– Bernd Debusmann is a Reuters columnist. The opinions expressed are his own –

The U.S. case for isolating Cuba and keeping it out of international meetings such as this week’s Summit of the Americas sounds simple: the country doesn’t have democratically elected leaders, it holds political prisoners, it violates human rights and its citizens can’t travel freely. All perfectly true.

But if the logic used for isolating Cuba were applied consistently, neither China nor Saudi Arabia, for example, should have taken part in the London G20 summit. The U.S. State Department estimates China has “tens of thousands” of political prisoners and describes it as “an authoritarian state in which the Chinese Communist Party … is the paramount source of power.”

That has made little difference to the close relationship of mutual dependence between the U.S. and China, the largest creditor of the United States. During U.S. Secretary of State Hillary Clinton’s February visit to China, pragmatism triumphed over human rights concerns as she urged the Chinese to keep buying U.S. treasury bonds.

In comparison to China’s “tens of thousands,” the State Department’s latest human rights report quotes a Cuban human rights group as saying the government there held at least 205 political prisoners at the end of 2008, down from 240 at the end of 2007.

The Saudi monarchy, according to the State Department report, denies its citizens the right to change the government peacefully, holds political prisoners, curbs free speech, restricts religious freedom, tolerates violence against women, and sanctions corporal punishment. The list goes on and includes lack of due process in the judicial system.

If the logic applied to Cuba were consistent, U.S. citizens should be banned from traveling to North Korea, an “absolute dictatorship” where the State Department noted extrajudicial killings, disappearances, arbitrary detentions, and political prisoners. Instead, the only country to which the U.S. government restricts travel by its citizens is Cuba.

In advance of making his first appearance at a Hemispheric summit this week, U.S. President Barack Obama eased restrictions his predecessor, George W. Bush, had imposed to make it more difficult for Cuban-Americans with relatives on the island to travel and send money there. Obama also allowed U.S. telecommunications companies to bid for Cuban licenses.

These are small steps that fall far short of lifting the 47-year-old U.S. trade embargo on Cuba, a Cold War measure that demonstrably failed in its aim to bring down the communist government of Fidel Castro, who defied 10 successive U.S. presidents, both Democrats and Republicans, before he formally handed power to his brother Raul last February due to a long illness.

HAVANA-WASHINGTON THAW?

Raul Castro, who is 77 and was Cuba’s defense minister for almost five decades, has since made several key changes in the leadership. They included firing foreign minister Felipe Perez Roque, one of a group of young officials whose dedication to Fidel Castro was so fierce they earned the nickname “tropical Taliban.” He was replaced by Bruno Rodriguez, a less doctrinaire foreign service veteran.

Some Cuba watchers saw this change as a move to facilitate efforts to thaw relations between Havana and Washington. How far and how fast Obama will go is certain to be a topic at the summit in Trinidad and Tobago where Cuba is the only country in all the Americas not invited.

Advocates of lifting the embargo, a policy change that would finally bring the United States in line with the rest of the world, see light at the end of the long tunnel. “This is the beginning of the end of the worst, least successful foreign policy experiment in the history of the United States,” in the words of David Rothkopf, head of a consultancy who blogs at Foreign Policy magazine.

Wishful thinking? Lifting the embargo would require repealing legislation — including the controversial 1996 Helms-Burton law - that penalizes companies doing business with Cuba. In one of its more bizarre interpretations, U.S. pressure resulted in Mexico City’s Sheraton hotel expelling a 16-strong Cuban delegation attending an energy conference there a few years ago.

The beginning-of-the-end school of thought points to legislation now pending - The Freedom to Travel to Cuba Act - which would allow all Americans, not only Cuban-Americans with family on the island, to visit. If that act were passed, a study for the International Monetary Fund estimates that up to 3.5 million Americans could visit annually.

Cuba is not on the official agenda of the Trinidad summit (the fifth in a series that began in Miami in 1994) but Venezuela’s left-wing, anti-American president, Hugo Chavez, is certain to bring it up, along with a demand that the 34-member Organization of American States readmit Cuba. Its membership was suspended in 1962.

