SPIEF DIARY: Unwrapping the enigma: 5 key takeaways from St. Petersburg forum

Saudi Energy Minister Khalid Al-Falih and Russian Energy Minister Alexander Novak (R) attend a session of the St. Petersburg International Economic Forum (SPIEF), Russia on June 7, 2019. (REUTERS/Maxim Shemetov)
Updated 09 June 2019

SPIEF DIARY: Unwrapping the enigma: 5 key takeaways from St. Petersburg forum

  • The Saudi-Russian relationship is strong enough to survive energy or geopolitical vagaries
  • Although the US was not officially there, its presence hung over the forum like a big black cloud

As I passed the Omsk Oblast stand for the last time, and waved farewell to the beautiful Siberian lady whose excellent English had gotten me through some of the trickier sections of the forum guide, I had time to reflect on three action-packed days in the Russian city of St. Petersburg.

The International Economic Forum (SPIEF19) had been a steep learning curve, not just in terms of my limited command of the Russian language, but also as a deep immersion in the geopolitics and economics of the country. I felt I had unwrapped some of the mystery and enigma that Sir Winston Churchill famously said surrounds Russia. Here are five riddle-free takeaways from the event.

1. The Saudi-Russian relationship is strong enough to survive energy or geopolitical vagaries. It all began well before the OPEC+ deal of two and a half years ago, and has widened beyond mere coincidence of interests in the global energy market. The 50 or so Saudi delegates to the joint commission on trade and economy taking place in Moscow on Sunday represent virtually all sectors of the Kingdom’s economy, right down to culture and wildlife. There was no mistaking the genuine warmth of the friendship between senior policymakers, even when they had honest differences of opinion on policy options, which was infrequent.

2. The Russia-China alliance is the really big strategic game-changer. The star of the forum, apart from Russian President Vladimir Putin of course, was his Chinese counterpart Xi Jinping. Delegates at the packed plenary hall for their joint address hung on the latter’s every word. It was striking to hear the presidents of what were once the world’s biggest communist powers extolling the virtues of free global markets and the need to repair its battered trading structure. Xi got a big laugh with his analogy for the World Trade Organization. “If you have fleas in your fur coat, you shouldn’t throw it in the oven,” he said in defense of multilateral trade.

3. Antipathy toward President Donald Trump’s America is tangible.

Although the US was not officially there, its presence hung over the forum like a big black cloud. One panel on global trade had a Russian minister accusing the Americans of weaponizing virtually every aspect of the global economy, from the shale oil business, to use of the dollar to exclude parties from world trade, to the use of sanctions against others. The prospect of big economic powers such as China, Russia and maybe even the Europeans developing their own currency for global trade in opposition to the domineering dollar was raised time and again. Uncle Sam has been warned. 

4. The Russians are as good as anybody at the global forum business. The SPIEF has been going in some form since 1997, but only really took off when Putin gave it his personal endorsement in 2005. It is a well-organized and productive event, with enough to keep the interest of a non-Russian generalist like me over three days. There was even a panel on “football in the city interiors,” with former England player Sol Campbell in attendance. Unfortunately for me, it coincided with the big global energy session with Saudi and Russian ministers, so I never got the chance to ask the former Tottenham Hotspur and Arsenal star any questions.

5. St. Petersburg has not shaken off its communist and imperial past, and nor should it. If anything, Peter the Great’s city appears to be rediscovering its historical heritage. Monuments to the World War II siege are ubiquitous. Statues to Vladimir Ilyich Ulyanov, aka Lenin, are prominent. 

Streets and districts are named after the Bolshevik leader. The city center is a glittering imperial hub that the Romanovs would have recognized and appreciated. 

Maybe another name change is on the distant horizon for the city that was the birthplace of the Russian president — Putingrad has certainly got a ring to it.


Frank Kane is an award-winning business journalist based in Dubai.
Twitter: @frankkanedubai



Lufthansa profit warning spooks European airline sector

Updated 41 min 3 sec ago

Lufthansa profit warning spooks European airline sector

  • Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called ‘attritional fare wars’

FRANKFURT: Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between €2 billion and €2.4 billion, down from the previously targeted €2.4 billion to €3 billion.
“Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning.
“The group expects the European market to remain challenging at least for the remainder of 2019,” it said.
It also pointed to high jet fuel costs, which it said could exceed last year’s figure by €550 million, despite a recent fall in crude oil prices.
Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called “attritional fare wars” and said four or five European airlines were likely to emerge as the winners in the sector.
“No signs that anyone is prepared to reduce capacity, therefore we would anticipate the wave of consolidation in European short haul is not over,” said analyst Neil Wilson, analyst at London-based broker market.com.
Earlier this month global airlines slashed a widely watched industry profit forecast by 21 percent as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
Lufthansa’s problems are centered on its European business, with a more positive outlook for its long-haul operations, especially on transatlantic and Asian routes.
Eurowings management is due to implement turnaround measures to be presented shortly, Lufthansa said, adding that efforts to reduce costs had so far been slower than expected.
Lufthansa’s adjusted margin for earnings before interest and tax (EBIT) was forecast between 5.5 percent and 6.5 percent, down from 6.5 percent to 8 percent previously, it said in a statement.
Lufthansa also said it would make a €340 million provision for in its first-half accounts, relating to a tax matter in Germany originating in the years between 2001 and 2005.