Christian Harbulot, director of the Economic Warfare School in Paris, provides an historical reconstruction of the economic balance of power between states. In this study, he demonstrates that the strategies that states put in place in order to increase their economic power – and their impact on the international balance of power – can only be interpreted through the concept of economic warfare.
According to Harbulot, the true goal of these economic clashes has so far been hidden. Therefore, there is no academic discussion or understanding of this topic that is capable of providing an effective reading of international relations. There are many factors that will potentially trigger tensions between states in the future: the crisis of liberal principles promoting a positive view of economic development and globalization as a tool for establishing peace between nations; gradual resource depletion; energy issues; challenges to the Western economic leadership posed by the process of deindustrialization and the development ambitions of emerging economies.
This perspective sheds light on the importance of recognizing the legitimacy of the concept of economic warfare and lay the theoretical foundations to analyze the economic strategies states adopt to increase their power. In Harbulot’s opinion, the principles of economic warfare can be historically retraced in the fight for survival and for the control of resources and territories. The first example of economic warfare in history is the incursions of the nomad populations aimed at raiding the wealth of sedentary populations. In modern times, the economic warfare increased its spatial scope so that maritime and terrestrial commercial routes became the theater of continuous clashes for the control of some specific resources.
At that time, maritime piracy became an effective tool to exert power. In fact, the British pirates – that were attracted by trade routes between Europe, Africa and America, became the ancestors of the British Royal Navy. Both at sea and on the ground, the economic dimension became a key feature in military and diplomatic operations. By the end of the Middle Age, some kings used the economic power in order to support their military actions. An example of this is the war between the French king Louis XI and Charles I of Bourgogne: the French king commanded his fleet to block corn and herrings supplies to the Flanders (in the kingdom of Bourgogne), convinced the bankers to stop funding his rival and encouraged the hosting of fairs in Lyon in order to reduce the money flux to Geneva, which at the time was the trade hub between Bourgogne, Germany, and Italy.
In the 17th century, the newly created states considered the security of their territory (cities and countryside) as a strategic priority. In this time, the Seven United Provinces of the North created the first model of sanctuary area, meaning the securitization of a given territory from any kind of attack from the enemy. A net of fortresses and natural barriers like rivers was meant to protect the Provinces from the attacks coming from Spain. Similarly, Vauban’s France built up fortifications along the frontiers of the newly acquired territories in the north. This defense system led to the concept of “pré-carré” (squared field) that made reference to the geometric shape coming out from the disposition of these fortifications on the map that looked like a garden, divided in different flowerbeds. From then, this term evolved to nowadays’ meaning of “external sphere of influence” from the diplomatic, military and economic point of view. In order to guarantee their territorial integrity, states also exploited the military capabilities of an allied state in exchange of economic concessions. Portugal, for instance, signed an alliance treaty with the United Kingdom in 1373 in order to get its protection against Spain’s attempt to incorporate it. If at the very beginning this alliance was set up between pairs, later on it became the framework for the establishment of British protectorate over Portugal, so that for centuries the UK offered military protection in return of financial and commercial control over Portugal. Economic warfare has always been a feature of each stage of colonization, from the Roman Empire to the maritime empires established in the 16th century that gradually acquired control of natural resources and trade routes. Human trafficking is the most evident example of how economic interest impacts power relationships. In this regard, the colonization process of North America clearly shows the overlapping of conflicting dynamics of different economic interests.
The exploitation of American settlers in cotton plantations as well as the fiscal policy and the trade restrictions applied, led Great Britain and its colonies to war. Harbulot mentions this historical case to show how the control of trade routes is a key feature of economic clashes between states. In the 16th century, before becoming an Empire built up on its maritime trade power, Great Britain was a poor country with no military power. At that time, Spain and Portugal dominated the sea routes. When the British decided to became a maritime power, they started with piracy actions threatening the superiority of the enemies’ fleets.
Under the reign of Elizabeth I, the British pirates started pillaging Spanish and Portuguese ships carrying precious metals from South America. Afterwards, the British started expanding their trade networks to Turkey, Russia, the Caribbean and Asia. Finally, in 1707 the birth of Great Britain out of the fusion between Reign of Scotland with the Reign of England, led to the creation of one of the greatest free trade area of the time and to the first model of mass consumption in the world. During the 17th century, the British tried to exploit the great trade potential of British territories overseas and established the East India Company that paved the way to the colonization of India.
