Davos 2018: Great “Bazaar” of the Globalizers?

by Elisabeth Hellenbroich

The impression, which this year’s Davos WEF summit left behind, was that of a gigantic “bazaar” where most of the 3000 attendants, among them entrepreneurs as well as political and economic leaders, were competing with each other about the question, which economy is the best performing in the world. The motto chosen for the Congress was: “Sharing a common future in a fractured world.”

Many leaders, among them some European head of states – like French President Emanuel Macron, German Chancellor Angela Merkel, British Prime Minister Teresa May and Italian Prime Minister Paolo Gentiloni – were unanimously presenting the line that the future is based on “multilateral cooperation” rather than on protectionist models. They demanded a common European effort in order to complete the 4rth industrial revolution, the digitalization transformation, initiating more research on Artificial Intelligence, Cyber Security, more education and engaging more in climate control.

Other leaders like Prime Minister Narendra Modi from India as well as Liu He, the key economic advisor of Chinese President Xi Jinping, were loudly calling for the need to eradicate poverty, to develop the middle class and invest more in education and the anti- pollution fight. This should be done in the defense of the “Common Good” and a “shared future of all mankind”. Many statements were along the line of Schumpeter’s “creative destruction” through new technologies (“innovations”, 1911) and in the speeches today of many political leaders the phrase “disruptive developments” in the global economy and labor markets were often used. This left the question unanswered, namely what the effect of such “future disruptive developments” will be and how to combat these occurrences. The speech which was given by US President Trump as well as various statements such as one made by former defense Secretary Ashton Carter, were less restrained and less “soft spoken”. The American President Trump devoted most of his 15 minute speech to the subject how “great America” has become under his term, praising himself as the man who has successfully brought more people of the US society into jobs and under whose reign the Stock markets are booming. He addressed himself essentially to the entrepreneurs inviting them to come and invest in the US.

What was striking was that substantial “geopolitical” questions were left out of the debate.

There was one panel discussion with former US Defense Secretary Ashton Carter on “Cyber Security” in which Ashton Carter declared that there is a necessity for the US to “write a new playbook” so as to answer the “behind the scenes operations” of Russia, as he put it. He called upon the NATO countries to develop a “plan for common military actions against Russia.” “I am of the opinion that Russia for the first time since 25 years, since the fall of the Berlin wall, has become our military adversary,” Ashton Carter stated. “Therefore we must together with our colleagues from NATO work out a plan for military actions against Russia.” In reference to the recently published new US “Defense Strategy”, Ashton Carter underlined that the main priority for the US is competing with big “revisionist” powers such as Russia and China.

This self-righteous attitude goes in line with the fact that at the WEF in Davos Russia -a country that culturally, geographically and economically is part of Europe and a key player in the Mideast- was hardly a topic during the different panels, except one panel which was directly dedicated to “Russia”. Instead there was a lot of “Russia bashing”, as the one expressed by three leaders from Eastern Europe: Lithuanian President Dalia Grybauskaitė, Ukrainian President Poroschenko and Polish President Duda. All three were united in their adamant rejection of the new Energy project “North Stream II pipeline”- arguing that with such a project they would be made dependent on Russian oil and gas, as well as warning of an “aggressive Russia”. Their incantation about a “United Europe” and “European Energy Security” was motivated by the desire to keep Russia out of Europe.

US unilateral sanctions against Russia

There was however one interesting panel at Davos “Outlook for Russia.” People participating at the panel were the CEO from the Russian Steel company Severstal Alexey Mordashov, Russian Deputy Prime Minister Dvorkovich, the chairman of the Russian State owned development Bank (Vneshnecombank) Sergei Gorkov, Emma Marcegaglia the chief executive chairwoman of the Italian oil and gas company ENI, as well as Frederick Kempe from the Washington based US Policy Think Tank “Atlantic Council.” The Italian ENI chairwoman Marcegaglia was the only one who had the guts to openly criticize the new US unilateral economic sanctions against Russia while the other Russian representatives tried to give a sober and self- assured assessment concerning the evolving economic situation in Russia.

