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How the G-7 looks from Russia

ST. PETERSBURG, Russia — Heads turned here in St. Petersburg, Russia, when they heard President Donald Trump’s call for Russia to be let back into the G-7.

Responding to the president, the Kremlin, which was suspended from the group formerly known as the G-8 in 2014, said it’s focused on “other formats.” But beyond the cool reception, the Kremlin and many Russians would be delighted to be welcomed back into the G-7 club.

President Vladimir Putin just returned from Austria this week, a rare sojourn into a Europe that has been largely unwelcoming of the Russian president since he annexed Crimea. As European leaders seek to engage Russia on issues like Syria and Iran, Putin has also received the leaders of Germany and France in the last month. In this way, Putin, to a certain extent, has re-emerged as a political player. Perhaps recognizing he’s gaining traction, Putin called for the sanctions that have been imposed against Russia by Europe and the United States to be dropped. Aside from Italy’s brand new Prime Minister Giuseppe Conte, who joined Trump in calling for Russia to be invited back into the G7 and who says Italy will work to ease the sanctions against Russia, Putin’s call for the sanctions to be dropped got little traction.

I came to St. Petersburg this week to interview the head of Russia’s central bank and a number of business leaders at the Bank of Russia’s annual International Financial Congress. One member of my panel, Andrey Kostin, the head of VTB, Russia’s second largest bank, has been personally sanctioned. Alexander Dyukov, the CEO of Gazprom Neft, one of the country’s largest oil companies, saw the company sanctioned in 2014. Both denounced the sanctions and told me their businesses will prosper despite them. But make no mistake – no business leader likes being all but cut off from the international financial system.

The sanctions have not collapsed Russia’s economy, though they were felt particularly in 2014, when they were first imposed amid oil prices and Crimea’s annexation. Still, while the economy grew just 1.5 percent last year, the global economy grew more than twice as quickly, at a heady 3.7 percent. Sanctions and Russia’s isolation are part of the reason for that. The lack of long-awaited structural reforms are a bigger reason. When you’re barely crawling, a sprained ankle isn’t much of a problem. That changes when you start running. If Russia’s economy were to approach Vladimir Putin’s target of 4 percent growth — requiring larger investment — sanctions would start to get in the way.

I was in St. Petersburg when Russia hosted its only G-8 Summit, in 2006. It was a triumphant moment for Putin. Putin is a native of St. Petersburg, and he made the most of the moment, hosting his seven counterparts in the Konstantinovsky Palace, an imperial masterpiece first envisioned by Peter the Great, the city’s founder himself.

Russia was supposed to host the G-8 again in 2014, but after its annexation of Crimea, and subsequent suspension from the group, the other seven countries met among themselves in Germany.

Russia’s “window to the West” has been all but boarded up and not just because of the sanctions. After the U.S. closed Russia’s consulate in Seattle, Russia closed the American Consulate here. In order for the residents of St. Petersburg to apply for American travel visas, they have to go to Moscow. The process can be daunting and, as a result, many Russians choose not to even try.

Russia’s isolation is taking other forms. A Russian man I flew with from London to St. Petersburg told me he was stopped at customs and questioned for half an hour. “Where did you make your money?” British officials wanted to know. The man, who had come to choose a private school for his son, said the whole process was humiliating. London is a home to so many Russians. Now many (especially, wealthy) Russians are afraid to either go or to invest their money there for fear of ending up in legal jeopardy. The Times of London has reported Russian billionaires are among 130 individuals whose assets are under investigation by Britain’s National Crime Agency and subject to seizure.

That agency has begun using what it calls unexplained wealth orders (UWOs) to compel its owners to explain the origin of the money they used to buy anything worth more than £50,000. The crackdown, which had already begun, accelerated after the UK accused Russia of attempting to murder the former Russian double agent Sergei Skripal and his daughter Yulia Skripal. The travel visa that allowed Roman Abramovich — one of Russia’s richest men– to live in the UK was not extended.

For many, “Londongrad” was a business home away from home, a useful second “window” for many Russians, who wanted to do business with the West. Perhaps not for much longer.

Most Russians see Trump’s call as an attempt to better position himself in his own G-7 battle over trade and tariffs. Some of his critics have called the summit “the G-6+1,” a nod to Trump’s at the moment adversarial position. (Note: the G-8 was frequently referred to as the G-7+1 — the outsider being Russia). As for the sanctions, the head of Russia’s central bank, Elvira Nabiullina, said she is working under the assumption that they won’t be lifted anytime soon. And many Russians believe their country’s isolation will only deepen. Trump’s desire to improve relations with Russia is not shared by America’s allies.

The one glimmer of hope, here, is that Putin’s request for Vienna to host a Russian-American summit is being considered.