G-8 summit -- Good for Putin and Russia

July 26, 2006

Russian President Vladimir Putin used this year’s G-8 summit, hosted in St. Petersburg, as an event to strengthen his role as world leader and to take significant steps to advance Russia’s economy. Before the event, Putin:

• Liberalized the ruble, allowing the currency to be transferred in and out of Russia.
• Allowed Rosneft, the state-owned oil firm, to sell some of its shares on the London Stock Exchange.
• Announced he would, in fact, step down as President when his term expired in 2008.
• Established trade agreements with Canada regarding Liquified Natural Gas and uranium.
• Announced with the U.S. the Global Initiative to Combat Nuclear Terrorism. Aimed at Iran, it reiterated Russia’s offer to sell enriched uranium to Iran.

The G-8 Group members are Russia, the U.S., Britain, France, Japan, Germany, Canada and Italy. Also invited were the leaders of China, India, Mexico, Brazil, and other important world powers...but not those of the Middle East.

Nevertheless, G-8 leaders crafted a declaration on the Middle East crisis that requested:

• The return of the Israeli soldiers in Gaza and Lebanon unharmed.
• An end to the shelling of Israeli territory.
• An end to Israeli military operations and the early withdrawal of Israeli forces from Gaza.
• The release of the arrested Palestinian ministers and parliamentarians.

The declaration was endorsed by U.N. Secretary General Kofi Annan, and accepted by Israel.

The major setbacks were related to trade. Despite the G-8’s support for a successful conclusion to the Doha round of trade talks, several days later World Trade Organization (WTO) Director Pascal Lamy declared them suspended. This was a final failure for Europe and the U.S. who refused to make significant cuts to agricultural subsidies.

The U.S. also blocked Russia’s admittance into the WTO by rejecting Russia’s insistence on inspecting U.S. beef exports. Relations between the two for the rest of the conference were noticeably chilly.

What It Means:
At a time when the “leaders of the free world” need to confront complex and dangerous global issues with a powerful unifying vision, they are playing to their home audiences and resorting to conventional platitudes. Most of the international bodies developed after World War II -- the U.N., WTO, World Bank, the IMF, and now the G-8 -- are losing their leadership role.

As a result, the world stage is being filled by fast-growing countries who have narrow economic interests at heart. China, Brazil, Iran, Japan, India, Saudi Arabia and Russia are all scambling to fill the void with scores of bi-lateral agreements. The result is a much more volatile global economy.

Action Steps:
Find at least one good source of global news analysis that you read regularly. Don’t rely on headlines from radio, TV and talk shows -- their job is to entertain.

Review your investments at least quarterly to be sure that your asset allocation still makes sense in light of new global developments. Consult with your financial planner, and don’t be afraid to challenge conventional assumptions...the world in the next 30 years will not be anything like the last 30.

Source: President of Russia Official Web Site

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