The guideline that only democratically-elected leaders can take part in summit meetings dates from the 1994 gathering - and even then, the logic was flawed. The Miami meeting’s participants included then Peruvian President Alberto Fujimori, a leader of dubious democratic credentials whose acts in office included dissolving Congress and closing the country’s courts.

He then won elections boycotted by the opposition. This month, a Peruvian court sentenced Fujimori to 25 years in jail for human rights abuses and involvement in two military massacres during a campaign against left-wing guerrillas.

Obama campaigned for president on a platform of “change we can believe in.” His moves on Cuba will provide a good indicator of how much of a change agent he really is.

China’s decision to link domestic fuel prices indirectly to the international crude oil market, subject to a price cap, while hiking the consumption tax on gasoline and diesel and phasing out a variety of road tolls and other fees shows Saudi Arabia’s worst fears about high prices and demand destruction are starting to come true.

It seems likely to confirm the kingdom’s determination to see prices stabilize around $75 per barrel, well below recent price peaks, and far below the level sought by some other OPEC members, as well as international oil companies and advocates of alternative energy.

China is among the world’s most inefficient users of energy, measured in terms of BTUs consumed per dollar of GDP produced.

Since China’s economy is one of the largest and fastest growing, and heavily reliant on imported crude oil, China has been hit harder than any other country by the recent surge in oil and energy prices.

Rising energy prices have worsened the country’s terms of trade, and threaten the viability of much of the industrial base (including the power-intensive steel and aluminum industries).

The central government has made reductions in energy consumption per unit of output a top priority.
Policymakers have used investment controls and other administrative measures to try to limit the expansion of energy-intensive industries aimed at producing primarily for export.

At the same time, export taxes have been introduced on a wide range of low-value added semi-manufactured products (such as unwrought aluminum) and VAT rebates scaled back to encourage the manufacturing sector to concentrate on exporting higher value-added items in which energy is a smaller fraction of the overall unit cost.

But efforts to increase energy efficiency have been only partially successful, because the government continued to hold prices for gasoline, diesel, thermal coal and on-grid electricity below international levels, using a combination of price controls and subsidies. The government’s strategy for improving energy efficiency came into conflict with the priority on economic and social stability.

Extensive price controls and subsidies largely insulated households and businesses from the rise in international oil and energy prices, blunting the incentive to improve energy efficiency.

Eventually, the rise in global oil prices became overwhelming. The resulting pressure on the current account of the balance of payments and need for growing subsidies to the country’s oil refiners forced the government to raise administrated gasoline and diesel prices almost 20 percent earlier this year.
One welcome effect of the rise in oil prices and the decision to increase domestic gasoline and diesel charges was that it sharpened incentives for energy efficiency considerably.

But as the economy has slowed sharply and international oil prices have tumbled, the government has come under pressure to cut fuel charges.

Instead, the National Development and Reform Commission (NDRC) has introduced a carefully integrated package of measures designed to provide short-term economic relief while maintaining the pressure for greater energy efficiency in the medium term.

By linking domestic prices indirectly to the international oil price, NDRC has ensured that consumers and businesses will benefit from the current easing in the oil market, helping stabilize the economy, but that domestic prices will move up again if the market picks up, reducing the subsidy burden and maintaining market-based incentives to limit energy consumption.

More importantly, the government has taken advantage of the (possibly temporary) reduction in oil prices to introduce a (probably permanent) increase in the energy consumption tax.

The key point is that the consumption tax is not linked to variations in the oil price and will sharpen the incentives for using energy more efficiently at any level of international prices.

In effect, China has started to emulate the successful conservation strategies used in Europe and Japan, where heavy fuel taxes have spurred the use of much more fuel efficient vehicles and much lower energy consumption per unit of output than in the United States and the rest of the world.

Europe and Japan took advantage of relatively low oil prices during the late 1980s and 1990s to raise substantial excise taxes on the consumption of gasoline and diesel. China’s decision to boost the consumption tax on gasoline and diesel looks like it could be the first in a series of phased increases over time, similar to the United Kingdom’s “fuel duty escalator.”

OPEC has long complained about the massive “wedge” these fuel taxes have driven between the pump prices paid by motorists in Western Europe and the net revenue which oil exporting countries actually receive for their crude, but they are widely cited as the most effective conservation strategy.