The colonial aspirations of Great Britain led to a military escalation that was necessary to defeat local sovereigns opposing the British hegemony, and to face the rivalry with other European powers. Great Britain went to war with the Netherlands (1652-1784) to win the control of the main trade routes with their colonies, which was threatened by the dominant position of the Dutch company of East India. Again, the necessity of securing maritime routes, led the British Empire to many other wars like Afghanistan (1839 -1842 and 1878 -1880) in light of contrasting Russia’s expansionism in India; the opium war with Chinese Empire (1839-1842 and 1856-1860) in order to force the Qing dynasty to open up to world trade; the occupation of Egypt in order to control the strategic platform in Cairo; the Boer wars (1880-1881 and 1899-1902) to ensure strategic control over Cape Town. After taking into account the British case as an example of how the ability to control sea routes is a key asset in geostrategic clashes, Harbulot analyzes the overlapping between war and economics that became evident for the first time during the revolutionary and Napoleonic wars (1792 – 1815).
William Pitt – British Prime Minister at the time – tried to preserve Great Britain’s predominant position in international trade. His strategy aimed at controlling the sea routes and establishing an indisputable maritime advantage through the Royal Navy – which was the only British force that could compete with France’s military capacity. The British military fleet was therefore empowered with 105 ships, whereas the French one could count on only 70. While Prussia – Great Britain’s ally – was able to contain France and its allies on the continent, the British fleet weakened France’s economic potential through preventing its access to the sea routes. For the first time in history, the economic warfare became global and delineated two blocks: on the one hand, Great Britain put in place a maritime block against France; on the other hand France locked the access to British exports to Europe.
The original feature of these two blocks consisted in the fact that both states wanted to adopt economic retaliation strategies to win the conflict. For example, Russia’s withdrawal from Napoleon’s continental block triggered Napoleon’s Russian campaign, that had disgraceful consequences for the French Emperor. The overlapping between traditional and economic warfare paved the way to some mechanism for economic warfare that were kept in place even in peacetime. By the end of the 18th century, France’s industry resulted to be significantly weakened by the military efforts carried on during the revolutionary wars. Napoleon then chose the scientist Jean-Antoine Chaptal, to reform the French industry and protect it from Great Britain’s trade threats.
In addition, Napoleon instructed the National Industry Encouragement Society to detect the strength and the weaknesses of the British economy: France was willing to do everything in its power in order to fill the twenty-year gap with the British, even smuggling machineries that were illegally purchased or stolen in Great Britain. In the framework of the continental block imposed by France, Napoleon consolidated this system of economic defense through a militarization of the custom check-points (whose officers in 1815 represented 20% administrative personnel of France besides the army). Despite the costs of the wars with France, Great Britain managed to keep its advantages: the industrial revolution that had started long before compared to the rest of the continent made British products more competitive; British colonies ensured a significant supply of raw materials and British naval supremacy allowed the control of the main sea routes.
It was paramount for London to reduce trade barriers in order to export its products to Europe, therefore the British government adopted the first techniques of economic warfare peacetime. In particular, a commission led by the political economist John Bowring was instructed to negotiate with French authorities for the opening up of trade. What Bowring did in reality, was lobbying for the creation of groups supporting British liberal trade in France and using the local press to influence public opinion that was the main tool to reach this goal. It was only with WWI, though, that the principles of economic warfare were formalized.
Already in 1914, in light of the likely long duration of the conflict, the powers involved elaborated the typical practices of the economic warfare: i.e. reducing the availability of materials for the enemy’s army, and raw materials for its industry – with an extremely negative impact on the population – blocking trade and finance flows that directly hit the enemy’s food supplies. In addition, over the course of the conflict, some specific structures dedicated to the economic warfare were created. In 1915, the French Ministry of War set up a Control Section responsible for collecting necessary information to support economic warfare. Similarly, Great Britain created an independent organization, the War Trade Intelligence Department, attached to the Ministry of Foreign Affairs. In 1916, Italy set up a special office entrusted with collecting and checking economic news, attached to the Ministry of War.
These structures were coordinated by an Inter-allied office located in Paris. During the conflict, economic warfare actions became more and more targeted against international objectives and supported by military operations, which became more sophisticated thanks to the development of aviation technologies. However, in 1918 there was no general consensus between France, Great Britain and the United States about the goals to reach. Paris wanted to use economic warfare to force Germany to surrender and accept international control on its possession of raw materials, so that France could still have the upper hand. Washington was aware of the leverage the economic warfare could play to stop Germany’s economic expansion and get to a peace treaty, however its main interest was to stress the liberal principles and play a dominant role in international trade; London aligned itself with the United States while keeping its focus on its economic interests. As the conflict ended, the structures dedicated to economic warfare were dismissed but were restored after the break out of WWII. In 1939, Great Britain created an actual Ministry for Economic Warfare, with similar tasks of the dismissed War Trade Intelligence Department.
