against third countries.
Georgian Parliament Chairman Shalva Papuashvili, speaking at a meeting of the NATO-Georgia Commission in Brussels, called on the North Atlantic Alliance to adopt the same welcoming approach toward his country taken recently by the European Union. The senior lawmaker is confident that Georgia meets all of the alliance's conditions, and thus Tbilisi should be given the opportunity to join. Papuashvili hopes that NATO’s doors may be opened to the Georgians already in 2024, Nezavisimaya Gazeta writes.
According to Papuashvili, it is crucial for Tbilisi to receive clear support from the alliance during the 2024 summit in Washington. He noted that the country now meets all NATO criteria and that the military bloc's leaders only need to demonstrate the political will to bring Georgia in.
"In 2007, a referendum was held in which Georgian citizens voted to join the EU and NATO. Every day for the next decade, we were told that we were about to join the alliance or receive an integration plan. Then, when certain circles in the United States concluded that NATO was not in Tbilisi's immediate future, the Georgian authorities focused their efforts on European integration. The alliance has hardly been mentioned in the news in the last five or six years," SIKHA Foundation founder Archil Sikharulidze told the newspaper.
Artur Ataev, an expert on the Caucasus, believes that Georgia will never join the alliance. "In recent years we have seen a decline in the interest of Western countries in the South Caucasus. This is reflected in the increasingly modest military exercises in the region. At the same time, the organization faces significant challenges in Eastern Europe and the Middle East. The United States is unlikely to want another flashpoint," he said.
More than 30 banks and brokers from friendly countries are in the process of gaining access to foreign exchange trading in Russia, the managing director of the Moscow Exchange (MOEX), Vladimir Krekoten, told Izvestia. The Russian government has approved a list of more than 30 friendly countries, including those from the post-Soviet space, Asia, Latin America and beyond, that can participate in trading. According to experts, the entry of friendly non-residents into foreign exchange trading in Russia is a significant step.
According to Krekoten, the main purpose of friendly non-residents engaging in foreign exchange trading in Russia is to be able to ensure prompt and accurate conversion of rubles into national currencies. "This is important because payments in dollars are difficult today," he said.
"We need to support economic processes, and in this regard, we are now fully compliant with current requirements. All innovations contribute to having more liquidity in any currency to meet any growing needs," Krekoten added.
Experts told Izvestia that even a few hundred international participants will not yet make a difference in the market, although their entry into the Russian market is already good news. "The market needs non-residents as a proof of normalization of investor relations and as a method of increasing liquidity. At the same time, their number is insufficient so far," said Gennady Fofanov, president of investment platform InvoiceCafe.
According to Valery Emelyanov, analyst at BCS World of Investments, non-residents from friendly countries will not be able to replace players from the United States and Europe who have abandoned the Russian market for the time being. At the same time, Fofanov believes that it is important to increase the number of non-residents in the currency market from year to year, which could be the first step toward buying and selling assets.
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