Saudi Arabia expressed consistent concerns that the recent surge in oil prices would lead to the long-term loss of demand even if prices subsequently fell back. Those fears are now being realized.

China’s decision to raise the fuel consumption tax is one of a number of measures adopted around the world to promote conservation and aimed at the volume of oil consumed for any given level of prices.

It is consistent with the massively increased bio-ethanol blending requirements introduced in the United States last year designed to displace oil consumption.

By pushing energy conservation to the top of the policy agenda, the frenzied escalation in oil prices during 2006-2008 is set to have long-lasting effects, even if prices eventually stabilize at much lower levels. President-elect Barack Obama has made clear that improving energy efficiency and cutting dependence on oil imports will be a top priority in the next four years.

Neither the incoming Obama administration, nor top planners in Beijing, will quickly forget the harsh lessons about reducing energy dependence taught in the last two years, even if prices now settle much lower.

China’s decision to raise fuel taxes will increase Saudi Arabia’s determination to stabilize prices at a much lower level than most other members of the organization are comfortable with, to try to limit the long-term damage to oil demand.

The kingdom’s worst fears about the long-term damage wrought by high and volatile prices are now being realized.

For more columns by John Kemp, click here.

Anyone who expected the major emerging economies to write fat checks in exchange for being invited to the first G20 leaders’ summit on rescuing the world economy will have been disappointed.

But that should only have surprised the naive.

Despite intensive lobbying by British Prime Minister Gordon Brown of Saudi Arabia and China, the rising powers were never likely to make a cash down-payment to the International Monetary Fund before getting more seats and votes at the top table.

IMF Managing Director Dominique Strauss-Kahn said after Saturday’s Washington summit that his organization will need at least another $100 billion in the next six months to bail out countries stricken by the credit crisis.

Among the world’s major reserve holders, only Japan, an established member of the Group of Seven most industrialized nations, offered the IMF a $100 billion unilateral loan.

The Saudis, Chinese, Russians and Indians want to be sure of winning a permanent say as equal partners in the management of the global economy, and of locking incoming U.S. President Barack Obama into a new world financial order, before they open their wallets.

Even then, they face serious constraints due to domestic development priorities, nationalist public opinion and uncertain energy prices that will limit any contribution.

Here is some of their thinking:

SAUDI ARABIA - Saudi Finance Minister Ibrahim al-Assaf was most outspoken in explaining, in a Reuters interview, why the oil-rich kingdom was not about to pick up the bill for the financial crisis.

“We (Saudis) have been playing our role responsibly and we will continue to play our role responsibly but we are not going to finance the institutions just because we have large reserves. These reserves are for the development of the kingdom of Saudi Arabia,” he said.

Economists say Riyadh has taken a bigger hit from the crisis than it has publicly acknowledged. Its ambitious industrialization plans, as well as its largesse to domestic interest groups, may require a higher oil price than today’s.

Oil has tumbled from a record $147 a barrel in July to just $55 today, which is likely to prompt deeper production cuts. So producer nations face a double revenue hit on price and volume.

At this price, Saudi Arabia and all other Gulf Cooperation Council states except Kuwait can expect to post a fiscal deficit next year, according to economist Mushtaq Khan of Citigroup Global Markets.

Politically, it would be hard to justify helping bail out the widely hated West at a time when Saudi investors have seen their stock market plunge and their foreign investments tank.

The Saudi government may also wait to see whether Obama takes up a King Abdullah’s Arab League peace initiative with Israel and gives priority to Israeli-Palestinian and Israeli- Syrian peace, in contrast to outgoing President George W. Bush.

CHINA - Chinese President Hu Jintao made clear Beijing’s main contribution to stabilizing the world economy was a massive domestic investment program that should help cushion growth at a time when exports may shrink due to recession in the West.

The $586 billion two-year economic stimulus, much of it to be spent on modernizing the creaking infrastructure of the world’s most populous nation, was a bold move by the cautious standards of China’s collective leadership.

The Chinese, sitting on almost $2 trillion in foreign currency reserves, are waiting to see if Obama will share real power with emerging nations. They also want guarantees against protectionism by a Democratic administration and Congress.