In June 1940, Prime Minister Winston Churchill set up a new service called Special Operations Executive – that was basically the offensive component of the Ministry of Economic Warfare – and entrusted it to conduct sabotage operations on the continent and fuel uprisings in the territories occupied by the Germans. At this stage, the interaction between war and economy shed light on the problems related to the economic warfare. However, in the second half of the 20th century, this topic was overshadowed. On the one hand, during the Cold War, Western bloc countries were keen to cover the economic disparities between them and powered their ideological projection against the Soviet bloc. On the other hand, the United States – the new global superpower – elaborated their version of the British strategy of influence and promoted the free trade theories and competition as the main model for the Western world economy.
According to Harbulot, an effective analysis of the economic warfare must consider the evolution of the methods states used to conquer territories, increase their trade and power. Over the 19th century, states preferred to conquer markets (through economic warfare) rather than territories (through traditional warfare) in order to acquire more influence on the international level. Harbulot identifies the cases of Japan and Germany because of the importance these states gave to the seek for a “vital space”, to be conquered through territorial acquisition and trade influence. In 1854 U.S. commodore Matthew Perry forced Japan to open up its ports to Western powers. However, in 1867 Mutsuhito ascended the throne of Japan and decided to reverse the established balance of power. His modernization policies aimed at filling the gap with major Western economies and hinder their leadership.
The Meiji Restoration – whose slogan was “Enrich the country, strengthen the military” – was framed in a policy aimed at acquiring a comprehensive expertise in many fields, following the example of the leading countries in a given sector. Japan also pursued an expansionistic policy through the annexation of Korea and claimed a trade protection on China – that threatened the United States’ interests in developing business ties with the country. Japan’s main goal was to establish a sphere of regional co-prosperity with East Asia countries, occupied by the imperial army. Therefore, the Japanese empire occupied Manchuria and founded the state of Manchukuo, a classic example of the reproduction of military systems invented by the Portuguese and then imitated by the Dutch and the British. The Japanese combined the model of the Company of India with the one of the American railroads to create the Railroad Company of Manchuria. This latter was in charge of the administration of Manchukuo and of the management of the Japanese occupation troops; it possessed its own police forces, a central bank and even a merchant fleet. The State of Manchukuo was test site for the new approach to increase state power through the economy.
The case of Germany is quite different. Over the course of its history, Germany constantly sought to acquire new territories to guarantee food supplies for its population, as German lands were covered with forests and difficult for farming. By the end of the Middle Ages, German settlers started colonizing the lands of East Bavaria. While acquiring new territories was not always a peaceful process because of the resistance of the local population, the expansion via sea was far easier. The creation of the Hanseatic League allowed Germany to peacefully establish its dominion on the Polish shores between 16th and 17th centuries. The battles conducted by the Hohenzollern family completed the creation of a sphere of influence at the eastern borders of Germany. The debate around the strategic advantages of territorial versus trade expansion was very popular in the politics of the Second Reich. The unification of Germany pursued by Otto von Bismarck allowed the country to acquire more influence on the world stage. However, the increasing in its power at the end of 19th century was not only boosted by the changes brought by the industrial era, but also by the geostrategic competition with the British and French Empire: the German strategic core consisted in the “Konzern” (associations of both vertically and horizontally integrated enterprises), in banks and insurance companies that challenged their European competitors.
The debate on how to handle a hypothetical geo-economic success gained momentum at the end of WWI. As a result, in 1915 Samuel Herzog published in Germany “German economic warfare plan”, which could be considered as a draft handbook of economic warfare.
In his book, Herzog listed the economic tools that States could oppose to the Reich’s enemies. Some of them are helpful to influence or control the exports during the economic warfare; some others could ensure Germany’s success against the passive resistance of defeated countries. According to the author, in order to preserve Germany’s economic assets, it is necessary for the state to exercise its control over industries that have kept the upper hand against foreign countries. In addition, the state should protect private initiative in a way that it does not conflict with national economic interests.
Harbulot focuses then on the dissimulation of economic warfare: firstly, the economic dimension acquired a great prominence in the balance of power among individuals, groups and states; secondly, he underlined the high interdependence between the economic strength and the political and military power. Nevertheless, the historic phenomenon of economic warfare has always been denied, because the political justifications for economic expansions have always been perceived as aggressive and illegal.
The negative perception of the economic war as a consequence of cupidity is grounded on Saint Augustine and Thomas Aquinas’ just war theory. According to this theory, States are pushed to hide their war plans for economic purposes and to proclaim their intention to spread religions, to stimulate growth of developing countries and, more recently, to promote democracy. This dissimulation attitude causes the distortion of the balance of power.
It is worth noticing that international military organisations, such as NATO, have not developed a proper economic warfare doctrine yet, because of conflicting interests among member states.
