ST. PETERSBURG: Russian President Vladimir Putin will host his fifth wartime economic conference in St. Petersburg, with his government struggling for a growth strategy as Ukrainian drone attacks hit the economy and businesses see no end to the war.
Russia’s US$3 trillion, commodity-dependent economy slowed sharply to about 1% last year from 4.9% in 2024, and shrank by 0.2% in the first quarter of 2026, which officials blamed on high interest rates, Western sanctions and a strong rouble.
Growth is now forecast at a modest 0.4% this year.
Ukrainian drone attacks deep inside Russia on refineries, fertiliser plants and ports have knocked out a significant part of the economy, affecting one quarter of refining capacity, and creating the risk of fuel shortages in the driving season.
Putin, who wants the economy to start growing again, told his officials to find ways to resume growth.
Businesses said the best way to achieve that would be to end the war in Ukraine.
“Rallies and enthusiasm in the Russian stock market following every piece of positive news from US-mediated peace talks for Ukraine indicate what their real answer should be,” a senior corporate executive, who requested anonymity, told Reuters.
The Kremlin said peace talks, which started with great pomp in February last year, were on hold for now, with the United States preoccupied by the war in the Middle East.
Billions of dollars in potential US investments in the Russian economy, as well as some easing of Western sanctions discussed at the talks, are also on hold, sowing pessimism in business circles.
Several prominent members of the Russian elite have attempted to warn Putin about the economic consequences of the war in the past, while Kirill Dmitriev, Russia’s point man in contacts with President Donald Trump’s administration, has been touting the potential economic benefits of a peace deal.
But a senior Russian banker, who also declined to be identified, told Reuters that Putin had already lost a good opportunity last year to strike a deal, and that the economy is now showing signs of instability.
Growth is the main theme at the St. Petersburg International Economic Forum, which runs from tomorrow through Saturday.
Delegates are likely to discuss strategies including the redistribution of labour to faster-growing sectors and the promotion of artificial intelligence-powered digital platforms in eCommerce and banking.
Officials also hope that consumer demand will grow.
Oleg Vyugin, former deputy chairman of the central bank, said that with the key interest rate in double digits, tax increases to fund the war and declining investment, growth will be hard to achieve. — Reuters
