At the recent Group of Seven summit in France, US President Donald Trump proposed that Russia be reinstated into the “rich nations” club because he felt its participation is essential to address global issues. Funny he did not mention China, because that country is arguably more connected to the world and better equipped to deal with hot issues such as financial and trade distortions and climate change.
China is the world’s largest economy in purchasing power parity (PPP) terms at more than US$25 trillion and and second-biggest in nominal exchange-rate measurements, estimated at more than $14 trillion, many times bigger than Russia’s. Though its per capita gross domestic product is low because of its large population, size still matters.
In that light, one can only speculate that Trump’s rapprochement with Russia is all about China – having Russia at the G7 table might strengthen his position against the Asian giant. So far, his trade and technology wars against China have failed to ruin the Chinese economy and kill its technological advancements.
In fact, the opposite might be true, as China’s economy is still growing almost three times as fast as that of the US, estimated at 6.2% this year versus America’s 2.2% growth. Huawei and ZTE, the Chinese companies that Trump wanted to kill, increased their market shares from 27% to 28.5% and 8% to 9.6% respectively in the first half of 2019, according to California-based market research firm Dell’Oro Group.
If the speculation is true, Trump might be in for a rude awakening. The same movie was played before, when then-US president Bill Clinton and British prime minister Tony Blair invited Boris Yeltsin into the G7 club to form the G8. The two Anglo-American leaders opined that by having Russia inside the club, they could dominate the world economically and militarily. But the plan did not play out the way the two leaders had expected.
The G7 did not fulfill the promises of economic aid to revive Russia’s economy and not to expand the North Atlantic Treaty Organization into Eastern Europe. Instead of helping Russia’s economy to recover, the G7 was trying to take over its vast resources, oil and gas in particular. Instead of not expanding NATO, the alliance intended to increase its presence in Eastern Europe, former Soviet satellite countries in particular.
Under Boris Yeltsin, the Russian economy was a basket case. Many of the formerly state-owned assets were bought up by oligarchs and former senior government officials on the cheap. Moreover, they did not have the know-how for managing or operating a market economy, resulting in significant waste of scarce resources.
Russia’s deteriorating economy required it to seek a $20 billion loan from the International Monetary Fund, but the IMF’s harsh conditions of privatization and fiscal austerity worsened Russia’s economic plight. Privatization was meant to allow Western oil companies to take over the Russian energy sector, according to Nobel Economics Prize winner Joseph Stiglitz. Fiscal austerity meant Russia had to prioritize loan repayments over spending on economic stimulative programs, thus setting a “debt trap” for the country, as its inability to generate revenue led to increased indebtedness.
Yeltsin resigned and appointed Vladimir Putin as interim president. Thanks to a combination of luck and effective reforms, Putin revived the economy but refused to play by the rules set by the G7. Instead, he kept a close hand on managing the economy, polity and society, prompting critics within and without Russia to accuse him of becoming a “dictator” and an “obstructionist” in global diplomacy (read: not toeing the G7 or more specifically the US line).
Moreover, the West, the US in particular, accused Putin of protecting Iran and Syria, “annexing” Crimea and “destabilizing” Ukraine, culminating in the expulsion of Russia from the G7/8 framework.
Whether Russia was guilty of “annexing” Crimea or destabilizing Ukraine depends on one’s perspective. An overwhelming majority of Crimeans (who are ethnic Russians) voted in favor of returning to Russia. Crimea was previously part of Russia but was given to Ukraine by Soviet leader Nikita Khrushchev, who was Ukrainian. As for Russia destabilizing Ukraine, American scholar John Mearsheimer has argued that it was NATO’s decision to encroach into Russia’s back yard that caused that issue. Moreover, US-led NATO was accused of replacing a democratically elected Ukrainian president who was pro-Russia with a far-right leader who was pro-West.
Against these backdrops, the relationship between Russia and the US-led Western alliance could be damaged beyond repair. There is no reason to believe that Russia would trust the West, the US in particular. The US has imposed sanctions on Russia over a host of issues.
Furthermore, Trump would likely encounter opposition from his G7 partners as well as the US Congress. Some members such as Canada still feel that Russia has not addressed the Crimea and Ukraine issues. In the US, some congressional Democrats still accuse Russia of meddling in the 2016 presidential election.
More important, the Russian-Chinese relationship seems to be flourishing: Trade is growing rapidly; the two countries are holding military exercises frequently and regularly; Chinese investment in Russia is increasing; Russia is building its 5G (fifth-generation) telecom network with Huawei equipment, to name a few examples. At the very least, the Russian-Chinese entente is in large part responsible for Russia being able to weather the US sanctions. In this sense, there is no reason to believe that Russia would join Trump’s anti-China campaign.
If Trump really wants world peace and economic stability, he should encourage the G7 to work closely with both China and Russia.