Some examples of the dissimulation of economic warfare are the domination strategies implemented by colonial empires, as well as recovery strategies of countries aiming at avoiding colonisation or at increasing their power.
Firstly, domination was dissimulated by the pretext to conquer and impose one’s religion to colonised people. Secondly, the doctrine of liberalism and the idea of increasing power through trade expansion stimulated free trade and the opening of new markets. All these factors became the justification to the foundation of new empires.
Any commercial achievement could lead into an economic warfare, which could represent a coercive instrument to use against countries that try to close their market. As to some examples, the United Kingdom implemented its “gunboat diplomacy”, in order to export its products in the Middle East and East Asia markets and in 1840-41 the Royal Navy closed the Alexandrian harbour. Moreover, during the Opium Wars, the Western countries forced an “independent country” to participate in the drug trade.
With the Opium Wars, the strategy of “economic aggression” became evident. As a result, countries such as Japan were forced to modify their plan and to implement a significant economic penetration policy (represented by the above-mentioned slogan “enrich the country, strengthen the military”) with the aim of reducing disparities with Western countries. When, a century later, at the end of ‘80s, Japan became the world’s second largest economy, the USA and Europe denounced its expansionism, as well as its economic trade’s strategy. The Central Intelligence Agency (CIA) even published a report on the “Japanese propaganda” aiming at hiding the protectionist measures taken by the US against other market economies, in violation of the principles of economic liberalism.
As for the recovery strategies, they focus on basic objectives and are strongly linked to geographic and cultural background. Due to its geographical morphology, Japan developed a solid maritime infrastructure, along with an industrial economy and became a model for South Korea, India, Brazil and China. In particular, South Korea opted for shipbuilding and for the creation of large private industrial conglomerates.
On the contrary, India chose to become a world leader in IT sector and pursued an education reform in order to improve science teaching. Moreover, the city of Bangalore, thanks to its favourable weather conditions, was transformed into a high-tech capital.
Brazil instead based its recovery strategy on the energetic sector, with the aim of becoming the regional leader in this field. Besides, Brazil used its soft power to claim the role of world’s sustainable development power due to its wide-scale production of electric power.
Finally, the Chinese recovery strategy was grounded on market opening, with the creation of special economic zones and the implementation of measures to attract foreign investments.
However China, as Japan did, developed an aggressive plan of foreign markets’ penetration, with the strong opposition of the United States. This triggered a debate around economic warfare in the Western world. In particular, China was deemed to become member of “normative” international organisation only in order to impose its own rules. As a matter of fact, reactions caused to a sceptic attitude against China could be considered as economic conflicts. This is true for protectionist measures on photovoltaic technologies taken by the Obama administration, as well as for the decision of the Australian government to refuse the participation of the Chinese company Minmetal in the Australian firm Oz Metal.
The paradigm of economic warfare changed after the Second World War, when the USA became the world geo-political, military and trade leader. Along with coercive methods of colonial empires, the USA expressed their economic power by pursuing a new strategy. In particular, in order to prevail over an allied country in the economic and cultural field, the United States established themselves as a superpower and managed to hold a stronger position in the hierarchy of the values, rules and arbitrages of market economy. As a result, the US imposed in peacetime to Western countries a “silent practice” of economic warfare.
Nevertheless, the availability of new markets after the collapse of the Soviet Union and the aggressive recovery strategies implemented by emerging economies modified the current stability of international economic relations. Furthermore, a growing competition, stemming from the two above-mentioned factors, pushed the USA to take into account the need of a “real” economic war. Asia’s increasing power and the EU internal market, actually undermined the supremacy that the USA had acquired by the end of WWII.
These changes in the balance of power highlight the new paradigm of the economic warfare: the relationship between ally and enemy is replaced by a direct or indirect conflict between two enemies.
Despite the fact that economic warfare was usually characterised by direct conflicts, globalisation has modified the world economic framework, both for emerging economies and developed countries.
States’ strategic interests diverge and become more and more complex. Therefore, a military or geo-political concern could be in contrast with an economic one, and vice versa. As a result, two countries could conclude a military alliance and fight for economic reasons at the same time.
Therefore, these new balances of power among States, where competition and cooperation co-exist, show that the current economic relationships are weaker than in the past. However, these changes do not reduce conflicts among states. During the ‘90s, the USA, as world leader, implemented a policy of economic security, started in the ‘70s with the introduction of Section 301 of the 1974 Trade Act (that enabled the country to oppose trade barriers penalizing its exports) and Section 301 of the 1988 Omnibus Trade and Competitiveness Act (that enabled the country to denounce unfair practices and protect American companies from intellectual property violations).
