We are doomed to trust each other – Russia’s Deputy FM
RT: First Deputy Foreign minister Andrey Denisov, thank you very much for joining me at this busy time. You spoke today to the General Assembly with respect to the financial and economic global crisis. In that speech you stressed that despite what the world is facing right now with the economy it is very important for the world body to continue assisting developing countries. Can you elaborate on that?
Andrey Denisov: It’s very simple. When such crisis happens everybody is a victim, everybody suffers, but some suffer more than others, and the most vulnerable part of the world, which is affected by negative consequences and the destroying effects of the turmoil of global finance, is the group of less developed countries. That’s why, if we speak about common goals in development, we must first of all think about helping those, who suffer more. The international development agenda is very important at any time, but in terms of crisis it’s twice as important as it was before.
RT: During your speech you also said that it’s trust and solidarity that will help the world overcome the current problems. But can’t it be hard for certain countries to trust others considering what got us here?
Andrey Denisov: Mutual trust is a comprehensive value. We need it in politics, in economics, in finance – everywhere. In that special environment created by the crisis we are doomed to trust each other. It’s a kind of blessing in disguise. Even if we don’t want to do it, if we are not ready to do it, while combining efforts to resist the economic crisis we have to trust each other. Maybe it would be helpful to set up a system of mutual trust and confidence not only in economics, but in politics as well. If we speak about increasing efficiency and effectiveness we must speak about discipline. We must set approvals and regulations, which are obligatory to everybody, which should be followed by everybody and everybody should obey these rules and regulations, otherwise it doesn’t work.
RT: the UN commission of economic experts will present a report this Thursday proposing that the U.S. dollar essentially be ditched as the reserve currency and that a new reserve be implemented. Is this similar to what Russia is proposing?
Andrey Denisov: First of all, Russia’s proposal is specific and concrete. We not only propose a kind of new universal currency, we propose to convene a conference to discuss how to set up such kind of currency system. That’s what we all need. It’s absolutely clear that it can be achieved on a consensus basis, only if everybody accepts such an idea. It’s not just a slogan, not just a principle, that is a practical proposal aimed at reaching mutual and universal benefits. The dollar plays an important role. It has been a core of the international currency system for decades and it still plays a very important role in international finance. But if we look at the future, we come to the conclusion that it should be replaced by something, which better fits the modern world, modern globalized economy, thus helping everybody to prevent such calamities as we face now. It’s not a politicized attempt to change something for something. It’s an attempt to face a challenge. Of course, it cannot be done overnight. Long preparatory work is needed and as I said, it can be done only on 100 per cent consensus basis. So that’s why I want to specify: Russia's proposal is not to set up a new reserve currency, but to convene a conference, a representative one, in order to elaborate approaches on how to do it. Russia's position is very clear and very simple – we have to act expeditiously, we cannot waste time on rhetoric, but at the same time we must apply a very careful and cautious approach. There is one old Russian saying: before cutting one has to measure seven times. My partners in the United Nations ask ‘Why seven times? Maybe two or three times would be enough?’ I say ‘No, seven times is better. Better more than less. Better to be very careful and cautious, but when you come to a decision just cut.
RT: Thank you very much.
Andrey Denisov: My pleasure.
Earlier, Denisov delivered a speech at the Interactive Thematic Dialogue at the UN General Assembly on the Financial and Economic Crisis and its Impact on Development.
Remarks by Andrey Denisov
We’re grateful to the President of the UN General Assembly for organizing this interactive thematic dialogue on the world financial and economic crisis and its impact on development. In fact, these days we see that substantive preparations for the UN High-Level Conference to be held in June enter their main phase. Our meeting is of particular importance also in the context of the G20 Summit to take place in London next week. Its decisions should take into account interests of all countries and regions, especially of the most vulnerable ones. The discussion of the UN General Assembly presents a unique opportunity to lay the foundation for future intergovernmental decisions aimed at building new, more effective and equitable system of international economic relations.
Since last autumn leading experts of national governments and major international organizations have tried to identify the roots of the crisis, forecast its further development and assess its impact. Various anti-crisis policies are being offered, including at the global level. Unfortunately, thus far there are still much more questions than answers.