“The question is whether developed countries are ready to accept China as a major player. If you want China to take out money when the crisis happens, but give China little power when voting, nobody is going to play with you,” a senior official in the country’s $200 billion wealth fund said.
Jin Liqun, supervisory board chairman of China Investment Corp. and a former vice finance minister, said industrialized powers “should address developing countries with humility”.

Although China is not a Western-style democracy, public opinion still matters.

Most media commentary has resolutely opposed any “bailout” of the West by succumbing to pressure to buy more U.S. Treasury bonds, Standard Chartered China analyst Stephen Green notes. But he said China could transfer some of its dollar reserves from U.S. Treasuries to IMF Special Drawing Rights, especially if it is given more voting rights in the IMF.

RUSSIA - Russian leaders have been dismissive of the IMF as a tool of U.S. dominance of the global economy. Although it still has $500 billion in reserves, Moscow is fast burning through its foreign currency pile as it tries to stabilize its own markets and bail out oligarchs in financial trouble.

A lower oil price also threatens future Russian state revenues and investment plans.
President Dmitry Medvedev and Prime Minister Vladimir Putin think in terms of power rather than economics.

Any Russian cash for the IMF would probably have to be part of a wider bargain with Obama covering missile defense, NATO enlargement, nuclear and conventional arms control, non-proliferation and perhaps Georgia and Kosovo as well.

The Russians don’t rule out such a deal but intend to talk with Obama from a position of strength. That is why they have blown hot and cold in the last two weeks, threatening to deploy missiles in Kaliningrad, on Poland’s border, but also voicing hopes of better ties with the new U.S. president.

INDIA - India, which still sees itself as a developing nation and has less IMF voting power than Belgium, is waiting to see whether Obama accepts a new distribution of world economic and political power before making commitments.

Finance Minister Palaniappan Chidambaram told a World Economic Forum event that the G20 had come to stay as the single most important forum to address global financial and economic issues, and much better than the G7.

But he said: “It is not clear to us whether the new (Obama) administration is fully on board with what the outgoing administration has put on the table.”

India too will be looking for guarantees against U.S. protectionism while demanding the right to protect its own millions of subsistence farmers.

All these countries say they are willing to become “responsible stakeholders” in a new world financial system. Just don’t expect them to pay up before they see the reality of power.

LONDON (Reuters) - Move over America! Make space Europe! The world’s top leadership table is expanding to bring in emerging powers from Asia, Africa and Latin America to help rescue the global economy.

This week’s Washington summit of 20 nations, called to discuss reforming the international financial system and avert a further worsening of the credit crisis that began in the United States, sets a precedent for a new international order.

Emerging economies such as China, India, Brazil, South Africa and Mexico are invited to share responsibility for the economic fate of the planet with the established Group of Eight industrialized nations — the United States, Japan, Germany, Britain, France, Italy, Canada and Russia.

Saudi Arabia is urged to disgorge its petrodollars and China to tap its $1.9 trillion reserves to underwrite rescue packages and buttress a Western-dominated financial system the collapse of which would wreak even worse devastation around the world.

No longer mere appendages invited for lunch at the end of the annual G8 summit, the rising powers are in demand because they have either mountains of cash, vital natural resources, fast-growing economies or regional security responsibilities.

Will they cooperate, and what do they want in exchange?

“A voice is the most important thing,” said a former senior U.S. financial policymaker, who spoke on condition of anonymity.

“As they look out at global economic prospects, they will also want to see that their money is going to be safe. They will want to see a plan that gives them confidence,” he said.

Beyond that, some of the key holders of dollars and oil may seek security guarantees and assurances that the West will not discriminate against investments by their sovereign wealth funds or their exports during the coming recession.

In a joint statement, the so-called BRIC countries — Brazil, Russia, India and China — called last week for “reform of multilateral institutions in order that they reflect the structural changes in the world economy and the increasingly central role that emerging markets now play”. They also sought assurances against protectionism in the financial crisis.

INTERESTS AT STAKE

Here are some of the interests at stake for key players:

CHINA - The world’s most populous nation, a nuclear power and member of the U.N. Security Council, still regards itself as a developing country. Its communist rulers have just announced a huge domestic stimulus package of public investment but they are deeply cautious about opening up further to the world economy.