With the aim of fighting unfair competition, the USA decided to tighten their position on trade. Despite the objections of several states, these unilateral measures are still in force and are used as leverage against the Dispute Settlement Body of the World Trade Organisation. Torricelli’s (1992), Helms-Burton’s (1996) and D’Amato’s (2001) laws implemented these measures and forbade thee WTO membership to the countries that were hostile to the United States. Among the countries affected by these provisions (with the exception of Cuba, covered by a US embargo since 1962), Iraq, Libya, Iran and Nigeria were rich in oil reserves. Moreover, the appointment by the Clinton administration of the National Economic Council in 1993, working jointly with the National Security Council, proved the paramount importance of the national economic security.
The USA represented a model for several countries: France, for instance, appointed a Committee for Competitive Economic Security chaired by the Prime Minister in 1995; over the course of his first mandate. President Putin strengthened the role of some State bodies on the protection of the economic resources in Russia. The economic weakness of Western countries and the increasing power of the emerging ones will probably reinvigorate tensions between developing and industrialized countries, which dominate the world economy. While developing countries are eager to increase their power through massively expanding their trades to foreign markets, Western countries tend to separate power strategies based on military and diplomatic means, from those based on economic warfare.
Moreover, the Western policy of deregulation emphasises this paradox. While European advantages decrease, in fact, emerging countries increase their competitiveness with the financial support from bank authorities, which are directly or indirectly controlled by the state.
Therefore, a competitive imbalance – that is usually strengthened by the substantial role the financial sector plays in the functioning of market economies – weakens industrialized economies. Chinese managers, instead, successfully adapted the Communist dictatorship to the rules of market economy and pursued more ambitious targets than purely making profits.
After the collapse of the Soviet Union – caused by the arms race – China elaborated the idea of “war with no limits”, by combining military and economic instruments. The crisis of colonialism and the growing power of emerging countries undermined the Western notion of ethnocentrism, which the foundation of the theory of Western superiority.
Therefore, in the new global contest, Western countries are weakened by a number of contradictions:
Liberalism and Protectionism
In the United Kingdom and in the United States economic doctrine, liberalism justified the dismantling of protectionist systems in the countries that were their top export destinations. The goal was to an increase their exports and to minimize the impact of the destination countries on international financial markets.
Delocalization vs. National Interest
In the United States there are two conflicting economic trends: one aims at opening the markets and benefiting from delocalisation, the other stresses the importance of protecting American people’s interests.
The European Union’s inability to react to the challenges posed by economic warfare.
In the aftermath of WWII, during negotiations on Marshall Plan, there has been a considerable discussion in France on some U.S. economic needs, such as the obligation to feed animals with American soya and the distribution in the French market of films coming from Hollywood. General De Gaulle, Prime Minister since 1958, pursued an independent policy against the U.S. interests: he created the oil company Elf Aquitaine with the aim of reducing dependency from the seven Anglo-American oil companies; he limited the settlement of American multinational companies; he started casting doubts on the role of dollar as reserve currency. Nevertheless, his vision was defeated by the liberal idea of markets’ openness. Furthermore, the creation of the EU single market marginalised the discussion on the role of the economy in state power strategies. As a result, France dramatically changed some of its economic structures that had previously provided the country with a significant economic power.
In particular, the Commission Permanente de l’Electronique, which in the ‘60s rose awareness on the need of developing the electronics industry, was abolished. At the beginning of 21st century, Prime Minister Dominique de Villepin re-launched the debate on the “economic patriotism”, fostered by the drawbacks of emerging countries’ recovery policies. Some of them, in fact, evolved in real “fighter economies”, to fill the development gap with the West. Their offensive strategies integrated the range of techniques already implemented by Western countries in the past: collecting information via Internet, stealing patents, dumping measures, counterfeiting, metal smuggling (especially copper, whose world-wide demand is increasing).
While these unfair measures, which undermine the Western economic leadership, represent an issue for concern in the United States, in the EU they are considered as “exception that proves the rule”. Accordingly, the US adopted coercive instruments against these measures, in order to single hostile countries out. On the contrary, the European Union rarely followed this example. In 1984 the EU adopted a retaliatory measure in accordance with Section 301 of The US Trade Act, even though it was only applied six times in ten years.
In the centralized EU system, since the only competences left for Member States are national defence and public order, the United Kingdom, the Netherlands and Germany integrated the economic war paradigm in their modus operandi. France, instead, lobbied for amending the EU Treaties with the aim of improve its room for manoeuvre, but its attempts were not successful. More generally, the EU Member States proved not to be able to set up a shared strategy on this issue. As a result, the EU did not react to Putin’s measures protecting and promoting Russian industries – through state aids, customs duties benefits, and debt cancellation – and not even to the Russian threat of cutting gas supplies to Europe.
