President of Russia Vladimir Putin: Colleagues, friends,
Unfortunately, our meeting is taking place in unusual conditions, to put it mildly, but we planned it in advance.
Of course, I would like to listen to Mr Shokhin who will tell us about his general considerations.
President of the Russian Union of Industrialists and Entrepreneurs (RSPP) Alexander Shokhin: Mr President, colleagues,
Obviously, the current geopolitical situation is compelling Russian businesses to operate under difficult conditions, given the various restrictions. However, I would like to confirm that not only the state and the economy in general but also Russian businesses have learned to survive crisis situations. Since 2014, our businesses have learned to adapt to crisis phenomena and even to resolve development objectives.
Incidentally, the COVID-19 pandemic has also provided additional instruments for companies and the Government and for our dialogue with the Government. We worked together to draft anti-crisis measures and systemic steps to improve the business and investment climate.
We are well aware that any new sanctions will be much tougher than the previous restrictions and will affect many sectors: the financial sector, the extractive sectors, deliveries of technological equipment. They will affect certain types of raw materials and components and could upset supply chains, transport and logistics.
Clearly, to dampen the effects of all these restrictions, Russian business, Russian companies will have to work even harder and more effectively to ensure continuing operations of their companies without job cuts, panic buying or price hikes. We will have to focus more on the import substitution strategy and look for new partners in the countries that are ready to cooperate. Of course, much will depend on the timely and successful performance of the Government.
Importantly, it is necessary not only to hedge various risks and minimise the consequences of new rounds of sanctions for the country’s development, but also to stick to the development agenda. We are not forgetting that we must think not only about today but also about tomorrow – you spoke about this in your opening remarks, Mr President.
And so, I would like to make a number of points about possible decisions that, we believe, must be made right away. First, to the extent possible in the current situation, we would like to ensure predictable terms for implementing large investment projects. We are working on this issue in active dialogue with the Government. In part, we are completing the elaboration of a mechanism for agreements on protecting and encouraging investment. I think we will finish this work literally within a month’s time.
I am referring to the so-called formula approach. In some cases, when important parameters of the terms for implementing projects are subject to change, it is indeed necessary to use certain formulas. They do not guarantee stability of all current and future conditions but make them predictable when sanctions act as a trigger and affect inflation, the budget deficit and the ruble exchange rate.
Mr President, we discussed this project with you at the December congress of the Russian Union of Industrialists and Entrepreneurs and are now trying to formalise it with the Government, with Mr Andrei Belousov. Importantly, this approach may be applied to other elements of economic policy.
Considering that sanctions may extend the time for implementing investment projects or delay their beginning, we suggest extending the most popular support tools and mechanisms, including corporate programmes for enhancing competitiveness, investment tax deduction and regional investment projects. This would certainly make the terms for implementing all planned corporate projects more predictable.
Considering the sanctions imposed on the sovereign debt, it is necessary to think about additional incentives for private investors’ demand for bonds. Let me recall that over 20 million broker accounts are open in Russia and the number of private investors on the Moscow exchange has exceeded 15 million. I am referring to individual investment accounts. Obviously, the potential domestic financial market, which has been making steady progress in the past few years, will be able to reduce the sting of sanction and create a new opportunity for working with the national debt.
Another area of minimising external financial risks, which is also related to development, is the introduction of effective management of digital financial assets and crypto currencies.
Legislation concerning digital financial assets is basically passed already. We have to fairly quickly introduce certain tax regimes that will not create incentives but rather lift some actually discriminatory conditions for the functioning of these assets as compared to other kinds of financial assets.
As for crypto currency, we support the balanced approach by the Finance Ministry and the Government and suggest that a legislative foundation be drafted promptly for this sector to develop legally.
We generally think it important to continue work and encourage the investment activities of private businesses, but this does not mean extra tax incentives as it is sometimes believed. It is about giving companies an opportunity to pursue their investment projects, including outside the framework of separate legal entities. In fact, it is about giving a clearer formal definition of “a holding company” which Russian legislation lacks. We can also consider the possibility of lifting moratoriums on the development of consolidated groups of taxpayers.
It obviously involves raising the quality of Russian corporate and tax legislation which can, firstly, increase the competitiveness of this legislation but the key is that it will make it possible to answer the question of how much Russian companies really invest, including with their dividends. You have set this task, and I would like our dialogue with the Finance Ministry and the Government to cover these components as well because currently many investment projects financed by dividends are not assessed as part of holding structures’ overall investments.
To conclude, I would like to say that we proceed from the fact that Russia is not closing down, it remains a part of the global economy, so we apparently are not turning away from international agreements on key cooperation issues, in particular, carbon and climate issues.
I think our foreign partners should understand that climate projects are not an area where tough sanctions regimes can be applied because it really concerns the interests of the entire world. I think cooperation in many other areas will proceed in the same way, including international taxation rules.
I generally think that we must do everything to show as clearly as possible that Russia remains a part of the global economy and will not provoke negative global events in world markets, including via response measures.
I have no doubt that we will cope with any external risks and challenges. However, inside the country we must also act effectively and work not only on the agenda for today but also the agenda for tomorrow.
Vladimir Putin: Thank you.
Here is what I would like to say.
First, this is the main point, so that this is clear. What is happening is a forced measure. There were simply no chances left for taking a different course of action. The security risks that had been created were so high that it was impossible to respond by other means. All attempts had come to nothing. Frankly speaking, I am even surprised – there was not one iota of progress on any issue. I would like to emphasise again that this was a forced measure because risks could have created for us to the extent that it would have been impossible to conceive how our country could even exist in the future. This is the first point.
Second, all of us, including you, understand the kind of world we live in, and we have been getting ready in certain ways for the restrictions and sanctions that are being imposed on us now. Nonetheless, what I am about to say is something that I consider extremely important. I would like to respond to what President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin said.
Russia remains part of the world economy, and to the extent that it remains part, we are not going to inflict damage on the system we feel ourselves to be a part of. We are not going to damage the system of the global economy that we are in, to the extent that we are in it. So, I think our partners should understand this and should not try to force us from this system. Nonetheless, restrictions will be imposed, even for political considerations.
In this context, I would like to appeal to you to be understanding of what is going on and cooperate with the Government to find ways to support production, the economy and jobs, though bearing in mind how things are shaping up.
I believe the goal of the Government and the authorities in general in the broadest sense of this word is, of course, to provide you with good conditions and ensure more freedom. There may be only one response – to ensure greater freedom of entrepreneurship, naturally, within a certain framework so that, as our colleagues put it, there is a certain amount of predictability from the Government but we expect predictability from businesses as well.
Obviously, we cannot predict all geopolitical risks but in relations between businesses and the Government, you certainly have the right to expect clear and consistent predictability from the Government. And, the most important point, it is necessary to be in touch at all times, to respond in a nuanced way to everything that is happening and to adjust our joint work whenever necessary.
I would like to thank you for what has been done up to now, even in these rather complicated conditions, and I hope that in the new conditions – although we cannot call them entirely new – but anyway at this stage we will work with the same solidarity and no less effectively.