TCSS Security Commentaries #027
For regional countries that availed loans and grants from earlier regional initiatives, especially China’s BRI, the interest rates have heavily burdened their economy aside from the global recession resulting from the pandemic.
Brian Castro, TCSS
On 26-28 June, the most powerful Western countries – G-7 member countries – met in Germany to discuss critical issues that challenged the stability of the international order. Earlier this year, the world was shocked when the Russia-Ukraine tensions escalated into military conflict. Global leaders witnessed the conflict’s severe repercussions, not limiting food and energy security. With the US-led sanctions on Russia, the energy sector suffered the most. Russia is one of the largest producers of oil and other energy resources in the European region and the global market, competing against other oil-producing countries. Due to the sanctions, countries could not conduct economic activities with Russia, and the other oil-producing countries had one less competitor in the market. The subtleness of global leaders was questioned when Russia unilaterally invaded Ukraine.
The G-7 Communiqué has been the most concrete and collective response by global leaders regarding the international community’s current challenges. In summary, they reiterated their willingness to provide financial, humanitarian, military, and diplomatic support to Ukraine to defend their country’s democracy. Further economic sanctions will be imposed on Russia, including its revenue from gold. The inclusion of gold is a response to the actions of Russia to shift their foreign reserves from currencies to precious minerals and metals to soften the impact of foreign sanctions.
Leaders of G-7 reiterated the importance of peace and stability across the Taiwan Strait and peaceful methods to resolve the tensions. On August 3, the G-7 leaders issued a statement on the latest tensions in the Taiwan Strait following China’s unnecessary escalation of risk with aggressive military activity under the pretense of US House Speaker Nancy Pelosi’s visit to Taiwan. The statement reaffirmed G-7’s commitment to maintaining a rules-based international order, peace, and stability across the Taiwan Strait and beyond in Indo-Pacific.
Besides the economic sector, the G-7 communiqué also emphasizes the importance of lowering living costs, caring for the environment, and equal access to vaccines for Covid-19. For energy, Indonesia, India, Senegal, and Vietnam were mentioned as “partners” for the Just Energy Transition Program. This year’s G-7 communiqué was the long-awaited response of Western global leaders against the threats to international peace and security resulting from recent international conflicts.
The group also showed the importance of relying on regional partners in dealing with energy, environment, and food security issues. To help propel the momentum of the G-7, the United States government has announced the Partnership for Global Infrastructure. The announcement entails mobilizing $200 billion from the US government and, together with the G-7 members, a total of $600 billion by 2027 in global infrastructure investments. With this, it is evident that the current US administration is taking a more proactive role in the international community than its previous administration. It could be their realization that other developed countries, especially China’s BRI, can already offer external help in the form of loans, funding, and economic initiatives to the developing ones to increase their regional influence.
However, for other countries that availed loans and grants from earlier regional initiatives, especially China’s BRI, the interest rates have heavily burdened their economy aside from the global recession resulting from the pandemic. The Partnership for Global Infrastructure (PPGI) offers grants, investments, partnerships, and infrastructure development options as an alternative to its predecessors. The partnership aims to improve people’s lives, lower living costs, and diversify supply chains to deter possible large-scale crises on resources. It is important to observe if these actions would materialize into results and how the other countries would respond.