Sledging is a tactic Australians often employ to intimidate their opponents. This time they picked the wrong guy — Russian President Vladimir Putin. The Aussies thought they could ban the most powerful man in the world from the G20 summit in Brisbane, but instead they ended up getting an awful kick in the guts. The BRICS (Brazil, Russia, India, China, South Africa) swiftly shot down the idea, saying it was not Australia’s call.
Stung by this very public humiliation, Australian Prime Minister Tony Abbott put on a tough guy act, declaring he would shirtfront — that is, give an aggressive front-on bump to — the Russian president at the summit. Someone has to break it to the Australians that diplomacy is not a contact sport.
The G20 was established as an economic steering committee of a new world order to get around the policy paralysis that afflicts other global groups. For instance, the G7 is currently on life support, while the United Nations has no leverage or credibility left after being cynically abused by the West.
But Australia’s churlish behaviour indicates that the West is not willing to mend its ways. For the West, politics is supreme, the global economy be damned. The desire to settle scores over Ukraine — where the West should have avoided jumping in the first place — takes priority over economic recovery. Each new week you have newer sanctions imposed, new threats brandished.
The Brisbane summit takes place at a time when a full-blown trade war is a real possibility and oil price manipulation by Saudi Arabia — with ample backing from the US — threatens to create mayhem in the commodities markets. There is also speculation that the steep fall in the value of the Russian rouble in relation to the US dollar is the handiwork of western currency manipulators. In effect, we have all the elements of an economic tsunami.
The current global situation has an uncanny parallel to the 1919 Versailles summit where an unequal treaty imposed wide-ranging sanctions on a defeated Germany. Wesley Widmaier, Australian Research Council Future
Fellow at Griffith University, Queensland, calls it the original sin of global economic crisis.
“States bereft of any appreciation of the common good failed to recognise that, in punishing Germany, they would be depriving themselves of customers and creditworthy borrowers,” says Widmaier. “One needn’t have absolved Germany of all responsibility for the conflict to recognise that what John Maynard Keynes termed ‘the economic consequences of the peace’ were likely to be dire.”
That original sin is being repeated nearly a century later, with Russia as the bogeyman. The difference, of course, is that unlike 1919 Germany, Russia is not a defeated power. Moscow is, in fact, pushing back hard.
With support from the BRICS, Russia is moving away from dollar trade, a step that will seriously impact the barely growing American economy. According to the financial portal Zero Hedge, “Russian presidential adviser Sergei Glazyev’s set of counter-measures specifically targets the core strength of the US war machine, i.e., the Fed’s printing press. Putin’s adviser proposes the creation of a ‘broad anti-dollar alliance’ of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping currency reserves in dollar-denominated instruments… An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US’ aggression.”
In fact, Putin now openly talks about Russia’s plan to drive a stake through the heart of the American economy. At the APEC Business Summit in Beijing on 11 November, he said doing away with the dollar and switching to rouble and renminbi payments will significantly increase Russia and China’s say in energy markets. “Payments in roubles and renminbis are very promising. Switching to such a large-scale work means that the impact of the dollar on the global energy sector will objectively decline. This is not bad either for the global economy, or the world of finance and the world energy markets,” said Putin. “It will help expand our capabilities in mutual trade and influence both world financial and energy markets.”
There are also some irreconcilable differences between the rich and emerging blocs within the G20. For instance, the idea of recapitalisation of the International Monetary Fund (IMF) has been flatly rejected by the US, which fears further dilution in western stakeholding in the IMF. Recapitalisation of the Fund will lead to demands for IMF reform. Translation: BRICS influence will rise at Europe’s expense. Imagine Russia’s Putin or the Indians having a say in the running of the Bretton Woods sisters. Shock! Horror!
Banking sector reforms are another troubled area. At last year’s G20 summit held in St Petersburg, Russia, one of the items on the agenda was to agree on broad principles to police and supervise the shadow banking system. However, this was put off. Here’s why: the current global banking system facilitates and encourages corruption around the world, while at the same time sucking wealth from poor countries and transferring it to the rich West.
Currently, illicit money flows west, into secrecy havens protected by western governments. These secrecy havens are at the heart of the black money industry. According to the UK-based Tax Justice Network — which ranks jurisdictions according to their secrecy and the scale of their activities — Switzerland is the most secretive territory in the world. The US, Singapore, Germany, Japan, UK and Canada figure in the top 21 countries. On the other hand, Russia, Brazil and India have fewer secrecy laws to facilitate illicit financial flows.
An estimated $21 trillion to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Nearly all of these tax havens are under western jurisdiction. As well as the notorious example of Switzerland, these include Luxembourg, Cayman Islands (UK jurisdiction), Jersey (UK jurisdiction), Panama, Bermuda (UK jurisdiction), Guernsey (UK jurisdiction) and the British Virgin Islands (UK jurisdiction).
You get the picture: the West won’t finger its own bankers.
If there are any positive takeaways from India’s point of view, it is that Australia has come a long way from looking at India as a strategic threat. In 1986, the Aussies made a lot of noises when India acquired its second aircraft carrier, the INS Virat. Again in 1998, when India tested nuclear bombs, Canberra withdrew its ambassador.
While a string of former Australian prime ministers, led by the bigoted Kevin Rudd, have taken a strong anti-India stance, there is another lobby that has tried to make amends. Abbott, for instance, seems keen to develop strategic ties with India and supply uranium for India’s nuclear power programme.
Plus, Prime Minister Narendra Modi has said that a closer strategic partnership with Australia would support India’s economic goals, promote its security interests, including maritime security, and reinforce efforts to foster peace and stability in the extended continental and maritime neighbourhood.
With its footprint covering more than 85 percent of the global economy, the G20 has the heft to pull the world away from a fratricidal trade war. However, the good money is on there being no big bang breakthroughs in Brisbane.
(The views expressed are the author’s own)