The annual St Petersburg International Economic Forum, once a showcase for Russia’s ambitions, has been overshadowed by drone attacks on the city and growing evidence that Western sanctions are hitting the everyday lives of ordinary Russians.
At least two drones struck targets in the historic centre of St Petersburg in the early hours of Thursday, forcing the evacuation of hotels and venues hosting delegates. While the Kremlin blamed Ukraine, the symbolism was inescapable: the very city Putin calls home is no longer safe from the conflict.
Meanwhile, delegates inside the forum’s main hall heard a very different message. Finance Minister Anton Siluanov insisted the economy was “adapting successfully” to sanctions, pointing to a rebound in manufacturing and increased trade with China. But the mood on the streets was more sombre. Prices for basic goods, from bread to cooking oil, have risen sharply, and the rouble has lost nearly a third of its value against the dollar this year.
The UK’s latest round of sanctions, announced this week, targets Russia’s energy exports and restricts trade in machinery, electronics, and chemicals used by its military. But the impact is also being felt in household budgets. “I used to buy cheese from Europe. Now it’s either Russian or nothing, and it costs twice as much,” said Maria, a 47-year-old teacher in Moscow, who asked that her full name not be used.
Union leaders, meanwhile, have reported a surge in complaints about unpaid wages and unsafe working conditions. “The war has masked a crisis in the real economy,” said Andrei Isaev, a former trade union official now living in exile. “Factories are running at half capacity because they can’t get spare parts. Workers are being laid off, but they dare not protest.”
Putin, in his keynote speech, tried to strike a confident tone. He announced tax breaks for businesses that invest in “import substitution” and boasted that Russia had become “the world’s largest wheat exporter”. But he also acknowledged the pain, promising to “raise pensions and benefits for families with children”.
The forum, once a magnet for Western investors, is now dominated by delegations from China, India, and the Gulf states. But even they are wary. “The sanctions are a problem for everyone,” one Indian executive told Reuters on condition of anonymity. “We want to do business, but we don’t want to be cut off from the dollar system.”
At a panel on the labour market, economists warned that Russia faces a severe shortage of skilled workers as hundreds of thousands of men have fled the country to avoid conscription. “The brain drain is worse than in the 1990s,” said Natalia Zubarevich, a professor at Moscow State University. “We’re losing engineers, IT specialists, doctors. It will take a generation to recover.”
For the worker on the factory floor, the cost of living crisis is the immediate pain. In the industrial city of Nizhny Novgorod, the local council has reported a rise in the number of families seeking free school meals. “We’re seeing people who have jobs but still can’t afford the basics,” said a social worker. “It’s a new poverty.”
The drone attacks on St Petersburg, and the empty hotel rooms around the forum, are a reminder that the war is not as distant as the Kremlin would like. Putin’s economic resilience narrative is looking increasingly threadbare. The real economy, the one that provides wages and pays the bills, is feeling the pinch.
