In order to reverse the disturbing trend toward economic isolation, Russia needs to address the lack of trust in official government policy.

Preparations to The St. Petersburg International Economic Forum is in full swing. Photo: RIA Novosti

The St. Petersburg International Economic Forum (SPIEF) is marking its “coming of age.” Starting on May 22, and continuing for three days, St. Petersburg will host the 18th such event.

Initially conceived as a rather nondescript inter-parliamentary conference, over the years it has turned into the most important economic forum in Russia, a showcase for the country's foreign partners and investors, and an authoritative platform for discussing the most important issues of global development.

It is here that Russia’s leaders unveil the country’s economic and political programs, large-scale investment projects announced, and multimillion-dollar contracts signed.

At this year’s forum much will remain the same: a full, multi-level agenda with the ambitious motto “Building trust in an era of change,” an extremely high level of VIP representation from the world of Russian politics and business, chic surroundings, and the incomparable charm of Russia's northern capital.

One can only assume that there will be no shortage of catchy headlines and announcements about future mega-deals.

Less foreign representation because of Ukraine

For all the invariable appeal of big politics and the attractiveness of big money deals, SPIEF-2014 will not be like previous incarnations.

The luster of Russia's G8 presidency has faded: Virtually no one from the political establishment of the developed world will be there. Moreover, by no means will all the traditional guests from the boardrooms of Western companies be able to accept the invitation.

The main reason for the no-show is clearly a response to Russia's actions in respect of Ukraine. However, individual motivations may vary.

State leaders and heads of international organizations will not come for political reasons, of course, expressing the sentiment that whether we like it or not, in Western capitals today there is a consensus on this issue – at least at the official level.

Many foreign politicians and public figures, surprisingly, given that there is no external pressure on them, hold the same position. For some, the trip to St Petersburg this year would be ethically or reputationally untenable. Some top managers, of course, would like to come, but have deemed it more expedient to heed the unambiguous and publicly expressed views of their countries’ heads of state.

Nevertheless, business is business. Commercial and contractual relations are not about to be ripped up, so all industries and firms of any relevance at all will be present in one form or other.

The inconceivable pressure from Western leaders in favor of a boycott of this year's forum needs little comment. Suffice it to conduct a small thought experiment: Would there be even one representative of a Russian company, even a second-tier one, brave enough to visit a foreign event if the Kremlin suddenly expressed disapproval?

It remains to be seen if the St. Petersburg International Economic Forum is able to restore the trust of foreign investors. Photo: RIA Novosti

The challenges facing Russia at the forum

What is far more important is that the general mood at the forum will be radically different from previous years. Even six years ago, during the global crisis, things were perhaps better. Back then, at least, everyone was suffering the same.

Today, Russia alone is facing an unprecedented combination of negative impacts: economic stagnation, internal political tensions, and possible sanctions. There can be no triumphalism. Therefore, interested observers, albeit from a distance, will closely follow what happens at the forum: In the present climate, what proposals will sound urbi et orbi from the Kremlin’s favorite tribune?

It is not a simple task for politicians and speechwriters alike.

First, a convincing program of government measures to overcome the incipient recession in the Russian economy has yet to be formulated. The declared intention to finance a number of major economic infrastructure projects at taxpayers’ expense is substantial no doubt, but cannot fully replace the overdue systemic and structural reforms required to restore the fundamentals of economic growth in the private sector.

Second, it will be extremely difficult to even partially compensate the sizeable damage inflicted in recent months on the domestic investment climate by polite (and not too polite) people under the Russian flag. The preference for “emergency measures” over steady compliance with accepted norms and rules, and the primacy of non-economic values ​​over economic, is clearly unacceptable for any rational investor — even the task of returning to the “pre-Crimean” situation would now require herculean efforts.

Building trust is key

The forum slogan could not be more apropos: “Building trust in an era of change.” In order to win over the skeptical public and reverse its economic decline, Russia needs to start with some unambiguous statements and, more importantly, some real steps to restore the sagging confidence in government policy.

This could take the form of an honest acknowledgment that the “Eastern pivot” in economic policy is no more than a bluff, and that the Russian economy cannot develop without Western capital and technology.

It could be a decisive rejection of the large number of isolationist projects and other “sovereign-ization” measures presently on the table that have the potential to damage the long-term prospects of the Russian economy no less than any conceivable sanctions from outside.

It could a toning down of the propagandist rhetoric and a softening of the contentious official position on Ukraine.

It could be any tangible steps towards meeting the interests and wishes of Russian private business, which has given a negative rating to the general economic outlook and suspended investment in economic development long before the events in Crimea and the threat of sanctions.

None of the above is impossible. In any event, all forum participants, without exception, should look positively on the fact that, three days before the start, Russian President Vladimir Putin ordered Russian troops on the border with Ukraine to return to their bases. It is to be hoped that other, no less meaningful, steps in the right direction will follow.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.