On Tuesday, June 25, an expert discussion dedicated to the upcoming G20 summit in Japan was held at the Valdai Club featuring Russia’s Minister of Economic Development Maxim Oreshkin. According to the minister, breakthrough solutions should not be expected from the G-20 leaders – the world economy is relatively stable, and they simply have no incentive to search for compromises, as was the case after the 2008 crisis. However, the nature of the coming crisis is already tangible – and we need to prepare for it now.
Since the financial crisis of 2007-2008, the leaders of the 19 most economically powerful developed and developing nations, along with the EU, have met regularly. Since the severity of the crisis subsided, G20 summits have come to be perceived by many as procedural, rather than yielding decisions which are vital for the global economy. Nevertheless, this platform retains its importance – it is worth remembering that the most important meetings at the summit are bilateral negotiations rather than roundtable discussions. That is why the G20 summit in Osaka, Japan which will take place in several days, promises to be interesting, says Russian Economic Development Minister Maxim Oreshkin, who participated in a Valdai Club expert discussion.
According to the minister, although there has been a limited slowdown in the global economy, it is too early to characterise this as a crisis. As historical precedent has illustrated, breakthrough solutions are achieved in a crisis that requires urgent action. Therefore, so far, nothing has compelled the G20 leaders to push for such a compromise. “There will be no substantive discussion at the level of the twenty (participants),” noted Oreshkin. “Suggestions will be offered, and they will be taken into consideration. The emphasis will be on bilateral relations.” That is why he described the upcoming meeting of the G20 in Osaka as a “summit of bilateralism”.
According to Oreshkin, the new crisis will be fundamentally different in its causes and consequences from the previous one. The period when trade was the driver of the global economy, and created new added value through the division of labour, is coming to an end, he noted. Amid these conditions, there is demand for a new model of globalisation.
Among the new risks to the global economy, Oreshkin cited the increase in tariffs and restrictions on access to technology and education. When goods no longer move freely, and technology is restricted by individual countries, national tech monopolies begin to emerge, he stressed.
The trade war between China and the United States, which, according to the minister, is only at its initial stage, could be one of the harbingers of a future crisis. “Trade wars affect the global economy; we’re seeing a slowdown in all indicators, and a very serious slowdown in the Chinese economy, ” Oreshkin warned, while noting that these adverse conditions may yield certain new opportunities for Russia. The minister cited the example of Chinese import restrictions on US soya: American companies are actively being replaced by Russian ones in the Chinese soybean market.
The Russian economy is less dependent on oil price fluctuations than it was five to seven years ago, Oreshkin noted. In this context, the increase in oil prices expected in connection with punitive US restrictions targeting Iran will not have an immediate effect on the Russian economy, and neither would a dip in prices. In general, Russia is better prepared for a new global crisis than it was in 2008, or when oil prices crashed in 2014. “We have a fiscal rule and inflation targeting,” the minister noted.
At the same time, a slowdown in the growth of the global economy will have an impact on non-oil exports from Russia. “If, in general, in the economy, we’re going in accordance with the parameters that have been established, then there is a risk of a negative (effect on) exports,” Oreshkin warned.
According to Oreshkin, after the presidency of the G20 passes to Saudi Arabia, a certain degree of continuity will remain in its agenda, one of the points of which is WTO reform. This topic was addressed by Vladimir Putin during his speech at the plenary session of the St. Petersburg Economic Forum. The Minister of Economic Development confirmed that Russia considers the WTO to be an important institution of global governance, which ensures the unity of the rules of world trade.