How the War in Ukraine and Big Power Tensions Could Derail the Bali G20 Summit

Ye Yu    source：Council on Foreign Relations

The Group of Twenty (G20) leaders summit is set to take place in Bali, Indonesia, on November 15 and 16 at a time of expanding global divisions. Strategic competition is increasing tensions between the United States and China, Russia’s invasion of Ukraine is reverberating echoes of a possible new cold war, and divergent economic policies could further exacerbate gaps between advanced economies and emerging and developing countries. In this Council of Councils global perspectives series, five experts recommend what the G20 summit’s priorities should be and reflect on what growing geopolitical tensions mean for the group's future.

The G20 Needs to Restore Its Credibility as a Crisis Committee

An atmosphere of hostility has hung over this year’s G20 process, and the tensions are set to dominate the summit in Bali. The deep geopolitical rift already prevented the G20 finance ministers and central bank governors meetings from issuing joint statements. The intense strategic competition and economic decoupling efforts between the United States and China continue to worsen, exemplified by U.S. President Joe Biden signing the CHIPS Act, which could further dampen international businesses confidence in the global economy. The geopolitical tensions are putting the global economy, and globalization, at risk.

Under this backdrop, the G20 leaders should reestablish the forum’s image as a crisis committee before discussing a more ambitious global economic governance agenda. They should address three important priorities at the summit.

First, the G20 should attempt to facilitate the end of the Russia and Ukraine military conflict as soon as possible. This is a necessary precondition for any effective global economic and social measures the G20 can hope to achieve. The war has made everyone suffer, especially those living amid the conflict and in the surrounding region. The global energy and food crises are hitting African and European countries hard, and will not end anytime soon without a quick peaceful resolution.

Second, the G20 should enhance monetary policy coordination. This should inject confidence in global markets and prevent any worsening in the global economy. As the World Bank warns, central banks around the world have been simultaneously raising interest rates in a way the world has not seen in the last five decades. Strikingly, this round of U.S. monetary policy tightening is not only causing great economic volatility for emerging and developing world, but also causing panic in other Group of Seven economies. The world therefore needs comprehensive G20 coordination. The leaders should also draw red lines about the economic and technology decoupling.

Third, the G20 should take meaningful measures to aid the most vulnerable groups in the developing world. Concerns over an emerging sovereign debt crisis are rising. The IMF disclosed that more than one hundred countries had requested emergency financing since the outbreak of the pandemic. G20 countries should address this issue as a common challenge rather than blaming each other. China has worked with the Paris Club on implementing the G20 Common Framework on debt treatment beyond the G20’s Debt Service Suspension Initiative. A case in point, this summer, Zambia was able to secure an agreement with China and France, which co-chair a committee of official bilateral creditors as part of a debt restructuring arrangement with Zambia under the G20 Common Framework, before private creditors made any concessions, which is vital for Zambia to get a timely access to IMF resources and avoid further deteriorating its sovereign debt rating.

The G20 Common Framework still faces a severe collection action dilemma, but it is not useful for U.S. Secretary of the Treasury Janet Yellen to single out China as the major obstacle for the process to go ahead. For major bilateral creditors such as China to contribute more, the G20 leaders should ask multilateral development banks to be more ambitious in recapitalization and resource mobilization.