Asia-Pacific

Russia says US should consult G20

(Agencies)
Updated: 2010-11-09 09:35

MOSCOW - Russia sided with China ahead of the Group of 20 summit, saying on Monday the United States should consult other countries before pumping cash into its economy.

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President Dmitry Medvedev will take part in the summit, where conflict is brewing over the US Federal Reserve's latest allocation of $600 billion to buy Treasury bonds - money that investors are likely to redirect into emerging markets in search of higher returns, potentially fuelling new asset bubbles.

"Russia's President (Dmitry Medvedev) will insist .... that such actions are taken with preliminary consultations with other members of (the Group of 20 countries)," said Russian G20 negotiator Arkady Dvorkovich.

Dvorkovich said that the Fed's policy was an internal matter but added that previous decisions by the G20 require consultations on such issues. He said the Fed's move may even benefit Russia because its current capital inflows were too small.

"Capital inflow for Russia now is a plus. It may not be a plus for other emerging countries such as Brazil or China where economies are overheated. Our economy is not overheated," Dvorkovich said.

Dvorkovich also said that Russia does not support the idea of establishing numerical target limits for current account balances, proposed by US Treasury Secretary Timothy Geithner when the G20 finance ministers met last month.

"We're against such a simplified approach; it can create other imbalances, no less dangerous," Dvorkovich told a news conference. "A system of criteria is possible, one criterion cannot work."

Dvorkovich said Russia was not "fully satisfied" with the reform of the International Monetary Fund (IMF) agreed by G20 finance ministers, suggesting that emerging economies will push for more voting rights in the near future.

Dvorkovich said the United States and other developed nations should open up their economies to investment from developing countries. He added that such investment can offset "hot" money flows resulting from the Fed's policy.

 "Now everyone is scared that this $600 billion will flow into emerging markets but a counterflow can have a stabilising effect," Dvorkovich said. "Everyone wants to invest in the US economy, it is not so bad."