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G20 Analysis

Russia at the G20 Cannes Summit

Dr. Victoria V. Panova, Associate Professor, Department of International Relations and Russian Foreign Policy, MGIMO-University, MFA Russia; regional director for Russia, G20 Research Group, University of Toronto
Cannes, November 5, 2011

It was the financial and economic crisis of 2008 that gave the start to the G20 at the leaders' level. Very soon, this gathering was acknowledged as the most appropriate forum for global economic governance. While the world has never completely left crisis behind, the intensity of the G20 meetings declined, as the worst times seemed left behind. The leaders of the world’s most systemically important economies were able to take a more relaxed pace, even meeting annually instead of twice a year. Now that the sixth summit, hosted by France in Cannes in November 2011, has finished, there are mixed sentiments about the G20. On the one hand, with the Greek demarche hijacking of most of the time at the G20 summit, there is a realization of missed opportunities, with strategic issues left out or discussion about them reduced to a minimum. On the other hand, G20 was shaken from the sleepy routine it was developing, and once again showed to the leaders that their voices are listened to carefully by the rest of the world. They thus felt the responsibility to be careful about what they should or should not do or say in order not to create another serious conundrum.

Given the general significance of the G20, there remains a question of what it means for each separate member, apart from the fact that they all are part of the whole and their well-being cannot be isolated from the global stability and prosperity. How do priorities of the different countries inside and outside of the G20 vary? For Russia, this particular G20 summit was not among the highest priorities regarding international events, as was demonstrated by the scheduling of the summit — which raises some questions. It has been the practice of such leaders’ clubs to set the dates of their summits so as not to conflict with the national or international commitments of their members. For example, the G8’s St. Petersburg Summit in 2006 was scheduled not to conflict either with the World Cup finals or France’s Bastille Day, and started the next day, on July 15. Indeed, at the 2010 G8 Muskoka and G20 Toronto summits the international press corps often paid more attention World Cup matches than to the official briefings, although much media attention remained present throughout the summit meetings, especially with regard to the protests outside, increasing popular awareness of the meeting. The situation looks even worse from the point of view of the summit outcome and the full participation of all the actors, when the interests of those participating are not taken into account. It is one thing when, for example, China’s Hu Jintao had to leave the G8 summit at L’Aquila in 2009 earlier because of unrest erupting in one of the provinces at home. It is also a different story when South African leader Jacob Zuma (or, rather, his staff) schedules bilateral visits for the same times (but chooses to attend the G20 summit as it is a more important event). But it looks rather strange when the summit host selects a date that coincides with Russia’s National Unity Day, so that President Dmitri Medvedev must leave a day before the summit’s end, leaving his sherpa and other officials to deal with the final documents. Is this a sign of Russia not considered a vital player within the G20? Or is it that Russia does not care about such details since as the G20 is not a top foreign policy priority? Or is it a sign of low state of bilateral relations and understanding between Medvedev and French president Nicolas Sarkozy? And if this scheduling conflict is simply lack of low-level coordination, why did no one notice until it was too late to change?

Regardless of the reason, Medvedev’s brief presence at the Cannes Summit cannot be ignored by Russia. First and foremost, Russia positions itself as a global power responsible for preserving stability and the proper functioning of the international system. By definition, it would be active in all the international institutions and forums, whether they are the informal mechanisms of the G8, G20 and the BRICS summits of Brazil, Russia, India, China and South Africa, or the hard-law organizations such as the United Nations. Russia’s increasing activity is demonstrated by its upcoming presidencies of the Asia Pacific Economic Co-operation (APEC) forum (2012), the G20 (2013), G8 (2015), not to mention its hosting of such important international sports events including the 2012 winter Olympics and the 2018 World Football Cup.

