Towards a new global governance architecture

Like many wars, Russia’s invasion of Ukraine, which began on February 24, has not gone according to plan. Fierce Ukrainian resistance, unfavourable terrain, and NATO-supplied anti-tank and anti-aircraft weapon systems stopped the Russian advance from the north, towards the capital Kyiv, and then forced them into a retreat. Fighting continues in the east and south of the country. While the progress of the Russian invasion and its immediate aftermath have preoccupied the commentary on the war, there are longer-term implications of the war with both geopolitical and economic dimensions that are worth considering. The war could very well signal the beginning of the collapse of the post-Second World War United Nations and Bretton Woods systems that have been cornerstones of the global security and economic governance architecture.

It may not be an exaggeration to say that international political governance has for over seven decades now centred on the premise that global peace and security are best guaranteed by giving the “great powers” a significant role in international affairs. This was the logic used to justify the pivotal role that the US, Russia, China, France, and the UK held in the UN system and the veto power they enjoyed in the UN Security Council. These countries, it was argued, would remain committed to the United Nations (UN) and use their economic and military power to ensure international security, if they could use their veto and avoid being sanctioned by other members. Otherwise, they would leave the UN system, as Germany, Japan and Italy had left the League of Nations between the first and the second world wars, thus jeopardising world peace. 

In the current context, the US and its allies now seem to be rethinking the role of Russia and China in the international security system. In addition to economic sanctions designed to cripple the Russian economy, they have also targeted Russia’s role in international organisations. They led the successful effort in the UN General Assembly to suspend Russia from the UN Human Rights Council, marking the first time that a permanent member of the UN Security was suspended from a UN organisation by its members. China was one of only seven countries that voted against this move. The US and its allies also supported a successful UN General Assembly resolution brought forward by Liechtenstein which requires the General Assembly to meet “within 10 working days of the casting of a veto by one or more permanent members of the Security Council” for a debate where the veto-wielding member would have to justify its veto. This measure seems targeted at both Russia and China, which in the past have vetoed US-sponsored resolutions for sanctions on countries such as Iran, Venezuela, and North Korea.

The fact that the US, France, and the UK now seem willing to undermine the role of Russia and China in the United Nations seems indicative of a fracturing of the long-held consensus among these five countries on how the international security architecture should be structured. Emerging powers, such as India, Brazil and Germany have for over two decades now been calling for a reform of the UN system and seeking permanent membership of the Security Council for themselves. The existing permanent members have successfully stalled reform efforts so far. However, the Ukraine crisis could very well mark a turning point. Whether this would eventually lead to a breakdown of the UN system, with countries such as Russia and China leaving or being forced out of the UN, or to reforms that create a new international architecture more suited to 21st century realities remains to be seen. What seems clear is that the current system does not seem “fit for purpose” and the pressures to alter it will accelerate. 

What could happen to the Bretton Woods sisters — the International Monetary Fund (IMF) and the World Bank— where decision-making is based on the vote-share of members? Despite the clamour for reforms in the IMF and the World Bank, it is well known that both these institutions suffer substantially on account of a democratic deficit and have for long been seen as toeing the combined line of the US and its European allies. In terms of the current quota distribution, Russia has a quota of 2.71 per cent, six times that of Ukraine, and the quota of the US at 17.43 per cent nearly double the combined quota of Russia and China at 9.11 per cent. Hence, there may not be an immediate threat to these institutions. However, given the resource-rich nature of the Russian economy, the economic might of China, and the combined foreign exchange reserves of the two countries, they could press for a change in current reserve pooling arrangements. With active Chinese interests in, and strategic relationships with, a number of African economies, their support for a possible realignment transcending their traditional relationship with France, the UK, and the US cannot be ruled out. This could well pose a threat to US dominance of the IMF. Insofar as the Russia-Ukraine war is concerned, while the IMF has taken the standard US line, it is aware of a possible threat to its own existence. In its latest World Economic Outlook of April 2022, the IMF says, “More fundamentally, geopolitical tensions threaten the rules-based frameworks that have governed international economic relations since World War II. Current sanctions imposed with the aim of pressing Russia to end the war are already cutting financial and trade linkages between Russia and other countries, with far-reaching repercussions”. 

The severe sanctions against Russia may turn out to be deeply destabilising. A new Cold War involving the US and its allies on the one hand, and Russia and China on the other, is inevitable unless Russia is brought to the negotiating table and a cessation of hostilities is agreed upon. This seems unlikely at the moment. Georg Hegel famously said, “The only thing that we learn from history is that we learn nothing from history.” We could be on the verge of repeating the crises and conflicts of the last century well into the current one.

Abraham is with the Indian Institute of Management Calcutta, Kolkata and Ray is with the National Institute of Bank Management, Pune. The views are personal