2012. vol. 7. No. 3

On May 18-19, 2012, at the presidential retreat in Camp David inMaryland,U.S.president Barack Obama hosted the 38th annual G8 summit. The leaders discussed global economic growth, development, and peace and security. After less than 24 hours of face-to-face time among the leaders, they issued communiqué of only five pages. However,Camp Davidwas a significant success. The leaders came together to effectively address the most pressing issues of the day while setting the direction for the summits that were to follow, including the summit of the North Atlantic Treaty Organization in Chicago, the G20 in Los Cabos, Mexico, and the Rio+20 Summit in Rio de Janeiro, Brazil. That success was propelled by several causes. The first is the set of strong global shocks were particularly relevant to a number of items on the agenda. This included the newest installment of the euro-crisis, spikes in oil and food prices, and the escalating violence inSyria. The second is the failure of the other major international institutions to address these challenges. The third is the club’s dedication to the promotion of democracy and its significance on issues such as the democratic transition in the Middle East andNorth Africa. The fourth is the high relative capabilities of G8 members, fuelled by the strength of the U.S. dollar, the Japanese yen and the British pound. The fifth is the domestic political control, capital, continuity, competence and commitment of the leaders in attendance.Camp Davidsaw several G8 leaders returning for their sixth or seventh summit and leaders with a secure majority mandate and control of their legislative houses at home. Finally, the constricted participation at the remote and secluded Camp David Summit, a unique and original advantage of the G8 summit style, allowed for more spontaneous conversation and interpersonal bonds. Together, these interconnected causes brought the G8 back, as a broader, bigger, bolder centre of effective global governance.

The paper presents an analysis of the G20 Los Cabos summit outcomes. The author explores three dimensions. The first part of the paper assesses the balance of national interests of the presidency and the interests ofMexico’s G20 partners in the summit agenda; the balance of continuity and innovation in the agenda. It then moves over to the analysis of organization of engagement with G20 partners, third countries, international and regional organizations, civil society, business community, thinks tanks and academic institutions in the run up to the summit and over the course of the leaders’ meeting. The third part contemplates on the quality of global functions implementation, with a focus on consistency of commitments implementation and transparency of the outcomes. The relevance of these three dimensions for the G20 effectiveness and legitimacy defined their choice for assessment.

The summit proved to be a success. Attainments and setbacks are registered on each of the evaluated dimensions.  The presidency has managed to strike a balance of national interests and the interests ofMexico’s G20 partners in the summit agenda, also balancing continuity and innovation in the agenda.Mexicohas included its key priorities into the summit deliberations. However, on green growth no breakthrough decisions have been made.  On tourism, disaster management, financial literacy and inclusion the declaration includes several direction setting statements, but there are practically no commitments made.

Manifest strengths of the presidency include active engagement of the presidency engagement with the international organizations, integration into the G20 process of new formats, such as the meetings of ministers of trade and ministers of tourism; international financial architecture working group recommendations; promotion of Mexican presidency priorities  in numerous international forums; integration of Latin American countries into the consultations; creation of space and opportunities for the leaders bilateral meetings in the summit. However, substantial expertise potential of international organizations has been underutilized. G20 has not been able to fully process and respond to the materials and recommendations. Proposals from the experts’ community and the civil society have not been reflected in the summit documents.

The Los Cabos documents analysis allows conclude that in terms of global governance functions the summit discourse was the most balanced in the G20 history. Implementation of commitments was a primary concern. Another step was made towards creating G20 accountability mechanisms. The author asserts that the work should be carried forward under the Russian presidency of G20.

The publication is prepared within the framework of a joint project "Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Compliance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian Presidency of G20 in 2013" implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

Global governance problems generate demand for international multilateral institutions actions (demand for global governance), which can or can not be met by international institutions’ supply. Priorities of the international institutions’ member-states also shape demand for the collective actions. The institutions’ capacity for forging consensus and making collective decisions can be transformed into “global governance supply”. The country chairing an institution should align both types of demand (global risks and members positions on key global governance issues) with the capacity of the institution it chairs and its national priorities, interests and capabilities. It should also be guided by a comparative assessment of institutions’ effectiveness for dealing with specific global governance problems.

