G20 has a Russia-Ukraine problem as India takes up presidency next year

The war has cleaved the group, stalling much of the preparatory work on more substantive issues

The controversy involving India hosting the G20 summit in Kashmir in 2023 is one of the issues deflecting attention from the critical importance of the meet scheduled for November in Bali. This one will take place in the middle of the worst supply shock the world has faced in decades, a climate crisis and the aftershocks of the Covid-19 pandemic. Added to that, the Russia-Ukraine war is threatening the institution as it has never done since it was formed 23 years ago in 1999.

The G20 delivers heft because it is the only forum where the heads of state of these countries plus the heads of all multilateral organisations sit across each other physically, for 48 hours, in some part of the earth. The 19 member-nations, plus the European Union (EU), account for up to 80 per cent of the world’s economic output, two-thirds of the global population and three-quarters of international trade. 

That is why the difficulties that Indonesia as the president is facing this year, and India could face next year as the next president, are significant. “The G20 has a global profile, but it is true that in the wake of the Ukraine crisis its role will be constrained,” said Shyam Saran, former Indian foreign secretary and the erstwhile chairman of the National Security Advisory Board.

What the G20 decides matters to the world. In the Italian presidency last year, the G20 agreed to put a floor under corporation tax rates of 15 per cent. Since then, multinational companies with a turnover of $100 billion or more have begun to recalculate their tax liabilities, globally. The G20 will also give directions for setting standards, such as telecom, data interoperability, financial technology and so on. 

But geopolitical problems have begun to arrest the speed of work at G20 meetings this year. The Russia-Ukraine war has cleaved the G20 into two groups. Russia is a member of the G20, Ukraine is not. Much attention is devoted to whether the US, Canada and EU will agree to sign a joint communique with Russia in November this year. As a result, even the preparatory work has largely stalled.

As the table shows, the various working groups were in full flow under the Italian presidency; 22 meetings of the working groups were over between April and June. In contrast, just half the numbers have got done in Indonesia. As the war became intense in April, work practically came to a halt. 

While Yogyakarta will be attempting to restore the speed in July — finance ministers and central bank governors of the G20 nations arrive there next week to revive the process — the obstacles are severe.
 

The EU and the US are keen to include a reference to the ongoing war in every possible forum, condemning Russia. While all the Asian member-nations are on the same page in their criticism of Russia, they also insist the right place for expressing such opinions is the declaration of the heads of state, which will follow their meeting in November this year. 

As a result, when officials from the G20 nations are meeting this year as members of the working group, their dialogue is stalled on these issues. In the G20 framework, a large number of subject areas are decided at ministerial levels by the member countries. The working groups of country officials create draft joint declarations on labour, energy, telecommunications, health, finance and even culture. This is known as the Sherpa track (Piyush Goyal, minister for commerce, industry and consumer affairs, is India’s Sherpa).  

Former lead interlocutor for India in the Sherpa track, Alok Sheel, said he was doubtful if the heads of state will appear together at the summit’s plenary session. “The G20 has begun to now follow the lead of G7 on most international issues. This could get even more pronounced now,” he said.

After a series of consultations through the year, the ministers issue a joint declaration that includes action points for their respective governments. The work begins as early as December, and after the first meeting of the finance ministers and governors of central banks in January and February, the Sherpa track is joined in earnest. 

An example of how the process is stalled is provided by the result of the second meeting of the Environment Deputies Meeting and Climate Sustainability Working Group. Laksmi Dwanthi, Indonesia’s director-general of climate change control, was forced to concede at a press briefing on June 21 that “we currently only have a pre-zero draft of the Communique; thus, we are unable to disseminate it. We will have a series of discussions and negotiations for the Communique, until the third meeting at the end of August in Bali.”

An official transcript of the crucial joint meeting of the health and finance ministries made the same point. Speaking together after the meeting with the media, Indonesia’s health and finance ministers noted that members <generally> agreed on the need for enhanced coordination between finance and health ministries to be better prepared for future pandemics. “Members are looking forward to further deliberations on the coordination arrangement between finance and health,” they added.

The Covid pandemic and the European war have dealt a severe blow to the prestige of the multilateral organisations. The World Trade Organisation was able to work out a trade deal because nations stayed away from core trade issues to focus on other topics. Having wedged themselves into the war by supporting one of the combatants, neither the International Monetary Fund (IMF) nor the World Bank and its associate organisations have shown the ability to bring all nations to a constructive dialogue.

More flashpoints are emerging, such as that of Taiwan and the South China Sea. Compared to the polarised G7, the G20 remains the only organisation with the persuasive power to make peace. So how far nations agree to various issues in Indonesia will be watched very carefully by investors, global markets and even the poorest nations – and will set the tone for India’s presidency next year.