Chancellor Merkel’s Summit

13.07.2017

The G-20 summits were established in response to the global financial crisis of 2008-9, giving recognition to the important role that emerging powers outside the G-7/8 could play in resolving the crisis. Heads of state and government agreed to large increases in funding for the IMF and World Bank, and to modest increases in developing countries’ voting power in both organizations. The United States and China implemented large stimulus packages that helped to re-stabilize the world economy.

However, the G-20 has neither an enforcement mechanism nor a democratic mandate, and it is closely identified with the neoliberal orientations of the IMF and World Bank. The lack of popular legitimacy was symbolized by Friday night’s concert at the Elbphilharmonie. While the leaders enjoyed a gala performance of Beethoven’s Ode to Joy, the EU’s official “national” anthem, outside the concert hall an estimated 100,000 protesters confronted 20,000 police armed with tear gas and water cannon as American predator drones circled overhead.

Therefore, it is not surprising that since the crisis abated in 2010 the G-20 has been less effective, with much of its importance deriving from informal diplomacy. In this respect, of course, the Hamburg summit did not disappoint. The relatively tame formal proceedings were overshadowed by bilateral meetings among the leading powers, most notably a two hour and 15 minute face-to- face meeting between Vladimir Putin and Donald Trump that was unclear in its substantive impact but provided new ammunition for the war between Trump and the American “deep state.”

Chancellor Angela Merkel declared that her goal was to establish a consensus among G-20 leaders on a range of economic measures, including free trade, climate change, and migration, and also to represent European interests. Yet, these goals—and the prospects for German leadership— conflict with Donald Trump’s “America First” project.

G20 Summit’s Main Takeaway: Under Trump, US Will Continue to Go It Alone Clifford Kupchan
Being out of sync with the rest of the world has great impact on the United States’ influence, writes Valdai Club expert Clifford Kupchan. However, just because the US was an outcast at the G20 meeting in Hamburg doesn’t mean it didn’t make inroads of its own. Regarding developments in US-Russian relations, some progress was made.

This project was on full display with Trump’s decision to visit Poland en route to the G-20 summit, a decision that was arguably more significant than anything that happened in Hamburg. Although reiterating U.S. support for Article 5, NATO’s doctrine of collective defense, the demonstration of what Trump called “our strong ties to central Europe” was designed to accentuate the EU’s east-west divide. In addition to announcing an $8 billion sale of Patriot missiles to Poland, Trump delivered a starkly nationalist and “sovereigntist” message to supporters of the increasingly authoritarian Law and Justice Party, asking them—and his own white nationalist base-- “whether the West has the will to survive?” Meeting with members of the “Three Seas Initiative,” the group of 11 “new European” countries between the Baltic, Adriatic and Black seas that are heavily dependent on Russian natural gas exports, he pledged to cooperate with the Polish-led initiative to establish north-south energy and transport links, including a gas corridor running from Poland’s new LNG terminal on the Baltic coast, which just received its first cargo from the USA, to a proposed terminal in Croatia on the Adriatic Sea. In the coming years U.S. LNG exports are expected to increase substantially. U.S. firms are targeting the European market and are seeking to reduce Gazprom’s market share.

The Three Seas Initiative is a reaction to the growth of German power in the EU. It challenges the proposed $10 billion Nord Stream 2 pipeline that would potentially double Gazprom’s capacity to carry natural gas from Russia across the Baltic Sea to northern Germany, which would then serve as a distribution hub for Central and Western Europe. Like its predecessor, Nord Stream 2 is strongly supported by the German government and set to be financed by a consortium of German, French, Austrian, and French companies. Not only would it increase central and eastern European dependence on Russian gas, but it would also allow Russia to divert gas from the Ukraine pipeline corridor, compelling the EU to increase its subsidies to Kiev to compensate for the loss of substantial transit revenues. The European Commission itself has opposed it on the grounds of incompatibility with the EU’s nascent “energy union.” On June 15, the U.S. Senate directly targeted Nord Stream 2, passing a bill by 97-2 that would impose automatic sanctions on companies involved in financing Russian export pipeline projects.

The future of Nord Stream 2 remains unclear, subject to complicated negotiations among a wide range of actors. The sanctions bill has the potential to set the United States on a collision course with Germany and also to exacerbate tensions between Washington and Moscow. However, Germany will not easily submit to Washington or Brussels on this issue. Angela Merkel insists that Nord Stream 2 is a purely commercial project; German foreign minister Sigmar Gabriel has stated that “Europe’s energy supply is a matter for Europe…instruments for political sanctions should not be tied to economic interests.”

The Three Seas Initiative is laden with its own limitations and internal divisions. Central and eastern European member states of the EU remain closely tethered to Germany through their participation in German-owned production chains, subordination to German finance, and dependency on the German market; their freedom of action is limited. Russian gas is expected to remain substantially cheaper than U.S. LNG for years to come; switching to U.S. LNG would hurt European firm’s competitiveness vis a vis U.S. and other exporters. Some U.S. oil majors, moreover, are reportedly lobbying against the sanctions bill, which would prevent their own involvement in joint operations with Russian companies. Much will also depend on U.S. domestic politics. Trump hopes that the House of Representatives will modify the bill to allow for presidential discretion on sanctions. However, his options are limited in the context of toxic Russophobia, and the reaction of Congress is unpredictable.

Given the deep divide between Trump’s nationalist rhetoric and Merkel’s defense of free trade and the Paris Agreement, the summit nevertheless gave Merkel at least some grounds for optimism. The atmosphere appears to have been less acrimonious than the Taormina G-7 summit in May. Trump himself called it a “wonderful success.” The violence on the streets of Hamburg is unlikely to derail Merkel’s prospects for victory in the September elections. Just prior to the summit the EU and Japan concluded agreement on a free trade pact, although it has yet to be ratified. Merkel apparently avoided criticism of Germany’s massive and destabilizing trade surplus.

For the most part, the summit communique avoided confrontational language. While stipulating that all members of the G-20 but the United States considered the Paris Agreement to be “irreversible” and acknowledging the United States’ pending exit it noted that the United States “affirms its strong commitment to an approach that lowers emissions while supporting economic growth and improving energy security needs.” The statements regarding trade were more conciliatory, agreeing that “We will keep markets open,” acknowledging the “importance of reciprocal and mutually advantageous trade and investment frameworks,” and the need “to continue to fight protectionism including all unfair trade practices and recognize the role of legitimate trade defense instruments in this regard.” Indeed, it is possible that further conciliatory statements will result from Trump’s July 14 visit to Paris at the invitation of Emmanuel Macron, where he will participate in Bastille Day celebrations marking the one hundredth anniversary of the U.S. entry into World War I. 

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

Related articles

G20 Summit’s Main Takeaway: Under Trump, US Will Continue to Go It Alone
11.07.2017
Being out of sync with the rest of the world has great impact on the United States’ influence, writes Valdai Club expert Clifford Kupchan. However, just because the US was an outcast at the G20

Expert: 
Clifford Kupchan

Category:
Expert Opinions
G20 in Hamburg: Positive or Negative? Expert Discussion
11.07.2017
On July 10, the Valdai Discussion Club held an expert discussion dedicated to the results of the Hamburg G20 summit, which took place over the weekend. The main topic touched upon by experts was the

Category:
Club Events
Globalists on Defense and Nationalists on Offense at G20
11.07.2017
Each of the annual G20 summits is unique in its own way. Each summit registers in various forms the current alignment of forces in the world and the level of consensus between the leading players on

Expert: 
Andrei Kortunov

Category:
Expert Opinions