For Russia, which will be chairing G20 in 2013, G8 in 2014 and BRICS in2015, a sequence of three presidencies presents a unique opportunity to influence global processes balancing external conditions and national priorities. The sequence of presidencies provides an opportunity to elaborate an innovative agenda for the three institutions on the basis of comparative analysis of forecasted global governance challenges and G20, G8, BRICS capabilities.

The paper presents a comparative assessment of G20, G8, BRICS capabilities and their missions’ relevance to surmounting key global governance challenges of the forthcoming decade. To identify these challenges the authors used the data of two World Economic Forum reports “Global Risks2011”and “Global Risks2012”. The analysis was carried out on 5 risk categories (economic, societal, geopolitical, technological and environmental) and 25 risks with the biggest sum of impact and likelihood indicators. The assessment of the G20, G8 and BRICS capabilities draws on the analysis of the official documents content and decisions made in the summits and in other institutional formats. The comparative analysis has allowed identify the risk categories most relevant to each institution’s mission and capability. The findings were used to make recommendations for G20, G8, BRICS agendas using the supply-demand model matching global governance problems (demand) and international multilateral institutions capacity (supply).

The report “Global Risks2012”prepared by Risk Response Network has been used by courtesy of the World Economic Forum.

The publication is prepared within the framework of a joint project "Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Compliance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian Presidency of G20 in 2013" implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

Strong, sustainable and balanced growth of national economies after the global crisis requires implementation of structural reforms by major economies. The article presents the analysis of G20 structural reform commitments dynamics since the Pittsburgh summit and comparison of the OECD structural reforms recommendations with the G20 agenda in this area. The author explores how national economic conditions, primarily the level of economic development and current account balance impact the choice of structural reforms priorities and approaches to their implementation in G20 countries.

The article also provides the analysis of major countries’ national strategic documents on structural reforms. The author concludes that comprehensive normative approach to implementing the reforms does not really affect the level of compliance with relevant G20 commitments and OECD recommendations.

The study on the efficiency of structural reforms implementation in G20 countries draws on OECD and other international institutions data and information from national sources. Developed countries generally perform better than developing ones, and Russia is a top performer among all G20 members. On the basis of the research findings and analysis of the OECD recommendations and G20 commitments on structural reforms the author identified those recommendations that are not included in the G20 structural reform agenda at the moment, and developed a methodology for assessing the likelihood of their further inclusion into the G20 discourse. The methodology enables to make a forecast on the G20 future actions in fostering structural reforms, which are most likely to be focused on strengthening labour markets, market liberalization and tax reforms.

The publication is prepared within the framework of a joint project "Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Accordance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian G20 Presidency in 2013" implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

The article analyzes the G20 contribution to overcoming imbalances of the world economy by implementing the commitment on fiscal consolidation. The commitment which consists of halving state budget deficits by 2013 and stabilizing or reducing state debt ratios by 2016 was made by the advanced G20 member-countries at the Toronto summit in 2010 and reaffirmed at subsequent summits.

The analysis of the IMF data and forecasts shows that despite the fact that many countries have already started implementation of their consolidation programs, more efforts are needed in the countries with large state debts (like Italy and Japan) and huge budget deficits (United States). In the middle-term perspective the substantial increase of spending on healthcare and pension system will influence situation in all countries.

According to the IMF forecast of April 2012, six G20 developed countries (Australia, Canada, France, Germany, Italy and Korea) are on track in implementing the commitment on fiscal consolidation. United Kingdom and United States show partial compliance (state debt component). Japan will not implement the commitment as the situation in this country aggravated after the natural and anthropogenic disaster in 2011.

The G20 commitment on fiscal consolidation with specific parameters supplemented relevant national plans with the elements of international coordination, peer pressure and influence from international organizations. But the G20, unlike the European Union, is not able to agree on the measures to stimulate compliance, including the use of sanctions. However, the G20 could promote enforcement of international organizations’ surveillance instruments with tougher indicators to assess the implementation of fiscal consolidation commitments.

