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G20 in the shadow of global crises

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Indonesia Island Bali is busy hosting the most strained edition of the G20, or Group 20 countries on 15 and 16 November. The annual summit will host for two days with including G20 members – Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. The G20 was created after the Asian financial crisis in 1999, and the members consider themselves something of a superpowers club that manages future crises.

Beside political issues such as US-China tensions and Russian-Ukraine war, there are plenty of other issues on the discussion block. Soaring inflation, the ever-looming threat of a global recession, nuclear threats and perhaps most alarming of all, a rapidly warming earth are key agenda of discussions.

Amid all this ambiguity, the host and Indonesian President Joko Widodo is trying to play chief dealmaker, however, the success of the summit is in limbo.

No peace without dialogue

Of course, the host leader, Widodo will try level best to make this summit a success. He already insisted on co-existence and peace, and believes that there would be no peace in the world sans dialogue.

In fact, Widodo seemed sanguine about what has been described as the most diplomatically delicate and stressful G20 ever, but the first face-to-face meeting between US President Joe Biden and China’s leader Xi Jinping at the sidelines of the summit, have reported positive. Both sides made their best efforts to refrain from “cold war” which shows the first success of the summit.

Mr. Widodo has good relations with both Washington and Beijing as they remained as top trade partners, but in recent years China has consistently ranked as one of its top foreign investors.

Mr. Widodo is hosting the G20 summit as he is in the final stretch of his presidency as he has to stand down after two terms in the presidential palace.

Will the G20 make progress on many crippling issues?

Undoubtedly, there are plenty of issues to deal with. The COVID-19 pandemic has wrecked the global economy as it affected the supply chains. It has also slowed down global trade where even many developing countries pushed into the verge of bankruptcy.

The second headache is war in Ukraine that has created a global energy crisis and runaway inflation, prompting central banks to drastically raise interest rates.

All this is adding up to what the International Monetary Fund (IMF) is predicting will be a bad 2023 for the global economy. The 2023 slowdown will be broad-based, with countries accounting for about one-third of the global economy poised to contract this year or next, according to the IMF. It is feared that the global economy continues to face steep challenges as the IMF said that the worst is yet to come and, for many people, 2023 will feel like a recession.

This time G20 summit comes aimed political wrangling

It would not be wise to think that all the issues will be resolved in the summit. This time the world leaders are much divided on several fronts, starting from the Russia-Ukraine war to US and Middle Eastern issues and from Turkey to EU substance and so on. In such a context, it would be a difficult task on how to address these problems. The best Mr. Widodo can do in this summit is to open a window for discussions between the leaders which itself is a big development and pave the ground for face-to-face talks.

Much of G20’s work happens behind the close doors

It’s unlikely all the issues will be resolved in Bali in just two days of meetings. It has several dimensions, and needs more practical steps once promised by the world leaders to overcome it. Though there is high hope at the summit, but, in fact much of the G20’s work happens quietly behind the scenes, with leaders and high-ranking officials meeting throughout the year under a rotating presidency to address global economic challenges.

Rising tensions and deepening economic crisis have highlighted the need that these leaders should share the outcome of the summit in order to provide some relief to the anxiety of the people who are scrambling with delicate economic conditions and worried over the trend of daily inflation.

However, this year’s summit would take place in the backdrop of food and fuel prices spiking worldwide, and the renewed threat of nuclear war. There will also be one conspicuous absence around the table, Russian President Vladimir Putin. Russia is represented at the summit by Foreign Minister Sergey Lavrov.

DIPLOMACY

EU, Mercosur aim to finalize trade deal by early December

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The European Commission and Mercosur countries are working to complete negotiations on a long-anticipated trade deal by early December, sources familiar with the discussions told POLITICO.

Farmers are expected to rally against the deal in Brussels on Wednesday, with additional protests in France later in the week.

The upcoming G20 summit in Rio de Janeiro was initially seen as the ideal opportunity to finalize the agreement, which has been under negotiation for nearly 25 years.

“All the cards are on the table,” said one person familiar with the EU-Mercosur talks. “They want to ensure a near-finalized deal, so Ursula [von der Leyen] doesn’t make the trip in vain.” However, the signing of the agreement might be delayed over concerns that China could overshadow the summit.

