Yulia Mironova
Prime Minister Vladimir Putin made a number of promises to foreign investors
Late Thursday night, Vladimir Putin held a meeting with the top executives of major international companies, including Deutsche Bank, Siemens AG, Mitsubishi, Chevron, BP and other participants of the Sochi International Investment Forum.
The proposed subject of the Prime Minister's speech, which had been initially formulated as "Should investments be made into Russia?", was further developed into a comprehensive and detailed turnaround programme designated for the recovery of the financial market. The arguments that substantiated the positive answer to the proposed question were standard: "There is no comprehensive crisis in Russia", "speculative capital flees from the Russian market", "capital inflow in Russia will have reached as much as $40 billion by the year-end", and so on.
"You are representing the companies that have been fruitfully working together with their Russian partners for a long while. I believe we are going to discuss our potential cooperation, and we will certainly discuss the problems that worry both you and business communities in general," said Mr Putin, as if he were an experienced psychotherapist. Immediately after that, he reminded the audience about the basic figures characterising the Russian economy, including the annual GDP growth rate of about 7%, rise in investments, and the growth of real earnings.
To make his arguments more persuasive, Mr Putin labeled GDP duplication by 2010 "a medical factor", and condemned any speculations concerning "the tightening of the screws and the replacement of Russia's present model of economic development" after Russia's involvement in the conflict between Georgia and South Ossetia as "speculative and untrue".
"Our policy will remain unchanged, our market will not close, and no mobilisation model of the economy will be implemented. We will not make any politically motivated decisions," said the Prime Minister. His address sounded very much like a lecture on economics, while any projections made by the Prime Minister enjoyed the tacit approval of each listener.
"We will be reducing the tax burden on the economy - this is our strategic choice," said Mr Putin. "However against this backdrop we will take a break in reducing our VAT rate." Later, investors had a chance to listen to the promises that sounded very sweet to their ears: "We are considering a reduction of the Unified Social Tax rate, although we will be able to introduce it only after we have the parameters of our pension system identified," Mr Putin dug deeper into taxation issues. He mentioned higher standard rates of amortisation deductions, reduction in subsoil tax rates and customs duties in the oil sector and further liberalisation of taxation in the stock market. However he prudently avoided stating any specific figures.
Mr Putin demonstrated his deep knowledge of the Russian financial market. He reminded the listeners about the launch of tenders for the placement of budgetary funds in bank deposits for the terms of three months. "The Government will back the mortgage market, and we are going to increase the charter capital of the Agency for the Housing Mortgage Lending by 60 billion roubles; the Government is ready to support the stock market by spending up to 500 billion roubles for the purchase of the stock capital of the leading Russian companies, as we believe that our companies are undervalued," said the Prime Minister about the efforts of the Government and the Central Bank to ensure stability in the financial market. "Funds (designated for the maintenance of financial liquidity - Ed.) will be reserved in the budget, not in the Reserve Fund or in the National Welfare Fund," said Mr Putin, having noted that Russia was still capable of accumulating its oil proceeds.
Mr Putin, being aware that numerous representatives of oil companies were present in the conference hall, told them that Russia would maintain optimal oil prices "as we are both producers and consumers of crude oil." According to Mr Putin, "We feel comfortable with the current price." For Russian oil companies to feel more comfortable with crude oil prices, the Government may alter the methodology of charging oil-related tariffs (see p. 7 for details). According to Mr Putin, this effort would leave $5.5 billion at the disposal of Russian crude oil exporters.
The response of foreign businessmen to the statements made by Mr Putin is unclear.