ST. PETERSBURG, Russia — President Vladimir Putin was all swagger last week at an annual economic forum, effectively wagging a finger at Europe over its fiscal problems and keeping the chief executives of some of the world’s most powerful oil companies waiting for hours in a hallway until he finally met with them.
In the forum’s keynote address, Putin boasted of Russia’s relatively low debt burden, balanced budget and “fiscal discipline.”
But the man largely credited with putting Russia in that enviable position, the former minister of finance, Aleksei Kudrin, warned at a news conference Saturday that Russia was in danger of falling into a recession and that Putin should delay much of the increased social and military spending he announced during his recent campaign forthe presidency.
Kudrin, who was ousted from the government last year after protesting rising military spending, said he listened to presentations and speeches at the forum, where Russian officials typically woo foreign investors, and heard expressions of “worry” and discussions of “worst-case scenarios.”
Still, he said, “the situation is a lot worse than it was presented.” With Europe apparently slithering into recession this summer, Russia is now more likely than not to suffer a crisis of its own this year, he said. While he acknowledged that other economists were less worried about Russia than he is, he said, “I saw even less worry in the Russian government.”
Banks and investors are already pulling money out of Russia, he said in a question-and-answer session with journalists at the close of the three-day St. Petersburg International Economic Forum, while indications from Europe worsen by the day.
Putin, in contrast, spoke of Europe’s turmoil largely to highlight that Russia is better off.
The gross domestic product, Putin said, will grow 4.3 percent this year. Money the government salted away in sovereign wealth funds from oil profits is ready to prop up businesses in a crisis, he said. And Russia’s debt, measured as a proportion of economic output, is one-tenth that of the United States and many European countries.
Putin, in an apparent reference to the West, said heads of state must show “effective leadership and a responsible course of action.”
“That means a balancedbudget policy, control over state debt and fiscal discipline,” he said. “Rampant financial speculation and political populism are equally dangerous.”
But Kudrin said Putin might need to rethink some of his own populism and renege on spending promises.Otherwise, Kudrin said, Russia’s budget could become too vulnerable to a downturn in global oil prices.
During this year’s presidential campaign, Putin announced higher wages, better maternity leave benefits and greatly expanded military spending in the coming decade.
“We need to look again at all programs being launched or expanded,” Kudrin said. “Even our current expenditures will be difficult to meet.”
To balance even this year’s more modest budget, Russia needs oil prices for European export of $117 a barrel or higher; the price on Friday was $90.37. Russia’s economy suffers when oil prices decline. The Kremlin, Kudrin said, should brace itself for an extended oil price slump to $60 per barrel or lower.
The forum, an annual event in Putin’s hometown, reflected many of the challenges ahead, for Russia and the world.
Panel discussions focused on topics like continuing safety concerns about nuclear power one year after the disaster in Japan and the question of whether China’s remarkable economic growth has run its course, leaving a risk of stagnation.
Kudrin did allow that Putin’s speech struck a positive note in highlighting new businessfriendly laws and promising a new round of privatization of state enterprises.
Kudrin said the actions would matter more than talk. “Putin’s speech was good, if it is realized,” he said.
Front Section, Pages 7 on 06/24/2012