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Victoria Panova

PhD in History, Vice Rector, HSE University, RIAC Member

Russia’s year-long presidency of the G20 ends on December 1, 2013, when it is succeeded by Australia, and the main event showcasing the work done by Russia, is around the corner: September 5-6 in St. Petersburg. While interactions within the G20 “club” never stop and continue virtually without a break, it is the summits that make it possible to assess the status of the G20 as the world’s key administrator of monetary, financial and economic processes.

Russia’s year-long presidency of the G20 ends on December 1, 2013, when it is succeeded by Australia, and the main event showcasing the work done by Russia, is around the corner: September 5-6 in St. Petersburg. While interactions within the G20 “club” never stop and continue virtually without a break, it is the summits that make it possible to assess the status of the G20 as the world’s key administrator of monetary, financial and economic processes.

Under a tradition borrowed from yet another such club, the G8, the agenda is built around three priority subjects, which will serve as the basis for discussion. The rationale behind limiting them like this is clear: it is predicated on the need to achieve specific outcomes, as discussing a little of everything makes practical decisions unlikely. However, although the three topics rule is formally adhered to, in reality debates can still become too wide-ranging in their subject matter. Sometimes priority topics expand to their very limits, or there is no limit to secondary topics. Consequently, summit decisions rarely lead to any breakthroughs. The whole process is further complicated by the fact that their decisions, which are merely political, are not always implemented.

Russian Priorities

The agenda Russia proposed focuses on the issues of investment for economic growth and employment, building trust in the global economy, and ensuring its transparency and effective regulation. Due to the breadth of the proposed issues Russia defined a subgroup of 8 narrower areas. And while, this time, the topics may be radically different from those Russia advanced in 2006 at the G8 summit, Moscow continues to promote some of the initiatives that failed to be properly reflected or developed in the past decade. The topics as proposed are still relevant to international cooperation and improved global stability and also to helping Russia manage its economy in a more efficient way.

This year, the G20 is focusing on new sources of long-term economic growth.

This year, the G20 is focusing on new sources of long-term economic growth. Russia is not the only country that is struggling (its 2013 growth outlook has been downgraded again, this time to 1.8 percent, and from 1.7 to 1.4 percent in the January-June 2013 forecast, many other countries are as well. The United States remains the best-performing developed country, with Europe showing negative growth, while Japan’s economy had already been in stagnation for some time when this latest global financial crisis started. China, today’s flagship economy, shows signs of slowing down, and should the growth rate stay below 7 percent, the country could face serious social upheavals.

Another important topic centers on new sources of long-term investment funding. Here the discussion is spearheaded toward the role of government, in particular public-private partnerships (PPP), foreign direct investment (FDI) and reforming the financial regulators.

The G20 invariably touches on reforms to international financial institutions, and this year is no exception. It is a well-publicized fact that the G20 summit in Seoul in November 2010 approved plans to reform the IMF governance system and quotas. However, it remains largely just a talking point, as nothing has happened at the national level either in Europe or in the United States. It is rather unlikely that this issue will be resolved during Russia’s presidency, given in particular the situation inside the United States.

What was new under the Russian presidency, was the fact that, for the first time, a joint meeting of the Ministers of Finance and Labour of the G20 countries was held – its goal being to facilitate efficient decision-making.

A significant emphasis has placed on employment issues. Unemployment levels remain high across OECD countries – with 48 million people unemployed in 2013 (OECD Employment Outlook 2013 ), i.e. 16 million more than in 2008. In southern Europe, unemployment is as high as 25 percent and even higher among young people (OECD Employment Outlook 2013). Although in Russia and other emerging and transition economies, unemployment is lower (5.5 percent in Russia), these states face the problem of underemployment and the employment of vulnerable groups of the population in the informal sector of the economy. This is not a new issue for the G20, which has had a Working Group on Jobs and Employment since 2011. What was new under the Russian presidency, was the fact that, for the first time, a joint meeting of the Ministers of Finance and Labour of the G20 countries was held – its goal being to facilitate efficient decision-making and help overcome inter-ministerial rivalry in identifying the most appropriate and acceptable approaches to this problem. No breakthroughs were made at this joint ministerial meeting, but good working outcomes of the meeting suggest that the Russian presidency has, at least, built a solid foundation in this area. However, for Russia, its own domestic policies to reduce social expenditure (on healthcare, education) gradually, in GDP terms, is more important, especially as it seems to contradict stated plans to create 25 million “highly productive” jobs by 2020.

