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6 Jun, 2009 08:45

St. Petersburg World Economic Forum, Day 2

Delegates from more than 70 countries have been gathering in St. Petersburg for a major economic forum to help define the world's post-crisis financial architecture.

Established in 1997, the annual conference is dubbed the Russian Davos, after the annual financial event held in the Swiss ski resort.

Today’s main event of the forum was the address of Russia’s Minister of Finance and First Deputy Prime Minister Aleksey Kudrin on the future of the post-crisis world’s financial architecture.

Russia's Finance Minister has called for the International Monetary Fund to be reformed and for other world financial institutions to adapt to the changing economic situation.

For a number of years, the Kremlin has been saying that the existing financial system is prone to crisis because it is distorted in favor of the US and its partners, therefore it needs to be more balanced and transparent, as well as serving the interests of all the major players.

“We must seriously and boldly raise the issue of turning the IMF into a proper representative of key world economies, and power should be distributed in proportion to the size and importance of those national economies. There is no such thing at the moment. For now, the US is represented by 15% of votes, and China’s participation is less than that of some of the EU members, such as Switzerland or Belgium,” Kudrin said.

Another interesting discussion on the future of reserve currencies tops the agenda as well. The topic of new reserve currencies is a favorite of Moscow’s. President Dmitry Medvedev mentioned it in his speech on Friday, saying that the world needs more reserve currencies to diminish the dominance of the US Dollar. Medvedev said the risks of making the world dependent on the microeconomic situation of just one country are obvious.

The Russian President also noted that Russia would like to see the Russian Ruble as a regional reserve currency for the post-Soviet space, and Moscow has already come out with the strategy of how to achieve that.

Russian officials are talking about pricing Russia’s prime export commodities – such as oil, gas and grain – in Russian Rubles, thus forcing buying partners to stock the Russian currency.

On Saturday another event – The World Grain Forum – is opening in St. Petersburg. This is the first time that this event is being held in Russia, and is it has been timed to coincide with the St. Petersburg Economic Forum. This reflects the growing importance of grain as a Russian export commodity.

Russia has repeatedly voiced its intentions to diversify its economy away from oil and gas to different commodities, and grain is certainly one of them.

Currently, Russia ranks as the world’s fourth largest grain exporter.

This year, Russia has actually broken its own record of selling abroad: about 20 million metric tons of grain to over 50 countries, most of which are represented at St. Petersburg Economic Forum.

Plans of creating a grain cartel similar to OPEC – which would regulate grain prices, maintain quality and set export policies – are going to be discussed in St. Petersburg too.

Russia has ambitions to climb to second position in the world’s largest grain exporter ratings after the US, thus taking over Canada and the EU, and many experts believe there is every reason to believe this is possible.

Meanwhile, as the world’s largest country, Russia still lags behind, due to its outdated agricultural infrastructure, preventing the country from producing much more grain than it potentially could.