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In the G20, geopolitical tensions cloud the economic agenda

Medan, Indonesia – The G20, the world’s largest economic forum, is tasked with finding solutions to some of the thorniest problems facing the world economy.

This year, the list of challenges facing the club of major economies, whose main summit takes place on Tuesday and Wednesday in Bali, is more daunting than usual.

Inflation in many countries is hitting 40-year highs as the war in Ukraine disrupts supply chains and disrupts energy markets.

As central banks raise interest rates to rein in runaway prices, fears are growing that the world may soon slide from a cost-of-living crisis into a global recession.

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At the same time, the United States, China and other leading economies are facing urgent calls to take drastic action to avert a looming climate crisis.

Meanwhile, despite the summit’s optimistic tagline: “Recover Together, Recover Stronger,” prospects for cooperation at the first gathering of the world’s largest economies since the Ukraine invasion appear dim, as the US .and its partners find themselves increasingly at odds with China and Russia.

“The problem of inflation, which is immediate, and the longer-term problem of having a more sustainable development to reduce our carbon footprint requires global coordination that is difficult in a much more fragmented world where geopolitical tensions are increasing” , Trinh Nguyen, Senior Economist. for emerging Asia at Natixis in Hong Kong, he told Al Jazeera.

“So the challenge for the G20 is to bring together the leaders, who diverge on geopolitics, to find common ground and solutions for short-term and long-term crises.”

Nguyen said inflation, above other issues, will be high on the agenda as it has “affected everyone from households who find essentials more expensive to corporations.”

Nguyen added that another challenge for the G20 would be to forge a more integrated global supply chain that is less vulnerable to geopolitical shocks such as the Russian invasion of Ukraine.

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The International Monetary Fund (IMF) estimates that global inflation, which has risen steadily throughout the year, will reach 8.8% in 2022, compared to 4.7% in 2021, due to a combination of factors including the COVID-19 pandemic, supply chain disruptions, the war in Ukraine, and rising fuel prices.

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The G20, which includes 19 countries and the European Union, has struggled to reach a consensus on the issue, with finance ministers and central bank governors in July scrapping a planned communique that would have tackled inflation. , global food and supply shortages, and slow economic growth. due to disagreements over the war in Ukraine.

Summit host Indonesia has sought to maintain the forum’s neutrality, rejecting calls from Western countries and Ukraine to exclude Russia, and highlighted the potential for cooperation on food and energy security.

In a newspaper interview last week, Indonesian President Joko Widodo lamented the possibility of geopolitical tensions overshadowing the summit, which he said was “not intended to be a political forum.”

At the G20 finance ministers meeting in Washington in April, representatives from the US, UK and Canada walked out of a closed-door session as Russian delegates began speaking, and in July the foreign minister Russian Foreign Minister Sergey Lavrov walked out of the G20 talks in Indonesia following criticism of the Russian invasion of Ukraine.

Russian Foreign Minister Sergey Lavrov will represent Russia at the G20 leaders summit in Bali [File: Dita Alangkara/Pool via Reuters]

Russian and Indonesian officials confirmed last week that Russian President Vladimir Putin would not attend the summit and would instead be represented by Lavrov. However, Putin is expected to attend at least one of the meetings virtually. US President Joe Biden and Chinese President Xi Jinping will attend, with the two leaders scheduled to have their first face-to-face meeting on Monday before the summit. Other high-profile attendees include Indian Prime Minister Narendra Modi and Japanese Prime Minister Fumio Kishida.

Radityo Dharmaputra, a professor of international relations at Airlangga University in Surabaya, Indonesia, said the summit’s main challenge will be to find a way to encourage some positive movement in Russia-Ukraine relations.

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“Indonesia just invited both presidents without offering any kind of proposal,” Dharmaputra told Al Jazeera.

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He said Russia likely viewed the invitation to attend the summit as a setup, as Western leaders would likely have boycotted Putin’s attendance.

In June, Widodo visited Ukraine and Russia in a diplomatic effort to broker peace talks and once again allow free passage for grain exports.

The following month, Russia, Ukraine, and Turkey signed the United Nations-brokered Black Sea Grains Initiative aimed at ensuring the safe transportation of grain and other food products from Ukrainian ports.

“Indonesia right now just wants to build trust, but it will be almost impossible during the war,” Dharmaputra said.

“Apparently Indonesia is continuing the ASEAN way of building trust with informal meetings, meals, golf and coffee. But it is very difficult to make it work also for a very different conflict and cultural background.”

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Indonesian President Joko Widodo has lamented the possibility of geopolitical tensions overshadowing the G20 summit [File: Bullit Marquez/Pool via Reuters]

Shahar Hameiri, a political economist at the University of Queensland, said energy would be a major theme of the summit as the war in Ukraine had highlighted the power of energy-producing countries to influence prices everywhere else.

“Some of them are members of the G20, including of course Russia itself, but also Saudi Arabia and Indonesia,” Hameiri.

“The United States was outraged when so many producing countries did not increase production to keep prices high, in apparent support of Russia.”

Hameiri said another important issue that he hopes the G20 will discuss is debt restructuring for developing countries facing financial difficulties.

“The G20 has been trying to coordinate this for a while, but the scale of the debt problem has gotten much bigger recently, as the US Federal Reserve Bank has raised interest rates to combat the domestic inflation,” he said.

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Still, some observers see room for optimism about the G20’s ability to address common issues of concern despite unprecedented challenges and political discord.

Dandy Rafitrandi, an economic researcher at the Center for Strategic and International Studies, said the forum has seen achievements in recent years, including initiatives to halt debt payments by the poorest countries and provide financing to countries facing urgent debt deficits. liquidity during the pandemic.

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“The G20 Finance Track has discussed various follow-up initiatives from the previous presidency, such as the Debt Service Suspension Initiative (DSSI) and Special Drawing Rights (SDR), which aim to protect developing countries that are vulnerable to macroeconomic pressures in the face of COVID-19 and rising food and energy prices,” Rafitrandi told Al Jazeera.

“However, the legacy of this year’s G20 Indonesia will be the successful establishment of the Pandemic Prevention, Preparedness and Response Financial Intermediation Fund (PPR FIF), which will be managed by the World Bank in collaboration with the World Health Organization. Health (WHO),” Rafitrandi said, referring to an initiative aimed at helping low- and middle-income countries strengthen their pandemic preparedness.

“Amidst heated geopolitical tensions, this achievement is to be appreciated.”

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