Russia warns G20 unity in danger: G20 source

Russia said on Thursday the unity among members of the G20 group will be difficult to maintain as crisis pressures are easing but warned that the global economy remained "unstable and unbalanced."

Russian criticism of the Federal Reserve's policy of printing money has so far been subdued compared with China's or Germany's, since the world's biggest oil exporter stands to benefit from the resulting surge in commodities prices.

Russia is also aware that in the longer run higher oil prices will drive up the rouble and create asset bubbles, hampering President Dmitry Medvedev's efforts to modernize the economy.

"It is obvious that to agree on joint action now when the peak crisis pressure is behind us will be much more difficult," a source with the country's delegation to the G20 Summit said on Thursday.

"But taking into account individual features of different countries, we need to remember global goals and problems," the source said.

Market Nervousness

Russia, a member of the BRIC group of emerging nations which also includes China, India and Brazil, said it is concerned that some countries are weakening their currencies to stimulate growth.

"We believe that such steps lead to nervousness among market players and volatility of main currencies, prompting fears of global 'currency wars'," the source said, calling on developed countries to improve their fiscal policies.

"There is risk that lack of clear, solid and all-encompassing plans of fiscal consolidation by the countries issuing reserve currencies can contribute to uncertainty and weaken confidence in financial markets."

The source criticized proposed steps to reform the International Monetary Fund (IMF), demanding more voting power for emerging nations and saying proposed lending mechanisms may turn the fund into a "rating agency."

World leaders gathered in Seoul for a two-day summit hoping to move beyond broad promises of economic cooperation, but days of debate appear to have undone much of the G20 unity forged in the throes of a global crisis two years ago.

President Dmitry Medvedev, who took power just before the economic crisis hit Russia in 2008 and is now in the middle of his four-year term, is also keen to raise Russia's profile in the group.

The source said emerging markets should be wary of capital inflows resulting from the Federal Reserve's policy and said they should apply regulatory measures "to avert or smooth out negative effects from such inflows."

Russia is currently the only country in the BRIC group which does not have any capital movement restrictions, although such measures were widely discussed at the height of the crisis.

[Source: By Gleb Bryanski, Reuters, Seoul, 11Nov10]

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