Another issue that Russia has been advancing, with a good chance to get it on the summit agenda this year, is the credibility and transparency of the global financial system, and in particular, the proposed steps towards institutionalization of the Financial Stability Board.

From early on in its presidency, Russia insisted that it was important not so much to make new decisions as to implement those made earlier. Back in 2012, in Los Cabos, Mexico, the G20 Development Working Group was asked to look into accountability and implementation. Having made previous decisions its priority, by August 28, on the eve of the summit, Russia presented the Accountability Report. Russia has consistently been promoting the need for a plan of action or “road map” for the G20 development agenda, but some of its partners in the group are not ready to embrace such a radical move, and prefer merely to agree principles for such a road map. The Russian chairman has been working hard to raise awareness and stimulate the presentation of independent reports on the implementation of commitments made by non-governmental groups and institutions. The mere fact that this goal has been reached could, in itself, be good evidence that the current presidency has been successful.

A Group of 20 or a Group with 20 Members?

Photo: Constantine Palace
Infographics


Bilateral relations between any of the group’s members do not amount to the Group 20 in its entirety.

There have been a lot of lively debates in the expert and policy-making communities lately about the implications of President Obama’s decision not to visit Russia earlier for bilateral negotiations with Vladimir Putin, after Russia granted former NSA intelligence contractor Edward Snowden the status of a year’s asylum. Will the new spiral of tensions between the two countries affect the outcome of the G20 or result in the summit’s failure? It is important to remember, in this context, that bilateral relations between any of the group’s members do not amount to the Group 20 in its entirety.

Russian-U.S. relations have been unsteady for some time, and considerable efforts made by government authorities in both countries have, at times, stumbled upon accidental and not so accidental developments or moves by other actors in their respective countries. It is another issue, however, whether this coolness may affect the outcomes of the G20. First, the significance of multilateral talks on a wide range of issues outweighs the relevance of immediate bilateral problems: apart from Russia and the U.S., the G20 includes another 18 members that are keen to making good progress in the negotiation process. Secondly, as history shows, clubs usually survive squabbles among leaders or countries, and often this only has a limited impact on what they achieve. One could recall the behavior of George Bush Jr. at the G8 summit in Evian, France, in 2003, following the split among the G-8 countries over invading Iraq. For internal political reasons, Vladimir Putin did not attend the 2012 G8 summit in Washington; the Americans later reciprocated and President Obama did not attend the APEC summit in Vladivostok. Nevertheless, the outcome of the multilateral event does not depend on immediate bilateral relations, as it is relevant to all “club” members and is prepared long in advance, away from any disputes involving certain members.

Even though, officially, potential strikes on Syria cannot be listed on the G20’s agenda, a military operation on the eve of the high-level meeting could considerably chill the atmosphere at the summit, particularly since this issue has long ceased to be limited to bilateral tensions, and now affects more than just two G20 members.

G20 or G8?

Photo: G20, G8, BRICS development
momentum and interests of Russia,
Report №2 / 2012

It has often been said that the role of the G8 is waning. Indeed, everything seems to point to this being the case. When, in 2010, Canada hosted summits of both groups in swift succession, the G8 summit, which previously caused a great deal resentment and became a target for anti-globalization activists and others, this time was very low-profile – more than can be said about the G20 which, as a pretender to global governance, had to take on most of the attacks.

