Russian President Vladimir Putin was in a good mood as he took to the podium at the annual VTB “Russia Calling!” investment conference, one of Russia’s flagship conferences run by the country’s second biggest bank.

In pre-war days the Russia Calling! event would attract fund managers from around the world who came to meet Russia’s banking and finance elite. Putin always gave the keynote speech, but also entertain a Q&A session from the floor, with the occasional uncomfortable question. Typically billions of dollars of assets under management were present amongst the audience, many of whom had earned fortunes from investing into Russia.

Since the war the international investment community has stayed away. Unlike Russia Calling!’s sister event, the St Petersburg International Economic Forum (SPIEF), there is less political pressure to attend and the audience was made up of delegates from the Global South and other members of the Eurasian Economic Union (EEU).

And Putin had a lot to crow about. After almost two years of war in Ukraine and extreme sanctions by the West, Russia’s economy is doing surprisingly well and the international coalition against Russia appears to be crumbling. Ukraine fatigue has set in after Kyiv’s much vaunted counter-offensive failed, as have most of the sanctions. As bne IntelliNews reported the oil sanctions are a spent cannon and not a single barrel of Russian oil has been sold below the $60 price cap, according to the Financial Times. Likewise the technology sanctions have also failed, as too many friendly countries have been willing to act as a middle man and send banned technology on to Moscow.

Moreover, as bne IntelliNews reported, the ongoing attempts to tighten sanctions are increasingly bouncing back due to the boomerang effect. Nearly all of the EU’s economies are slipping into recession, while Russia’s economy is expected to grow by at least 2.2% this year or more, ironically making it one of the fastest growing countries in Europe.

On the political front, rather than isolating Russia, it turns out that the “international community” is largely made up of the G7+ countries in Northern America and Europe. Most of the Global South have chosen to sit on the fence or actively co-operate with Russia in return for discounted raw materials and energy. The West appears to have overestimated its hold over the world’s smaller, poorer economies.

Robust economy

As is traditional, Putin started his speech reeling off Russia’s latest macroeconomic successes. GDP has grown by 5% year on year in October and by 3.2% in January-October. The economy is already bigger than it was before the war started, Putin said.

"So, over the ten months of this year, Russia’s gross domestic product grew by 3.2%. Today it is already higher than it was before the Western sanctions attack," the President noted.

He went on to say he expects growth to be at least 3.5% by the end of the year, well ahead of the official forecasts and those of the other international financial institutions (IFIs). The good economic news seems to have surprised everyone, leading Prime Minister Mikhail Mishustin to say in September that the worst is over.

"It is expected that by the end of this year, in any case – we all really count on it – GDP will increase by at least 3.5%. You would agree – all the people here are competent – these are good indicators for the Russian economy. Russia is the largest economy in Europe and in terms of growth rates it is now ahead of all the leading countries of the European Union," he boasted.

And that economic good news is being felt on the streets as real wages in Russian are up 7% y/y, and real disposable income (the money in people’s pockets) rose by 4.4%, Putin crowed. That is a big change, as for most of the last decade real incomes have been flat or falling. The military Keynesianism bump that the economy got from the Kremlin’s heavy spending on defence has had a very real and positive effect on people’s lives.

Sanctions don’t work

The sanctions that the West cobbled together failed to destroy the Russian economy, and some industries have even produced more than at the beginning of 2022, Prime Minister Mikhail Mishustin said at the same event.

“The sanctions that the collective West has cobbled together did not lead to the destruction of our economy they expected. Of course, we had some serious troubles, and we suffered from them mainly in the second quarter of 2022. But we have been recovering consistently since then. The level of the beginning of the previous year has been exceeded by many industries. We have weathered the bulk of the challenges,” he said.

Even Russia’s opponents have started saying openly that the anti-Russian sanctions are not working, Putin said, but he went on to warn that the world has entered a new and difficult period.

"The world has entered an era of fundamental changes and serious challenges. This concerns not only individual companies and industries, but also entire world countries and regions," the head of state said. According to him, "only a strong, stable and sovereign country can successfully navigate this stage and become one of the growth centres of the new global economy."

Putin launched into a tirade against the West, whom he accused of breaking up global commerce and undoing globalisation, things that his attack on Ukraine caused and the extreme sanctions regime it brought down on Russia. The West has come down to abolishing the very principles of the market economy, Putin complained.

"The Western elites came down to cancelling the very principles of the market economy they are fond of talking about in attempts to preserve their vanishing advantage," the Russian leader said. "Everybody should be in equal conditions, everybody should be placed in such equal conditions, and borders should be opened! Borders should not be closed in any case! How is that?! This contradicts ideas of global development. As soon as competitors appeared – bang! They started closing their borders immediately, at their fingertips, at a moment. That’s all; these are all the principles.”

The upshot is global economic relations are changing; “the previous model of globalisation is being replaced by a multipolar model,” Putin said returning to one of his favourite tropes.

"The entire global system of economic relations is now going through fundamental and irreversible changes due to the fact that the previous model of globalisation is being replaced by a multipolar model," he said.

As bne IntelliNews opined, the multipolar world is here, but not in the form that Putin imagined. His is a vision of countries being left alone to govern their people as they see fit, without the interference or criticism of others, but enjoying flourishing mutual trade and investment. What the combined Russo-China aggression has actually produced is a fractured world fraught with military tensions and distorted trade routes that has pushed up inflation and slowed growth everywhere.

Nevertheless, Russia's new multipolar approach has paid it some dividends as its trade with non-aligned countries and the other BRICS countries flourishes. Russia's trade turnover with China passed the targeted $200bn a year early in November, offsetting a large part of its reduced trade with Europe.

