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Standoff over Ukraine overshadows St. Petersburg Economic Forum

Just in time for the International Economic Forum in St. Petersburg, Russia and China have signed a huge gas supply deal. But the good news for the Kremlin is not enough to stamp out the negative mood among investors.

Executives in a bind

Saint Petersburg is hosting an International Economic Forum dubbed "Russia's Davos" this week, with the 18th edition of the gathering running from Thursday through Saturday in President Vladimir Putin's home town.

Usually a showcase for Russia's raw materials-based economy, this year's meeting is taking place in an environment of a political stand-off between the Kremlin and the West over Ukraine.

Some 150 international firms and 450 leading Russian companies have announced their attendance at the gathering, but many top executives from the nations supportive of the current sanctions against Russia are staying away. The number of foreign participants has dropped by 40 percent compared with last year.

Threats from Washington?

From Germany for instance, only some 20 out of the 33 top managers originally scheduled have traveled to St. Petersburg, according to the DPA news agency. Newspaper reports indicated the United States administration has been exerting massive pressure on would-be participants not to show up at the meeting, a claim that was brushed aside Thursday by the head of German Industry's Committee on Eastern European Economic Relations, Eckhard Cordes.

He said he was not aware of any US interference, adding that only the chief executive of utility company E.ON, Johannes Theyssen, had decided not to participate.

Russian President Vladimir Putin said in a message to participants that he wanted to improve ties with other nations, but emphasized that Russia must be treated as an equal partner.

"Russia is ready to broaden multi-faceted contacts with all partners on the basis of true equality and respect for one another's interests," Putin said in a telegram.

Friday will see a keynote speech by the president in which he's expected to tout the mega gas supply deal reached with China on Wednesday. He's also expected to emphasize why in his view sanctions against Russia make no sense, and why his country cannot really be isolated.

Investors remain wary of the state of Russia's economy. Gross domestic product (GDP) is forecast to expand by a meager 0.5 percent this year, and may shrink in 2015, as massive capital outflows continue to weigh on the economy.

Despite the rather dim prospects, Russia is putting on a show of confidence in St. Petersburg, spending some $29 million (21 million euros) on the event.

hg/nz (dpa, Reuters)

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