Nevertheless, there were no obvious issues for Russia to push forward within the G20, due to lack of resources, unless a similar stance was taken by its other partners, primarily BRICS countries. The only issue purely in Russia’s interest was an agreement to allow it to host the 2013 G20 summit. It could be argued that this decision may have been taken because other contenders, such as Turkey, had even less weight and thus could not overrun Russian aspirations. As a result, the hosting sequence for the four years is now Mexico, Russia, Australia and Turkey. As of 2016, the host would be chosen from within regional groupings, to start with the Asian four (China, Indonesia, Japan and Korea). This discussion does not to diminish Russia’s role or its abilities, however, because most other countries need to strike coalitions as well. Nonetheless, it is clear that the United States, the European Union with its main continental members and China have more opportunities for bold action within the grouping. The Cannes Summit and Russian Priorities For Russia, the Cannes Summit started earlier with a consultation with its BRICS partners just before the G20 met, which Medvedev considered very useful because it was the first time that these countries had sought common ground for operative issues. Instead of the usual strategic visioning, Greece dominated even that meeting, with all the leaders expressing extreme dissatisfaction with Prime Minister George Papandreou and general approval of the EU’s actions. It was decided and further translated into the G20 meeting that the BRICS countries were ready to assist Europe, but there had to be signs of reciprocity, mainly on what emerging economies could get in return for a bail-out — in the short term and in the long term. The BRICS countries also thought it important to have a working group of their own to monitor situation in the eurozone and make appropriate recommendations as the situation evolves.

Russia came up with a number of initiatives at the BRICS meeting, such as the promotion of cooperation in energy, space, aircraft manufacturing, the improvement of healthcare systems, high-tech projects in nano-materials and second-generation biofuel production. In addition, after the second meeting of BRICS agriculture ministers in South Africa, there have been joint efforts in innovative agricultural production to mitigate the unfavourable effects of climate change. A number of technical decisions also increased BRICS efficiency, in ways similar to the kinds offered by British prime minister David Cameron in his report to the G20, to ensure the BRICS grouping can serve as a mechanism in its own right rather than as an ad hoc co-ordination meeting before G20 gatherings.

As already mentioned, at Cannes the leaders’ discussions were overtaken by one single issue from the first day of the meeting up until the ridiculous ending of the epic story when Papandreou called off the referendum. Several initiatives that had been proposed earlier by Medvedev, such as new internet regulations, were not raised at Cannes. In particular, because current internet regulation, created in a different technological context, is no longer relevant, Medvedev had put forward a new concept to vest the state with the responsibility of introducing legal protection regarding the internet, as well as offering to the holder of those rights to choose relevant the model of protection. The final documents of the Deauville Summit contained a position incompatible with the Russian view. At Cannes, however, the initiative did not even get onto the agenda.

The economic and financial agenda was very much in line with Russia’s main aspirations. Obviously Russia is greatly concerned about the eurozone crisis and questions about the EU as an entity, especially since the EU is Russia’s most important trading partner. At their October 27 meeting, European leaders had deemed it important to raise to €1 trillion to be able to get out of the crisis, but no figures were announced at Cannes. Russia insisted, taking a stand similar to most of the other G20 members, that it was up to Europe to attract such funds from wherever it could. No collective requests were made, but some G20 members were approached bilaterally. Meanwhile, all the G20 members, including the BRICS countries, were prepared to help through the International Monetary Fund (IMF) with certain conditions imposed on the countries receiving support. While Argentina went through the painful process of official default in 2001, Russia remembered its own tough situation of 1998, when it had to turn to the IMF and was obliged to meet the most drastic conditions it had ever introduced. Nevertheless, Russia expressed its readiness to increase its share of support to the IMF, having already budgeted $10 billion budgeted and additional funding subject to further consideration. Although the Cannes Summit also saw much speculation on the amounts promised by various countries, Russian sherpa Arkady Dvorkovich declared the figure of $146 billion from Russia to be false. Cannes deliberately did not announce specifics, he said, because it was more important to for the leaders “to look into each others eyes” and reach an agreement in principle to decide on the actual details later.

