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G20 Is Too Big To Fail: Time To Compromise On Russia And Save World Economy – Analysis

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By Yose Rizal Damuri and Peter Drysdale*

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On 12 and 13 May the leaders of ASEAN will meet US President Joe Biden at the White House for the first in-person US–ASEAN Summit since the beginning of the pandemic. The summit will be a way for ASEAN to communicate what it wants from US engagement in the region, but also an important moment for urgent dialogue between the White House and Indonesia, this year’s G20 chair.

The stakes are high. They involve not only the United States’ ability to support Indonesia’s emergent leadership role on the world stage, but also the viability of the G20 as a platform for coordinating the global economic recovery from the pandemic and managing other global problems.

Indonesia’s role both in the G20 and its weight within ASEAN make it vital for the United States. Indonesia’s diplomatic instinct is to build bridges between the developed and developing world, an asset in the G20, which brings together both. This year’s Indonesian G20 agenda brings developing country interests in equitable and sustainable recovery to the fore. Indonesia’s size, legitimacy and its tradition of non-alignment mean it is uniquely qualified to lead the G20 in difficult times like these.

The United States also needs Indonesia perhaps more than it realises: the Biden administration’s Indo-Pacific Framework and indeed anything the United States does in Asia needs Indonesian buy-in to succeed.

But Indonesia does not want to get its hands dirty in great power politics: it takes non-alignment seriously. This is a problem because of the increasing injection of geopolitics into economic forums like APEC and, potentially, the G20 — a process in train before Vladimir Putin’s invasion of Ukraine, but one which has accelerated drastically since.

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When US and ASEAN leaders meet at the Washington summit, a point for discussion will be finding a way for Indonesia and the West to prevent the diplomatic fallout over Russia’s invasion of Ukraine from derailing the economic cooperation agenda embodied in the G20, while also addressing the substantial economic impact of the conflict itself.

The politics of the G20 are multifaceted for Indonesian President Joko ‘Jokowi’ Widodo. The success of Indonesia’s chairmanship is deeply important to him, not only for the short-term policy wins that may emerge from this year’s meetings so much as a legacy as he prepares to leave office in 2024.

For that reason, Jakarta will have to take on board the view of some G20 members that it would be a travesty to offer Vladimir Putin a chance to pose as a responsible stakeholder in the international system by participating in the G20 leaders’ summit in Bali. Some have mooted a boycott should Putin attend.

Indonesia could solve this problem and let the G20 proceed as planned simply by contriving, through quiet diplomacy, a way to keep Putin away from the Bali summit. But domestic political optics now starkly colour decision-making: with the United States and allies having staked out their position so publicly, by disinviting Russia the government would face accusations at home that it had caved to Western pressure. The Indonesian public was supportive of Putin initially, due to anti-western sentiment in Indonesia, though that mood has shifted as the economic effects of the conflict, notably resurgent food and energy price inflation, have cut in.

The attendance of Ukrainian President Volodymyr Zelensky offers a chance to ring-fence the Ukraine–Russia conflict at the G20. Ukraine and Russia could deliberate on the sidelines of the summit, perhaps aided by the mediation of Turkey or another non-aligned G20 member. This could be complemented by all countries commitment to present in Bali for the summit. Whatever it takes to keep the G20 focused on the economic cooperation agenda is the priority.

A framing that focuses on the economic impact of the conflict and the framework for a post-war settlement in Europe, including the conditions for lifting sanctions and rebuilding the Ukrainian and Russian economies, is a way forward. Post conflict Russia needs to be Germany after WWII, not Germany after WWI.

The costs of failure should be clear to President Widodo of all people, as he faces political blowback from rising food prices. In response to a spike in cooking oil derived from crude palm oil — of which Indonesia is the world’s largest producer — the government instituted a retail price ceiling in January; predictably, stocks either disappeared from shelves or traded hands at inflated market prices. In the hope of stabilising domestic supply and prices the government has now banned crude palm oil exports — sending the global market into disarray, crashing the local farm gate price, and costing the government billions of dollars a month in lost tax revenue.

The palm oil export ban exemplifies the kind of knee-jerk policy which, if replicated across the world, will imperil the post-pandemic recovery. With the global trading system in a sorry state, in the short term the G20 is the world’s best hope for dialogue and policy coordination to forestall counterproductive national responses to inflation, supply chain disruptions and geopolitical fracture. The global trade and economic recovery agenda is a burden beyond the capacity of the United States and G7 alone (which collectively account for only 27 per cent of world trade) without active participation of developing economies in the G20.

For these reasons the focus of the US–ASEAN summit is bigger than ASEAN. It’s an opportunity for the key stakeholders in the regional architecture to send a message to the US leadership on their multilateral priorities; for Indonesia, it’s a chance to impress upon the Americans the need for scope to exercise leadership in global affairs on its own terms, guided by its long-professed values and its unalterable domestic political realities.

*About the authors:

  • Yose Rizal Damuri is Executive Director of the Centre for Strategic and Economic Studies (CSIS) Indonesia.
  • Peter Drysdale is Emeritus Professor and Head of the East Asian Bureau of Economic Research in the Crawford School of Public Policy.

Source: This article was published by East Asia Forum

East Asia Forum

East Asia Forum is a platform for analysis and research on politics, economics, business, law, security, international relations and society relevant to public policy, centred on the Asia Pacific region. It consists of an online publication and a quarterly magazine, East Asia Forum Quarterly, which aim to provide clear and original analysis from the leading minds in the region and beyond.

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