LIKELY SAUDI POSITIONS AT THE G-20 SUMMIT

C O N F I D E N T I A L SECTION 01 OF 02 RIYADH 001219 SIPDIS DEPT FOR EEB, NEA/ARP E.O. 12958: DECL: 09/16/2019 TAGS: ECON ETRD EINV ENRG PREL SA SUBJECT: LIKELY SAUDI POSITIONS AT THE G-20 SUMMIT Classified By: Charge d'Affaires David Rundell for reasons 1.4 (b) and (d) ¶1. (C) Summary: The Saudi Finance Ministry provided a preview of its thinking in preparation for the G-20 Summit in Pittsburgh. Saudi Arabia is pleased with the G-20's performance to date and thinks it is the forum best able to enforce policy changes needed to prevent a recurrence of the international financial crisis. Saudi Arabia will look for strong statements from developed countries that they will continue expansionary fiscal policies until it looks more certain that the global economy has recovered. Saudi Arabia also wants to see a strong emphasis on putting the necessary regulatory reforms in place. The Saudis are likely to be sensitive to any calls to reduce their voting share, and thus perceived role, in the IMF. They will also be sensitive to any attempts to "demonize" oil in discussion about climate change. End summary. CONTINUE EXPANSIONARY POLICIES -------------- ¶2. (C) During a September 15 phone call with Econcouns, Deputy Finance Minister and G-20 sherpa Hamad Al-Baz'y provided an overview of Saudi Arabia's positions for the upcoming G-20 Summit in Pittsburgh. Saudi Arabia's most important concern is that the gathered leaders provide a strong message to the world about the need to continue expansionary policies until the global economic recovery is assured. It is also important that leaders commit to restoring fiscal health, particularly in developed countries. He explained that Saudi Arabia is concerned that failure of developed countries to rebalance their fiscal policies moving forward will undermine the long-term sustainability of economic growth. ¶3. (C) Saudi Arabia will also look for clear statements in support of regulatory reform. It is crucial that the world put in place the right kind of mechanisms to avoid future crises, especially in the financial sector. In that regard, it is important for all countries to faithfully implement their commitments to avoid the possibility of regulatory arbitrage. Al-Baz'y said it is unfortunate that regulatory reform discussions often have been bogged down by disputes over executive compensation. While this is an important issue, Al-Baz'y said it should not distract from the broader need to put in place a sound regulatory system. ;DON'T BACK US INTO CORNER -------------- ¶4. (C) Al-Baz'y expressed significant concern that Saudi Arabia not be backed into a corner at the Summit on the issue of rebalancing shares in International Financial Institutions (IFIs),most notably the IMF and World Bank. Al-Baz'y reported that he was concerned by the detailed and prolonged discussion at the sherpa meetings on wording to cover this issue. In particular, Saudi Arabia is concerned that these proposals ignore the important role Saudi Arabia has played in the global economy over many years, including providing considerable amounts of foreign assistance. Al-Baz'y thought that most of the suggested language (e.g., developed versus dynamic, under-represented versus over-represented) would not enhance the role of developing countries (e.g., Saudi Arabia),and he hoped that the Summit would avoid any statement that would go against earlier statements such as RIYADH 00001219 002 OF 002 the London communique. ENERGY AND SECURITY -------------- ¶5. (C) Al-Baz'y also expressed concern about agenda items related to energy security. The original wording struck the Saudi delegation as being targeted against oil rather than a broader range of energy sources. Al-Baz'y said that Saudi Arabia would not be able to support any language that would undermine its main source of national income, although it would be able to support a more balanced approach. He argued that developed countries need to help less developed countries (LDCs) address difficult political and social tradeoffs involved with energy policy. Al-Baz'y also said Saudi Arabia would not support proposals to discuss funding climate change at this Summit (Comment: We understand from the British Embassy that the UK delegation will raise this despite being told by the SAG they will oppose it. End comment). Al-Baz'y said the Saudi position is that developed countries should provide assistance to affected poor countries in addition to current assistance levels, or else these countries will not be able to meet their Millennium Development Goals. G-20 VS. G-7, G-8 -------------- ¶6. (C) Al-Baz'y said Saudi Arabia is very pleased with the G-20's track record to date as it has demonstrated its ability to be productive and enhance international cooperation. Saudi Arabia believed the G-20 is much more representative than the G-7 or G-8, and will prove much more effective when it comes to enforcing international financial regulatory reform. Al-Baz'y also indicated that Saudi Arabia is very pleased with the agenda's emphasis on financial issues and is preparing its delegation accordingly. COMMENT -------------- ¶7. (C) Although it may not take a proactive role, we expect that the Saudi delegation will emphasize areas of cooperation, particularly on international financial regulatory reform and the need to continue coordinated stimulus programs. However, we expect they will be very sensitive to several areas of perceived vulnerability. They are likely to resent any sustained effort to settle the IMF voting rights issue at this Summit, as they read this as discounting their generosity over many years on foreign assistance issues. We also expect that they will demure on any commitment to provide fresh funding for the IFIs until the voting rights issue is settled, as the SAG will want to avoid the perception that they are paying to rescue the West from its financial crisis and being thanked with a lower voting share. Finally, we expect the Saudi delegation will be sensitive to any discussion of a post-carbon future or of climate change that seems to "demonize" oil. We are getting the impression that the SAG increasingly attributes U.S. leadership to efforts to diminish the role of oil in the world economy. To the extent that discussions at the Summit focus on the need to find a sustainable transition to a cleaner future, this may make the discussions less contentious. MUENCH