G7 - INTERNATIONAL RELATIONS
News: G7
price cap on Russian oil kicks in, Russia will only sell at market price
What's in the news?
● The
Group of Seven price cap on Russian seaborne oil came into force as the West
tries to limit Moscow's ability to finance its war in Ukraine, but Russia has
said it will not abide by the measure even if it has to cut production.
Key takeaways:
● The price cap, to be
enforced by the G7 nations, the European Union and Australia, comes on top of
the EU's embargo on imports of Russian crude by sea and similar pledges by the
United States, Canada, Japan and Britain.
● It
allows Russian oil to be shipped to third-party countries using G7 and EU
tankers, insurance companies and credit institutions, only if the cargo is
bought at or below the price cap.
● As
the world's key shipping and insurance firms are based in G7 countries, the cap
could make it difficult for Moscow to sell its oil for a higher price.
● Russia,
which is the world's second-largest oil exporter
●
● said,
it would not accept the cap and would not sell oil that is subject to it, even
if it has to cut production.
● Selling oil and gas to
Europe has been one of the main sources of Russian foreign currency earnings
since Soviet geologists found oil and gas in the swamps of Siberia in the
decades after World War Two.
G-7 - Backdrop
● The
G7 is an informal forum of leading
industrialized nations, which include Canada,
France, Germany, Italy, Japan, the United Kingdom and the United States.
● As
of 2022, G7 countries make up 10% of the
world’s population, 31% of global GDP, and 21% of global carbon dioxide
emissions, according to the Summit website.
● The
G7 countries are important players in global trade. The US and Germany in
particular are major export nations.
● The
G-7 was known as the 'G-8' for
several years after the original seven were joined by Russia in 1997.
● The
Group returned to being called G-7 after Russia was expelled as a member in
2014 following the latter's annexation of the Crimea region of Ukraine.
Working:
● The
G-7 does not have a formal constitution
or a fixed headquarters. The decisions taken by leaders during annual
summits are non-binding.
● The
G-7 nations meet at annual summits
that are presided over by leaders of member countries on a rotational basis.
● The
summit is an informal gathering that lasts two
days, in which leaders of member countries discuss a wide range of global
issues. The host country typically gets to invite dignitaries from outside the
G-7 to attend the Summit.
● The
groundwork for the summit, including matters to be discussed and follow up meetings,
is done by the "sherpas",
who are generally personal representatives or members of diplomatic staff such
as ambassadors.
Exclusion:
● China and India,
the two most populous countries with among the largest GDP figures in the
world, are not part of the grouping.
● There
are no G7 members from Africa, Latin
America or the southern hemisphere.
Challenges of G-7:
● In all G7 countries,
annual public sector expenditure exceeded revenue in 2021.
Most G7 countries also had a high level of gross debt, especially Japan (263%
of GDP), Italy (151%) and the US (133%).
● The
rise of India, China, and Brazil
over the past few decades has reduced the G-7's relevance, whose share in
global GDP has now fallen to around 40%.
● Internally
the G7 has a number of disagreements,
e.g. clash of the USA with other members over taxes on imports and action on
climate change.
● The
organization has also been criticized for not
reflecting the current state of global politics or economics.
Significance of G-7 for India:
● As current president of
Brazil-Russia-India-China-South Africa (BRICS) and G20 president in 2023,
India will play a key role in multilateral cooperation helping to build back
better around the world.
● Build Back Better World
(B3W) is an initiative undertaken by G7
countries. Launched in June 2021, the initiative is designed to provide an
alternative to China's Belt and Road Initiative (BRI) for the infrastructure
development of low- and middle-income countries.
● The
initiative builds on the Blue Dot
Network, a collaboration that aims to build a global network through
lending-based financing to build roads, bridges, airports, ports, power plants.
The B3W efforts are in line with the standards and principles of the Blue Dot
Network (BDN), relating to the environment and climate, labor and social
safeguards, financing, construction, anti-corruption, and other areas.
● India
will get more voice, more influence, and more power by entering the G7. After
the UN Security Council (UNSC), this is the most influential grouping.
● The
three countries of this group are permanent
members of the UN Security Council, which provides global political power
to this group, which India can benefit from.
● India
has attended several G7 summits earlier, as a special invitee for its outreach
sessions. This should hold down China's objection to an expanded G7.
● Diplomatically,
a seat at the high table could help
India further its security and foreign policy interests, especially at the
nuclear club and UN Security Council reform as well as protecting its interests
in the Indian Ocean.
G-7 and G-20:
1. Induction:
● The
G-20 is a larger group of countries, which also includes G7 members. The G-20
was formed in 1999, in response to a felt need to bring more countries on board
to address global economic concerns.
2. Membership:
● Apart
from the G-7 countries, the G-20 comprises Argentina, Australia, Brazil, China,
India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey.
● Together,
the G-20 countries make up around 80% of the world's economy.
3. Role:
● As
opposed to the G-7, which discusses a broad range of issues, deliberations at
the G-20 are confined to those concerning the global economy and financial
markets. India is slated to host a G-20 summit in 2023.