A European Commission official confirmed that face-to-face talks are scheduled for the week of November 25 in Brazil to resolve any outstanding issues. While the official refrained from specifying a completion date, they emphasized that the Mercosur nations—Brazil, Argentina, Uruguay, Paraguay, and new member Bolivia—are pushing to sign the agreement promptly.

Uruguay is set to host the Mercosur summit from December 2–4, with Argentina, under newly elected Javier Milei, assuming the bloc’s presidency.

China concerns accelerate EU-Mercosur deal timeline

This “cows-for-cars” trade deal would eliminate trade barriers and establish a common market encompassing around 800 million people, representing 20% of global GDP. For European countries, particularly Germany, this agreement is viewed as overdue, especially given China’s expanding economic footprint in South America, where European firms are increasingly being sidelined.

“If we don’t reach a trade agreement with [Mercosur], China will inevitably fill the void,” remarked Kaja Kallas, the EU’s new foreign minister, on Tuesday. Citing data, she added that Chinese investment in Latin America surged 34-fold between 2020 and 2022.

Those familiar with the negotiations indicated that certain issues remain unresolved, including public procurement regulations, environmental provisions, and the legal structure of the agreement.

Mercosur nations are particularly keen on securing more flexibility from the EU and additional time for local firms to compete with European counterparts. Brazil has also expressed a desire to protect its domestic automotive industry from EU imports, especially electric vehicles.

France’s reluctance and Macron’s challenges

French Trade Minister Sophie Primas recently stated to POLITICO that Mercosur countries are eager to finalize the deal before the Mercosur summit. However, Primas remains skeptical that the agreement will enable the EU to effectively counter China’s influence in Latin America.

Amid concerns over a potential surge in agricultural imports, France successfully blocked the Mercosur negotiations in January, just as they were nearing completion. This time, however, President Emmanuel Macron faces a tougher challenge, especially after recent electoral setbacks in the European Parliament and National Assembly.

In a recent letter published in Le Monde, over 600 French MPs from both parliamentary chambers urged von der Leyen not to proceed with the deal, citing unmet democratic, economic, environmental, and social standards for an agreement with Mercosur.

Paris falls short of blocking coalition

Despite recent efforts to secure opposition, Paris is unlikely to gather the qualified minority—representing at least 35% of the EU population—needed to block the deal when it comes to a vote among EU member states.

France has also launched a diplomatic campaign to persuade other EU nations to oppose the agreement. However, two diplomats with direct knowledge report that Italy has not been swayed.

Italy remains cautious in supporting the deal, wary of the potential for political fallout like that seen in France.

‘France’s opposition is symbolic; the battle is lost’

Over the weekend, Macron traveled to Argentina to meet with Milei ahead of the G20 summit in Brazil. Meanwhile, Italian Prime Minister Giorgia Meloni is scheduled to visit Buenos Aires on November 20.

Although French ministers have vehemently opposed the deal and increased efforts to build a blocking minority, Prime Minister Michel Barnier has kept a low profile. Barnier is expected to meet with von der Leyen and EU Trade Commissioner Valdis Dombrovskis in Brussels today (November 13) and will likely address the Mercosur agreement, which he opposes in its current form.

Critics argue that France’s resistance is mostly symbolic, and that Paris has already lost this battle.

For years, France has insisted on incorporating the Paris Agreement and enacting legally binding deforestation commitments as part of the Mercosur deal. In response, the European Commission has indicated its intent to support French demands in the final phase of negotiations, although Mercosur countries have repeatedly signaled their resistance to any form of sanctions.

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Japan, UK to launch bilateral economic dialogue ahead of potential Trump tariffs

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Japan and the UK are set to initiate an economic version of the “two plus two” dialogue—a regular meeting between foreign and trade ministers—due to rising concerns about possible tariffs from U.S. President-elect Donald Trump.

Japanese Prime Minister Shigeru Ishiba and his British counterpart, Keir Starmer, are scheduled to meet in Rio de Janeiro during the upcoming G20 Summit on Monday, November 18. According to officials from both governments, the goal is to establish a bilateral economic dialogue.

This development follows Trump’s recent election victory and his anticipated return to the White House in January. During his campaign, Trump pledged to impose tariffs of 60% on imports from China and 10-20% on imports from other nations, including Japan and the UK.