Putin said: "Thank God, our relations with China have been extremely effective. We set the task of reaching a $200bn trade next [year] or in the coming years. I think nobody has doubts that we will hit $200bn as early as this year."

According to the latest trade statistics, exports from China to Russia have increased by 50.2% in eleven months, to reach approximately $100.33bn. Imports of goods and services from Russia has increased by 11.8%, up to $117.84bn. Together this would take the mutual trade over the $200bn target already.

Putin went on to say that relations with Beijing are deepening as they move away from the traditional trade and increasingly invest in each other's countries and co-operate more closely.

"As for China, we are ready to co-operate in all areas, we have no restrictions. This applies, by the way, to military technologies as well," Putin said.

Russia’s expanding in Middle East

The West has attempted to isolate Russia, but observers have been surprised how reluctant the countries from the global south have been to join the sanctions regime and indeed how willingly some of them have been to embrace Moscow, as highlighted by the half dozen UN votes to condemn Russia’s invasion of Ukraine show.

To underscore Russia's expanding international relations Putin had just returned from a visit to the Middle East where he held talks with the leaders of the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA).

And on the day of the conference Iranian President Ebrahim Raisi arrived in Moscow on an official visit to continue talks on deepening co-operation. Iran has become one of Russia's key allies in the Middle East. The Kremlin announced that, during talks in Moscow, Putin and Raisi would discuss trade and economic co-operation, including in the transport and energy sectors. The two leaders will also exchange opinions on key international and regional issues, the Kremlin added.

Raisi said that the implementation of the North-South transport corridor project will be one of the major topics for discussion during bilateral talks with President Putin in Moscow, the IRNA news agency reported.

"Both countries are striving to implement the North-South corridor project, and one of the topics of negotiations is accelerating its construction," he said in remarks at Tehran’s Mehrabad airport before departing for Russia.

The president of the Islamic Republic of Iran noted that Russo-Iranian cooperation "still has room for development" in addition to the two countries’ partnership within the Eurasian Economic Union (EEU), Shanghai Co-operation Organisation (SCO) and BRICS. The last time Putin and Raisi met was in September 2022 in Samarkand, Uzbekistan, on the sidelines of the SCO summit.

On the agenda for their talks is the development of a multimodal North-South transport corridor signed by Russia, India and Iran in 2000. Since then another eleven countries have signed up to the scheme.

The goal of the project is to direct trade flows of Europe-bound cargo traffic originating in India, Iran and the Persian Gulf states through Russian territory to markets in Europe. This corridor will supplant another trade corridor that runs from India, via KSA and Israel to Europe that was agreed at the G20 summit in August. However, following the outbreak of war in Israel it seems that the project has died the death only a month after being conceived.

Compared to the maritime route through the Suez Canal, the North-South corridor cuts the overall distance by more than half, thus reducing the time and cost of transportation. Currently, the project combines several different transport systems of various participating countries.

The relations between Moscow and Riyadh have also been rapidly developing and deepening at the same pace as relations between Riyadh and Washington sour.

During Putin’s meeting with Crown Prince Mohammed bin Salman (MbS) a day earlier, Russia and Saudi Arabia agreed to expand co-operation within the OPEC+ oil cartel as well as other projects. Russia has just agreed to help build a fertiliser plant in KSA.

"The two sides agreed on the importance of expanding co-operation in the following areas: oil and gas, such as procurement, supply and standardisation of equipment in the field of oil and gas, research and development services in the field of oil, gas and petrochemicals, assessment of the use of modern technologies in this field between companies of the two countries," a joint Russo-Saudi statement said issued following the meeting.

Like China, Russia and Saudi Arabia also agreed to expand their co-operation in technology, including in the peaceful uses of nuclear energy, electricity and renewable energy sources, which the joint statement said is at the heart of their new relationship. After KSA joined the BRICS+ this August, those countries now control about 80% of the world's oil reserves.

"Of course, they talked about cooperation within OPEC+. The parties show an interest. The parties agree that our countries shoulder an enormous responsibility for co-operation so as to support the international energy market at a proper level and in a stable and predictable condition. This co-operation will be continued," presidential spokesman Dmitry Peskov said in comments to journalists at the Russia Calling! event.

Multipolar world

These relationships are quickly moving beyond mere trade deals as both Russia and China are trying to institutionalise the clubs that unite the global south countries.

A key feature of Russia's new foreign policy concept is the development of the EEU and reorientation of Russia's trade from west to east. But already a new direction has been introduced as Russia works on improving its ties with the south and in the Middle East, adding to the already good relations with many African countries, which Russian Foreign Minister Sergei Lavrov has been touring vigorously in the last year.

The chief of Russia’s foreign intelligence service, or SVR, believes the Arab world will take centre stage in the struggle for a new world order next year in an article published a day before Russia Calling! started.

Sergey Naryshkin believes that in the Arab countries "the globalist elites’ ambitions to play the role of a global hegemon, which they imagined for themselves after the collapse of the Soviet Union, are being shattered."

"The multipolar world is already a reality that the globalists will be unable to “cancel”," says Naryshkin. "What seemed nearly impossible yesterday: the normalisation of relations between Saudi Arabia and Iran, their entry, along with Egypt and the United Arab Emirates, into the BRICS group, and Syria's return to the “Arab family,” are now facts of life. Russia welcomes in every possible way and will continue to contribute to the success of these processes to the best of its ability," Naryshkin wrote, in what is likely a co-ordinated message.