#12 - RW 3-11-05 - RW Home
Moscow Times
March 11, 2005
G7 Likely to Turn Down Russia
By Simon Kennedy and Kevin Carmichael Bloomberg

WASHINGTON -- Finance ministers from the Group of Seven industrialized nations will rebuff the Russia's bid to become a full member and lead the group's economic policy deliberations next year, G7 officials said.

Russia's $533 billion economy, which is the world's 16th largest, is not big enough to justify it joining the ranks of the G7, the officials said. Its government has also stalled on implementing policies encouraging investment, free markets and the rule of law, the officials said on condition of anonymity.

Russia is due to chair the Group of Eight most politically powerful governments in 2006, allowing President Vladimir Putin to host the annual summit of its leaders. In the past, the nation chairing the G8 has also chaired the G7, prompting Russia's effort to be included this time.

"Pushing for G7 status is a great stretch for Russia, as it simply doesn't deserve it," Stuart Eizenstat, who served as U.S. undersecretary of state and deputy Treasury secretary under President Bill Clinton, said in an interview. "Russia's economy is too small and isn't free enough to merit membership, and it has drifted on democracy and reform."

Russian finance officials attend some meetings with G7 finance ministers and central bankers. Rebuffing Russia's full membership reflects disappointment with Putin's wavering commitment to democracy and free markets as well as reluctance on the part of the rich nations' club to enlarge its ranks, said Vito Tanzi, who attended G7 meetings as an undersecretary of finance for Italy from 2001 to 2003.

While China's economy is already larger than G7 member Canada, "the G7 wants to keep the group relatively small so the issues it discusses don't become too wide," Tanzi said in an interview. "The G7 will work hard to keep others out."

Russia was invited to send representatives to some G7 economic sessions a decade ago, and Chinese officials attended for the first time in October. Finance ministers and central bankers from the two countries attend a portion of the G7's four-times-a-year talks, although they play no part in writing the group's post-meeting statement or setting joint policy. At the G8 level, Russia's president and foreign minister have the same stature as other members.

Last month, Republican Senator John McCain of Arizona and Democrat Senator Joe Lieberman of Connecticut introduced legislation in the U.S. Congress urging the G8 to suspend Russia's membership "until the Russian government ends its assault on democracy and political freedom."

"In 2003, I warned of a 'creeping coup' in Russia against the forces of democracy and market capitalism in Russia," McCain said. "Since then, Russia has actually moved backward. The coup is no longer creeping, it's galloping."

The nation chairing the G7 hosts two of the group's four annual meetings, shapes the policy agenda and takes the lead in crafting statements on behalf of the group. Regarding the group's decision concerning Russia's role next year, Yevgeny Khorishko, a spokesman at the Russian Embassy in Washington, said, "I would not comment on speculation unless this is confirmed."

Under a compromise now being discussed, Germany would inherit the chairmanship of the G7 at the end of this year from Britain. As a consolation, Russia may be allowed to convene and chair a gathering of finance ministers to plan the G8 leaders' summit.

"Germany has for a long time supported Russia's integration into the G7 finance ministers' meetings," said Nicole Rosin, a spokeswoman for the German Finance Ministry. "However, consensus among all members has to be in place for that to happen."

G7 finance ministers will next meet in Washington in April to discuss the world economy. They will reconvene in June in London to prepare an agenda for the G8 leaders' meeting, which is scheduled to take place in Gleneagles, Scotland, in July.

"The issue of Russia's full participation in the financial G7 is still open," Andrei Sharonov, Russia's deputy economy minister, told reporters last week. "This is an evolutionary process; we can't just click a switch."

Jim O'Neill, the head of global economic research at Goldman Sachs Group in London, said that pressure was growing for the G7 to enlarge. "If the G7 wants to be regarded as a credible entity, it's living on borrowed time," he said in an interview. "At the financial level, it is quite ridiculous not to include China at a minimum, and there is a very good case to consider having Russia, India and Brazil too."