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Russia carves out role in crisis-hit world economy

Published 03/31/2009, 06:29 AM

* Russia seeks to carve out global economic role

* Marginalised in G8, Moscow wants influence as G20 player

* Could become informal voice for other BRICs

By Toni Vorobyova

MOSCOW, March 31 (Reuters) - Russia is seeking a bigger role on the world economic stage during the financial crisis, submitting proposals to this week's G20 summit and lending some of its oil wealth to crisis-hit neighbours.

The push comes at a time when developed countries are increasingly turning to the emerging world for joint moves on the worst global crisis since the Great Depression.

Russia, which never felt fully accepted as a G8 partner, now sees a chance to become a major G20 player.

With nearly $400 billion of reserves, no toxic U.S. assets in its banking system and very little state debt, Russia is in a much stronger position than when it had to go cap-in-hand to West during its last recession a decade ago.

Low levels of non-performing loans and consumer debt mean it may be better placed to cope with the crisis than many developed countries, but big corporate debts and a sharp fall in oil and metals prices have hit Russia's economy hard -- the Organisation for Economic Co-operation and Development forecast on Tuesday that it would shrink 5.6 percent this year.

"I think in general they see this crisis as a way to show the world that they have some answers and they've moved on," said Tim Ash, head of CEEMEA research at RBS in London.

"It is a great opportunity for them to re-jig the global financial architecture and put themselves in a central place."

Arguably Russia's closest allies are the other BRIC nations, emerging market powerhouses Brazil, China and India. All have sizeable foreign currency reserves and are vulnerable to the global slowdown as they rely on exports.

This month the BRICs released their first communique at a G20 finance ministers' meeting and joined the Financial Stability Forum, signalling a growing world role.

The communique reflected some of Russia's campaigns, calling for "major reserve issuing economies...to ensure that the macroeconomic policy is more balanced" and for a reshuffle of country representation at the International Monetary Fund (IMF).

Russia followed that up with its own proposals for Thursday's meeting of G20 leaders. Its suggestion to replace the dollar with a new international reserve currency quickly found support from China and sparked international debate.

MONEY, EXPERIENCE

At a time when countries need money to bail out their economies, reserve-rich nations are in a stronger position.

Russia has been using some of its cash to strengthen its position as a regional economic power, granting loans to Ukraine, Belarus, Kyrgyzstan and Armenia. It is also considering credit requests from other countries as far afield as Iceland.

"Russia needs the world as part of its own development, but the world also needs Russia as a major player in the international economy. If that is a role that Russia is increasingly playing, that is very welcome," said Klaus Roland, country director for Russia at the World Bank.

Russia's seemingly greater cooperation with the other BRIC countries and bigger interest in the G20 marks a turnaround from years of trying to become a full member of the more exclusive Group of Eight (G8) industrialised nations, where many key issues were discussed in a G7 format, excluding Moscow.

"Russia is keen for the G20 to become the most important global organisation," said Chris Weafer, analyst at Uralsib.

"Russia has never been accepted as a full member of the G8 ... It seems to me as though it's given up on that and sees the G20 as a forum where it can play a bigger role."

An argument against the G20 is that such a big group may be unwieldy and prone to factions -- something Russia doesn't want.

"There will be no separate joint (BRIC) communiques, nor should there be," Kremlin's top economic aide Arkady Dvorkovich told reporters ahead of this week's London summit.

"This is the summit of the leaders of the G20 countries. There will be one statement on a single common position. We do not have the aim of pitting our countries against the others."

Brazil, India and China are all powerful economies in their own right and may not be keen to have Russia as their official mouthpiece, but Moscow could still secure a position as the key voice for concerns which affect emerging market countries.

"A lot of the issues that Russia is concerned about are also of concern to other emerging countries. Given Russia's greater geopolitical experience and more confidence we will probably hear a lot more from Russia," said Uralsib's Weafer. "Informally we may hear Russia voicing the concerns of this group (BRICs)."

(Editing by Mark Trevelyan)

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