The Japan-UK economic dialogue aims to strengthen cooperation in upholding the international economic order, including principles of free trade.

Topics at the meeting will cover a wide range of strategic and geopolitical issues. Both partners are expected to explore ways to initiate a trade dialogue with the U.S. to prevent a potential tariff hike. Sources indicate that countermeasures may also be on the table if U.S. import tariffs do increase.

In 2023, 20% of Japan’s exports and 15% of the UK’s exports were destined for the U.S., underscoring the potential economic impact of increased tariffs.

Additionally, the UK hopes that a strengthened partnership with Japan can help offset its reduced influence since leaving the European Union (EU) in 2020.

During the previous Trump administration, the EU (of which the UK was then a member) imposed retaliatory tariffs on U.S. steel and motorcycles in response to Washington’s high import duties.

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Azerbaijan plans to boost oil and gas production as it hosts COP29

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The 29th Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) has commenced in Baku, Azerbaijan’s capital. As the host nation, Azerbaijan is also looking to expand its fossil fuel production, positioning itself at the intersection of climate policy and energy expansion.

According to the Financial Times, Azerbaijan’s state oil and gas company SOCAR (State Oil Company of Azerbaijan Republic) is set to increase production of new fossil fuel sources during the COP29 summit. The summit, a key gathering on global climate change, underscores a paradox for Azerbaijan: pledging climate action while pursuing expanded oil and gas output.

A report by campaign group Global Witness, which analyzed data from independent consultancy Rystad Energy, estimates that 44% of SOCAR’s production will be new oil and gas by 2050—the second-highest proportion among national oil companies globally. This report examined production projections based on both developed and undeveloped fields as well as undiscovered fossil fuel reserves.

According to the International Energy Agency (IEA), new long-term oil and gas projects conflict with the goal of limiting the average global temperature rise to 1.5°C above pre-industrial levels—the target set by the Paris Agreement. This expansion aligns Azerbaijan with Europe’s aim to diversify energy sources, especially given the EU’s push to replace Russian gas following the Ukraine conflict.

Meanwhile, SOCAR has increased production in recent years as Europe seeks to replace Russian natural gas with resources from other nations, including Azerbaijan. This has drawn criticism, particularly as Azerbaijan—through Muhtar Babayev, COP29 President and Minister of Ecology and Natural Resources—continues to call for limiting global warming to 1.5°C.

At COP28 last year in Dubai, almost 200 nations committed to phasing out fossil fuels by mid-century. Nevertheless, Azerbaijan has signed multiple oil and gas deals since securing COP29 hosting rights, including SOCAR’s first international investment in upstream oil and gas—a $468 million stake in UAE gas projects.

“Azerbaijan is Europe’s strategic supplier of natural gas and is expanding capacity to meet European energy demands after the 2022 supply disruptions,” a COP29 spokesperson stated. Additionally, Azerbaijan is “expanding its renewable energy exports to serve the region and European markets,” he added. SOCAR did not respond to requests for comment.

Azerbaijan’s COP presidency has sparked criticism, echoing concerns raised during the UAE’s COP28 role. Richard Kinley, former executive secretary of the UN climate panel, expressed disappointment: “It is deeply disturbing that they can’t even seem to draw a ‘sanitary cordon’ around the COP presidency to prevent fossil fuel interests from undermining its purpose.”

Danish Climate Minister Lars Aagaard—attending COP29—remarked that Azerbaijan’s energy strategy also includes renewable energy initiatives, with Ørsted, a prominent wind energy company, present at the summit. However, European diplomats told the Financial Times that Azerbaijani officials have raised gas deal discussions alongside climate negotiations, mainly in relation to replacing Russian gas supplies transiting through Ukraine, with this contract ending soon.

According to Bloomberg, companies in Hungary and Slovakia are finalizing a deal with Azerbaijan to substitute gas from the Ukrainian pipeline. Energy analysts have cautioned that this agreement could mask continued Russian gas flows. Additionally, a recent report from Chatham House highlighted Azerbaijan’s strategy to secure long-term European gas supply agreements.

“By positioning itself at the heart of the multilateral climate process, the Azerbaijani government may seek to shape the global energy transition dialogue to ensure its oil and gas reserves remain profitable as long as possible,” the report suggests.

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