Russia: Between economic growth and the Ukraine challenge

Editor's note: Nikola Mikovic, a special commentator on current affairs for CGTN, is a freelance journalist in Serbia. He covers mostly Russian, Ukrainian and Belarusian foreign policy issues and writes for multiple web magazines. The article reflects the author's opinions, and not necessarily those of CGTN.

The sanctions that the Western powers have imposed on Russia over Moscow's actions in Ukraine do not seem to be working. The Russian economy has found new markets in the East and the Global South, although that does not mean that the Kremlin aims to completely break economic ties with the West.

Despite pressure from their governments, most Western companies operating in Russia have decided not to leave the Russian market. It is an open secret that some EU members continue to indirectly purchase Russian energy. Moscow, therefore, is developing its economy, although its major focus now is cooperation with friendly countries.

The ongoing conflict in Ukraine has forced the Kremlin to pivot towards Asia, and also the rest of the non-Western world. According to Russian President Vladimir Putin, three-quarters of all Russia's trade is linked to "friendly countries." It is, therefore, no surprise that the major guests at this year's St. Petersburg International Economic Forum were not Western leaders.

Founded in 1997, the forum is an important international economic event in Russia. It has been successfully held for years with the support of Russian presidents, and is often described as Russia's equivalent to the World Economic Forum in Davos.

During the plenary session on June 7, Putin mostly talked about the economy. However, prior to the event, and also during the debate with other participants, he discussed the situation in Ukraine, as well as other geopolitical issues. He also spoke with journalists from countries that the Kremlin sees as "unfriendly." Such a gesture suggests that Russia still wants its voice to be heard in the West. The Kremlin's move looks like a unilateral "goodwill gesture" that policymakers in the West could interpret as a sign of weakness.

Developing cooperation with China, India, Brazil, South Africa, as well as other non-Western actors, seems to be the Kremlin's priority, at least in the field of economy.

"BRICS is working on the formation of an independent payment system that is not subject to political pressure, abuse and external bailout intervention," Putin said on Friday, pointing out that BRICS also has great potential for the accession of new members.

Before the start of the plenary session, the organizers of the forum presented a short video about Russia's role in the formation of a new world order, in which BRICS, in the Kremlin's view, should be one of the major actors. But the West is unlikely to easily give up on its political, economic, and cultural domination in the world.

The conflict in Ukraine was also an issue of heated discussions at the forum. The longer it lasts, the higher the risk of a nuclear escalation. Putin, however, said that the use of nuclear weapons by Russia is possible "only in exceptional cases." His rhetoric shows that the Kremlin is not particularly willing to use tactical nuclear weapons in response to Western actions over Ukraine.

In the coming weeks and months, Putin will have a hard time preserving the current Russian approach regarding Ukraine. The challenges are likely to be high.

What seems to encourage the Russian leader is the country's economic growth and a fairly low unemployment rate. According to Putin, Russia has become the world's fourth largest economy in terms of purchasing power parity, overtaking Japan and Germany.

But although Russia might be winning the economic battle against the West, the conflict in Ukraine is far from over. And that, rather than the economy, could be the Kremlin's major headache.

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