G20 Brisbane 2014: Global Pragmatism or Regional Tantrums?

The Group of Twenty summit will take place on 15-16 November 2014 in Brisbane, Australia. So far 2014 could not be called the most successful or easiest in terms of international relations. The Ukraine crisis, the marked reduction in economic activity and the geopolitical disagreements between the main players in global politics – these factors are making it difficult to build contacts and strengthen links between countries and organisations. The economy has become a hostage to political decisions. Will the G20 member countries manage to make a sober assessment of the economic prospects? We asked three experts to comment on the situation: Ivan Timofeev, Mark Rakhmangulov and Victoria Panova.

The Group of Twenty summit will take place on 15-16 November 2014 in Brisbane, Australia. So far 2014 could not be called the most successful or easiest in terms of international relations. The Ukraine crisis, the marked reduction in economic activity and the geopolitical disagreements between the main players in global politics – these factors are making it difficult to build contacts and strengthen links between countries and organisations. The economy has become a hostage to political decisions. Will the G20 member countries manage to make a sober assessment of the economic prospects?Will they be able to work out a united approach to addressing the issues that have emerged, or will they be reluctant to compromise?

We asked three experts to comment on the situation: Ivan Timofeev, PhD in Political Sciences and RIAC programme director, Mark Rakhmangulov, Deputy Director of the Global Government Research Centre at the Higher School of Economics’ International Organisations Research Institute and RIAC expert, and Victoria Panova, PhD in History, and regional director for Russia in the G8/G20/BRICS research group at the University of Toronto.

Do you think it’s possible, given the worsening economic and political situation, especially in the Euro-Atlantic region, that the Group of Twenty summit in Brisbane could mark a breakthrough?

Ivan Timofeev: The summit is unlikely to mark a breakthrough, for several reasons. The Group of Twenty was originally conceived as a forum for discussing financial and economic issues. We should therefore not expect the G20, as an institution, to be able to help solve the political problems between Russia and the Euro-Atlantic community. How the downturn in relations will affect the mood of informal meetings that might take place on the sidelines of the G20 is another matter. The positive side of the summit is that it provides another opportunity to meet world leaders on the sidelines and to have one-to-one discussions of common problems.

The actions of the Australian government and its desire to organise an obstruction to the president of  Russia are, in my view, not entirely appropriate. If the G20 were dealing with political issues there would be a certain logic to this, but in this case why mix security and political issues with financial and economic ones?

What interests do you think Russia will pursue at this summit?

Ivan Timofeev

Ivan Timofeev: Russia wants to emphasise its vision of the problems which have currently emerged in international economic relations, to focus on the existing imbalances and to propose possible ways of addressing them. Russia’s main interest is in linking the G20 agenda with its own development. Russia can make a particular contribution to solving global problems but at the same time help its own development.

Do you think it’s possible, given the worsening political and economic situation, especially in the Euro-Atlantic region, that the Group of Twenty summit in Brisbane could mark a breakthrough in international relations?

Mark Rakhmangulov: If we’re talking about normalising relations between Russia and the West, I don’t think the summit in Brisbane could be some kind of breakthrough in itself – contact between the leaders of Russia and western countries has not ceased: it has taken place in various formats and within the framework of meetings of various international institutions. What is much more important here is a real development or normalisation of the Ukraine crisis. I believe, however, that inviting the president of  Russia to the summit is in itself an important step, since as far as one can tell it was not easy for the Australian presidency and was the subject of intense discussions both within Australia and in their contacts with their G20 partners. At the same time it’s worth noting that both Russia and other countries have repeatedly emphasised that it’s not possible for the country holding the presidency to decide not to invite any particular member to the summit. Such a decision, which effectively means excluding a country from the institution, can only be taken by consensus of all the other members and is without precedent in the history of the G20.

Economic cooperation between the developed countries and Russia has indeed been overshadowed by conflict and sanctions, and this is also affecting work within the G20. I find it difficult to imagine a serious discussion of free international trade and investment, which have always been some of the G20’s key priorities, in the context of mutual sanctions.

The summit’s work may also be overshadowed by the Australian presidency’s attempts to include in the official agenda conflict resolution issues, which have never been part of the G20’s mandate. Experts from the Lowy Institute acting as consultants to the Australian government openly proposed that the summit discuss how to resolve various conflicts, from the Middle East to the South China Sea. They proposed that the Ukraine crisis be included in order to show the world, among other reasons, that Australia had not simply invited the Russian president to the summit just as if nothing had happened but rather to “haul him up” before the international community to account for Russia’s recent actions.

