The group of 7 (G7) leaders from Canada, France, Germany, Italy, Japan, the UK and the U.S. have concluded a three-day summit: the 48th annual G7 summit. G7 leaders meeting in southern Germany has agreed to invest hundreds of billions of dollars in global infrastructure. The move aims to help developing countries and counter China's drive to exert influence in emerging economies, through large-scale investments. But it is Russia's war in Ukraine that is dominating the three-day meeting of the world's seven richest democracies, including the global economic impact of Moscow's invasion. The G7 leaders met in the tranquil surroundings of the Bavarian Alps, but the topic of highest priority is a stark contrast to their peaceful surroundings. Top of the agenda is, of course, the war in Ukraine and the worldwide fallout. Ursula Von Der Leyen, The European Commission President, gave a statement saying: “We've just tried to overcome a global pandemic and it shook the global economy and then as the global economy was just recovering, Russia's vicious attack on Ukraine happened, driving prices up everywhere, from food to energy and casting deep uncertainty, especially in the most fragile countries.” Host, German Chancellor Olaf Scholtz also said: “the world is facing economic difficulties just as big as the problems of the 1970’s when the G7 was starting out.” He goes on to say: “falling growth rates, rising inflation raw material shortages, and supply chain disruptions. These are no small challenges and we must share the responsibility.” U.S. President Joe Biden announced a $600 billion G7 initiative to boost infrastructure in developing countries, intending to counter China's growing global influence. He said: “developing countries often lack the essential infrastructure to help navigate global shocks, like a pandemic, so they feel the impacts more acutely, and they have a harder time recovering in our deeply connected world. That's not just a humanitarian concern, it's an economic and security concern for all of us.”
Tight security prevented any unrest at the summit, but protesters were gathered on the fringes, mainly climate change campaigners and activists opposing Germany's plans for a big rise in defence spending.
As well as this, the leaders are considering more measures to punish Russia for the war in Ukraine; the U.S., Canada, Japan and Britain have all announced a ban on imports of Russian gold. The overall message is one of unity in the face of aggression. When the G7 leaders spoke with Ukrainian President, Zelenskyy, on the second day of the summit, they were all united in criticizing Russia for its attack on Ukraine. The G7 leaders are trying to show their support not only with words but also with practical plans; for instance, implementing a ban on gold imports. Russia is the second biggest gold-mining nation in the world. As a show of their unity to Ukraine, G7 countries have pledged to no longer import gold from Russia. As a result, the price of gold will rise. A ban on any import, that Russia is the primary holder of i.e. titanium, will see a price rise in that commodity. This is because the greatest supply of this commodity is being banned, we can no longer access it, but the commodity is still being demanded, therefore this demand is now being spread out amongst a smaller supply of that commodity. As demand is greater than supply, price rises. There were also talks about implementing a price cap on oil exports from Russia, this too will negatively impact Russia. Ultimately, G7 want to make it evident to Ukraine that they are here to support them in the long term.
Moreover, helping the world deal with climate change is another major topic for the G7. Climate change has taken a bit of a back seat now that the war in Ukraine has been the dominating topic at the G7 summit, but climate change is connected in some way to Russia's aggression in Ukraine. This is because a lot of G7 countries now have the urgent need to make themselves independent of Russian fossil fuels and they have to do that quickly. The war, albeit unfortunate, is an opportunity for them to pursue faster and bigger development of renewable energies in the future. This is something that chancellor Olaf Scholtz also wants to bring home; he has an idea to create a ‘Climate Club’ of willing countries that can be an example and show leadership in terms of building up renewable energy and promoting sustainability.
Although the ban on imports of Russian gold will adversely affect the Russian economy, as long as Russia still can sell oil and gas globally, they won’t be impacted too largely. If India, China and other big countries are buying Russian gas, the negative effects of the gold ban, won’t be felt as intensely. Despite the war, Russia is doing well, even the Russian welfare fund is growing. It is hard to see that Putin will make any compromise here because he wants to get Ukraine under control. It is unlikely, that the ban on importing Russian gold will change Russian policy at the moment.
The war in Ukraine is a defining moment for the west, which the G7 embodies to some degree. But the west’s influence in the world is severely tested as a consequence of the war. It is impressive how united western countries are. G7 is somehow back after it was a declining format. Western democracies understand that they have to coordinate and cooperate more in light of the Russian war. At the same time, we can also see the limits of the influence of western countries, for instance, countries like India, China, Brazil and South Africa do not follow western countries on sanctions. We see a changing order which is neither unipolar nor bipolar it is multipolar. It is evident that other major countries neither follow Russia nor follow the G7. In order for the G7’s policies to truly have an effect on Russia and mitigate the effects of the war, the world needs to back these policies, not just the G7.
Edited and reviewed by Tanish Bagga.
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