For G20, Ukraine war an obstacle to cooperation on global economy

Medan, Indonesia – When G20 finance ministers and central bank governors met in Bali on July 15-16, the summit raised hopes of coordinated action to tackle some of the thorniest issues facing the global economy.

Those hopes withered over the weekend as divisions over the war in Ukraine scuppered any chance of a joint communique to address mounting challenges including soaring inflation, slowing economic growth and widespread shortages of food and goods.

“The failure to reach any kind of consensus on economic threats was inevitable from the start, not least of which is due to the fact that some of the most pressing of these, such as commodity price increases due to supply chain disruption, are being generated by Russia’s invasion of Ukraine,” Ian Wilson, a lecturer in politics and security studies at Murdoch University in Perth, told Al Jazeera.

The summit’s rare failure to produce a communique, instead publishing a 14-paragraph “chair’s summary,” augurs poorly for the prospect of consensus at the headline G20 leaders’ summit in November.

Indonesian Finance Minister Sri Mulyani Indrawati said the decision to scrap the planned communique was “a challenging and difficult situation” and a source of regret.

“Most of the paragraphs are actually supported by our members [but] there is still an issue that they cannot reconcile yet,” Indrawati told media when asked about the communique.

Despite host Indonesia calling on participants to find consensus for the sake of the global economy, the summit splintered between Western countries on the one hand and Russia and  China on the other, as the United States and its partners blamed the current economic instability on Russia’s invasion of Ukraine.

“Russia chose this war, having been warned that a broad coalition of countries would respond with sanctions,” US Treasury Secretary Janet Yellen said on Friday. “By starting this war, Russia is solely responsible for negative spillovers to the global economy, particularly higher commodity prices.”

In April, at a previous finance ministers and central bank governors meeting, Yellen and representatives from Canada, Ukraine, France and the United Kingdom walked out of talks in protest of Russia’s attendance.

Russian Foreign Minister Sergey Lavrov earlier this month walked out of a meeting of G20 foreign ministers in what was seen as retaliation for the snub.

Russia’s invasion of Ukraine, which has resulted in shipments being stuck at Ukrainian ports for months on end, has been blamed for disrupting supply chains of everything from edible oils to grain exports.

The invasion has also interfered with exports of raw materials used in chemical fertilisers from Russia and neighbouring Belarus, with knock-on effects on oil palm crops in countries like Indonesia.

Consensus ‘naive’

“Meaningful consensus, on even a limited scale, is simply not possible when there are such deeply conflicting sets of political-economic interest,” Wilson said.

“Facilitation of Russia’s interests as a part of a compromise deal, for example, would undoubtedly be viewed by other G20 nations, such as the US and UK, as helping to facilitate and legitimise its war on Ukraine. A sizable chunk of G20 countries are actively opposed to Russia’s invasion. It is extremely naïve to imagine consensus would be possible and that this wouldn’t overshadow the entire event.”

On Friday, Bank Indonesia Governor Perry Warjiyo reiterated the theme of the Bali talks — “Recover Together, Recover Stronger” — as he pleaded with the G20 members to unite for the good of the global economy, seemingly to no avail.

“This is a global problem, that’s why a global solution is needed,” Warjiyo said.

Radityo Dharmaputra, an international relations lecturer at Airlangga University in Surabaya, said that Indonesia’s efforts to remain neutral on the war and Indonesian President Joko “Jokowi” Widodo’s recent visits to Russia and Ukraine meant that Indonesia lacked leverage to foster effective dialogue at the forum.

“I think this was an expected situation and many warned Indonesia that the G20 would not be a normal summit and would be filled with great power politics,” Dharmaputra told Al Jazeera.

“Appealing to the West that this war is devastating the global economy will be difficult since, at the same time, Ukrainians are being killed and bombed by Russia. The moral stance of the West will be questioned by many of its own citizens if they agree to a compromise with Russia. Indonesia is trapped in its own hole. The Indonesian government, from the very beginning, tried to be neutral in a war. It has some drawbacks since, by staying in the middle, Indonesia can’t really influence the proceedings.”

Dharmaputra added that if Indonesia had taken a clear position and been more critical of Russia, the government could have used its G20 presidency to put pressure on the country either by disinviting Russia or threatening its expulsion if it kept attacking Ukraine.

Indonesia, which currently holds the annual G20 presidency, has been leaning heavily on its historical legacy of a “bebas-aktif”, or non-aligned, approach to diplomacy while seeking to play an active role in brokering peace.

Some analysts, meanwhile, question the assumption the talks were a failure.

“Through this forum, Sri Mulyani Indrawati has succeeded in raising the issue of the need for countries in the world to pay attention to the food crisis and that has been agreed by many countries,” Deni Friawan, an economic researcher at the Centre for Strategic and International Studies, told Al Jazeera.

“The cancellation of this communique was very unfortunate, but also understandable because of the tension that exists between the West and Russia and China.”

Friawan said countries needed to realise there was no “winning” at forums such as the G20 and that blaming Russia for the invasion of Ukraine would not produce a consensus on broader economic issues.

“Like the 2008 global financial crisis, it is necessary to coordinate economic policies, including at the central bank, to overcome the current crisis, so that there are no beggar-thy-neighbour policies such as protectionism or restrictions on food and commodities,” he said.

“That will actually make the crisis worse or become a race to the bottom.”