Putin warns protectionism risks global economic crisis

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Saint Petersburg (AFP)

Russian President Vladimir Putin warned Friday that the world could be heading for an unprecedented economic crisis due to the confrontational trade policy and protectionism being pursued by the United States.

Without directly naming US President Donald Trump, who has slapped on tariffs and pulled out of trade deals, Putin lamented that a new era of protectionism was emerging and "breaking" the free trade system responsible for global prosperity.

"Today we need not trade wars or even trade truces, but trade peace," Putin told an economic summit in Saint Petersburg, also attended by Japan's Prime Minister Shinzo Abe and French President Emmanuel Macron.

Global trade rules "should be clear and the same for all".

But "breaking the rules is becoming the rule," Putin said in another apparent jab at Trump, who has abandoned a Pacific free trade deal and forced a renegotiation of the US pact with Canada and Mexico.

The Kremlin leader said that a combination of sanctions, trade barriers and a lack of trust was hugely dangerous and "could lead to a systemic crisis the likes of which the world has not seen before."

Putin also appeared to take a poke at the United States justifying tariffs on steel, aluminium and cars using national security concerns.

- New type of protectionism -

"Today we are talking about a new type of protectionism, about the use of clear pretexts of protecting national security. For what? To pressure competitors or wringing out concessions," said Putin.

"This could knock the world economy far back to the epoch of subsistence farming," he added.

IMF chief Christine Lagarde, who spoke at the forum, also warned of the "determination of some to rock the system that has presided over trade relationships".

She said it would be a "great mistake to resort to protectionism and unilateralism."

Putin has a clear interest in currying the support of other nations burned by US trade barriers, or its renewed sanctions on Iran that apply to companies worldwide, as it needs additional foreign investment and access to markets.

Europe and Russia have criticised the US withdrawal from the Iran deal, which Tehran has respected, and the European Union has indicated it will seek to protect its firms with investments in Iran from the US sanctions.

Trump justified abandoning the deal by saying his predecessor Barack Obama negotiated a bad deal, but Putin said this raises problems for international cooperation.

"Every four years the US holds presidential elections ... if every four years they revisit documents they sign what kind of planning horizon will we have -- none," Putin said.

However Putin expressed hope a new agreement could be reached.

"The US president is not closing the door on negotiations," Putin said. "I think that all is not yet lost."

Much of Putin's criticism of sanctions concerns those applied by Europe and the United States from 2014 over Moscow's annexation of Crimea and support for separatists in eastern Ukraine.

Those sanctions, combined with a plunge in the price of oil, strangled growth in Russia.

While the Russian economy has recovered along with oil prices, growth remains tepid.

- Billions needed -

Putin, who was re-elected in March, has put the development of the economy at the heart of his fourth term in office, and wants to catapult the nation into the fifth-largest economy spot, from its current position in 12th place.

To accomplish that tens of billions of dollars in investment will be needed, sums Russia will not be able to muster without foreign firms and investors.

Despite the strained international situation, the Saint Petersburg forum has still attracted top dignitaries and more than 1,400 foreign companies from 70 countries.

Even if most US multinationals have stayed away, others showed their commitment to a nation of more than 140 million people into which foreign firms have poured billions in investment since the collapse of the Soviet Union in 1991.

Macron, who led a major business delegation, called on French firms to step up investment in Russia.

"We can do much better," he said at an earlier meeting with Russian and French businesses.

Despite Russian gas exports to Europe still being a sensitive issue, French oil company Total on Thursday signed a $2.5 billion deal to take a stake in a second liquefied natural gas project in the Russian Arctic.