In our view, the crisis has a system-wide and multi-factor nature. It was caused, first of all, by the failure of the existing financial system due to underestimated risks and ineffective regulation. The world financial institutions have not adequately responded to developments in recent years. They appeared to have no instruments to prevent and minimize the consequences of crises and no tools to leverage over the strategies of market players. Thus, the world faced serious economic shocks and a threat of global social instability.
Secondly, there are huge imbalances in the world economy. In the context of global economic growth, the generated welfare has been distributed rather unevenly both within States, even highly-developed ones, and among various countries and regions of the world. Decent housing, education and high-quality healthcare are still unaffordable for a major part of humanity.
Moreover, this crisis is a logical outcome of excessive expectations, and not just in business community. Pushing upwards stock indexes and capitalization have become more important than increased productivity and real efficiency of companies' activities.
Thus, what shall be done to restore the normal functioning of the world economy? We believe that the priority is to establish a stable and predictable international economic system based on the well known rules and the principle of maintenance of macroeconomic and financial discipline by the leading world economies.
Obviously, the current situation requires new collective solutions agreed at the international level.
We have specific proposals to restructure the global financial and economic architecture.
As a matter of priority, we should:
– increase legitimacy and efficiency of international regulatory institutions on a new conventional basis;
– develop an effective risk management system;
– provide continuous monitoring of the situation and strengthen regulation (supernational and national) and supervision over financial sector;
– establish a system of incentives to make market actors behave reasonably based on a balanced risk assessment.
Now I don’t have enough time to dwell upon every aspect of our initiatives. Russia’s proposals have been made public more than once, including by our senior leaders, and we have been discussing them with all interested partners. We are ready for a dialogue and are willing to consider various ideas in a constructive spirit.
In this regard, I would like to underscore the work of the Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System headed by the esteemed professor Joseph Stiglitz. We have carefully studied the recommendations of his Commission and found them a generally sound basis for further discussion.
At the same time we think that our experts have much to do yet. It would be useful for the Commission to elaborate a “road map” for the implementation of its recommendations. Moreover, the Commission’s experts could provide an expertise to the United Nations follow-up activities after the High-Level Conference to be held in June 2009.
The current range of the most urgent issues faced by the world economy requires global solutions which can only be adopted on a legitimate basis. It is, first and foremost, the United Nations which has the universal and unchallenged legitimacy.
Therefore, we attach paramount importance to the Conference to be held in June. We consider it as a landmark event aimed at building a sound political foundation with a view to consolidating the efforts by the international community to combat the global crisis. We want it to be successful and we are ready for a constructive dialogue on the whole range of issues related to the Forum.
Obviously, it is impossible to solve all the remaining problems in two months before the Conference, in particular to agree on the details of the new world financial architecture. That is why we suggest a special international conference at the level of authorized representatives, involving experts in relevant fields, which could elaborate specific proposals and draft international conventional arrangements which would provide the basis for a new international monetary and financial architecture.
We are aware that this is not a matter of a few days and, certainly, such decisions should be supported by all States. The main objective is to ensure that concerted international efforts are taken both within the United Nations and other formats, primarily within the G20.
In the context of the world financial and economic crisis the key task of the United Nations and, in particular, of the High-Level Conference to be held in June is to promote, in every way possible, international development agenda and the achievement of the Millennium Development Goals by all States.
It is important that, through joint efforts, we avert a crisis in the development assistance. This time we should prevent the situation that took place in the early 1990s, when the recession in the world economy was followed by a more than 20 percent cut-off in the development assistance. In this regard we should focus on the support for the most vulnerable populations in developing countries and on financing infrastructure projects which make it possible to ensure economic growth and resolve the issue of unemployment.
Despite a global financial and economic crisis, which has affected Russia as well, we reaffirm our commitments to provide assistance to developing countries. Russia’s contribution to the Eurasian Economic Community (EurASEC) Fund, for example, will amount to $7.5 billion.
We cannot consolidate our anti-crisis efforts without mutual trust and, first of all, trust between States. A key joint task is to achieve this mutual trust. It is trust and solidarity that will help us to overcome current problems, avoid many shocks and achieve prosperity and welfare in the 21st century.