Russia challenged U.S. power at the IMF well before Moscow’s annexation of Crimea last month, a move that raised diplomatic tensions and prompted the leading Western powers to impose economic sanctions on Russia.
China has used more cautious diplomacy, even as it explores alternative financial aid mechanisms that eventually could make the IMF obsolete. China’s extensive loans and assistance to other developing countries already dwarf the aid provided by the World Bank and the IMF.
Even nations with historically friendly ties to the U.S. are losing patience. India’s finance minister recently noted that the congressional impasse reflects badly not only on Washington but also on the whole economic order set up by the U.S. and its Western allies after World War II.
“This is perhaps the first visible failure of the G-20. This has reduced the credibility of the G-20,” India’s economic affairs secretary, Arvind Mayaram, told reporters at the G-20 meeting in Sydney. Implementation of the 2010 reforms is “vital for the credibility, legitimacy and effectiveness of the IMF,” he said.
IMF Managing Director Christine Lagarde continues to insist that there is little she can do without U.S. approval. Analysts point out that European countries, which continue to dominate the IMF’s board of directors and stand to lose the most clout under the reforms, have been happy to let the U.S. block the legislation even while publicly deploring the congressional delays. While American voting power would be mostly undiluted under the reforms, the greater power given to emerging countries would come largely at the expense of smaller European countries that would lose voting shares.
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