Following are excerpts from a CNBC interview with Kirill Dmitriev, CEO of the Russian Direct Investment Fund, and CNBC's Geoff Cutmore and Steve Sedgwick.
GC: Let's move on, VTB Bank Chairman, Andrey Kostin, has told CNBC Russia shouldn't expect a new direction from the US regarding sanctions over the next two years, Kostin added, quote, 'No one likes American sanctions.' Unfortunately, they are currently a reality on the regime, and December, we saw the EU extend its current set of sanctions. Kirill Dmitriev joins us, the CEO of the Russian Direct Investment Fund. Kirill, good morning, nice to see you. Just to-,
KD: Thanks for having me.
GC: Let's just-, let's tick the box on this one. Were you disappointed that the EU took that decision in December, to extend the sanctions? Because there was a little bit of hope, I felt, in Moscow, that maybe that wouldn't happen.
KD: Well, first of all, Russia really adjusted to sanctions, so, you know, economy is growing at 2%, oil prices are stable, so, frankly, it's, you know, way of doing business now, and people are used to it. We invested more with our partners last year than in any other year, and continue working a lot with Asia, with the Middle East. Of course we believe sanctions are wrong, and particularly US sanctions, because they really undermine US long-term. Basically, we see lots of people moving away from dollar, because lots of dollar transactions are getting restricted, and I think, US, by focusing so much on short-term pressure, and short-term, you know, competitive pressure, on Russian gas, and other things, it is really undermining its own long-term fundamentals, you know, things that held the world together, such as dollar, fair trade practices, and fairness.
GC: I hear what you're saying, but the reality is that Russia has had a relatively weak recovery from the global financial crisis, it may do 1.8% in 2019, I think that's the IMF forecast, pencilled in-,
KD: Mm-hm.
GC: But for an economy with its potential, it could be doing so much better, and so, just setting aside the issues for the United States, for Russia, it does remain a drag on growth, and Ms Nabiullina, the Central Bank Governor, has now started lifting interest rates, rather than cutting them, because of structural inflation returning, around this-, this-, this problem of sanctions.
KD: Yeah, but the real solution for Russia is to become more efficient in many industries, the President is undertaking a number of national projects, to improve our infrastructure, our healthcare, to diversify our economies. You know, we have partnerships with 20 top sovereign wealth funds, we were able to generate teen returns on dollars every year for the last seven years, and they are actively investing with us. So, we'll continue to attract major investment from Asia, from Middle East, you know, US businesses, 30 new US companies opened operations in Russia last year, and actually, Coca Cola and Pepsi cola, McDonalds, all of these, they're just quietly present in the Russian market, taking advantage. So, yes, sanctions do matter, but investment flows are happening, and we had a great meeting with Prime Minister Abe yesterday, from Japan. Japan is investing quite a bit with us, the Russia-Japan Fund.
SS: In Britain, we have Brexit, in France, we have Gilets jaunes, in Italy, you have this chaotic government, in America, you have Trump. In Russia-,
KD: Stability!
SS: Even-,
KD: [Laughs].
SS: Well-, well, let me just go for you. The latest Public Opinion Foundation Survey, FOM, said 54% of respondents indicated that Russian actions in the past month leave them feeling dissatisfied and resentful. Is Russia, in 2019, going to exhibit the same-, the same population concerns that we've seen all over the western world, with actually not rising living standards? Because we know the contract from the government is about security, and it's about the economy.
KD: Yeah. Well, actually, you know, we meet in Davos every year, we have solutions for the world, and you would expect the world to get better every year-,
SS: Yeah.
KD: But it gets to a sense of turmoil, I think it's really-, last year is the year of turmoil in the US and Europe. Russia is quite stable, and, yes, of course, there were some people who would like to see better growth, but they also rally behind President Putin, and, by the way, there was a Pew poll of the world, and they asked, 'Who would you vote for President of the World, if you had the chance?' and Pew is an American company, the two finalists were President Xi and President Putin. So, President Putin has some serious messages to the world, he cannot be ignored, I think Russian people support him strongly, so yes, there are some issues on the growth of economy, on transformations that need to happen, but Russia remains very stable.
SS: But whilst I appreciate your comments about Russian autarky, i.e. it's found substitutions from American money, and American flows, as well, I-, I-, I appreciate that, and that-, that seems obvious. The fact of the matter is, Russia hasn't given, perhaps liberal reformers, those looking for structural reforms in the economy, perhaps as much latitude as we thought they were gonna get, when I went to SPIEF first, you know, ten years ago.
KD: No, it's definitely true, but sanctions are actually hurting the liberal agenda in Russia.
SS: Mm.
KD: US sanctions, European sanctions, are making more conservative people in Russia stronger, and basically say, 'Why would we even want to attract foreign investment? Let's be separate.' So, frankly, sanctions are hindering the liberal agenda in Russia, and that's another example how they're really not well thought through. They don't achieve any positive result, but they have lots of negative externalities.
GC: Just-, just while we cover off this-, this particular issue, it's quite possible that we might get the results of the Mueller investigation, over the next five to six weeks, it's been a long time in the coming. Is there any nervousness, in Russian business communities, about what the Mueller investigation may lead to?
KD: Not really. I think, you now, it's really clear that there was no collusion, and there is lots of media speculation, and, again, we see the negative externality of this, that anybody who tries to bring Russia and US closer together is viewed negatively. And that's really crazy. We want to support people who are trying to bring Russia and US closer together, President Putin, President Trump, agreed to have a business council between Russia and the US. It needs to start working, it needs to start having positive agenda, because every day we have major animosity between Russia and the US, we are moving to major geopolitical problems, crazy problems, and business needs to work together to solve them, and media, frankly, needs to start supporting reconciliation between Russia and the US.
GC: Kirill, we're going to talk some more, no doubt, over coming days, about some of the other projects you're announcing while you're here, so thank you very much for joining us-,
KD: Thank you so much.
GC: For the time being. Kirill Dmitriev, the CEO of the Russian Direct Investment Fund.
ENDS