Among other issues discussed either separately or in connection with the Greek crisis were the reform of the international financial architecture and financial market regulations, as well as the negotiations of the World Trade Organization (WTO). Russia considers the reduction of budget deficits in all countries as the most important way to preserve financial stability, a view firmly supported by its BRICS colleagues.

The problem of IMF reform will remain on the G20 agenda. Further change is required, although the first steps of increased quota share have already been taken — although Russia won the least as its quota was increased only by the smallest percentage. The rescue of Europe by the surplus countries should also mean that those countries are ready to compromise more and to continue ceding their shares in the international financial institutions.

Energy security issues, energy market stability and the security of supply are also important for Russia, as is commodity price volatility. While the initiative to expand the JODI initiative into the gas sector took shape in the final communiqué, other types of hydrocarbons were still left out of the information exchange. Russia will contribute fully to that initiative after the relevant law passes all the necessary stages in its parliament and is signed into law by the president. Also excluded from the final documents was the issue of oil production and other hydrocarbons on the ocean shelf, despite Russia’s desire for the G20 to approve its initiated mechanism on information exchange in this area, due to start functioning December 2011.

Corruption received little attention, although fighting corruption is one of the aims of the Medvedev presidency. Russia has already decided to hold a meeting of the Presidential Anti-Corruption Council in December 2011, starting the procedure of acceding to the convention on the fight against corruption set out by the Organisation for Economic Co-operation and Development.

The G20 agreed “to disagree” on the financial transaction tax (FTT), a major issue at Cannes pushed by France and Germany with the initial support of Brazil and Argentina. Other G20 members, including the United States and the United Kingdom, firmly oppose it. The generally accepted view was that an FTT would increase the burden not on institutions but on individuals. While there was attempt to interpret Dvorkovich’s words that Russia would go along with a general consensus to introduce an FTT even though it is not good for Russia, it seems premature to do so. The low level of non-cash interactions in Russia would not be stimulated by such a tax. Russia’s position is similar to its stance on reform of the United Nations: knowing that several countries would not accept such developments, Russia chooses to agree in principle, to make life easier. With the FTT it is clear that even in the EU, with 80% of its financial transactions taking place in London, the UK would never agree to that tax.

One outcome of Cannes considered positive by Russia is the confirmation in the final declaration of the resolve “to welcome Russia as a WTO member by the end of the year.” There have been many statements in the documents issued at G8 and G20 summits to finalize the Doha trade negotiations — always by the end of that year — but it would be optimistic to expect this to happen. Several technical and political issues remain, and even with the Swiss compromises it is still too early to claim an end. Nevertheless, there situation seems to favour Russia’s long-awaited accession. The WTO is in deep crisis, with the Doha negotiations stalled and no light at the end of the tunnel. On the contrary, the G20 meeting proved that the WTO’s existing mandate is considered dead by many countries. The developed countries are not ready to listen to the developing world. Few are optimistic about the outcome of the upcoming WTO ministerial meeting, even beyond the Doha negotiations. The accession of Russia to the WTO is needed to prove the organization is still capable of positive developments, although the progress of Russia-WTO negotiations should not be underestimated.

In addition to the BRICS and G20 meetings, Medvedev held several bilateral meetings in Cannes, with more given to non-western countries of China (to discuss trade, economic and humanitarian cooperation, as well as the two countries’ approaches to the world economy, and also the political situation in Central Asia, North Korea, Africa and the Middle East), Brazil and Turkey.

All in all, the Cannes Summit produced some positive outcomes for Russia. Although it did not achieve its aims on its priorities of energy and internet regulation, and negotiations continue on the reform of the international financial architecture, Russia insisted on the agreement of its colleagues to host the G20 in Moscow in 2013, provided a boost for finalizing its WTO accession and did not cede any strategic interests to its G20 partners. Now it is time to start preparing for Russia’s presidency, especially with the re-introduction of the “troika” of the previous, current and future hosts. If Russia is to host a successful summit, it must not only provide for follow-up and consistency, but must also ensure that its main national priorities are innovative and can be extended to the other G20 members, which would lead to their enforcement.