Where To? – Russia at the Helm of the G20

So a quick trip to Moscow!  Moscow you say – in December?  Yes indeed.  Russia took over hosting of the G20 Leaders Summit on December 1, 2012 and decided to declare a kind of G20 ‘Party’ of sorts.  To initiate Russia’s leadership in organizing the agenda for the G20 and to then actually host the G20 Leaders Summit in September in St. Petersburg, the Russian President and Russian officials called for a Sherpa meeting for December 11th but added additionally a B20 meeting, a Think20 meeting and a civil society.  There was much ‘hustle and bustle’ of the G20 sort.

And of course lot’s of thinking!  This from all the gatherings including the G20 business, civil society groups now identified as the C20 and experts from the G20 think tanks.  I couldn’t resist, therefore, picturing all that thinking.  So there I am on the official Russian website – presumably thinking quite a bit.

Now the Russian President in his first remarks as G20 Host struck this very broad consultative cord – which G20 leader hasn’t – but here is President Putin:

Russia is ready for the broadest possible cooperation on reaching the G20’s objectives.  In order to make the G20’s work more effective and transparent and increase trust in what it is doing, we will hold the broadest consultations with all interested parties, with countries not part of the G20, and also with international, expert and trade union organisations, and business community, civil society and youth representatives.  Practice shows that global measures are only effective when they are based on the views and take into account the interests of different groups.

All right so broad consultation it is.  But where are the Russians hoping to take the agenda for the G20 leaders summit?  In his remarks President Putin identified Russia’s G20 priorities:

  • Growth through Quality Jobs and Investment;
  • Growth through Effective Regulation; and
  • Growth through Trust and Transparency in Markets

With these priorities, so the President claims, G20 policy progress will occur with further efforts on:

  • A framework for strong, sustainable and balanced growth;
  • Jobs and employment;
  • International financial architectural reform;
  • Reforming the currency and financial regulation and supervision systems;
  • Energy sustainability;
  • Development for all;
  • Enhancing multilateral trade; and
  • Fighting corruption.

And the President identified two additional issues on the financial agenda:

  • Financing investment as a basis for economic growth and job creation; and
  • Modernizing national public borrowing and sovereign debt management systems.

In a column from Sergey Strokan a Russian journalist posted by Russia’s RT titled, “Uphill battle: Russia at the helm of G20“,  Strokan reports:

The key issue Russia’s G20 presidency needs to address is the restoration of investor confidence, adds Russia’s Finance Minister Anton Siluanov. In a situation, when economic growth in the locomotives of the world economy, including China, is still slowing down and the southern countries of the EU are in recession, global investor confidence is crucial for meeting the main global challenge of jump-starting economic growth, says Mr. Siluanov.

It appears the Russian Presidency hopes to hold – beyond the usual Sherpa and Finance Ministers and Central Bankers gatherings, a meeting of Finance and Labor Ministers as well as a meeting of Energy Ministers.

What can we make then of all of this?  First, as usual there is far too much G20-speak; for the ordinary citizen from the G20 and beyond, this appears like a lot of ‘gobble y-guck’.  It is hardly transparent to them.  Even to the G20-types there is much vagueness and a lack of clarity over the specific policy objectives – probably to satisfy large and disparate interests in the G20.  Then there appears to remain a conundrum at the heart of G20 policy – a key clash by G20 countries that appeared at the Toronto Summit – and remains to this day.  That is which lever should G20 countries pull – the austerity and fiscal consolidation lever, or the stimulus lever.  Now it is likely that the answer lies in timing and reflected in the specific conditions of various country budgets, job creation, debt accumulation and most critically economic growth.  But the fiction remains of an overarching  G20 policy agenda.

It would also appear that Russia can’t help but poke at the traditional economies with calls for monetary reform.  What is urgently needed is a more serious discussion over currency manipulation whether China’s or the United States or now with a new Prime Minister in Japan.  This is a tough issue but currency reform starts here.

And then there is hollowness of the consultation process.  While it is valuable to encourage the various interests – business, think tanks, youth and labor – it lies rather uncomfortably with a government that still retains legislation that requires foreign-funded NGOs to declare themselves as “foreign agents”.  It is dispiriting to witness this Janus-like behavior and the willingness of NGOs largely to ignore, this oppressive domestic behavior in the face of what appears a seat at the table – if a small one and far from the core table.

So the picture remains clouded but let’s see if the Russian presidency takes it upon itself to order transparency and accountability in the G20 agenda and policy process.  There is time yet.

Image Credit: Official Russian Website of the G20.

