G-7 announces new sanctions against Russia, calls for infrastructure fund to counter China’s BRI

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Leaders of the world’s seven richest countries meeting at Schloss Elmau in Germany’s Bavarian Alps made two decisions at the Group of 7 (G-7) summit that are of interest to India. First, a cap on Russian oil prices and, second, an infrastructure fund aimed at giving China’s Belt and Road Initiative (BRI) a run for its money.

The oil cap suggestion had been in the works for months. The G-7 nations – US, Canada, Germany, UK, France, Italy, Japan – are working on a plan to cap prices on oil shipments from Russia to squeeze profit margins on oil exports. Will it affect India?

No. India, like China, now buys oil at reduced rates from Russia. And a cap on oil prices will have little impact on either. In fact, developing countries are always on the hunt for cheaper oil.

The details will have to be ironed out before such a plan can be implemented. Announcing intentions is much easier than making them work. G-7 countries may find it extremely difficult to implement this decision.

“To announce a cap on oil prices is really scratching the bottom of the barrel when it comes to sanctions,” said PS Raghavan, India’s former ambassador to Moscow.

However, for the moment, the message sent back to their national constituency is positive, that democratic governments have closed ranks to teach Vladimir Putin and his Russian coterie a lesson.

US President Joe Biden, unlike his predecessor Donald Trump, managed to convince all of Europe to support him. At a time when Biden’s national ratings are down, showing leadership in tackling the Ukraine crisis is helping to save his image.

A senior Biden administration official told a press conference, “The goal here is to starve Russia – to starve Putin of his main source of cash and drive down the price of Russian oil to help mitigate the impact of Putin’s war at the pumps.

“As I have said many times, we have a double objective here. The twin goals of G-7 leaders have been to directly target Putin’s revenue, including through energy, but also to minimize fallout and impact on G-7 economies and the rest of the world. .

Much will depend on how this ultimately plays out, as the price of oil cannot be controlled by political leaders outside the oil-producing countries. Oil politics and prices are really the subject of the Organization of the Petroleum Exporting Countries (OPEC).

While the main focus of the summit was war on Ukraine and punishment of Russia, China was not forgotten. China’s growing economic and political influence in Asia and Africa, as well as the popularity of Xi Jinping’s Belt and Road Initiative (BRI), pose a challenge for the United States and its allies.

It is also true that some of China’s major infrastructure projects have led countries like Sri Lanka to fall into the debt trap. So to counter the Chinese “way”, the G-7 is launching a $600 billion infrastructure fund to compete with the BRI. The new program – renamed the Partnership for Global Infrastructure and Investment – is a revised version of “Building a Better World” put forward at the last G-7 summit in the UK.

By promising a more transparent deal for building infrastructure in developing countries in Asia and Africa, the United States and its Western allies will compete with China’s groundbreaking initiative that has brought developing countries to secure much-needed funds for roads, highways, ports, and other projects. Poorer nations are desperate to build infrastructure to improve economic development.

Apart from India, almost all of South Asia has joined the Chinese Silk Road project. The China-Pakistan Economic Corridor (CPEC) which includes the port of Gwadar in Balochistan is at the heart of Xi’s BRI. But in recent years security has become a major concern as attacks on Chinese engineers and workers by Baloch nationalist groups have raised alarm bells in Beijing.

China has its footprints across Africa. In recent decades, China has been the first to score points in Africa. Even before the BRI was on track, China had made huge investments in infrastructure projects across the continent. The Forum on China-Africa Cooperation has been operational since 2000.

Biden said, “Developing countries often lack critical infrastructure to help weather global shocks, like a pandemic, so they feel the impacts more intensely and have a harder time recovering.”

“This is not just a humanitarian concern, it is an economic and security concern for all of us,” the US president said during the announcement. New Delhi will welcome this announcement. India is committed to working with Japan and the United States in third countries.

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