The G7 Summit, held in Germany’s Elmau Castle on 26-28 June 2022, has traditionally been the most protracted face-to-face meeting held annually with leading country leaders.[1] No other summit has lasted three days and included such an intense and sustained discussion of critical global issues. A week ago, the BRICS Summit held in China lasted only one day and was held in video format. It is clear that BRICS is not an alternative to the G7. In addition, two participants in the China virtual meeting, Indian Prime Minister Nadira Modi and South African President Cyril Ramaphosa were invited to the video conference at Elmau Castle. There, the leaders of Great Britain, Germany, Italy, Canada, the United States of America (USA), France, and Japan, along with the leaders of Argentina, Indonesia, and Senegal, who were invited to this Summit, discussed world problems posed mainly by the two BRICS leaders, Russia and China.
The G7 Summit is, directly and indirectly, dedicated to Ukraine. It is directly regarding the scope and timing of aid to Ukraine. Its indirectness removes Russia’s threat to world development and balances China’s challenge to market democracies. This does not mean that the focus of the G7 Summit has narrowed this year. However, it does mean that there are global consequences of Russia’s war against Ukraine with the connivance of China.[2]
On the first day of the Summit, the general problems of the global economy, recovery from the Covid-19 pandemic in the face of geopolitical changes caused by Russian aggression and Chinese assertiveness, and the destruction of global supply chains were discussed. A global partnership for infrastructure development and investment focusing on climate and health was then questioned. On the first day, there was an exchange of views on the worldwide security architecture, although this was not the main topic of the G7.[3]
The second day started with a discussion on providing aid to Ukraine. Ukrainian President Vladimir Zelensky joined the G7 leaders via video link. This is perhaps the first participation of the Ukrainian leader in the G7 Summit after the 1990s when nuclear disarmament issues were discussed. This was followed by the discussion of investing in the climate agenda, energy programs, and health services, and the ongoing problems created by Covid-19 were addressed. The day ended with a session on global food security and gender equality. United Nations (UN) Secretary-General Antonio Guterres joined this discussion online.[4]
On the third day of the Summit, international cooperation issues were discussed in the context of creating an appropriate, rules-based digital governance.
The G7 Summit reached clear conclusions on Ukraine. The main issue for Ukraine is the G7’s declaration of readiness to provide comprehensive support as needed, including on military, economic, and humanitarian issues. Attempts by Russia to forcefully change the borders will not be accepted. Just this year, Ukraine will receive $28 billion to cover the budget deficit. Next, the process of organizing international assistance in post-war reconstruction and development commonly referred to as the “Marshall Plan” for Ukraine, will be initiated. This plan may involve the use of seized Russian assets, and the countries that seize these assets must make decisions according to their national laws.
Despite Russia’s aggressive energy policy, previous plans to achieve carbon neutrality will not be canceled.[5] Deadlines remain in place to achieve these, including moving away from coal by 2035 and significantly reducing the world’s dependence on oil and gas by the middle of the century. But how to achieve these goals has become a severe challenge with no simple answer. Rising energy prices have pushed global inflation, previously triggered by the measures taken to support leading economies in the context of the Covid-19 outbreak, to record levels. At the same time, high energy prices gave Russia resources to continue the war against Ukraine. Russia must be deprived of this resource, which has become the declared target of the G7.
The inflation rate has risen so much that there is a threat of recession for the G7 countries.[6] If a recession occurs, it can automatically solve the problem of energy prices; that is, prices will inevitably fall. However, a recession may not be a desirable economic prospect. The question is how to deprive Russia of its oil and gas exports, which are used to finance the war, while simultaneously reducing inflation in the leading economies by lowering energy prices.
Among the understandable measures adopted by the G7, in addition to the sanctions already imposed on Russia, is the ban on importing Russian gold, which provides Russia with an annual income of about 15 billion. It’s not a cardinal income compared to oil and gas revenues, which generate hundreds of billions in revenue annually, but it is significant. There is also a ban on any semiconductor export to Russia. With this ban, Russia’s electronics industry, including electronic equipment for weapons and military equipment, could come to an almost complete halt, just as the automotive industry has already been halted.
