St Petersburg: Russian Davos

Russia's strategic interests, the profit margins of its flagship companies and the personal wealth of oligarchs loyal to the Kremlin are like blocks in a game of Tetris; they are all connectable in some way. All three will be represented at this weekend's St Petersburg Economic Forum, which Russia has billed as a homegrown version of the Davos summit.

The conference is becoming increasingly prestigious. Last year it attracted nearly 5,000 participants; this weekend, conference organisers are expecting 8,000. It is not just oligarch's entourages swelling the numbers; conference organisers expressly limit personal assistants to one per participant. 

Moscow will use the St. Petersburg summit to highlight its economic and industrial clout in former Soviet territories. The Commonwealth of Independent States (CIS) heads-of-state 'informal summit' has been relegated to a mere sideshow at the event, which reveals Russia's present might. Back in 1991, Moscow needed the CIS as a means of maintaining political and military engagement in the constituent republics of the collapsing Soviet Union.  Nonetheless, the attendance of the Belarusian, Ukrainian, Moldovan, Kazakh, Tajik, Turkmen, Kyrgyz, Armenian, Azeri and Georgian presidents underscores the forum's importance within what Russia terms its 'near abroad'. 

All eyes on Medvedev

Russian President Dmitry Medvedev will use the event to hold his first meetings with Ukrainian President Viktor Yushchenko and Georgian President Mikheil Saakashvili, the two post-Soviet leaders whose rising profiles have proven most challenging for the Kremlin. 

The Forum provides Medvedev with a high-visibility venue for his first address to international investors.  In keeping with the rhetoric of his presidential campaign, Medvedev's speech will contain platitude and promise: he will talk of Russian industrial resurgence and plans to liberalise markets and promote foreign investment.

Medvedev's audience will look for clues of substantive policy shifts.  There are indications Medvedev's Russia could become a more agreeable destination for foreign investment. Last week, Deputy Prime Minister and Finance Minister Aleksei Kudrin suggested decreasing the number of economic sectors -- currently 42 -- covered by Russia's law on strategic industries.

Progress on TNK-BP?

However, investors remain concerned by Kremlin pressure on UK oil supermajor BP in its dispute with the Russian shareholders of the TNK-BP joint venture. 

The chairmen of TNK-BP, Gazprom and Rosneft are slated to attend and address the St. Petersburg summit, and discussions on the joint venture are expected to take place on the forum's margins. Last week, BP raised the stakes in the dispute by announcing it would seek -- if the TNK-BP board unexpectedly manages to convene -- to slash 2007 dividends by nearly 50%. 

This puts the Kremlin under pressure. It is hardly a neutral observer, but it does value BP's contributions to research, development, exploration and exploitation of Russian hydrocarbons.  Forcing BP into submission could have a negative effect on the willingness of Western firms to invest in Russia's dynamic economy, and any moves to resolve the TNK-BP dispute this weekend will be welcomed by foreign investors.