The publication is prepared within the framework of a joint project “Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Compliance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian Presidency of G20 in 2013” implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

The article addresses the G20 compliance with its long-standing commitment to refrain from protectionist measures which was first adopted by the G20 leaders at their inaugural meeting in Washington in 2008. The paper attempts to measure and compare the results of individual G20 members in different timeframes between the summits. The analysis is based on the data from the WTO reports on the G20 trade and trade-related measures.

Despite the commitment, however, the G20 members did not slow down the pace of protectionism. Thus, the effectiveness of the G20 in this field of cooperation remains low, which is substantiated by a large number of measures adopted by the G20 members in the period between Washington summit in 2008 and Cannes summit in 2011. On the other hand, the WTO reports on the G20 trade and trade-related measures, prepared at the request of the G20 leaders, proved to be an effective monitoring tool to assess the scale of the G20 members’ compliance.

The publication is prepared within the framework of a joint project "Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Compliance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian Presidency of G20 in 2013" implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

The article addresses the G20 compliance with its commitment to rationalize and phase-out inefficient fossil fuel subsidies. The analysis is based on the reports by several international organizations, namely OECD, IEA, OPEC and the World Bank. This paper also reviews different approaches to subsidy efficiency and price evaluation.

The results of the announced fossil fuel subsidy reform show that the performance of the countries in that field differs significantly. The author believes that the absence of universally accepted criteria of subsidy efficiency hampers the realization of the G20 initiative. As of now, the countries tend to modify their definitions of subsidies or approaches to assessing efficiency rather than implementing concrete policy measures.

The publication is prepared within the framework of a joint project "Enhancing Effectiveness of Russia’s Participation in G8, G20 and BRICS in Compliance with the Russian Federation National Priorities in Global Governance and Developing Recommendations for the Russian Presidency of G20 in 2013" implementing by Russian International Affairs Council (RIAC) and International Organisations Research Institute (IORI) of the National Research University “Higher School of Economics” in 2012.

The global economy and especially its poorest members, face a perfect storm. The crisis has been created by a Global LIE: leverage this is unfathomable, institutions that are discredited, and, experts who are uncertain about the uncertainty. The poorest countries have been the hardest hit by the crisis, and their recovery may be years away. Under these circumstances, the Millennium Development Goals (MDGs) are not a best bet development strategy for Africa. As a financing decision, developed countries have never adequately resourced the MDGs and are unlikely to do so in future as they face more pressing priorities: entitlements, terror, climate, stimulus, and unwinding. As an investment decision, the MDGs focus on social services not infrastructure, which creates fiscal stress on the budget. The failure of the MDG to address revenue mobilization means that this strategy is fiscally unsustainable. Notwithstanding the limitations of the MDGs which include, among other things, dependence on foreign sources of funding, MDGs were a valid tool for gauging and comparing the level of a government’s commitment to allocating resources. A better strategy for foreign aid are Decade Infrastructure Goals (DIGs) that focus on the investment in growth promoting infrastructure (revenue, roads, power, and agriculture) rather than social services.

The paper analyses the process of creating the single electricity market in the European Union. It examines supranational efforts for creation and integration of member states’ competitive electricity markets and identifies the key challenges that supranational authorities, member states and EU power supply companies face within the process of the single European electricity market development.

The process of energy market liberalization in the European Union, which began in the mid 1990-s, was accompanied by amalgamation of multiple national markets into a single European market. The problems, which the EU energy market faces at the current stage include uncertainty and regulatory risks, caused by increased competition between the energy companies; the need to modernize the national networked infrastructure, necessitated by the expansion of the cross-border power transmission lines; markets fragmentation, as a result of structural differences in the national electricity markets; and the need of the energy industry restructuring.

