Thursday, 06 July 2017 14:01

Interview with the Razumkov Centre's Economist on G20: "The Issue of Sanctions Goes to the Background in the G20 Format"

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Volodymyr Sidenko told "Segodnya" publication about the G20 summit agenda, issues for which Trump will be scolded by global leaders and why the Ukrainian matter is discussed by G7

Already this Friday – July 7 – in the German city of Hamburg starts the two-day 12th G20 summit. It will not be an exaggeration to say that after the G7 summit, this event will be the richest in terms of political news, and at the same time will become a debriefing on the highest level. All of this concerns American policy and personally the U.S. President Donald Trump. European leaders do not conceal their dissatisfaction with the attitude of the United States leader to NATO, and literally the other day in his article for New York Times the former Chairman of the European Parliament Martin Schulz wrote that "the American people elected a President who hardly shows a respect for American values and the transatlantic partnership".

Besides political issues, the summit can expose some sharp political contradictions. According to an influential German publication Spiegel, the unpredictable American President risks turning the prestigious meeting of world leaders into a fiasco threatening to develop into EU-US trade conflict. "Almost nine years ago, at the height of the financial crisis, the world's 20 largest economies agreed to launch economic stimulus programs and to reach consensus on joint regulations to prevent bank collapses and tax evasion. Now, though, the Trump administration is reneging on numerous G-20 agreements," says the article in Spiegel.

In the official presentation of the G20 summit priorities, the Federal Chancellor of Germany Angela Merkel says that the issues of the global economy and trade will be the central theme of world leaders' discussion. On the overall, the agenda includes three key thematic areas: building resilience to economic shocks (world economy, global trade, employment, financial markets, tax cooperation), improving sustainability (climate and energy, digitalisation, The 2030 Agenda, health, empowering women) and assuming responsibility (tackling the causes of displacement, fighting terrorism, anti-corruption, partnership with Africa, agriculture/food security). Germany, as the country currently holding the G20 Presidency, will pay specific attention to partnership with Africa. As former Lithuanian Prime Minister Andrius Kubilius told in his "Segodnya" interview, the official Berlin developed a Marshall Plan for Africa.

The G20 summit agenda was being prepared by thousands, if not dozens of thousands, experts from different countries all over the world. Over the past six months, Berlin hosted seven expert forums on the topics later included in the G20 summit agenda. At one of such forums, on May 29-30 in Berlin, over 900 experts and analysts from more than 100 countries discussed issues of migration, climate, cybersafety, trade and investment. According to Razumkov Centre's Scientific Consultant on Economic Issues Volodymyr Sidenko, who represented Ukraine at this forum, in the focus of global experts' attention were the topics of climate, and in this context, the consequences of America's withdrawal from Paris Climate Agreement, global economy and world trade, as well as new technologies and high-tech businesses. Meanwhile, there was little talk about Ukraine and Russia's aggression.

In his "Segodnya" interview, Volodymyr Sidenko explained why Russia's aggression against Ukraine is discussed mostly by the G7, why we need to take measures in regard to reducing CO2 emissions, and what we must do in order not to find ourselves on the periphery of the world economy. 

- Tell us, what was discussed at the expert forum on May 29-30 in Berlin? Were all expert recommendations included in the G20 summit agenda?

- At the latest T20 meeting (Think20 Dialogue Forum) on May 29-30 in Berlin, there were over a thousand people from about a hundred countries. As far as I understand, I was the only representative from Ukraine. Т20 summit, as well as other non-government participants' summits affiliated with G20 (representatives of business, civil society, trade unions, women, youth), develops recommendations for the G20 on the top level. This summary document – Т20 "20 Solution Proposals for the G20" (general recommendations of the summit) was given to the Head of German Federal Chancellery and Federal Minister for Special Tasks Peter Altmaier. Also, the presence of four speakers representing Germany testified to the fact that the conference was held under the patronage of the Chancellor. All the research results were used by the headquarters to prepare for the G20 summit. I am not saying that G20 summit agenda will match the conclusions in this document. Yet they are closely aligned. And the top five areas defined by the Т20 will most certainly be the foundation of discussions: digitalisation – the introduction of digital technologies…

- And this will probably include the cybersafety issues?

- Obviously. Digitalisation should not be introduced without security guarantees, so that we can avoid such situations as we recently faced in Ukraine and other countries of the world. The second issue is building a global economy that is stable and resilient to shocks. And there is a special emphasis on the connection between economic and social changes – in many countries, the economy has stopped working to improve the well-being of citizens.

- Meaning, it is working to benefit large corporations?

- It so happened that at this moment it benefits the most powerful and wealthy circles.

The third issue to be raised at the G20 meeting is climate policy and its financing.

- The leaders will focus on America's withdrawal from Paris Climate Agreement…

- Yes, this is a key issue, and I think there will be a lot of controversy.

The fourth issue is the fight against hunger, reduction of the deepening inequality, and management of displacement processes.

And the fifth issue is The 2030 Agenda – a universal document aimed at ensuring prosperity of all countries, not just selected ones. Economists are predicting that in the period by 2030 the world will be seeing a fundamental technological change, which will rapidly create new productions, while simultaneously eliminating old jobs. And countries that are not part of this process, risk being left on the periphery of economic, as well as social development.

- Let us dwell on economic issues. Surely, in Berlin at the end of May, and in Hamburg in early July, the issue of sanctions is on the agenda?

