MOSCOW (Reuters) - 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, but stopped short of calling the policy a mistake.
President Dmitry Medvedev will take part in the summit, where conflict is brewing over the U.S. 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.
China has been particularly vocal in criticism of the policy, which U.S. President Barack Obama defended on Monday during a trip to India, saying the Fed’s mandate to grow the U.S. economy was good for the world as a whole.
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.
NO LESS DANGEROUS
Dvorkovich also said that Russia does not support the idea of establishing numerical target limits for current account balances, proposed by U.S. 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 results of U.S. congressional elections in which Democrats suffered heavy losses will not slow down the “reset” policy between the two countries. Medvedev is due to meet U.S. President Barack Obama this week.
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 stabilizing effect,” Dvorkovich said. “Everyone wants to invest in the U.S. economy, it is not so bad.”
Editing by Ruth Pitchford
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