Bloomberg News

Russia Seeks U.S. Ties, Won’t Skip ‘Reset,’ Shuvalov Says

October 04, 2011

(Updates with quotes from fund chief Kirill Dmitriev from eighth paragraph.)

Oct. 4 (Bloomberg) -- Russian First Deputy Prime Minister Igor Shuvalov said his country seeks stronger ties with the U.S. and won’t forget the “reset” in relations between Moscow and Washington.

Shuvalov, in a speech today in Chicago, said that the U.S. and European economic slowdown is challenging his country, while the major issue it faces is a dependence on commodity exports.

“We will not forget about reset,” Shuvalov said in a question-and-answer session after the speech. “We need to provide a deeper relationship and strengthen it.”

Shuvalov said he delivered that message from Prime Minister Vladimir Putin to U.S. Vice President Joe Biden in a meeting yesterday in Washington, eight days after a Russian economic leadership shakeup. Biden in February 2009 announced plans to “reset” relations with Russia after several years of occasionally strained ties.

“The slowdown in the economy which is so evident in both the United States and Europe is challenging the abilities of Russia,” Shuvalov told the annual U.S.-Russia Business Council meeting in Chicago. “The biggest problem we face is our dependence on international markets and most of all commodities exports.”

President Dmitry Medvedev dismissed Finance Minister Alexei Kudrin on Sept. 26 after Kudrin publicly criticized 2.1 trillion rubles ($64 billion) in additional defense spending through 2014. Anton Siluanov, Kudrin’s deputy for overseeing inter- budgetary relations, was named acting finance minister. Shuvalov is set to take over the responsibilities Kudrin had as the deputy prime minister in charge of the economy.

Putin’s Plans

Putin, 58, announced on Sept. 24 that he plans to return to the Kremlin next May by swapping jobs with his successor, Medvedev, potentially giving him another 12 years in power. The Russian leader, a former officer in the KGB, has called the 1991 collapse of the Soviet Union the greatest geopolitical tragedy of the 20th century.

Kirill Dmitriev, head of the Russian private-equity unit being set up by Medvedev, said the switch with Putin “will provide stability and an opportunity for further growth,” according to what he has heard from investors.

“The stronger business ties we have with the U.S., the better the business climate in Russia will be. It’s a relationship based on interdependence and mutual ties,” Dmitriev, chief executive officer of the Russian Direct Investment Fund, said in a telephone interview today.

‘Lasting Stagnation’

Russian manufacturers face “lasting stagnation” as external demand weakens, HSBC Holdings Plc said yesterday, while Goldman Sachs Group Inc. cut its global growth forecasts and predicted recessions in Germany and France. The Standard & Poor’s GSCI Index of 24 commodities sank to a 10-month low.

“Another global financial crisis is not inevitable, but cannot be ruled out,” Shuvalov said today. “Today, Russia is much better equipped to deal with crisis than in 2008.”

He said he expects a growth rate of about 4 percent this year or “maybe better.” The International Monetary Fund said Sept. 27 it expects gross domestic product to increase 4.3 percent in 2011.

Russian stocks retreated the most in more than a week on concern that a worsening European debt crisis will hurt manufacturers and erode demand for commodities, the country’s chief export.

Rosneft

OAO Rosneft, the country’s biggest oil producer, and OAO Sberbank, the largest lender, sank more than 4 percent. OAO Raspadskaya tumbled the most in two months after Kommersant reported the Russian coal producer may miss its output target. The 30-stock Micex Index retreated 4.4 percent to 1,286.1 at 4:47 p.m. in Moscow, the biggest decline since Sept. 23 on a closing basis. The dollar-denominated RTS sank 4.2 percent to 1,237.29.

Shuvalov said today that Russia is “closer” to the goal of joining the World Trade Organization.

“We unfortunately have a few minor things, which don’t relate to our operation with the Americans, but it involved a third party. I don’t want to discuss it publicly,” Shuvalov said in the question-and-answer session.

--Editors: Kevin Costelloe, Alan Crosby

To contact the reporter on this story: Blair Euteneuer in Chicago at beuteneuer@bloomberg.net

To contact the editor responsible for this story: Kevin Costelloe at kcostelloe@bloomberg.net


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