Putin’s Vladivostok Forum Underwhelming and Alarming

Executive Summary:

• Russian President Vladimir Putin on September 5 attended the Eastern Economic Forum in Vladivostok following the Shanghai Cooperation Organization summit and military parade in the People’s Republic of China (PRC). He discussed the war against Ukraine and Russia’s economic situation.
• The Kremlin likely intended for the forum to highlight Russia’s efforts to project independence from the PRC, though low attendance from Asian partners and overambitious export goals revealed limits to Moscow’s regional economic strategy.
• Russian officials struggle to frame stagnating economic realities while Putin insists on growth, even as deficits soar, oil and gas revenues decline, and Ukraine’s drone strikes exacerbate industrial disruptions.

The Eastern Economic Forum in Vladivostok took place on September 3–6, immediately after the Shanghai Cooperation Organization summit in the People’s Republic of China (PRC) on August 31–September 1 and the military parade in Beijing on September 3. One reason for this choice of date may have been to save travel time for Russian President Vladimir Putin, who already visited the Far East on the way to the Alaska summit with U.S. President Donald Trump on August 15. More important, perhaps, was an intention to demonstrate that Russia’s dependency on the PRC is not as strong as it appears and that Russia has domestic sources of growth (Carnegie Politika, September 5). In this regard, the absence of PRC officials and business leaders at the Vladivostok summit was not an issue. The lack of representation from India and Southeast Asia, with the prime minister of Laos as the single exception, however, certainly was (The Moscow Times, September 5). As usual, the organizers of the forum reported that Russia had great success in signing commercial contracts, but it appears that the officially set goal for increasing the industrial export to Asia by two-thirds may be too high (RBC; Kommersant, September 5).

Russian officials find it increasingly difficult to formulate agreeable assessments of the economic situation. German Gref, the head of Sberbank and Putin’s long-time associate, suggested the term “technical stagnation” to describe Russia’s economic situation (Meduza, September 4). These linguistic innovations did not appear to impress Putin, who insisted that despite a “soft, calm landing,” the economy continued to grow (Novaya Gazeta Europe, September 5). Elvira Nabiullina, the chief of the Russian Central Bank, refrained from contradicting Putin directly. She presented four scenarios of possible developments, with the most basic one outlining very slow growth and the key interest rate fixed at 19 percent for this year and gradual cuts in 2026–2027 (Izvestiya, September 5). Entrepreneurs not directly involved with the military-industrial complex do not need this, but when asked about the allocation of the necessary cuts in budget expenditures, none dared to suggest a reduction of the costs of war (RBC, September 5). The federal budget is indeed overstressed, with the deficit exceeding the high mark of 2024 by as much as 4.5 times, but Putin merely suggested increasing the income without raising taxes in response (The Insider, September 3).

One of the ideal ways to fulfill Putin’s instruction is to increase revenue from oil and gas exports. It is precisely in the energy sector, however, that global market problems lead to a severe decline in profits for Russian corporations, influencing their production cut decisions (Forbes.ru, September 3). These problems likely cannot be ameliorated by the long-cherished plan for increasing the export of natural gas to the PRC by constructing the Power of Siberia 2 pipeline via Mongolia, on which another memorandum on intent was signed during Putin’s visit to the PRC (The Moscow Times, September 2; RIAC, September 5). The margin of profit in the fast-decarbonizing PRC market is much lower than in Europe, now nearly completely lost for Gazprom, which is certain to face big problems with financing the mega-project on establishing a new energy “corridor” (The Bell, September 4). The Ukrainian drone strikes on major refineries in the European part of Russia add to the disruptions in the industry, and the intensity of these attacks has reached a new high in the last few weeks (The Moscow Times, September 4).

Putin could not avoid promoting the theme of making war and peace in Ukraine during the summit in Vladivostok (Kommersant, September 5). If Russian economists are at least trying to hint at the scale of accumulating problems, Russian generals are apparently feeding the Commander-in-Chief heroic tales, so Putin’s understanding of the course of combat operations likely departs even further from reality than his denial of economic stagnation (Business Online, August 24; Riddle, September 5). The perception of steady progress toward an elusive victory probably drives Putin’s resolute rejection of all ceasefire proposals. At the same time, he appears to continue to play a delicate game of keeping Trump both disappointed and not angry (Nezavisimaya Gazeta, September 4). His aides, such as Anton Kobyakov, emphasize the importance of normalizing relations with the United States, while asserting that Europe is a big loser in the ongoing geopolitical transformation (RIA-Novosti, September 6). Putin appears to be trying to reassure Trump that the Alaska summit was not a fiasco, but the military parade in Beijing, extolled by Russian jingoist bloggers, certainly did not help in that endeavor (Carnegie Politika, September 4; TopWar.ru, September 6).

On the same day that Putin, in the company of North Korean dictator Kim Jong Un, observed that parade supervised by General Secretary of the Chinese Communist Party Xi Jinping, European leaders held a meeting in Paris, attended by Ukrainian President Volodymyr Zelenskyy, to discuss security guarantees to Ukraine (Radio Svoboda, September 4). Russian pundits disparage the maturing resolve of the “coalition of the willing” to build a grouping of forces for underpinning these guarantees, and Putin likely sought to add another blow to these efforts (Izvestiya, September 5). His assertion that any foreign troops on Ukrainian territory would be “legitimate targets” for Russian strikes might appear an empty threat because the Europeans are planning the deployment only after an armistice is agreed (BFM.ru, September 5). Putin’s real point is that all troops from North Atlantic Treaty Organization (NATO) member-states in Ukraine would be targeted when Russia inevitably decides to break the ceasefire (Nezavisimaya Gazeta, September 4). The intention appears to be to discourage the U.S. administration from making any meaningful contribution to the wavering European coalition, while Putin seemingly awaits another phone call from Trump (Republic.ru, September 4).

The outcomes of wars of attrition are typically decided by the capacity to mobilize material resources. The Kremlin appears to believe, however, that impressions matter more than real capabilities and the depth of public support. Putin likely knows that his courtiers deliver only doctored data, and his only sincere remark at the Vladivostok forum was that nobody could be trusted, but he probably does not care to get the true picture (Holod.media, September 5). He is probably most concerned that Xi is well informed about Russia’s economic degradation. The escalation of drone and missile strikes on Kyiv and other Ukrainian cities is likely supposed to balance this suspected impression and reinforce the message that Russia’s stability can only be ensured by a victory (RBC-Ukraine, September 7). Xi, Trump, and even the European leaders could agree that Russia’s defeat is a high-risk scenario, but granting it a victory is a distinctly dangerous proposition.