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Defterios: Style and substance of two leaders

By John Defterios, CNN
June 21, 2013 -- Updated 2123 GMT (0523 HKT)
  • Defterios: Sluggish growth projected by the World Bank to be less than 2.5% is forcing Putin to be bolder
  • He will tap the country's sovereign funds to build out road and rail networks
  • Putin also singled out his incoming central bank Governor, Elvira Nubiulliana

Editor's note: CNN's John Defterios is reporting from the St. Petersburg International Economic Forum. Watch his show, Global Exchange, Sunday to Thursday 1900 UAE and follow him on Twitter.

(CNN) -- The lavish architecture and endless culture which is St. Petersburg may be the creation of Tsar Peter the Great in the 18th Century, but the city is Vladimir Putin's hometown.

This is where he welcomes political and business leaders to the annual "Davos of Russia," filled with Putin's political and corporate leaders and the who's who of global business.

At Friday afternoon's plenary, the main event each year, the first few rows were filled with the leaders from GE, BP, Shell, Alcoa, Siemens and ENI mixed in with their Russian counterparts. This is the annual festival of Russian deal making, on the Neva River.

See also: Vladimir Putin fast facts

This year, President Putin invited German Chancellor Angela Merkel to share the stage. There was a 45 minute question and answer session following their speeches, which I chaired.

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The Russian President spelled out his economic blueprint for what many refer to as "Putin 2.0": his second stint as President. Sluggish growth projected by the World Bank to be less than 2.5% is forcing him to be bolder and be less dependent on oil prices which are softening.

He will tap the country's sovereign funds to build out road and rail networks. He is capping revenue increases and tariffs for the Russian state run monopolies at the rate of inflation.

Putin also singled out his new central bank Governor, Elvira Nubiulliana, who takes over the job Monday. The President has heard the complaints from Russian oligarchs that interest rates of 8.25% are too high and that he needs to create conditions to stem capital flight.

Chancellor Merkel, as can be expected, took a no nonsense approach in her formal remarks. She admitted trust was eroded in the eurozone and that a policy of growth and sound fiscal policies must be pursued no matter how painful.

Read: Angela Merkel fast facts

But it was the candor and body language during our interview session -- and the steely resolve of both leaders -- that captured the standing room only audience.

I asked President Putin if the so-called Geneva II talks could take place in a climate where Russia continues to sell arms to the al-Assad government and the U.S. has chosen to back rebels.

"If the United States and the State Department recognize that one of the key opposition organizations al-Nusra is a terrorist organization officially recognized as terrorist which is linked to al Qaeda, how can they give weapons to that part of the opposition?" he said.

Putin added: "We believe that our position is well founded ... we believe only the Syrian people themselves can guarantee a long-term solution."

The German Chancellor jumped in off the back of her Russian counterpart to say after tough and at times divisive discussions at the G8, in Northern Ireland, there was an opportunity now to end the suffering.

See also: So what did the G8 meetings accomplish?

Germany has been often been criticized for putting economic competitiveness above all else and for shying away from foreign policy. That was not case in our plenary.

I asked why she has made a move to block EU accession talks for Turkey, coming on the heels of intense protests in Istanbul and Ankara.

To which the Chancellor replied: "The values we share in Europe are essential, crucial to us and I think that what has happened in Turkey is disproportionate."

She added: "Next week there will be a discussion and I don't want to pre-empt the German position, but I have some degree of skepticism."

Merkel underlined this also has to do with the so-called Ankara protocol, which covers the negotiations and progress made by Turkey in this process. However, she added, "I was shocked to see how authorities dealt with demonstrators."

It was clear, despite having not seen eye-to-eye on many issues in the past, that the President and the Chancellor were eager to re-boot business relations whether it is natural gas going to Germany or high speed trains being sent to Russia.

Having been accused of raising his voice during talks with his European counterparts, President Putin at one point whispered a reply into the microphone to illustrate his willingness to cooperate.

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