G8 Bulletin. November 18-24, 2002.

By Daniella Aburto, Karma Dolkar, Carrie Fiorillo and Judah Harrison
Edited by Elizabeth Ben-Ishai
G8 Research Group

Canada and Russia finalized a weapons agreement this week in Moscow, while both countries called upon Iraq to comply with United Nations resolution.

Canada agreed on Monday, November 27, to make the first payment of a US$20 billion drive to help Russia destroy chemical, nuclear and biological weapons. This needs to be done in order to prevent such materials from landing in the hands of militants.

Canadian foreign minister Bill Graham signed the accord that was first agreed upon in bilateral talks earlier this year. The talks were intended to help build a chemical weapons destruction facility at Shchuchye in Western Siberia.

The money will be spent on helping Russia clean up its decaying store of nuclear, chemical and biological weapons. The deal hinges upon Russia’s ability to prove that the money will not fall prey to corruption and legal disputes.

The deal starts with US$5 million for the disposal of chemical and biological weapons only. Russia has pledged to destroy its arsenal, the world’s largest, under the 1997 Chemical Weapons Convention. Russia has 40,000 tonnes of chemical weapons. At a meeting in Moscow with Russian foreign minister Igor Ivanov, Graham said, “You have to start somewhere. And this is a first step.”

As well, Ivanov has rejected any suggestion of problems in the dialogue with G8 partners in the area of non-proliferation of nuclear weapons. According to Ivanov, U.S. Under Secretary of State John Bolton, who represents the U.S. at consultations with the Russian side, “did not express any concerns when he visited Moscow.”

Meanwhile, both Russia and Canada have called for Iraq to comply with UN resolution 1441 in order to stave off a war once again in the Persian Gulf.

Charities Criticize British AIDS Report, Russian AIDS Problems Out of Control

The British government, seeking to avert millions of unnecessary deaths from malaria, tuberculosis and AIDS, published a report on November 27 that it said would pave the way toward providing cheaper medicines to the world’s poor. However, charities including Oxfam and Médecins Sans Frontières slammed the study for failing to address the issue of global patent rules that protect pharmaceutical firms’ profits, just as rich and poor states were deadlocked in Geneva over how to implement an accord on relaxing patent laws. The report, backed by British drugs giant Glaxo SmithKline and AstraZeneca, calls on companies to sell life-saving drugs “close to the cost of manufacture” in least developed countries (LDCs), which total almost 50, and across Sub-Saharan Africa. In return, safeguards would be put in place to ensure countries do not re-sell the drugs to the developed world. The most obvious limitation of these proposals is that they do not address the needs of middle-income countries, such as Brazil and Thailand, which have large HIV epidemics and cannot afford to provide treatments at U.S./European prices. However, such countries are able to use other strategies, such as generic production by state-owned companies, to control the cost of treatment.

Russia’s AIDS problem is raging out of control even though the number of new HIV cases halved this year, health officials there said November 27. More than 220,000 people are infected with HIV, and at least half a million will die of AIDS by 2010 even if urgent measures are taken, the officials said at three news conferences held around town ahead of World AIDS Day on Sunday. First Deputy Health Minister Gennady Onishchenko said 41,000 new HIV cases were detected in the first 10 months of this year, a drop of 47% from the number found in the same period in 2001. A total of 87,177 new infections were detected in 2001, a 46% jump from 2000. Asked to explain this year’s reduction, Onishchenko said, “I wouldn’t say it’s our work, but there are clearly fewer new drug addicts.” Military action in Afghanistan has hit the supply of heroin passing through Russia to Europe, he said.

However, at a separate news conference, Vadim Pokrovsky, the head of the Federal AIDS Center, said that “the lower numbers are because a lower number of drug addicts were checked this year.” He said the actual number of HIV cases probably stands between 800,000 and 1.2 million.

The AIDS epidemic struck Russia almost a decade later than many other countries – largely because the Soviet Union collapsed only 11 years ago – and only 3,000 people have died.

Earlier this year, Pokrovsky together with Christof Rühl, the World Bank’s chief economist in Russia, drew up an economic model of the consequences of HIV infection that shows the epidemic will have significant effects on labour resources and gross domestic product, not to mention high treatment and prevention costs.

A large part of Russia’s AIDS budget is spent on providing antiretroviral drug treatments that cost US$4,000 to US$6,000 per person per year – which means only a few hundred people are treated. Pokrovsky also said there is a lack of coordination among government structures in the fight against AIDS. For example, while Russia is negotiating for a US$50 million loan from the World Bank and is benefiting from a British AIDS program worth US$40 million, it has pledged US$20 million to the Global Fund to Fight AIDS, Tuberculosis and Malaria. Mariangela Bavicchi, external relations manager for the fund, said on November 26 that as a G8 nation, Russia is ineligible to receive any grants. However, the growth in HIV/AIDS is similar to Ukraine’s, and Ukraine has received funds.

Russia’s situation appears serious enough that it could well be treated as an exception and receive a grant. World Health Organization representative Mikko Vienonen, speaking at the launch of a joint UNICEF, UNAIDS and WHO study on the effect of the epidemic on young people Wednesday, called on Russia to put a closer emphasis on prevention. “The risks of AIDS and HIV need to become a part of everyday life if society is to survive it,” said Vienonen.

At the G20 meeting in New Delhi, India, on November 23-24, among the topics discussed were the reduction and removal of high trade barriers and subsidies (see G8 Bulletin, November 18–24, 2002). As well, an idea was floated for appraising certain economies independently. Russian finance minister Aleksey Kudrin stated that Russia “is ready for any international independent appraisal of the Russian financial system.”

No agreement was reached on establishing a sovereign debt mechanism. Officials said Brazil and Argentina, both heavily debt laden, adamantly opposed any measure leading to a compulsory system of debt resolution.

India resisted U.S. pressure to legalize the Hawala money-transfer system, which is thought to be often involved in financing terrorist groups. India countered with the fact that there was a growing trend that tangible items, such as gold and diamonds, are used more often in this financing than money obtained with the Hawala system.

Deflation may be on the horizon in many countries, with a few of the G7 nations hovering at an inflation rate of a little over 1%. As well, the Organisation for Economic Co-operation and Development predicts that all the G7 countries except Canada will have an output gap next year, pushing inflation down further. This may be bad for various reasons including the facts that wages fall more slowly than prices squeezing profits even more, banks are forced to deal with bankruptcies and are less apt to lend, and falling prices raise real interest rates and the real burden of debt.

Anne Krueger, the first deputy managing director of the International Monetary Fund, said that the outlook for the European economies is “not that good.”

The next meeting will be hosted by Mexico in 2003. The agenda will likely again touch upon the identification of better practices to restructure sovereign debt, as well as the fight against tax havens, issues relating to globalization, and the role of financial services as promoters of integration.

Sources: The Telegraph, Jiji Press, Financial Times, El Economista, SAPA-AFP, Hindu Business Line, Rediff, Business Standards

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