From Asia Times
Last week, two important meetings took place: in Buenos Aires, of the Group of Twenty, and in Vienna, of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers.
The two meetings did not produce any resolution to the major economic challenges in the world. But they did soothe the nerves of financial markets.
At the G20, the United States and China dialed down the temperature over trade but did not settle the long-term grievances each side has against the other. At the OPEC+ meeting, Russia and Saudi Arabia agreed to cut production and raise the price of oil despite pressure from the US and others to keep oil prices low.
At neither meeting did the major powers find solutions to their problems. They are all caught in mazes from which there are no easy exits. But what calmed the world of finance was that the geopolitical tension between the major powers seemed to have lessened.
What impact this reduced tension has for the world’s people, however, is not clear.
The “trade war” engineered by US President Donald Trump against China began with tariffs and ended with a damp squib. At the G20, Trump told Chinese President Xi Jinping that the tariffs that would have gone up to 25% on US$200 billion worth of Chinese imports would no longer be applied. China, for its part, said it would import more goods from the United States.
No specifics were announced, which is why the tensions over even this agreement spilled over on to Twitter (courtesy of Trump’s hyperbole) and into more sober statements from the Chinese government.
The more fundamental questions of intellectual property and currency valuation remain unsolved. The United States accuses China of theft of the intellectual property of US firms, but the Chinese counter — as they have in the arbitration panels of the World Trade Organization — that they merely draw from technology transferred as a result of commercial agreements freely made by companies eager to use Chinese labor.
It will be impossible to resolve these two problems, since the two sides do not see the issues in the same way. Their worldviews regarding intellectual property and currency valuation are utterly alien to each other. If the United States believes that China is unfairly valuing its currency, the Chinese point to the unfair advantage that the dollar has over every currency in the world, since it is used as one of the major global currencies for facilitation of trade and for the storage of wealth.
Russian President Vladimir Putin and Saudi Crown Prince Mohammad bin Salman offered each other a friendly hand slap at the G20. Everyone seemed happy to see MBS, despite the clear evidence of his role in the murder of the Saudi journalist Jamal Khashoggi.
But the real agreements between Russia and Saudi Arabia were not directly made in Buenos Aires. They were made more quietly in Vienna at the OPEC+ meeting.
At Buenos Aires, Putin said, “Yes, we have an agreement to prolong our accords.” He was referring to the deal between Russia and Saudi Arabia since 2016 to manage oil prices to their mutual benefit. That deal notwithstanding, Saudi Arabia has continued to pump itself into trouble — flooding the market with oil, driving prices down and depleting its own treasury as a result. Now Russia is eager to see oil production cut and oil prices rise. Trapped by sanctions and by low oil prices, Russia has plunged into internal economic difficulties.
The real issue was how much each country inside and outside OPEC should pump. That is why Putin said, “There is no final deal on volumes.”
In fact, even after the deal has begun to emerge, there is no final deal. Saudi Arabia has not been a good partner here. It has pumped outside the numbers over the course of the past few years, largely under pressure from the United States.