Russia and the G20

(Policy Paper) Russia occupies a unique place among the G20 in that it is also a member of both the G8 and the newly created BRICS, the association of Brazil, Russia, India, China, and South Africa. As a continental nation that straddles Eurasia, Russia has also tried hard, especially in recent years, to develop a Euro-Pacific approach to its international role.

This duality to Russia’s G20 personality could be a source of strength. Russia has the potential to act as a bridging power, both between the advanced and emerging economies and between Europe and Asia. Russia should leverage its unique position of being at both the BRICS and G8 tables to seek positive-sum outcomes at the G20.

Clearly, being on both sides of an increasingly sharp dividing line between the G8 and the BRICS on matters of global economic governance presents a challenge to Russian diplomacy. Russia risks losing credibility in one group if it pushes an agenda more consistent with the other’s interests. It also has a mixed track record in terms of using its strategic position between the West and “the rest” to advance global public goods.

In recent years, Moscow has put forward constructive and interesting proposals on international finance and nuclear security, but it often indulges in geopolitical gamesmanship, at times siding with the BRICS purely to balance the West. In today’s interconnected world, such tactics are unlikely to be successful.

How Russia, as the host, shapes the agenda for the 2013 G20 summit in St. Petersburg could therefore define the role Russia will be able to play in the G20 in the future.

PRIORITIES

In answering the question of Russia’s priorities for its G20 presidency, President Vladimir Putin saidin fall 2012, “The agenda for the next summit, which will take place in St Petersburg in autumn 2013,will be determined by developments in the global economy and the situation in international finances… The G20’s decisions concern all countries in the world, and the G20 members thus cannot letthemselves be guided only by their own positions and interests.” He then proceeded to list the followingas central issues for the summit:

reforming the international currency and financial system

strengthening international financial institutions and financial market regulation

advancing discussions on global trade and development assistance

completing the Doha Development Round of multilateral trade negotiations

moving forward the conversations on energy security and climate change

Clearly, these items on the summit agenda are priority issues for other BRICS countries as well.

In most other international organizations, Russia has inherited its present status as a privileged insider by virtue of taking on the international legal rights and obligations of the Soviet Union. However, in the international financial institutions, like the IMF and the World Bank, Russia is a relative newcomer – it joined in 1992, but became a donor only in the past decade – and therefore has a stake in their restructuring.

If the shareholding in the IMF and World Bank has not already restructured by the fall of 2013, it will be an important item on Russia’s agenda, and understandably so. Russia has joined with fellow BRICS in calling for an increase in the BRICS’ share.

Having completed its World Trade Organization (WTO) membership procedures this year, Russia will be able to influence the global trade agenda for the first time. The issue of completing the Doha Development Round of WTO negotiations may find traction in 2013 well before the St. Petersburg summit. If the new U.S. administration cannot demonstrate more flexibility on some of the outstanding issues in the talks, progress on Doha is unlikely before the G20 and therefore should be addressed at the St. Petersburg summit. That said, Russia’s interests on trade diverge significantly from its fellow BRICS; its main exports are commodities, particularly hydrocarbons, many of which are not governed by WTO rules.

Finally, most countries, developed and developing, want climate change negotiations to be accelerated by the G20 leadership. Indeed, the G20 should play a more active role in bridging the North-South and East-West gaps on climate change, though there is considerable resistance to this idea – from within the G20 because of concerns about overloading the G20 agenda, and from outside countries that want their voices heard but do not have a seat at the G20 high table. On climate change policy, Russia has failed to demonstrate leadership, despite having much at stake in the debate.

Whether the G20 should take any meaningful steps forward on such multilateral issues has become a contentious topic. Apart from genuine intellectual differences on the role the group should play, the grievance of countries outside the G20 – that they are being left out of these discussions – has made the G20 more cautious.

ACHIEVEMENTS AND DISAPPOINTMENTS

The consensus is that the G20 acquitted itself creditably in its first three summits – in Washington, DC (November 2008), London (April 2009), and Pittsburgh (September 2009) – by showing solidarity in dealing with a global financial crisis and taking concrete steps to boost growth, inject liquidity, stabilize markets, and generate positive investor sentiment. The sharp V-shaped recovery in global growth in 2009 and 2010 is often attributed to this phase of decisive intervention.

