Home Economy The war in Ukraine widens the gap between major economies at the G20 meeting

The war in Ukraine widens the gap between major economies at the G20 meeting

by SuperiorInvest

A year after Russia’s invasion of Ukraine, the war is deepening divisions among the world’s major economies, threatening a fragile recovery by disrupting food and energy chains and diverting attention from plans to fight poverty and restructure debt in poor countries.

Those rifts were evident last week when top economic policymakers from the Group of 20 nations gathered for two days in the resort town of Bengaluru, a city in southern India where efforts to show unity were overshadowed by flare-ups over Russia. Western nations imposed a flurry of new sanctions on Moscow during the summit and unveiled greater economic support for Ukraine, while developing countries such as India, which benefit from cheap Russian oil, resisted expressing criticism.

The differences of opinion left officials scrambling to cobble together Saturday’s traditional joint statement, or communique, that forces senior leaders of the Group of 7 nations, the world’s most advanced economies, to try to convince reluctant counterparts that defending Ukraine is worth it.

“Ukraine is fighting not just for its country, but to preserve democracy and peaceful conditions in Europe,” Treasury Secretary Janet L. Yellen said in an interview Saturday as she explained the case she made to more reluctant countries. “It is an attack on democracy and territorial integrity that should concern us all,” she added.

The summit was held at a pivotal moment for the global economy. The International Monetary Fund updated its global output projections last month, but warned that Russia’s war in Ukraine continued to cast a cloud of uncertainty. The fund also noted that increasing “fragmentation” in the world could be a drag on growth in the future.

Ms. Yellen was among the harshest critics of Russia during the two-day meeting. At one point, she directly confronted senior Russian officials in a private meeting and he called them “accomplices” in Kremlin atrocities.

The dispute over how to characterize Russia’s actions led French Finance Minister Bruno Le Maire to publicly vent his frustration with some countries that would not challenge Russia in writing. He noted that when the leaders of the Group of 20 nations met in Bali, Indonesia, in November, their statement confirmed that most members strongly condemned the war, and on Friday he said he opposed weakening that sentiment.

“I want to make it very clear that we will oppose any step back from the statements made by the leaders in Bali on this issue of the war in Ukraine,” Mr Le Maire told a news conference, declining to name the objections. . “We strongly condemn this illegal and brutal attack against Ukraine.”

India’s close economic ties with Russia have made its role as host of the Group of 20 this year particularly challenging. Moscow is a major supplier of energy and military equipment to India, while the United States is India’s largest trading partner.

To remain neutral, India tried to avoid describing the conflict as a “war” and instead focused on other issues. In his opening speech at the summit, Prime Minister Narendra Modi outlined the threats facing the global economy but did not mention Russia, pointing instead to “growing geopolitical tensions in many parts of the world.”

Part of the backlash against condemning Russia stems from concerns that the United States is using its economic power to isolate the Group of 20 member.

“The fact that the U.S. apparently has so much power to take action against a geopolitical rival is a significant concern,” said Eswar Prasad, a trade policy professor at Cornell University who speaks to both U.S. and Indian officials. “The G20 has clearly broken up.”

Mr. Prasad added that the aggressive use of sanctions by the United States had raised concerns among other nations — even if they disagreed with Russia’s actions — that they could one day incur Washington’s wrath.

This use of economic warfare was seen on Friday when the United States imposed sanctions on more than 200 individuals and entities in Russia and other countries that are helping to financially support Moscow’s invasion of Ukraine. Sanctions were also imposed on Russia’s metals and mining sector and energy companies.

The war in Ukraine was not the only issue that preoccupied finance ministers in India last week.

The United States and Europe continued to settle differences over US subsidies for electric vehicles, which European countries believe will damage their economies. Global Tax Agreement which was struck in 2021 continues to tremble, raising the prospect that it could break up. And he will speak debt restructuring in the face of poor countries to avoid a cascade of defaults has not borne fruit, mainly because of China’s resistance.

“There has been no significant change that I can see,” said Ms. Yellen, who last week expressed frustration with China’s role as an obstacle.

But it is the war in Ukraine that has caused the world’s economic leaders to be most divided. Resistance to supporting Ukraine and confronting Russia is in many cases the result of complicated domestic politics in many countries, and the United States is no exception.

A growing number of Republicans, including former President Donald J. Trump, have argued in recent weeks that the United States cannot afford to support Kiev indefinitely. At a time when the United States is saddled with record debt and a faltering economy, he argues, that money would be better spent on domestic issues.

In the past year, the United States directed more than 100 billion dollars humanitarian, financial and military aid to Ukraine. Congressional Budget Office expected last week that the United States was on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than originally thought.

For the Biden administration, cutting aid to Ukraine does not appear to be an option.

In the interview, Ms. Yellen argued that the United States could afford to bear the cost and that supporting Ukraine was a priority for national security and economic reasons.

“The war is having an adverse effect on the entire global economy,” Ms. Yellen said, “and providing the support that is necessary for Ukraine to win and end it is certainly something that we really cannot afford not to do. do.”

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