In the current international framework, the pacification process favoured by the leadership of the Western countries is weakened by multipolar geo-economic relationships and growing conflicts with emerging countries. As a result, the European Union – that does not consider economic warfare – cannot do much other than following the lead of the United States. Despite its image of cohesion, the EU is fragmented: Germany leads Northern Europe and is engaged both in increasing its power and promoting itself as a peaceful country in open contrast with its past; Southern Europe tries to solve its infrastructural problems, while post-Soviet countries are still under American, German and Russian influence.
To conclude, the economic warfare paradigm shall be taken into account in current international relations. Harbulot imagines a new political economy based on a consistent combination between state power strategies, trade expansion and territorial development. Nevertheless, these dimensions deal with three divergent interests. Therefore, the definition of short, medium and long-term priorities relies in the hands of the political power.
St. Petersburg Forum Offers Unlimited Business Opportunities
The 24th St. Petersburg International Economic Forum (SPIEF’21), unique business forum that is highly expected to bring together politicians, corporate business directors and investors from different parts of the world, is set to take place June 2-5 as the epidemiological situation begins to stabilize in Russia.
That however, the Russian Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor) with organizers promise everything in its power to ensure that the event is held with all the necessary measures in place to prevent the spread of coronavirus, and strictly in compliance with the recommendations given by the World Health Organization (WHO).
Roscongress Foundation, the organizer, says on its website that it has decided to create new infrastructure for comfort and safety of participants in view of the coronavirus pandemic. For instance, PCR test conducted at access to the venues, catering, sanitizing the premises, and providing participants and staff with personal protective equipment.
Thermal imaging control will be provided. Medical stations at the venue provided with the necessary equipment and medicines. There will be ambulances and resuscitation vehicles, including teams of English-speaking doctors. All spaces of the site equipped with air recirculation units and decontamination devices, among other measures for all participants visiting the events in St. Petersburg city.
Hans Kluge, Director of the World Health Organization (WHO) Regional Office for Europe, together with Anna Popova, Head of Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor), will hold a special briefing for participants on pandemic situation and its control in Russia and around the world.
Kremlin Spokesman Dmitry Peskov told the Russian local media that President Vladimir Putin plans to take part in the plenary session of the St. Petersburg International Economic Forum (SPIEF). “But Putin will be there in person,” Peskov reaffirmed his earlier statement, and further informed that in-person forum will be held in strict accordance with health and safety measures, the president received the first vaccination shot on March 23 and the second on April 14.
Over the years, this forum has strengthened multifaceted business ties, facilitated broadening relations and the development of cultural dialogue between Russia and many foreign countries. According to Roscongress Foundation, a number of foreign countries, keen on making solid business presentations and equally seek partnership opportunities for mutually beneficial cooperation, have already registered their participation.
Traditional inter-country business dialogues are planned as part of SPIEF featuring representatives of business communities of Italy, Germany, France, the United States, India, Africa, Finland, Japan, Latin America, Middle East, as well as the EAEU-ASEAN business dialogue. Under the umbrella of SPIEF, international meetings in business room format will be held with the participation of representatives of Roscongress Foundation’s international partners and businesses in the corresponding world regions.
Apart from the main business programme, SPIEF will also host the SME Forum, Youth Economic Forum, SCO, BRICS and ASEAN events, B20 Regional Consultation Forum, Creative Business Forum and Drug Safety and Security Forum, as well as events on Arctic and African agenda.
The central theme of the Forum is A Collective Reckoning of the New Global Economic Reality. The business programme includes more than a hundred events divided into four tracks touching upon the issues of global and Russian economy, as well as social and technological agenda.
Joining Forces to Advance Development is the key track of the business programme. It includes sessions on economic recovery and international cooperation, discussions on Eurasian integration, transformation of global trade, effectiveness of business during the pandemic, global energy market, recovery of food market, and sustainability of national healthcare systems.
The second theme block of the business programme focuses on national development targets, the anti-crisis agenda for strengthening long-term potential of the economy, investment climate in Russian regions, shaping of Russian research and technology space, development of the financial market, creation of circular economy, and functioning of strategically important industries.
Discussions under the New Technology Frontiers track will feature the topics of international cooperation in science, digital sovereignty and information security, healthcare digitalization, tech ethics and others.
The Human Factor in Responding to Global Challenges theme block will talk about cultural codes of the new reality, collaboration in international education projects, and new skills and employment models in a post-COVID world. Moreover, there are sessions on the development of creative industries, sport and education.
The Russian Small and Medium-sized Business Forum is an annual event held as part of SPIEF to discuss the current state of small and medium-sized businesses and measures to enhance their role in the Russian economy. It is, however planned that the focused sessions encompass the key aspects of support and development for small and medium-sized enterprises.