It cannot be ruled out that the Russian side would be willing to discuss the Ukraine question, but such a discussion format would influence the atmosphere of the entire summit, and it would not be possible to have a calm dialogue on economic issues. This is a matter which of course can and should be discussed by the leaders, but not at summit sessions; it should be discussed within the framework of bilateral or multilateral meetings on the sidelines. At the same time it must be admitted that it was Russia that set an example of how to discuss security matters at the G20 summit when one of the sessions at the summit in St Petersburg, which had originally been planned as a purely economic session, was almost entirely devoted to the question of how to resolve the crisis in Syria. At that time this was explained by the urgency of the situation in that country in the context of discussions about the start of a foreign military operation on its territory by individual countries.

It might be appropriate for the G20 agenda to include the question of economic aid to Ukraine, whose economy is in an extremely lamentable state. The rapid reaction of the G20 finance ministers to the first signs of the “Arab Spring” comes to mind, for example, when the communiqué at the end of their meeting in February 2011 declared their willingness to provide support for reforms and economic stabilisation in Egypt and Tunisia. It’s true, of course, that later this work was pursued more actively within the G8 and the specially created Deauville Partnership. Now, in the absence of the G8, the G20 could become one of a number of platforms for preliminary discussion of the decisions to issue IMF and World Bank loans to Ukraine or for involving a broad coalition of countries prepared to take part in restoring its economy.

Will countries be able to map out a united policy for strategic development of the international economic system as effectively as they did in 2008?

Mark Rakhmangulov

Mark Rakhmangulov: I don’t think the G20 members have the same incentives now that they had in 2008, when the global economy was on the brink of the abyss. Yes, economic forecasts continue to worsen, but the situation in the world as a whole is calmer. Economic sanctions are significantly reducing the effectiveness of efforts to coordinate economic policy. In addition one might consider that the strategic areas of development on the main priorities had already been laid down at preceding summits, and now it’s a matter of implementing them, which requires both political will and day-to-day professional work. Thus it is extremely important to seek to fulfil the obligations which the G20 publicly undertakes. Research over many years by the University of Toronto and the Higher School of Economics’ International Organisations Research Instituteshows that beginning with the summit in London in 2009, the level of fulfilment of obligations has risen year by year, although it has never been 100 per cent. On the basis of the data currently available it is possible to identify a decline in the average level of fulfilment of obligations in the period of the Australian presidency, which has a negative effect on the effectiveness of the G20 as an arena for coordinating economic policy.

Is it worthwhile expecting the forthcoming summit to talk about reforming the international economic system?

Mark Rakhmangulov: Various aspects of reforming the global economy are always the main part of the G20’s agenda. These include regulating financial markets, and international cooperation in the area of taxation. As far as reform of the International Monetary Fund is concerned, that process has obviously run into a blind alley. The USA is the only country in the whole G20 that has not ratified the relevant amendments to the IMF Articles of Agreement, which means that the reforms agreed back in 2010 cannot be carried out. Now that the balance of power has shifted in Congress, we cannot expect ratification as a minimum before the next elections, and the only thing the G20 will be able to do is repeat once again its appeal to the American legislators.

The situation concerning implementation of the package of WTO agreements approved in December 2013 looks extremely tense. After the ministerial conference in Bali, which was acknowledged as a breakthrough in international trade negotiations, disagreements over their practical implementation have put the effectiveness of the entire WTO in doubt. The G20, which includes both developed and developing countries, must try to find points of contact on the trade agenda.

What position will Russia take in relation to its western partners in the light of the events in Ukraine and their consequences? What interests is Russia pursuing at this summit?

Mark Rakhmangulov: Russia has an interest in seeing the decisions taken by the G20 under the Russian presidency last year implemented, and in seeing the priorities that were approved by the leaders at the summit in St Petersburg continued. These include incentivising investment in infrastructure, international exchange of tax information, and adoption of national economic growth strategies by all members of the G20.

I think Russian officials may begin to make more active contact with their partners from Turkey, which will be the next president of the G20 (with effect from 1 December 2014). Bearing in mind the continuing economic cooperation between our countries and the possibility of sharing Russian experience of organising the G20 presidency, Russia could, if it wants to, have greater influence in the G20 next year than it has had during the Australian presidency.

In addition, in view of the discussions that are underway, Russia is likely to support a developing country from the Asia-Pacific region with which it is already developing a strategic partnership for the G20 presidency in 2016 rather than its possible rival, a developed country from the same region.

Which of Russia’s traditional and potential partners will adhere to a line that is relatively favourable for Moscow?

Mark Rakhmangulov: In the context of events occurring in the international arena Russia has begun to cooperate more closely with the BRICS countries. This is also aided by our country’s forthcoming BRICS chairmanship, which will culminate in a summit in Ufa in July 2015. It seems to me that these are the countries that have played a decisive role in the decision not to prevent Russia taking a full part in the G20’s work, including the President of the Russian Federation visiting Brisbane. One might recall the unambiguous statement on nuclear security made by the BRICS ministers of foreign affairs on the sidelines in The Hague in March 2014, when they expressed their apprehension over attempts to unilaterally define the “nature and character” of the G20.