Chinese investment has not always been welcome in the United States, where many in Congress accuse Beijing of keeping its currency artificially cheap and want to curb imports from China.
Beijing has said nothing about its terms for helping bail out the capitalist West, but it is likely to want a bigger voice in global economic governance and some guarantees against protectionist steps by Washington and Brussels.

It may also want to ease Western pressure on it to curb greenhouse gas emissions in the fight against global warming.

INDIA - The world’s second most populous country has long sought a larger role in global leadership and sees itself as a spokesman for the developing world.

Prime Minister Manmohan Singh has called for reform of the United Nations Security Council and the G8, implicitly to give India a permanent seat in both.

“Our voice on how to manage this crisis in a way that does not jeopardize our development priorities needs to be heard in international councils,” he told a summit with fellow emerging powers Brazil and South Africa last month.

India seeks both assurances against Western protectionism and the right to continue protecting its subsistence farmers. It too wants to deflect Western pressure to curb emissions which it says would deny its right to economic development.

SAUDI ARABIA - The world’s biggest oil exporter is the only Middle Eastern state in the G20, frustrating Egypt, which lacks resources but sees itself as the leader of the Arab world.
Arab specialists say Riyadh seeks above all U.S. protection against Iran’s growing regional power and nuclear ambitions and from the ascendancy of Shi’ite Muslims in Iraq, which it fears will embolden Shi’ite minorities around the Gulf.

It also wants the next U.S. administration to take up an Arab League plan for peace with Israel and pressure the Jewish state to reach accommodations with Syria and the Palestinians and to stop discrimination against Arab investments, such as the blocking of Dubai Ports World’s purchase of six U.S. ports.

The Saudi monarchy also wants an end to what it regards as destabilizing U.S. pressure for democracy in the Middle East.

INCUMBENT POWERS UNEASY

The first-ever G20 leaders summit, for which the European Union has made all the running, comes in the lame-duck period when President George W. Bush is preparing to hand over to President- elect Barack Obama, putting Washington on the defensive.

“It is outrageous that the Europeans would take advantage of the moment of maximum U.S. weakness to call such a meeting,” the former U.S. financial policymaker said.

The G20 was created in 1999 but until now has been limited to broad-brush discussions among finance and monetary officials.

The world’s only superpower prefers bilateral financial diplomacy, in which it has the upper hand, and tried-and-tested smaller formats such as the G7 grouping of finance ministers and central bankers, which does not include Russia.

Washington is trying to deflect a battery of ideas from hyper-active French President Nicolas Sarkozy for supranational regulation or supervision of financial markets, hedge funds, private equity, mortgage lenders and sovereign wealth funds.

The EU has led pressure to expand the G8 to incorporate the emerging nations, whose cooperation the Europeans see as vital not only to help restore financial stability but also on issues such as trade liberalization and fighting climate change.

Despite anomalies in its make-up, such as the inclusion of Argentina, the G20 summit is well placed to become a key forum on financial reform because it already exists, and there are plans to hold a series of such meetings.

This might prove more practical than British Prime Minister Gordon Brown’s proposal for a sweeping review of the post-World War Two financial order, known as Bretton Woods.

But the G20 may be too unwieldy to be effective, and smaller leadership forums seem bound to emerge. One favorite is a G13 or G14 — a forum that would expand the G8 to include China, India, Brazil, Mexico and South Africa. Some see an Arab or Muslim member, either Egypt or Saudi Arabia, as essential.

Spain, Europe’s fifth largest economy and the world’s ninth but not a G20 member, announced at the weekend that it had won a last-minute invitation to the summit.

However many policymakers, both in the United States and in the developing world, see the over-representation of Europe at the world’s top tables as part of the problem.

The Europeans only reluctantly yielded a little of their voting powers to China in the International Monetary Fund this year. The big EU member states remain unwilling to pool their seats into a single EU delegation in global institutions, with the notable exception of the World Trade Organization.

But a further redistribution of European and U.S. votes at the IMF and some consolidation of Europe’s seats at the world’s top tables may be the price to pay for the emerging world’s help in resolving this financial crisis.

(Pictured above: Brazil’s Finance Minister Guido Mantega, South Africa’s Finance Minister Trevor Manuel (R) and British Treasury Financial Secretary Stephen Timms (L) attend a news conference in Sao Paulo November 9, 2008.)