“Small and medium-sized business is the foundation of the economy and a key indicator of the current status of socioeconomic development. As we are looking towards the future, it is essential to develop and implement long-term programmes that will give a new impetus to the development of SMEs,” said Anton Kobyakov, Adviser to the Russian President and Executive Secretary of the SPIEF Organizing Committee.
“We plan to discuss all the proposals in details at the SME Forum because they determine how small and medium-sized businesses will thrive in the future. Small and medium business is the largest employer and a guarantor of socioeconomic stability and the dynamic development of society. The development of entrepreneurial education, cooperation among small and big businesses, and the development of youth entrepreneurship, among other issues,” he said.
With a similar view and position, SME Corporation CEO Alexander Isayevich said “Entrepreneurs need to understand how to work in the new economic realities and what support measures the state will continue to provide. In addition, it is crucial for entrepreneurs to have high-quality non-financial services. The sessions, attended by a wide range of experts, will help to find optimal solutions not only for the SME sector, but also for the entire economy. We always advocate an open dialogue with business, as this is the principle that underlies our new development strategy.”
As part of Youth Day programme, the most promising undergraduate and postgraduate students, as well as young scientists from Russia’s leading universities and scientific organizations will participate in the St. Petersburg Forum.
“It has become a good tradition for talented young scientists and students to take part in SPIEF, it is a leading business event that brings together unique experts from all areas of the economy. Participation opens up limitless opportunities for young people to exchange experience and gain new knowledge,” said Andrey Fursenko, Aide to the President of the Russian Federation.
There will also be large-scale different cultural events. For instance, Qatar plans an exhibition – “Qatar between Land and Sea, Art and Legacy” – this exhibition is a great opportunity for people from around the world to explore the very precious elements of the Qatari and Middle Eastern tradition and lifestyle, such as handmade carpets and artifacts, pearls, and antique jewelry, which makes it a magical journey through history.
St. Petersburg forum is highly-considered as an important step forward in developing and strengthening investment‑related collaboration. As one of the biggest economic forums in Russia, it yearly gathers several thousands of participants, including representatives of ministries and government bodies, financial and investment organizations, startups, and tech and innovation companies, and representatives of the media.
Despite the adjustments made due to the pandemic, there are for all participants interesting and useful initiatives for comprehensive interaction as the key objective is to create opportunities and friendly conditions to consolidate links between Russia and the world.
About the SPIEF’21 Organizer: Roscongress Foundation is a socially oriented non-financial development institution and a major organizer of international conventions and exhibitions; and business, public, sporting, and cultural events. It was established in pursuance of a decision by the President of the Russian Federation.
On the Role of Sovereign Wealth Funds (SWFs) in Supporting a Green Recovery
Perhaps one of the few areas where a consensus is crystallizing across the major powers of the global economy is on the urgency of advancing the green environmental agendas and reducing the carbon emissions. Global institutions such as the IMF are emphasizing the need for a green recovery to take hold in the world economy as the global community emerges from one of the starkest crises in the past century. The world’s sovereign wealth funds as a powerful force in international financial markets could play a vital role in advancing green projects as well as green finance. This is particularly relevant for Russia, where the National Wellbeing Fund could be partly invested into green financial instruments.
At this stage there is a number of global networks and initiatives that bring together the world’s largest institutional investors, including sovereign wealth funds, to drive the green investment agenda. These include European Long Term Investors, the Institutional Group on Climate Change and the Network on Climate Risk. Some of the wealth funds from the Middle East, including the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the Qatar Investment Authority and the Public Investment Fund of Saudi Arabia, are signatories to the One Planet SWF Framework. The meeting held by the International Forum of Sovereign Wealth Funds in 2016 “participants highlighted that SWFs are particularly well-positioned to become trailblazers in green investment”.
Recent data and surveys reveal a growing integration of the green agenda into the decision-making and strategies of the world’s sovereign wealth funds. These were the findings of an inaugural survey of 34 sovereign wealth funds, representing 43% of the world’s sovereign funds, conducted in September by the International Forum of Sovereign Wealth Funds and the One Planet Sovereign Wealth Funds .
The survey reveals that climate-related strategies represent more than 10% of portfolios for 30% of responding wealth funds. The survey also found that these funds made 18 investments in agriculture technology, forestry and renewables opportunities in 2020 at a total value of $2 billion, up from eight investments valued at $324 million in 2015. Overall, according to the survey “sovereign wealth funds have invested more than $5 billion in agritech, forestry and renewables opportunities over the past five years as part of an increased push toward climate change-aware investing”.
Just over a third of responding funds (36%) have a formal climate-change strategy in place, with 55% of these funds adopting the policies since 2015 and 30% since 2018.