There has been coordination of positions on the G20 agenda between the BRICS countries in the past, including through meetings of the five countries’ finance ministers (and also some other formats) directly before meetings of the relevant G20 ministers. Now, as a result of their disillusionment with its ability to achieve serious reforms to international economic institutions, the BRICS countries have begun to create their own mechanisms, such as the New Development Bank and the Pool of Currency Reserves.

In order to effectively promote its interests in the G20 Russia needs to cooperate more closely with other countries, including developed countries. Professional dialogue on the G20’s priorities at the ministerial and expert level and also within the framework of business and civil society cooperation should not be put at risk for political reasons.

Do you think it’s possible, given the worsening political and economic situation, especially in the Euro-Atlantic region, that the Group of Twenty summit in Brisbane could mark a breakthrough in international relations?

Victoria Panova

Victoria Panova: There was more chance of some kind of breakthrough at the meeting of leaders at the APEC Forum that took place a few days before the G20 summit. Just as in 2003 the winner’s garland for conditional and limited peace-making after the Iraqi disagreements went to Vladimir Putin, who invited the leaders of the G8 countries, among others, to the celebrations of St Petersburg’s tercentenary before the G8 meeting was held in Evian, so too today Beijing could play a similar role when hosting the APEC summit on the eve of the G20 meeting. The European leaders who are affected to a significant degree by the current geopolitical confrontation were not present at this forum, but nevertheless the main actors who determine the potential for peace-making and a resumption of cooperation with Russia, and particularly the USA, were taking part in this summit. While separate special meetings between Vladimir Putin and Barack Obama were not planned, the two leaders were able to discuss Syria, Iran and Ukraine, and also bilateral relations, on the fly. It is also important that contact with Japan and Austria, which had followed up with sanctions and increasing tension, took place in a fairly friendly atmosphere. At the end of his meeting with Vladimir Putin on the sidelines of the APEC summit, Prime Minister Shinzo Abe of Japan declared his intention to develop “a trusting personal relationship with the Russian president”, and moreover new dates were arranged for a visit by Putin to Japan. Australia’s prime minister Tony Abbott did not make any “harsh statements”, despite the exaggerated statement by an Australian representative just beforehand about their determination to demand an “apology” from the Russian president for the Boeing that was brought down, and moreover both leaders expressed their shared interest in a rapid and objective conclusion to the investigation. It is therefore not worth expecting that a new breakthrough will take place during the G20 meeting. The impossibility of isolating Russia and forming a united front against it was demonstrated during the commemorative vote by the UN General Assembly, at the Asia-Europe Meeting in Milan, and at the aforementioned APEC meeting. Accordingly, the G20 summit is most likely to be not so much a breakthrough event as a working moment whose positive role lies in demonstrating that no matter how much the world might be torn by serious disagreements, the mechanisms of global economic regulation that have been created are capable of withstanding them and continuing to work in strategically important areas of economic, monetary and financial cooperation which determines the possibilities of sustainable development and stability throughout the world.

Will countries be able to map out a united policy for strategic development of the international economic system as effectively as they did in 2008?

Victoria Panova: According to the Australian presidency’s declared priorities, the main themes of the coming G20 summit are economic growth, help for employment and global economic management. It’s interesting that despite the fact that Australia is emphasising exceptional innovation in all the topics and approaches, a great number of points were effectively continued in developing what was proposed during the Russian presidency. These include the problem of employment on Australia’s agenda, one of the topics of the Russian presidency, which Australian officials quite scornfully referred to as insufficiently important and systematic. In 2013 the Russian Federation merged the financial and labour tracks, but this year merging the financial and leadership tracks is referred to as an exceptionally innovative idea. And of course the approach to ensuring the G20’s accountability to its own and the global public remains unchanged, although earlier there was no emphasis on the importance of “peer review”. The president believes that publishing the national strategies of the G20 countries together with the Brisbane plan of action will make it possible to evaluate the opportunities for resuming economic growth and increasing employment throughout the world.

Talking of potentially positive opportunities to determine a united strategic policy, in terms of not just expressing good intentions but also taking practical steps in this direction it would be exceptionally useful for the world economy if the G20 decided to seek an increase in the total average growth of the G20 countries by a minimum of 2% during the next five years and to propose corresponding national and international strategies. However, it is not so much average growth that is an important factor as a sustainable rise in all systematically important economies. On the one hand we saw in the recent IMF report that the new top seven developing countries have already surpassed their colleagues from the old top seven in total GDP, while China has already become number one in GDP (PPP). On the other hand the unsustainability of current economic trends and the influence of geopolitical confrontation on global economic links mean that no single group of countries can count on a cloud-free development scenario.