True, the G7/G8’s death-knell has often been sounded in the group’s 38-year history, but every time the G7/G8 emerges from the crisis and adapts to the changing reality. In the 1980s, the group embraced new security issues and identified commonalities in its members’ approach to that area. With the end of the Cold War, the G7’s flexibility was ascertained with the invitation extended to (former foe) Russia to join the club. In the late 1990s, its demise was predicted due to the establishment of the G20 forum, then at the level of finance ministers and national bank governors from systemically developed economies. Subsequently raised to the level of countries’ leaders, it is currently believed to be competing with the group that preceded it.

Immediately after the establishment of the G20 at summit level, experts and policy-makers busily tried to draw lines in the terms of reference of the two “clubs,” – following the most recent G8 summit at the Lough Erne resort, it is clear that not only has the G8 retained the issues of defence and political security, which fall outside the remit of the G20, it has also found a niche of its own in the area of monetary and economic development and the eradication of poverty.

In view of the distinct worsening of relations between Russia and the U.S., and uneasy relations with Europe, it may appear there is a risk of weakening in the G8 (even seeing it shrink it back to G7). However, all those who may be eager (for whatever reason) to kick Russia out of the group, may do well to remember the considerable interdependence between Russia and Europe in trade and economic links, human contact and cultural cooperation, as well as the positive, albeit small, advances in Russia’s relations with Japan. Because, despite the temporary hitch following Premier Medvedev’s visit to the Kuril Island, Japan is trying to improve relations with Russia, in particular after its major falling out with China. Finally, it would do well to remember that, despite short-term difficulties in its relations with the Euro-Atlantic community and its positioning of itself as a Eurasian power, Russia has not withdrawn from the European family, as is graphically suggested by the fact that its accession to the OECD, which has re-emerged as a priority after almost a decade of neglect, is now expected in 2014. Finally, it is also worth remembering that there are similar problems outside Russia, with Japan trying to hold meetings with South Korea or China on the sidelines of the G20 summits.

Parallel Membership

Following the most recent G8 summit at the Lough Erne resort, it is clear that not only has the G8 retained the issues of defence and political security, which fall outside the remit of the G20, it has also found a niche of its own in the area of monetary and economic development and the eradication of poverty.

The topics announced and Russia’s approach to the presidency (promoting multi-faceted collaboration in 2013 between the G20 and a variety of strata and groups of international and national community including civil society, business, and young people) have already given grounds for a moderately positive assessment of Russia’s efforts. There are unlikely to be any sensations or structurally significant decisions (such as delivering reforms to international financial institutions, or banning protectionism, etc.) but at the same time, Russia can be proud of deepening and enhancing working processes that aim to strengthen the global economic system and engage the broadest possible circle of state and non-state players in cooperation.

This story is far from over. Russia enjoys a unique position as it is a concurrent member in all three existing clubs (the G8, G20 and BRICS) and will preside in 2014 and 2015 over the G8 and BRICS, respectively.

Russia’s membership of all three groups gives Moscow added leverage to influence the discussions and work to exclude any decisions unacceptable to Russia in any of these different formats. However, speculating about Russia being a link between the BRICS and the G8, as well as a conduit of the BRICS’ interests in the G20 is extremely counterproductive. Being a member of three clubs gives a member more restrictions than possibilities, since any attempt to influence openly one of the clubs while leveraging another, or to position itself as a conduit of one group’s interests, will only alienate the other members.

To benefit fully from the strategic advantages of Russia’s comprehensive presence, Russia should avoid speaking on anybody else’s behalf in these groups; instead it should emphasize its lack of bias and clearly outline what its aims are in each club. Should the topics happen to overlap, fully or in part, Russia would be wise, in particular in the framework of its current and future presidencies, to stress continuity and coherence in approaching the topics, rather than trying to broker this or other solution.

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Poll conducted

  1. In your opinion, what are the US long-term goals for Russia?
    U.S. wants to establish partnership relations with Russia on condition that it meets the U.S. requirements  
     33 (31%)
    U.S. wants to deter Russia’s military and political activity  
     30 (28%)
    U.S. wants to dissolve Russia  
     24 (22%)
    U.S. wants to establish alliance relations with Russia under the US conditions to rival China  
     21 (19%)
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