The survey came up with the following recommendations to wealth funds based on the survey findings:
· to adopt and implement climate-related strategies;
· to seek appropriate talent and expertise;
· to explore board member and executive education;
· to use metrics to show not only climate impact but also comparable returns and risk reduction;
· to communicate to all stakeholders the strategic importance of climate change;
· to partner with peers and international initiatives to share experience and generate greater leadership from within the wealth fund network.
The latter recommendation dovetails the recent Valdai Club initiative to enhance cooperation among the largest sovereign wealth funds against the backdrop of the Covid pandemic. In particular, in 2020 the Valdai Club together with Shafi Aldamer and Curran Flynn from King Fahd University of Oil and Minerals advanced the proposal to create a platform for the sovereign wealth funds (SWFs) of G20 countries to boost long-term cooperation, direct investments, and the formation of bilateral/trilateral/multilateral investment accords. The findings of this policy brief were included in the T20 communiqué, which encourages the G20 to promote “the creation of a platform that would bring together the sovereign wealth funds of its members, possibly in coordination with the International Forum of Sovereign Wealth Funds.”
Such a platform would encourage the G20 states to strengthen their economic cooperation, bolster mutual interests, improve multilateralism, and develop opportunities for their SWFs. Additionally, it would act as an emergency tool in easing the impact of a global crisis, such as the current COVID-19 pandemic, as it can be employed as an anti-crisis measure via the investments of the G20 states’ SWFs. One important venue of cooperation for such a platform for sovereign wealth funds could be the elaboration of green investing principles and benchmarks for the major sovereign wealth funds, which in turn would support the advancement of a green recovery in the global economy in the aftermath of the Covid pandemic.
As regards Russia’s sovereign wealth funds, most notably the National Wellbeing Fund (NWF), which by Q1 2021 has accumulated more than USD 180 bn in overall resources there may be a case for investing part of the liquid reserve into green instruments, including sovereign green bonds. In particular, the investment guidelines for the NWF may involve a formal target on the share of green assets in the Fund’s portfolio. These in turn may include corporate and sovereign green bonds from advanced economies as well as an allocation reserved for Russia’s corporate and sovereign green bonds. The latter would potentially deliver a significant boost to the development of Russia’s green bond market. Currently green bonds account for just 1.5% of total corporate bonds outstanding in Russia and the emergence of sizeable demand from Russia’s sovereign wealth fund would raise the potential growth for this very important market segment.
From our partner RIAC
5 things you should know about the state of the global economy
Is this the year we overcome the global economic crisis caused by the pandemic? Are our jobs in danger? Who has lost the most in the crisis and what can be done to recover? As the UN Department of Social and Economic Affairs (DESA) prepares to launch the mid-year update of the 2021 World Economic Situation and Prospects (WESP) report, here are five things you need to know about the state of the global economy.
1) US and China bounce back, but a slow recovery for developing countries
While economic output in the United States and China is expected to grow robustly and lift global growth, many developing economies are not expected to return to pre-pandemic output levels anytime soon. The pandemic is far from over for most developing countries where vaccination is advancing slowly, and fiscal pressures have intensified.
2) The situation of the most vulnerable has become even more precarious
Lockdowns and social distancing measures resulted in large job losses in contact-intensive and labour-intensive service sectors, which predominantly employ women. The pandemic has also exposed the vulnerability of informal employment, which is the main source of jobs in many countries and which offers less job security, social protection and access to healthcare.
3) Global trade recovery is strong, particularly in Asia
Merchandise trade has already surpassed pre-pandemic levels, buoyed by strong demand for electrical and electronic equipment, personal protective equipment (PPE) and other manufactured goods. Trade in services remains constrained by restrictions on international travel. While exports from Asian economies have soared, exports from Africa, Western Asia, and the Commonwealth of Independent States has stalled.
4) The COVID-19 crisis has inflicted more harm on women and girls
This crisis disproportionately affected women, who suffered significant job and income losses, contributing to the worsening of gender poverty gaps. Burdened by increased home care duties, many girls and women gave up on schools, and the workforce altogether. Returning to school and work might take longer or may not happen at all for many of them, further widening gender gaps in education, income and wealth.
5) Countries need to do more to address the uneven impact of the COVID-19 crisis
There is an urgent need for countries to formulate better targeted and gender-sensitive policies to drive a more resilient and inclusive recovery from the crisis. Though on the frontlines of the pandemic, women have been under-represented in pandemic related decision-making and economic policy responses. The severe and disproportionate impact of the pandemic on women and girls call for more targeted policy and support measures for women and girls, not only to accelerate the recovery but also to ensure that the recovery is inclusive and resilient.
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