A year after Russia invaded Ukraine, the war is deepening divisions among the world’s major economies, threatening fragile recoveries by disrupting food and energy supply chains and distracting from plans to alleviate poverty and debt restructuring in poor countries.
Those fissures became apparent last week when senior economic leaders from the Group of 20 nations gathered for two days at a resort in Bengaluru, a city in southern India where efforts to demonstrate unity have been overshadowed by surging tensions over Russia. During the summit, Western nations imposed a barrage of new sanctions on Moscow and revealed more economic support for Ukraine, while developing countries like India, which have reaped the benefits of cheap Russian oil, defied criticism.
Because of the divergent views, officials on Saturday struggled to cobble together the traditional joint statement, or communiqué, forcing senior officials from the Group of 7 nations, the world’s most advanced economies, to try to persuade reluctant colleagues that Ukraine’s defense should not be compromised worth the cost.
“Ukraine is fighting not only for its country, but for the preservation of democracy and peaceful conditions in Europe,” Treasury Secretary Janet L. Yellen said in an interview on Saturday, explaining the case she had taken to more reluctant countries. “It is an attack on democracy and territorial integrity that should affect us all,” she added.
The summit came at a crucial time for the global economy. The International Monetary Fund raised its global production forecast last month but warned that Russia’s war in Ukraine continued to cast a cloud of uncertainty. The fund also noted that the increasing “fragmentation” of the world could slow growth going forward.
Ms Yellen was among the most vocal critics of Russia during the two-day meeting. She once directly confronted senior Russian officials in a private meeting, calling them “complices” in the Kremlin’s atrocities.
The dispute over how to characterize Russia’s actions prompted French Finance Minister Bruno Le Maire to publicly vent his frustration at some countries that refused to write to attack Russia. He noted that when the leaders of the Group of 20 nations met in Bali, Indonesia in November, their statement said most members strongly condemned the war, and he said on Friday he was opposed to dilute that vibe.
“I want to say very clearly that we will oppose any move from the statement by the leaders in Bali on this issue of the war in Ukraine,” Mr Le Maire, who declined to name the holdouts, told a news conference. “We condemn in the strongest possible terms this illegal and brutal attack on Ukraine.”
India’s close economic ties with Russia have made India’s role as host of this year’s Group of 20 particularly challenging. Moscow is a major supplier of energy and military equipment to India, while the United States is India’s largest trading partner.
To remain neutral, India has tried not to label the conflict a “war,” instead focusing on other issues. In an opening speech at the summit, Prime Minister Narendra Modi outlined the threats to the global economy but made no mention of Russia, instead pointing to “increasing geopolitical tensions in many parts of the world.”
Some of the resistance to condemning Russia stems from concerns that the United States is using its economic power to isolate a member of the Group of 20.
“The fact that the US clearly has the power to act against a geopolitical rival is a matter of great concern,” said Eswar Prasad, a professor of trade policy at Cornell University, who speaks to both American and Indian officials. “There has clearly been a fragmentation of the G20.”
Mr Prasad added that the aggressive use of sanctions by the United States has raised fears among other nations – even if they disagree with Russia’s actions – that they may one day face Washington’s wrath.
This use of economic warfare was evident Friday when the United States imposed sanctions on more than 200 individuals and organizations in Russia and other countries that help fund Moscow’s invasion of Ukraine. Sanctions were also imposed on Russia’s metals and mining sector and energy companies.
The war in Ukraine was not the only topic on the minds of finance ministers in India last week.
The United States and Europe have continued to resolve differences over American subsidies for electric vehicles, which European countries believe will hurt their economies. A global tax treaty struck in 2021 continues to falter, raising the prospect that it could unravel. And talks on restructuring poor-country debt burdens to avoid a cascade of defaults have stalled, largely because of opposition from China.
“As far as I can see, there hasn’t been any significant change,” said Ms Yellen, who expressed frustration with China’s roadblock role over the past week.
But it is the war in Ukraine that has divided world business leaders the most. In many cases, resistance to supporting Ukraine and confronting Russia is the result of complicated domestic politics in many countries, and the United States is no exception.
A growing number of Republicans, including former President Donald J. Trump, have argued in recent weeks that the United States cannot afford endless support for Kiev. They claim that money would be better spent on domestic issues at a time when the United States is saddled with record debt and a flagging economy.
Last year, the United States provided more than $100 billion in humanitarian, financial, and military assistance to Ukraine. The Congressional Budget Office last week forecast that the United States is on track to increase its national debt by nearly $19 trillion over the next decade, $3 trillion more than previously forecast.
For the Biden administration, cutting aid to Ukraine doesn’t seem like an option.
In the interview, Ms. Yellen argued that the United States could afford to bear the cost and that assisting Ukraine was a priority for national security and economic reasons.
“The war is having an adverse effect on the entire world economy,” Ms Yellen said, “and to provide Ukraine with the support necessary to win and end this war is something we really cannot afford to do.”
Comments are closed.