Russia challenges the world economic system

UPDATED: 09:45, June 18, 2007

Russian President Vladimir Putin has said that the control of the world economic system by a few developed countries is outdated; it is necessary to establish a new world economic order to reflect the growing role of rapidly developing emerging nations.

He made the remarks on Sunday at the St. Petersburg International Economic Forum wherein participated 9,000 delegates from sixty-five countries and regions.

Putin said 60% of the world's GDP was produced by nations not within the Group of Seven leading nations-the United States, France, Germany, Britain, Japan, Italy and Canada.

"Stable economic development demands the creation of a new architecture of international economic relations based on trust and mutually beneficial integration," Putin asserted. He noted that in the new world economic system, developing countries and newly emerged economic entities should have more of a say.

Putin also questioned the current financial system. He stressed that while the economies of most developing countries develop steadily, the world financial system only connects with certain currencies at only a few financial centers. This cannot meet the demand of long term global economic development. "There is only one possible response to this challenge: the creation of several international reserve currencies and more financial centers," he declared.

In fact in February, Putin had already put forward the idea of establishing just international economic order at the 43rd Munich Conference on Security Policy. Putin criticized the US for taking unilateral stances, abuse of arms, deployment of anti-missile systems in Eastern Europe and the expansion of NATO. This put Russian-US relations in the spotlight, while his view of establishing a new world economic order failed to bring any attention. This time, however, Putin used the opportunity to be host of the forum, and in a timely manner illustrated his idea of establishing a just new world economic order. It aroused great attention among the 9,000 delegates.

Analysts say that with the rise of its comprehensive strength, Russia is challenging the current international economic system dominated by western countries. Putin has proposed that Russia continue to strengthen the ruble, the domestic financial market, and the banking system so that Russia can establish an international financial center with the ruble as the settlement currency for export commodities. This shows that Russia wants to have a bigger say in the international economic system, especially in the international financial system. In recent years, the Russian economy has developed steadily with enough foreign reserves and a financial surplus. The Russian ruble began to be freely exchanged last July. This is, in fact, in preparation for breaking the monopoly of the US dollar and the Euro.

On the other hand, Putin's remarks had a lot to do with Russia's delay in joining the World Trade Organization. Russia is now one of the few economic entities which are not members of the WTO. Although such talks have come upon their final stages, Russia still holds that some countries want to make use of Russia's eagerness to join the WTO and place more demands on Russia. Russia firmly holds that it will take into consideration its own economic interests before it joins the WTO. WTO Executive General Pascal Lamy said without Russia, the WTO will not be a true multilateral organization. Meanwhile, if Russia does not join the WTO, it will not build up enough capital trust in the future.

In addition, analysts also think that Putin playing the economic card now aims at this year's Duma election and the next presidential election in March, so that he can set the tone for future foreign economic policy. Russia's Duma chairman, Boris Grazlov, said that Russia's goal is to obtain economic sovereignty in the global market.

Statistics show that the Russian economy has kept up a good momentum. The Russian Economic Development and Trade Ministry has increased its predicted growth rate from 6.2% to 6.5% this year. However, high international oil and gas prices are still the driving forces for the Russian economy. The latest World Bank report says that this year there is a new wave of investment in Russia, but the economic growth mode has not changed. The Russian economy is still in the mode of energy-dominated economic growth, while the government's role in the economy is increasing.

However, the uncertainty of international energy prices will also bring certain risks to the Russian economy. Analysts say that only by constantly optimizing the economic structure and creating a new economic growth sector, and reducing the dependence on energy, can Russia's role of pushing forward a change in international economic order be more outstanding.

By People's Daily Online

People's Daily Online ---