To achieve a functioning global economy it will be important for leaders to approve the recommendations of the Financial Stability Board (FSB) concerning the introduction of stricter rules regarding systematically important banks (total loss absorbing capacity – TLAC).

Is it worthwhile expecting the forthcoming summit to talk about reforming the international economic system?

Victoria Panova: Another no less important, or even more strategic, topic for the G20 is the question of reforming the global economic system. Despite the decisions of the G20’s Seoul summit in 2010, the management and decision-making system in the IMF is not changing. The question of changing quotas has up to now been effectively blocked by the US Congress, and in view of the lack of progress on decisions already taken, the further redistribution of quotas planned for the beginning of 2014 has also not happened. In this respect the BRICS countries have already repeatedly called collectively, both separately and within the G20, for this process to be accelerated. Moreover, the overall position of these five countries is that if there is further obstinacy the reform could be undertaken without Washington. Despite the fact that at the end of the latest meeting it was Russia’s finance minister Anton Siluanov who voiced the idea, which could be regarded as a demarche by the Russian side in the light of the worsening relations between Russia and the USA, this position is shared by the BRICS countries and was initiated by the other partners in this group of five.

According to a number of experts, there are legal opportunities to implement such a scenario.

Today, despite the similar position of the country holding the presidency (Tony Abbott stated the need to bring the membership of the IMF and the FSB into line with the realities of the current century rather than remain in the last century), the potential to solve this problem will depend to a large degree on the determination of Beijing, as the leading state with an interest in reforming the international economic system, to match its statements with practical steps. In particular, this might be a question of all the BRICS countries blocking the allocation of more lines under the New Arrangements to Borrow for the next six months, as was announced earlier in the event of there being no progress on reforming the IMF by the end of 2014.

What position will Russia take in relation to its western partners in the light of the events in Ukraine and their consequences? What interests is Russia pursuing at this summit?

Victoria Panova: Despite the fact that Russia, in spite of numerous antagonistic publications in the media and statements by officials in the West (here it is a question not only of the aforementioned Australian demarches but also of the recent statement by a NATO general about Russian forces crossing the border with Ukraine, etc), there is no way that the G20 summit will be able to put Russia on trial, and the West must not count on isolating Russia within the G20. One can state with virtually total certainty that the G20 meeting will discuss topics concerning the development of the global economy and prepared by sherpas away from geopolitical confrontation. The success of the summit is therefore more likely to depend not on the relationship between the West and Russia but on the possibility of compromise between the leading players on questions of global economic reform and of strengthening international institutions (in particular, despite a statement that the question of the WTO’s effectiveness would be tabled at the meeting, there is little chance of overcoming the organisation’s crisis within the G20). The G20’s mandate does not include the possibility of it replacing bodies such as the UN Security Council, which is the place to discuss questions of peace and security on which the main disagreements exist between Russia and a number of its western partners. Therefore the absence of serious problems at the G20 meeting will in no way mean that the disagreements between these players in the geopolitical sphere have really been overcome.

For Russia this could possibly be another opportunity to demonstrate that it remains an important global player which will always have to be reckoned with regardless of how the situation develops. Brisbane will possibly become an opportunity to discuss once again the Ukraine issue and the European crisis on a bilateral basis with all the main European partners. But the main aim remains solving the problems on the G20 agenda, not overcoming the regional confrontation with colleagues from the Euro-Atlantic region. These are, specifically, reform of the international monetary and financial system, energy security problems and financial regulation problems. The G20 arena will possibly be an additional chance for Russia to promote its thesis about the unacceptability of using unilateral sanctions against other countries when there is politically motivated disagreement.

Which of Russia’s traditional and potential partners will adhere to a line that is relatively favourable for Moscow?

Victoria Panova: It seems that despite China’s policy of general neutrality, the PRC’s weariness with the USA’s twin-track policy in relation to Beijing will make it possible to continue the policy of moving the two countries closer together within the framework of the G20, as was demonstrated by the APEC meeting and by the signing of a significant package of bilateral agreements between Russia and the PRC. It is definitely possible to talk about the policy of creating joint approaches by the BRICS countries being maintained, although as in the case of Beijing on its own, the other BRICS countries will be unlikely to take positions that are actually pro-Russian, but nevertheless joint positions on a number of global economic issues and financial regulation issues will be maintained and are likely to characterise the whole process of negotiations. I think that a number of countries with an interest in cooperation with the BRICS countries, in particular Indonesia, whose claims to a stronger role in maritime security in the APR were unequivocally supported by Russia, and potentially Turkey, which has a chance of using the West’s sanctions game for its own benefit, will also take a fairly favourable position.

Prepared by Maria Gurova, RIAC programme assistant.