The recently concluded G7 Summit in Italy – all the various stages of it – seems to be an acceptance of the group’s waning influence and relevance in today’s world. From reading and hearing news reports of the summit, I got the sense that with weakening economies, and plenty of political problems in each of the member countries, the group is trying hard to put up a united front, when there is very little that actually unites them.
I have wondered about the significance of the G7 group of nations for many years now, and with G20 having emerged as the more important and relevant grouping of countries for this century, G7 seems more and more like a defunct club of once-rich nations. Indeed, the clubbiness is perhaps the only thing on display at their gatherings, where they can pat each other’s backs and agree on matters that seem to have very little effect on the rest of the world. Remember, they once even allowed the enemy nation, Russia, in and called it the G8! That was in Obama’s time, and soon Russia was expelled from the grouping. Then, Trump confronts Angela Merkel on Germany’s energy policy – the Nord Stream 2 pipeline specifically – looking for a deal to export America’s shale gas instead.
Well, as it has turned out, all of Europe is now importing vast amounts of America’s shale gas thanks to Russia’s attack on Ukraine. At the latest G7 Summit, a financial loan to help Ukraine was the most important topic of discussion according to news reports, and all member countries agreed on using Russia’s frozen assets to help Ukraine. Except that it isn’t going to be easy to go ahead with this plan without violating international laws and according to this news report, there are various plans being considered, and the modalities have yet to be worked out. I shuddered and winced at some of the ideas under consideration and though I am not a finance professional, I can tell everything isn’t above board.
Yet, nothing stops the mostly western rich nations grouping – with the exception of Japan – from flexing its muscles and its money power. And let’s understand this correctly, I mean of course, the weaponization of the US dollar. On the eve of the final G7 summit, US announced bigger sanctions on Russia by banning dollar trade on the Moscow exchange and the EU followed suit by banning Euro trade as well; the Russian rouble plummeted as never before and this news was making waves on Twitter, sorry X.
Weaponising the US dollar has gone to such ridiculous extents that soon it will cease to have any meaningful effect of the desired kind, what with all the exceptions and opt-outs also being made. India continued to import Russian oil and gas at discounted prices and so did many countries, including those in Europe until they were able to make alternate arrangements. In fact, let me say that over-weaponisation of the US dollar can even hasten its demise or fading away as the reserve currency and the international currency for most trade. Russia is reported to be already doing a lot of its trade with China, for example, in rouble and the Chinese yuan. By over weaponizing the US dollar to sanction Russia, Iran and other such countries, America might have caused the world to reduce trade in dollars considerably already, if there is any data to tell us this, and that can’t be good for them or for the world.
In fact, the fact that the ECB and the EU fear that in anticipating sanctions against them, China too might sell its holdings of European bonds, shows how real and serious the concerns are about further fragmentation, including of the financial kind. The US having raised tariffs by 100% on Chinese EVs and semiconductors and urging that the EU do the same, is yet another sign of the paranoia that grips rich western countries about their waning influence.
Then, there is the moral argument against weaponizing of an international currency, to this extent. Or indeed of using a country’s frozen assets to help another country that is being attacked by them, especially without any talks or agreement between the two affected countries, in this case Russia and Ukraine. Let us not forget that the west froze Afghanistan’s foreign assets as well and having abandoned the country to Taliban rule, have still not bothered to release any of the country’s assets even as Afghans were in dire need and dying of cold and starvation.
Through constant policy actions like these, western nations exacerbate geopolitical tensions by pushing China and Russia closer together. The biggest surprise was Russia signing agreements with North Korea, followed by Putin visiting Vietnam as well. Coming close on the heels of the G-7 Summit and the Ukraine Peace Conference in Switzerland, this certainly seemed an attempt at cocking a snook at the west. And let’s not forget, both North Korea and Vietnam are also firmly in China’s sphere of influence.
I am not sure how much progress was made at the peace summit in Switzerland immediately following the G7 summit, considering that Russia was not present at the meet. Meanwhile, if we turn our attention to the conflict in the Middle East, do we see a resolution to the humanitarian crisis and devastation in Gaza? Media reports spoke of a UN resolution for ceasefire – based on Biden’s plan – finally being passed at the UN Security Council with Russia abstaining. The US keeps saying that it is up to Hamas to agree to the peace plan, but there is no firm commitment from Israel either.
Does any of this suggest a rules-based order, when the G-7 nations themselves are considering breaking the rules, or circumventing them at any rate? Does this suggest a group of nations that is in control of global matters, or is it a club that is overseeing greater fragmentation of the economic and political kind? I see a set of flailing democracies trying desperately to maintain the status quo – as the EU parliament elections indicated – when the world around them is changing and changing rapidly. I think the western nations know it in their bones that the G-7 doesn’t exactly represent the current world order. Why else would they have invited several other countries including India, as observers or participants in the summit?
Meanwhile, expect the unexpected if Trump were to return to office in the US.
The animated owl gif that forms the featured image and title of the Owleye column is by animatedimages.org and I am thankful to them.
Peripatetic Perch 