St Petersburg, Russia: The European Union needs to engage with Russia despite the painful sanctions exchanged over the past two years, a top EU official said Thursday during a rare visit that included talks with President Vladimir Putin and raised hopes for a thaw in ties.
Jean-Claude Juncker, the president of the EU's executive Commission, is the highest ranking EU official to visit Russia since the country annexed Ukraine's Crimean peninsula in March 2014, triggering sanctions from the U.S. and EU. Moscow retaliated by banning imports of meat, vegetable and dairy products from the EU, a blow to many of the bloc's members.
After a two-year break that felt more like a boycott, the leaders of some European states and chief executives of top multinational companies are back at Russia's top economic gathering in a sign of weariness about sanctions. The CEOs of American companies attended against the direct recommendation of the U.S. government.
In his address to the forum, Juncker lashed out at his critics in Europe who argued that his visit to Russia could signal that the EU was ready to compromise on sanctions while Russia is still not willing to help advance the peace process in Ukraine.
"I take the view that we must talk with Russia, the leadership, its people: for some it must be a radical idea; for me it's common sense," he said, drawing applause.
Russia's takeover of Crimea in March 2014 and its support for separatist rebels in eastern Ukraine landed President Vladimir Putin in international isolation and cost Russia its seat at the Group of Eight leading industrialized nations.
Juncker said the relationship between Russia and the EU is "not broken beyond repair. We need to mend it and I believe we can."
However, he made a point of confirming the EU's stance that it does not accept Russia's annexation of Crimea because it has "shaken the very principles of European security" and still views the Minsk peace accords for Ukraine as the only conditions for the sanctions to be lifted.
"Russia is party to the Minsk agreement," he said. "The next step is clear: the full implementation of the agreement, no more, not less. This is the only way to lift the economic sanctions."
Russian Foreign Minister Sergey Lavrov turned the tables on the West, saying that the U.S. and EU should encourage Ukraine to comply with the Minsk deal by speaking to the rebel regions on holding elections in the region. He argued that the West has encouraged Ukraine's non-compliance to the deal by making lifting the sanctions contingent on implementing the agreement.
Once a showcase of Russia's geopolitical weight and economic attractiveness, the St. Petersburg Economic Forum - dubbed Russia's Davos - was a sore sight the past two years. European leaders and heads of the major companies who once had lucrative long-term projects in Russia were nowhere to be seen.
This year's gathering, however, signals what could be an emerging movement within the EU to ease the economic sanctions. The measures didn't only affect the Russian economy by closing long-term EU lending to Russian companies but also triggered a Russian import ban on meat, vegetable and dairy products from the European Union, dealing a heavy blow on agriculture-dependent nations such as Greece.
Chief executives of major European companies who are either engaged in long-term projects in Russia or whose projects were affected by the sanctions are also coming this year, including the CEOs of oil company ExxonMobil, the chairman of the board of Nestle S.A. and others.
Moscow has been keen to spin the attendance as a sign that European politicians have failed to convince businesses to break ties with Russia.
U.S. authorities, in their turn, have dismissed the participation of ExxonMobil, a pillar of the American economy, as an exception.
"We've been very clear on our engagements with U.S. companies that we believe that are clear risks, both economic and reputational, associated with top-level engagement with a government that is flouting the most fundamental principles of international rule of law by intervening military in a neighboring country," U.S. State Department spokesman John Kirby said on Wednesday. Those companies that are not going to St. Petersburg recognize, Kirby said, that "attending this forum sends a poor message out there about the acceptability of Russia's actions."
The fact that the chief executives of top American companies have in a sense defied their government shows that they put their business interests before any political considerations, analysts say.
"Two years ago, there was political pressure on companies not to attend (the forum), not to come to Russia and show interest," said Charles Robertson, global chief economist at Renaissance Capital. "I think that's changed. The one thing that is really important that has changed is that the economy has stopped its freefall."
As the price of oil, the backbone of the Russian economy, rallied in the past few months, inflation has slowed down and the forecast for the economy this year has improved to a drop of only 0.5 percent.
"Those companies are not prepared to sacrifice their ten, 20, 30-year projects for political problems of one to two years," Robertson said.