As for hydrocarbons, the option of establishing a special tax on imported Russian energy resources that would be directed to assist Ukraine was considered. However, this will not solve the high prices and rising inflation problem. There are many hopes for US President Joe Biden’s visit to the Middle East countries, which could mean normalizing relations between the US and Saudi Arabia. Theoretically, the US-Saudi deal to increase oil production that led to the economic collapse of the former Union of Soviet Socialist Republics (USSR) in the 1980s could be repeated. Still, it is unlikely that Saudi Arabia will now readily agree to renegotiate obligations under OPEC+.
There is no cartel restriction on the exchange of Russian gas. Qatar is ready to increase its liquefied gas supply. However, several years are needed to change Russian ties completely. Preparations to switch the European Union (EU) to liquefied gas instead of the Russian pipeline go so far that options are being considered to convert Nord Stream’s onshore infrastructure into new liquefied gas terminals. But this will take time. Meanwhile, Russia is proactively reducing gas exports to Europe and trying to reverse gas embargo plans.
Given these issues, the G7 is considering the French idea of capping energy prices for its consumers through a cartel agreement. Such an attempt has already been made under the oil embargo by Arab countries in the 1970s, angered by the West’s support for Israel.[7] Then the price crisis was finally overcome by market mechanisms by liberalizing the global oil market and diversifying oil resources. A new problem for the hydrocarbon consumers’ cartel agreement is the need for Chinese support.
How the price crisis will be overcome this time is unclear. It is likely to reactivate national oil reserves, reduce the abandonment rate of coal and nuclear energy by countries that have decided to secede, primarily Germany, and use several tools. In any case, the G7, with the participation of India, South Africa, Argentina, Indonesia, and Senegal, did not consider it necessary to abandon its green transition plans and limit Russia’s revenue from hydrocarbon sales.
The China issue was also discussed at the G7 Summit. The G7 agrees that the form and purpose of China’s investment in the Belt-Road Project, which spans a hundred countries worldwide and has led to excessive debt with political implications, is a challenge to global development. In this context, a fund pool of 600 billion dollars has been decided to invest in infrastructure in low and middle-income countries. With these investments, it is aimed to reduce the global dependence on China.
No G7 summit presupposes immediate solutions to global problems, but it mostly means that the most influential countries are always ready to solve them without jointly compromising their core values. This time, the importance of global development coincided with the interests of Ukraine, and the Russia-Ukraine War left its mark on the G7 Summit.
[1] “German G7 Presidency”. Deutschland.De, 2022, https://www.deutschland.de/en/G7-at-a-glance-G7-Summit-2022. (Date of Accession: 29.06.2022).
[2] “Саммит G7 В Эльмау: Под Знаком Войны В Украине | DW | 26.06.2022”. DW.COM, 2022, https://www.dw.com/ru/sammit-g7-v-jelmau-pod-znakom-vojny-v-ukraine/a-62253095. (Date of Accession: 29.06.2022).
[3] “Как «Большая Семерка» Будет Останавливать Россию”. Зеркало Недели | Дзеркало Тижня | Mirror Weekly, 2022, https://zn.ua/international/kak-bolshaja-semerka-budet-ostanavlivat-rossiju-.html. (Date of Accession: 29.06.2022).
[4] “G7’de Ukrayna’ya ‘Gerektiği Sürece’ Destek Taahhüdü”. Www.Haberturk.Com, 2022, https://www.haberturk.com/g7-liderlerinden-ukrayna-ya-gerektigi-surece-askeri-ve-mali-destek-taahhudu-3473017. (Date of Accession: 29.06.2022).
[5] “Достижение Углеродной Нейтральности К 2050 Году: Самая Неотложная Глобальная Задача | Генеральный Секретарь ООН”. Un.Org, 2022, https://www.un.org/sg/ru/content/sg/articles/2020-12-11/carbon-neutrality-2050-the-world%E2%80%99s-most-urgent-mission. (Date of Accession: 29.06.2022).
[6] “Bloomberg Сообщил О Планах Стран G7 Объявить О Помощи Киеву”. Interfax.Ru, 2022, https://www.interfax.ru/world/847945. (Date of Accession: 29.06.2022).
[7] “Арабский Мир И Нефтяное Оружие”. НЛО, 2022, https://www.nlobooks.ru/magazines/neprikosnovennyy_zapas/126_nz_4_2019/article/21749/. (Date of Accession: 29.06.2022).
