Russian president criticizes the imperialism of the currencies

Putin Wants New Economic 'Architecture'

By Andrew E. Kramer
The New York Times
via International Herald Tribune, Paris
Sunday, June 10, 2007

http://www.iht.com/articles/2007/06/10/business/forum.php

ST. PETERSBURG, Russia -- President Vladimir Putin sought to reassure investors and foreign leaders that Russia remained committed to free trade and investment for businesses that work here, in spite of a chill in political relations with the West.

But Putin said Russia would integrate with the world economy on its own terms -- and possibly not by embracing the current rules of the global economic order.

Speaking at a business forum here Sunday, Putin called for a new world economic framework based on regional alliances rather than global institutions like the International Monetary Fund.

The new system, he said, would reflect the rising power of emerging market economies like Russia, China, India, and Brazil, and the decline of the old heavyweights of the United States, Japan, and many European countries.

The developed countries, Putin said, were dominating the institutions of world trade in an "inflexible" manner, even as their own share of the global wealth is diminishing. He said the world needed a "new architecture of international economic relations based on trust and mutually beneficial integration."

Putin said 60 percent of the world's Gross Domestic Product was now produced outside of the Group of 7 countries -- the United States, France, Germany, Britain, Italy, Japan, and Canada.

Putin's combative tone came even as Russia was seeking membership in World Trade Organization, the Geneva-based regulator of the world economy, and perhaps reflected frustration at the long-drawn-out process of admission, over concerns of Russian violations of intellectual property rights.

"Today, protectionism, which the WTO is meant to fight, often comes from developed economies," Putin said.

In another swipe at the economic traditions that benefit the rich nations, Putin called for central banks to hold reserves in a wider selection of currencies. Now banks largely hold their reserves in dollars and euros. Putin also said the world needed more cities that would serve as financial centers.

The speech reflected the theme of the gathering, which the Russian authorities have billed as a Davos of sorts for emerging markets. The forum is intended as an open exchange between government and business leaders, as is the case in Davos, the Swiss ski resort that hosts the World Economic Forum.

In St. Petersburg, the wealthy and powerful gathered at another striking location -- a site at the tip of one of the islands in the delta of the Neva River that comprise the city, overlooking the Gulf of Finland.

Even late in the evening, the suited executives and their rows of police guards were illuminated in an otherworldly shimmer of sunlight, as the northern city enters its period of near continuous daylight known as the White Nights, the time chosen as a backdrop for the gathering.

Boeing used the get together to announce a $3.5 billion sale of 787 jets to Aeroflot, the Russian national airline. Suzuki, Audi, and Samsung announced new factories. In all, 30 deals were signed worth a total of $13.5 billion, according to organizers.

The Russians presented the gathering as a coming of age party for Russia's resurgent economy.

Still, the idea Putin floated on changing the global economic architecture was met with a lukewarm response, at best, from the academics and foreign officials in attendance.

Peter Mandelson, the European Union trade commissioner, pushed back against Putin's suggestion that regional economic alliances replace the global institutions of trade that emerged after World War II, like the WTO and International Monetary Fund.

"Globalization does not respect spheres of influence," Mandelson said. "Membership in the WTO is Russia's ticket to a rules-based system."

Nursultan Nazarbayev, the president of Kazakhstan, meanwhile, contradicted Putin's suggestion the Commonwealth of Independent States, the loose alliance that replaced the Soviet Union, would become a regional economic grouping.

It would be more accurate to say the former Soviet countries were drifting apart rather than cutting new cooperation deals these days, he said.

"The inertia of separation turned out to be strong than integration," Nazarbayev said.

Earlier, on Saturday, Putin met with roughly 100 chief executives from multinational corporations to assure them that Russia remained open to investment.

"The fact that you are participating in today's event is evidence that your work in Russia is developing successfully," Putin said. "I am sure we have good prospects for the future."

Motorola, ConocoPhilips, Siemens, Schlumberger, BP, Royal Dutch Shell, PepsiCo, Coca-Cola, Deutsche Bank, and Ernst & Young were among the companies that dispatched their senior executive to the meeting.

At the meeting, Jeroen van der Veer, the chief of Royal Dutch Shell, asked Putin to clarify the rules of investment for energy companies in Russia, Reuters reported. Last autumn, Shell lost control of its Sakhalin-2 development in a forced sale to Gazprom, the natural gas monopoly. Putin responded by reciting the history of the Sakhalin project and thanked van der Veer for his role in resolving the dispute.

After the opportunity to rub elbows with the Russian president, several chief executives praised Putin's economic polices and razor sharp attention to the details of their companies' work in Russia.

Putin showed "a remarkable grasp of industrial policy," Andrew Gould, chairman and chief executive of Schlumberger, the oil field services company, said after the meeting.

Michael White, the vice president of PepsiCo, said Putin struck him as "very articulate and remarkably on top of every deal."

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