“What’s on Second”

So let’s stipulate – I like acting like a US lawyer – that the US grand strategy  of the second term seems fixed on Asian rebalancing or  a ‘Pivot’, and that we have at least some acknowledgement in the halls of Washington that the new grand strategy is as much about economic diplomacy as political and military actions, as I wrote in the last blog post – ‘Determining Who’s On First‘.  Well how does this then line up the US-China relationship in the face of new leadership in Beijing?  That requires us to look at both the domestic and foreign policy stance of the new leadership.

On the domestic front are we likely to see significant economic and even political reform?  On the foreign policy front are we likely to see a more reflective and restrained Chinese strategy in the Asia Pacific in the light of the need to build or rebuild economic alliances and wider collaborative behavior?

Now a quick examination of likely domestic policy moves.  First, let’s dispel the impossible.  There was little likelihood, asymptotically approaching zero I’d say that these new leaders – from this generation of leaders – would on their own adopt democratic political reform.  As China expert Susan Shirk put it recently in the FT.com in the run up to the new Standing Committee choices:

This is a question of legitimacy and popular support for the party,” says Susan Shirk, a US expert on Chinese politics put it ft.com in “China wrestles with democratic reform (November 7, 2012): “They need to show that they’re moving in the direction of democracy but they are very fearful of losing actual control.

So their might be musings of reform – in fact there were such thoughts expressed by some in the old Standing Committee, but actual reform – not likely.  To seemingly underscore this, the two candidates most likely to favor political reform – Li Yuanchao the head of the Organization Department (and an early attendee to Harvard’s Kennedy School) and Wang Yang the Communist Party Chief of Guangdong Province – were both left off the Standing Committee. As Iain Mills, a freelance writer in China saw it:

Also of note was the public reappearance of ex-President Jiang Zemin alongside one of the instrumental figures in the Tiananmen crackdown, ex-Premier Li Peng. Although Jiang had taken on the state-owned enterprises (SOEs) and secured China’s accession to the World Trade Organization during his presidency, in terms of social and economic policy, the influence of this generation of leaders would seem to be highly retrograde. Jiang loyalists took senior positions in the Central Military Commission, while conservative factions appear to have blocked the promotion of reform-minded officials such as Wang Yang.

Okay so little likelihood of serious political reform.  But what of significant economic reform.  Certainly the previous leadership including Premier Wen Jiabao pointed to the need  to tackle the growing economic power and corruption of China’s State-owned Enterprises.  Now of course The Premier only began to talk about this at the twilight of his career.  And it would appear that the collective message, including from the new Chairman Xi Jinping,  is a broadly anti-corruption message.  Unfortunately this message is conservative and not reformist.  The anti-corruption message is an internal Party message to root out bad guys -if they can be found – and not indicative of major structural reform. Again Iain Mills reflections on economic reform seems apt:

It should also be noted that the renewed pre-eminence of conservative elements on both the Standing Committee and the Central Military Commission comes ahead of potential changes of the heads of key civilian institutions including the People’s Bank of China, the state-run power sector and the National Social Security Fund. How these institutions will be aligned and function under the new administration remains unclear. The broader picture, however, seems one of an economic reform agenda that will continue at a gradual pace, while hopes of major political reform have been pushed out to 2017 at the earliest.

Finally, what then of foreign policy action? Now it was positive that the new Chairman took over the the Central Military Commission.  It is evident that foreign policy has suffered from a number of voices.  China’s behavior in the Asia Pacific has seemingly become more assertive.  The pattern has yet to end.   A new policy to take effect on January 1st provides that border patrol police will have the right to board and expel foreign ships entered disputed waters in the South China Sea.  China has also begun to issue new visas that includes a picture including disputed territory in the South China Sea.  Various South China states including the Philippines and Vietnam have publicly objected to the new visas and refused to validate them.  Officials seem to be continuing policies that reflect the assertive China strategy in the South China Sea, not to mention the East China Sea.  In the face of little moderation, China policy, as described by Mills, appears to continue to be an assertive nationalist approach:

Beijing has often been unable to speak with one voice on major external events and has offered no clear articulation of how it would operate as the largest power in Asia. This vacuum, coupled with still-fervent nationalist sentiment in many quarters, appears to have been filled by those who favor a more forceful approach to enforcing China’s foreign policy objectives.

The assertive China approach has driven a number of ASEAN states to encourage a US return to Asia; it has even enabled Japan to play the military card with a number of Asian players.  There is little to hinder the new leadership if it chose to moderate its stance in the Asia Pacific.  Let’s watch closely for a more collaborative China approach of the new China leadership.

Image Credit:  Reuters