Yesterday, the Premier of the Chinese State Council, Wen Jiabao and Prime Minister Vladimir Putin opened the annual session of the World Economic Forum (WEF).
For the first time in several years this session had a chance of putting news from Beijing and Moscow on the top of the Davos agenda. Everyone present expected answers from Russia and China and specifically to the question "What happened with the global economy?" Bad weather prevented participants from receiving the crucial information about the future of the world investment climate. The speeches were delivered, but Wen Jiabao and Vladimir Putin missed their scheduled appointment with each other.
For the first time in the last few years, the Davos-2009 agenda offered the prospect of an interesting event beyond the scheduled parties and fierce albeit abstract debates about the world's prospects in 2050. In September 2008 Klaus Schwab, WEF founder and executive chairman, agreed with Putin in Moscow that the Russian prime minister, the leader of a state at war with Georgia, would open the session in Davos in January.
In five months the forum's agenda was changed – almost all gala parties were cancelled and the agenda was reduced to the global financial crisis. Nevertheless, the interest in Russia and China did not abate. Any heads-up on two questions -- Russia and its crisis export policy and China and its crisis industrial policy -- could help the economists and CEOs at Davos predict what to expect next.
Participants in the session started writing the Russian-Chinese scenario for Davos in advance. Technically, based on the results of the current forum, the world leaders were supposed to draft an agenda for the G20 meeting in London in April 2009. On January 20 Deputy Prime Minister Alexei Kudrin adjusted positions with the Chinese for the meeting in London. On January 28 Wen and Putin were supposed to announce their mutual agreements in Davos. By that time Wen would have already delivered his speech, whereas Putin would just be taking the floor.
In an interview with Bloomberg on the eve of his visit to Davos, Putin merely hinted at what he was going to say at the opening of the session. He planned a very busy schedule. Apart from Wen, he scheduled the following appointments -- with his Polish counterpart Donald Tusk on January 29 (speaking at the panel discussion that opened the session, Tusk almost avoided the two topics he was to discuss with Putin – Gazprom exports to the EU and the deployment of the NATO missile defence system in Poland); then with Israeli President Shimon Peres (to discuss gas exports to Israel and the conflict in the Gaza Strip); with his Mongolian counterpart Nambaryn Enkhbayar (to talk about Erdenet and cooperation with Russian Railways), and finally with Armenian President Serzh Sargsyan (who was planning to hold a historic meeting with Turkish Prime Minister Recep Tayyip Erdogan). Putin had to meet all of them within several hours – he arrived in Zurich in the latter half of the day and was planning to leave on the following day.
Wen could not tell the world about a Russian-Chinese strategy for the crisis before meeting with Putin. His speech was brilliant and smooth. He said what was expected of him – that is, almost nothing, and was awarded with stormy but brief applause. At that point Putin, who had told Bloomberg that credulity was his main weakness, was desperately late for his appointment with Wen. He planned to leave Zurich for Davos on a helicopter at the same time Wen democratically left the resort on a commuter train. Putin was let down by bad weather. Instead of a quick flight he had to spend two hours in a car crossing the Alps. The weather had prevented a serious meeting between the two geopolitical players – Swiss trains are always on time.
In general, the 2,500 participants at Davos-2009 did not really expect to receive an exhaustive answer to the session's main question about a new global post-crisis arrangement. During the day, Sberbank CEO German Gref noted with good reason that it would make more sense to discuss the economy in crisis rather than what to do after the crisis. At any rate, in his estimate the governments will control banks for the next three to four years. Before the agenda was announced organisers conducted an electronic poll through a TV-like remote control process. Respondents were asked to choose one of the suggested answers. A provocative scenario in which China would make up for everything that others had lost was not popular. Participants in the forum voted much more willingly for the scenario in which the global economy must count on the self-regulation of the markets. In general, this year a search for precise questions was more popular than the elaboration of answers. On the morning of January 28, Steve Schwarzman, chairman of the world's biggest hedge fund, The Blackstone Group, gave a precise albeit scary answer: "40% of the world's wealth was destroyed during the last five quarters." He added that the crisis was not over yet.
This is why the discussion of a V-recovery trend by the heads of Nestle, Dell and Renault became the most interesting topic of the first day. On one hand, everyone welcomes this scenario but on the other, the early debate made it clear that fewer and fewer CEOs, economists and politicians believe in it. At the very first discussion at Davos, Stephen Roach, head of the Morgan Stanley office in Hong Kong said that no matter what happens in China, the forecast of the biggest investment bank is that global growth would be anemic at around 2.5% instead of the previous 5% per year. Three years of stagnation on the table of global economic growth do not look like the Latin letter V. Economists headed by Nouriel Roubini from New York University will have to choose between the pessimistic U (U-shaped longer recession) and the frightening L (L-shaped severe recession).
Paradoxically, it was the Russian delegation that could have given participants at Davos hope for a V-shaped recovery – First Deputy Prime Minister Igor Shuvalov, who attended the meeting in Davos, repeatedly claimed the resumption of economic growth in Russia at the end of 2009. Neither Rosnano Director Anatoly Chubais, nor VTB Bank President Andrei Kostin, nor new director of US Rusal Oleg Deripaska has refuted this statement. However, Russia's private businesses shared a global pessimism. The first Russian news from Davos was a statement by Vympelkom General Director, Alexander Izosimov, about the company's decision to suspend investment projects abroad in the context of "the vague global situation." Izosimov himself was ready for uncompromising struggle against this "vague situation." He announced his readiness to quit his position before the expiry of his contract in 2010 if the company's shareholders choose his successor. The heads of Troika Dialogue, Ruveb Vardanyanm; AFK Sistema, Vladimir Yevtushenkov; and LUKOIL's Vagit Alekperov were reluctant to predict anything for lack of clarity, too.
In theory, all the participants at Davos agreed that only the new U.S. President Barack Obama could make clear predictions about the global economy. But the current WEF session was probably the most un-American in its entire history. Lawrence H. Summers, assistant to the president for economic policy, and Citigroup CEO Vikram Pandit cancelled their speeches at Davos. Merrill Lynch CEO John Thain was dismissed two days before the opening of the WEF session and thus did not attend; former CEOs are not invited to the forum. In 2008, US Secretary of State Condoleezza Rice opened Davos-2008. This time Bill Clinton and Bill Gates were expected to be the most interesting guests from Washington. Gates was at Davos only to talk about charity in the post-crisis world, which was also rather vague.
Putin, the only hope for clarity in the world economy, after Wen, started his speech at 8.51 pm Moscow time (see the text on the same page).
Read about the response of the session's participants to his speech in Kommersant's next issue.
By Dmitry Butrin