According to Deputy PM Dvorkovich, Russia this year is doing economically much better; inflation and interest rates have been brought down while a few sectors are picking up like agriculture, particularly the grain sector, as well as manufacturing and the service sector. He added that wages have increased and new opportunities are opening for small and medium size companies. Mordashov underlined that 70% of the Russian population is using Internet as a tool for development and that Russia should do more to embrace new technologies. The chairman of the Russian development Bank Sergei Gorkov emphasized that Russia is the main leader in the world concerning the “blockchain” technology (not to be confused with the hype around bitcoin and the other artificial monies).

What struck during the panel was the statement given by Emma Marcecaglia as chief executive from ENI, the 11th largest multinational oil and gas company in the world with a 90 Billion $ turnover, operating in 83 countries with 84 000 employees. Marcecaglia praised the relation between her company ENI and Russia and reported that the company is present in Russia since 1950. “We import 20 Billion cubic meter of gas and we have strong relations with Gazprom and Rosneft.” Contacts between ENI and Russia were characterized as “bold and large.” Yet, at the same time she complained about the effects of the sanctions that were imposed on a company like ENI as result of the unilateral US sanctions (declared by US congress in August 2017). She reported that ENI was for example involved in the Black Sea for an offshore project led by Gazprom and Rosneft. As result of the latest sanctions, ENI however was obliged to stop this drilling project. “Sanctions create a situation of uncertainty and in business nobody likes the sanctions since they affect very much business,” Marcecaglia said. This is all the more important since Italy was the number 1 partner of EU for Russia and one should look at that in the context that “Russia after all supplies 40% of the gas and oil for Europe.”

During the discussion with the audience one question was raised by Lukjanov from the Russian magazine “Russia in Global Affairs” who wanted to know how long the panelists thought the sanctions will continue. Marcecaglia qualified Russia as an important player in the Mideast (in terms of the geopolitics of the Mideast as well as OPEC) .That as a business company they would like to have a better situation, “the Italian government and companies always stay close to Russia. We stick to it, even though trade is down with some countries.”

Deputy PM Dvorkovich underlined that President Putin wants to improve the economic situation of Russia who’s GDP has slightly grown in 2017. He spoke about many talents in Russia and announced that the government will take steps after elections in March which will unleash those talents. During the discussion the moderator made reference to the fact that by January 29^th reports will be presented in US Congress concerning the Kremlin’s meddling in the US elections; he spoke about a list that will be presented with names from business people and that between 40- 400 may be sanctioned. In reference to this the Chairman of the Washington based think tank “Atlantic Council” Frederick Kempe pointed to what he qualified as “toxic” relations between the US and Russia. He emphasized that until the situation changes in Ukraine, i.e. until the Minsk agreement is fully complied with by Russia, relations between the US and Russia will remain “toxic”. Marcecaglia in turn underlined that “unilateral sanctions” from the US are aimed at hitting the Energy sector both in Russia and Europe, while the Russian Deputy PM Dvorkovich commented that the sanctions imposed by the US have the aim to “compete” with Europe in the field of energy. This corresponds to the line given in early summer by many European CEO’S from Austria, Germany et al who made clear that the aim of these new sanctions is to hit foremost European energy interests.

In respect to the US Congress report that accuses Russia for having meddled into the US election campaign, the chairman of the “Atlantic Council” expressed a certain sophistry concerning this operation. He stated that in the US Intelligence and Congress there is the ‘consensus’ that Russia did meddle into the US elections and he underlined that this was ‘factual’. He told the Russian panelists, that Russia behind the scenes should admit to the US Intelligence Community their involvement and thus deescalate the situation. Deputy PM Dvorkovich responded very calmly by stating “that the whole issue of Russia meddling in US elections was invented.” He stated that the sanctions were not the most important thing in the world and that Russia wanted dialogue. He also noted the peculiar experience which the Russian delegation had in Davos, namely that US representatives were “hiding” from having dialogue with the Russians.

Pope Francis warns not to sacrifice human dignity

A true counterpoint to the many self-referential boasting talks at the conference was given in an address that was sent by Pope Francis to the organizers of the conference. In it the Pope warned that “to our dismay we see technical and economic questions dominating political debate, to the detriment of genuine concern for human beings (…) Men and women risk being reduced to mere cogs in a machine that treats them as items of consumption to be exploited.” He strongly urged that “we cannot remain silent in the face of the suffering of millions of people whose dignity is wounded, nor can we move forward as if the spread of poverty and injustice has no cause. It is a moral imperative, a responsibility that involves everyone, to create the right conditions to allow each person to live in a dignified manner.”