However, it is also widely believed that G20 members have since failed to work together to advance the Pittsburgh Framework for Strong, Sustainable, and Balanced Growth. The G20’s effectiveness has been limited by the fact that it did not absorb the G8, G7, or BRICS; instead, these groups continue to meet separately and, within the G20 context, often act as competing blocs.

One way in which the G20 can respond to its critics is to take the Pittsburgh agenda forward: accelerate the pace of restructuring multilateral institutions, restore momentum to WTO talks, and discourage countries from pursuing beggar-my-neighbor trade and currency policies.

SHORTCOMINGS AND REFORMS

The main obstacle to the G20’s effectiveness has been the domestic preoccupations of its leaders. In 2008 and 2009, the sense of crisis that gripped the leaders enabled them to make bold decisions and ensure their quick implementation. However, the initial V-shaped recovery in global growth induced complacency in completing implementation of the Pittsburgh framework. Moreover, the domestic political preoccupations of most G20 countries, especially the United States and the eurozone economies, as well as their unwillingness to share their control over multilateral institutions in favor of emerging economies, diminished the early solidarity of the G20

The G20 does not, in fact, have a mechanism to monitor the implementation of its decisions. Moreover, the trend of G20 host countries seeking to impose their own priorities on the agenda and invite guest members has diffused the original spirit of the early summits. It is not clear, however, whether the creation of an institutional arrangement, including a permanent secretariat, will resolve this problem. Several plurilateral groupings with full-time secretariats, such as the Commonwealth of Nations, have not had any greater success in implementing summit-level decisions than the G20 has had so far.

THE G20 AGENDA

The emerging consensus within the G20 is that its agenda should be restricted to global macroeconomic coordination and financial regulation. Apart from the fear of overloading the G20 agenda, the advocates of this more modest approach believe that the unrepresentative and ad hoc character of G20 membership weakens its ability to deal with the more long-term policy issues of concern to the international community. Crisis management is more amenable to summit-generated solutions than are systemic issues or structural reform of the global economy.

However, one way in which the G20 can become more representative and, therefore, more effective is for existing members to consult regionally with other countries and present those shared perspectives on issues such as climate change. This would make the G20 a more politically representative forum, not just one of economically dominant countries. Unfortunately, individual member countries are increasingly voicing their national views at G20 meetings, rather than seeking a global consensus around shared concerns.

DIVISION OF LABOR

The IMF and World Bank are shareholder-driven organizations, rather than international ones like many in the UN system and even the WTO. The G20 includes almost all the major shareholders of the IMF and the International Bank of Reconstruction and Development, who have significant influence over both organizations. Although the internal argument to restructure shareholding in both these organizations continues, the G20 does not need to reckon with dissent from non-G20 countries on policy issues pertaining to these organizations.

Even the WTO can be guided by the G20, though to a lesser extent, because the G20 includes most of the WTO’s “green room” members -the major policy-shaping countries within the WTO – and the WTO director-general is an invitee to the G20. However, the same cannot be said about other global negotiations, especially climate change, because a large number of non-G20 countries, notably the island nations and the Scandinavian countries, have an enormous interest in climate change negotiations.

If the G20 emerges as an effective and active forum for global consensus-building on economic policy issues, forums such as the G7, G8, and BRICS should dissolve themselves. However, as long as the differences persist between advanced and emerging powers on global governance issues, these subgroups will continue to seek alternative visions within the G20. In addition, other cleavages, particularly on models for addressing the crisis, still cut across these dividing lines and create strange bedfellows, such as Germany and China, on issues regarding the role of government spending in spurring economic recovery.

Russia’s challenge lies in retaining its status in the G8 and the BRICS while seeking solutions to bridge the policy gaps that divide them. This will not be easy, but Russia has the advantage of having equities in international economic issues that do not overlap neatly with either grouping.

Authors: Samuel Charap and Sanjaya Baru. This policy 'memo' appeared as part of the Council on Foreign Relations' Council of Councils initiative, in a collection of essays called 'Prospects for the Russian Chairmanship of the G20′