The author notes the recent initiatives by the European Commission aimed at resolving the current issues. Among them: implementing new legislative measures to finish the processes of liberalization and merging the national energy markets; strengthening cooperation between the national regulators and transmission operators through, inter alia, establishing the Agency for the Cooperation of Energy Regulators and the European Network of Transmission System Operators for Electricity; and adopting the target of creating the common European energy market within the framework of the Treaty of Lisbon.c

Russian gas industry is one of the main constituents of Russian economy secondary sector, it has not only high potential for enhancing its own competitiveness, but can in prospect create positive external effects upon other branches of Russian economy. Russia’s WTO accession, membership in GECF, as well as leading positions on world oil and gas markets stipulates the topicality of Russian gas industry competitive advantages research and determination. It should be stressed that international energy projects are subject of engagement of the largest domestic and foreign MNCs, where Russian companies have traditionally got leading positions. The article presents an analysis of the key European gas market issues for Russian exporters, and suggests a way of using Russian gas extracting companies’ natural competitive advantage – access to domestic natural gas reserves – for increasing economic efficiency of participation in international gas storage projects.

Inter alia the article focuses on the following issues, crucial for the export potential of Russian gas industry: gas market fluctuations in EU member states amid world financial crisis, price margin distribution in gas selling to the final consumer, Russian-European cooperation prospects, including joint transportation and storage projects.

The stability of oil and gas shares in fuel balances of EU member states amid world financial crisis was proved. However, it shall be highlighted, that gas share in fuel balance of Germany (the largest foreign market for Russian gas exports) grew up by 1,5 p.p., while that of oil reduced by 0,1 p.p.

Margin analysis showed an overwhelming preeminence of distribution and tax shares in gas price for final consumers, while margin, got by Russian exporters, constitutes only 20-25%.

Mutually beneficial economic cooperation can become a solid ground for developing joint transportation and storage projects in gas sector of Europe.

The article assesses the important challenges to fiscal management which Russia faces as an oil-producing country. Among the critical questions regarding fiscal policy and the management of oil revenues and wealth which Russia has to consider the authors emphasize the following: how to assess the fiscal stance to better inform policy decisions; how to shield public expenditures and the non-oil economy from the high volatility in (and uncertainty about) oil revenue; and how to address sustainability and intergenerational equity issues.

The authors’ analysis shows that though many aspects of Russia's fiscal policy framework are close to best practice on paper, actual practice in recent years has been moving away from best practice. In particular, the continued focus on the overall rather than the nonoil balance, and the regular use of supplemental budgets to spend windfall oil revenues contribute to procylicality of fiscal policy, risking costly boom-bust cycles.

Against this background, this paper suggests several improvements to the framework for fiscal policy. A well-designed and consistently applied fiscal framework is needed to promote more effective policy implementation. Given the massive fiscal stimulus Russia undertook in response to the crisis, there is an urgent need to unwind the crisis-related measures and return to a sustainable fiscal position while oil prices are still high. A strengthened fiscal framework, alongside a more ambitious fiscal consolidation, would create a virtuous circle with reduced fiscal (and economic) vulnerabilities, increased credibility, and higher growth.

The paper suggests specific recommendations to strengthen Russia’s fiscal framework to bring it in line with best practice. It includes the international best practice, an overview of the current Russia’s framework, and assessment of how it compares to best practice.

The article examines Brazil's approaches to the UN reform, and in particular the UN Security Council. Brazil participates in the work of major international institutions, such as the UN, WTO, G20, and considers them to be the only effective tools for addressing major global challenges. The author discuses the country’s vision of peacekeeping operations, humanitarian missions, and hunger and poverty reduction and analyzes the priorities of Brazilian assistance to other developing economies.The author describes several concepts proposed by Brazil for implementation by the UN in the area of peace-keeping and peace-building. The “responsibility while protect” concept is considered as a supplement to “responsibility to protect” and is aimed at reducing the risks of military conflicts. The Friends of Mediation concept highlights the need for all military interventions to be fully controlled by the UN. The article specifies actions taken by Brazil to promote its ideas within the UN.Development assistance is considered to be another element of Brazilian “preventive diplomacy”. Most activities in this area are focused on neighbouring states in South America and on African countries and aimed at addressing poverty and starvation, strengthening health systems and fighting against communicable diseases, tackling climate change, ensuring sustainable development and protecting human rights. The author describes the system created to manage and assess the effectiveness of Brazil’s engagement in development assistance.The author identifies the interdependence between security and development as one of the main drivers of Brazilian foreign policy and highlights the country’s commitments to major international institutions and to the reform of the UN as a centre of the global governance system coordinating efforts to address major global challenges.