- I will probably disappoint you, but the subject of sanctions came up at random several times and was not the focus of attention. We need to understand that the G20 format is slightly different from the G7. While at G7 meetings the topic of sanctions is regularly discussed in recent years, in the G20 – it is more in the background. Many developing countries are not particularly interested in it. Moreover, among them, there are a number of countries that have partnerships with Russia.

- We often hear that it is German businesses that are complaining and asking to lift the sanctions in order to go back to business as usual.

- This also was not discussed, – they seem to be avoiding this issue, where a consensus is impossible. This is why such topics are passed on to the G7, – "now you go and solve this".

- But they will surely criticise the US for withdrawing from Paris Climate Agreement.

- There was no need in the steps that Trump made in this issue. Paris Agreement is very flexible and does not impose any mandatory requirements. Each country is free to choose its format and scope of obligations. I think that in this case, the US made a political propaganda-based decision, rather than one based on a pragmatic and grounded approach. Over 90% of works published in recent years show an increase of anthropogenic influence on the atmosphere. Numerous studies by American scientists show that CO2 emissions in the atmosphere have reached unprecedented levels not just in the time of observation, but in the entire many-millennia-long evaluation period. In the T20 meeting, there were hardly any major disputes on this issue. Moreover, prominent people such as Nobel Prize-winning and often cited economist Joseph Stiglitz, and the former Chief Economist of the EBRD Nicholas Stern, are saying that countries need to increase their CO2 emissions taxes. This is a big challenge for Ukraine. We cannot simply raise our carbon emissions taxes, we will have to raise them dozens of times in order to match the recommended global guidelines in this sector.

- But according to various estimates, Ukraine's emissions are already lower than Europe's, why should we then raise taxes?

- Indeed, they are lower, but Ukrainian GDP is significantly below even the 1990's level. And this is nothing to be proud of, we need to grow. And if we keep growing within the old coordinate system, the level of emissions will grow exponentially. So we have to develop using new technologies that will allow to reduce even our current emissions by 35%. And this means, first of all, energy efficiency measures, the use of new energy sources that are not tied to CO2 emissions (the share of all alternative energy sources (solar, wind and biomass energy) in the structure of electricity production in Ukraine was 1.1% in the 5 months of 2017, and this is far from enough), renewable and non-carbon-based energy sources.

- Do you think that at the G20 summit Trump could offer an alternative to Paris Climate Agreement?

- He can offer anything he wants, but I do not think it will have support from European countries, which come united in this issue. Moreover, the China is also against, this is why it is currently developing alternative energy very intensively. According to discussions held in Berlin, where the United States was represented by the four Nobel Laureates, it is clear that Trump's decision has no support in the US as well. One cannot shape a country's policy in favour of a small group of energy companies that are interested in lowering their costs.

- There already have been statements that at the G20 meeting Trump intends to discuss the launch of shipments of American LNG to Europe to reduce dependence on Russian fuels.

- Today the US Administration is focused on business interests: increasing its presence in the EU markets and creating jobs in the US, reducing debt burden through export growth, etc.

But Europe has its own, somewhat different position in this matter. They, apparently, do not mind reducing the dependence on Russian supplies. But they will not put all their eggs in one basket. Therefore, I do not think that Europeans will substitute one monopolist (Gazprom) for another.

There is also the issue of price: lately, Gazprom has been pursuing a price reduction policy, so there is a question –  will the supply of LNG from across the ocean be economically beneficial?

- Recently, there has been much talk about a Marshall Plan for Ukraine. In his "Segodnya" interview, the former Lithuanian Prime Minister Andrius Kubilius said that their "New European Plan for Ukraine" was already supported by the European People's Party Congress. The plan was also presented to the top officials in Brussels and Berlin. Have you heard any discussions about an economic support plan for Ukraine at the T20 meeting?

- Eastern Europe issues were discussed in the context of global security issues. Local topics were not in the focus of attention. We are talking about the fact that less developed countries, Ukraine included, require significant financial resources. Implementation of the Association Agreement requires billions of euros. But this does not necessarily mean that we have to resort to new major external financial infusions. According to estimates of banking associations, we have about 100 billion dollars outside of the banking system, which could be used for domestic investment. But this requires the state to create a favourable investment climate. Without this prerequisite, nothing will work, even with the "Marshall Plan for Ukraine".

- Referencing a Razumkov Centre report, "Segodnya" already wrote that next year, without the inflow of foreign investment, Ukraine can find itself on the verge of default.

- The topic of default arises from time to time. What do we mean by it in this case? Starting from the autumn of 2017, there is a tendency for increasing the volume of external payments. But the source of these payments is so far unclear. Any loans work when something is created inside the economy, which serves as a source of repayment. Right now, we live by refinancing our old loans with the new ones. Even the widely promoted restructuring of non-government external debt serves only as debt rescheduling. We must use loan funds effectively in order to create competitive industries capable of supplying foreign markets with expensive products and thus creating a base for our country's earning of foreign currency. Otherwise, there will come a time, when we are unable to service our external debt. Because any borrowing, if there are no sources of repayment, creates a vicious circle, and there comes a moment when the country can no longer pay. For us, this is not just a matter of financial default, but also the default of the entire political course. In this case, we will be unable to finance the implementation of the Association Agreement with the EU. This is also an important factor in our confrontation with the Russian Federation. So the issue of investing in new technological areas, – not just in technology, but also in the relevant process management systems, – is a key aspect for the country's development policy and its security.

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Last modified on Friday, 07 July 2017 12:29