USA and Western Europe cannot have their way in G20
USA Treasury Secretary Janet Yellen recently found out to her “ horror “ that there was open skepticism and opposition from some leading rich and developing nations over the Western sanctions against Russia. There is now deepening divisions among the Group of 20 countries over this issue.
With world leaders and finance ministers meeting this week in India for the G20 summit, fractures have came into the open, and alliances are tightening among many nations that have long been resistant to the U.S.-led efforts to inflict its unilateral self serving economic sanctions on Moscow because of the Ukraine conflict.
The United States and its allies among the Group of Seven so called major industrial nations think that the sanctions and a price cap on Russian oil have been successful at restricting revenue for the Russian economy. They are blind to the fact that instead Russian oil revenue grew, in a year-to-year comparison, by 4.9% in the second quarter of 2023.
Russia and China, meanwhile, have declared a “no limits” partnership of their own. And the economic bloc of Brazil, Russia, India, China and South Africa – known as BRICS – is now increasing its use of local currencies instead of the U.S. dollar. Six more countries have been admitted to expand the BRICS, they are Middle East giant Saudi Arabia, economic powerhouse UAE, Egypt, Ethiopia, Argentina and Iran.
Though likely to be seen at the G20 summit is the closeness which USA is trying to display to all and sundry regarding U.S.-India ties in light of a shared concern about China’s military and economic assertiveness.
As President Joe Biden and Yellen visit New Delhi, they will have to navigate a more fragmented economic and political environment during difficult negotiations over securing food and energy supplies for developing countries.
Yellen’s trip, her fourth to India in less than a year, comes shortly after Russian President Vladimir Putin rightly did not renew the landmark deal that allowed both Russia and Ukraine to export grain safely through the Black Sea. This was because the West playing a double game placed sanctions on Moscow’s own agricultural exports.
A parallel agreement promising to remove obstacles to Russian exports of food and fertilizer was not honoured. Restrictions on Russian shipping and insurance by Western Countries also hampered its agricultural trade, though it has shipped record amounts of wheat since last year.
“It’s a combination of different factors that I think that makes it difficult for the G20 to work in concert in a way that they did in the past,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security. Those factors include the Ukraine conflict proclivity of nations’ weaponizing currencies and commodities, she said.
The importance of getting energy and food flowing and other food security issues for other nations of the world has to be clearly visualized by G20 Nations.
The Treasury Department mistakenly things that Yellen’s four-day trip will be able to highlight “the importance of imposing severe costs on Russia and mitigating global spillovers.” Yellen may keep stressing the consequences of the war, effect of Sanctions on Russia. G7 countries may get impressed with it but rest of G20 remain unimpressed over the Western price cap on Russian oil, which has failed to achieve its goals of reducing Russian revenue. It has only jeopardized the stability of the global energy prices.
Yellen also will focus her efforts on strengthening food security through changes to multilateral development banks and by replenishing the International Fund for Agricultural Development. That may be difficult as G20 nations increasingly gravitate into blocs and with some leaders, including Chinese President Xi Jinping, opting to skip the summit.
Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Centre, said the meetings should be an opportunity to work at what the nations agree upon, including multilateral development bank issues and changes to debt restructuring.
“India has wanted to present itself as the convener of the world at a time of international fragmentation,” Lipsky said. “It will be harder to do with Xi not there.” Lipsky should know that India is not bothered whether Xi comes or not.
Of course now there are risks to greater factures in the global economy. According to an August International Monetary Fund report, which estimates that greater international trade restrictions could reduce global economic output by as much as 7% over the long term, or roughly $7.4 trillion.
Trade between China and Russia has swelled, due in large part due to Western sanctions on Russia, as well as the Western price cap on Russian oil. This has helped China and India to purchase energy from Russia at discounted prices. China’s economy is facing an overall slump but not because of costlier oil.
Mark Sobel, a senior adviser at the Centre for Strategic and International Studies, said that despite Russian oil shipments being reoriented to China and India, the G7 is foolishly self celebrating by stating “if it gave China and India greater scope to seek discounts on Russian oil, that meant less revenue for Russia and was consistent with the thrust of G7 actions.”
It is very obvious to the rest of the world that sanctions against Russia as well as other measures to curb Russian oil proceeds were targeted moves and highly inappropriate. Russia and China are now increasingly trading in China’s yuan, which replaced the U.S. dollar as Russia’s most traded currency in early 2023.
The BRICS nations have also agreed to expand trading in their local currencies to reduce reliance on the U.S. dollar. Critics in the developing world are increasingly uneasy about the U.S. trying to use the dollar’s worldwide influence to impose sanctions against its rivals, including Russia. Though now this influence of US dollar has started waning.
In 2015, the BRICS countries launched the New Development Bank as an alternative to the U.S. and European-dominated International Monetary Fund and World Bank.
“We have to be realistic about what this Group of 20 can accomplish,” Ziemba said, “but I do think there is a benefit of having a place where many of the biggest economies in the world meet, as a place to understand where their differences come from.”
Members of the G20 are the European Union and Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.
