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China backs Russia in opposition to Syria action

Alice Martins | AFP | Getty Images

China warned on Thursday that military intervention in Syria would hurt the world economy and push up oil prices, reinforcing Vladimir Putin's attempts to talk President Barack Obama out of air strikes.

The rift over Syria could overshadow a summit of the Group of 20 developed and developing economies in St. Petersburg, Russia, at which global leaders want to forge a united front on growth, trade, banking transparency and fighting tax evasion.

The club that accounts for two-thirds of the world's population and 90 percent of its output is divided over issues such as turmoil in emerging markets and the Federal Reserve's decision to end its program of stimulus for the U.S. economy.

But no rift is wider than the one between the U.S. and Russian leaders on possible military intervention in Syria to punish President Bashar Assad over a chemical weapons attack that killed hundreds of people on Aug. 21.

(Read more: Syria's chemical weapons aren't a simple target)

Putin was isolated on Syria at a Group of Eight meeting in June, the last big meeting of world powers, but now has China to back him at the G-20 summit in Russia's former imperial capital.

"Military action would have a negative impact on the global economy, especially on the oil price—it will cause a hike in the oil price," Chinese Vice Finance Minister Zhu Guangyao told a briefing before the start of the G-20 leaders' talks.

In Beijing, Foreign Ministry spokesman Hong Lei reiterated that any party resorting to chemical warfare should accept responsibility for it but said unilateral military actions violate international law and would complicate the conflict.

Like Moscow, one of Syria's main arms suppliers, Beijing has veto powers on the United Nations Security Council. Obama is unlikely to win Security Council approval for military action but is seeking the approval of the U.S. Congress.

France echoed Obama's call for action over the gas attack, which Washington blames on Syrian government troops and Moscow says may have been carried out by rebels trying to oust Assad.

"The position of France is to punish and negotiate," Foreign Minister Laurent Fabius told France 2 television before travelling to St. Petersburg, where Putin is hosting the summit in a czarist palace on the coast.

"We are convinced that if there is no punishment for Mr. Assad, there will be no negotiation," he added. "Punishment will allow negotiation, but obviously it will be difficult."

(Read more: The hardware the US will use to strike)

Fabius, whose country is preparing to support the U.S. military action with own forces, said Syria would be discussed at the summit even though it is not formally on the agenda.

Putin has said he would like to hold one-on-one talks with Obama but a Kremlin spokesman said no such meeting was planned. Last month, Obama pulled out of talks with Putin that had been scheduled for Wednesday, and U.S.-Russian ties are in free fall.

Foreign ministers from key states in the G-20—which includes all five permanent U.N. Security Council members—will also discuss Syria on the sidelines of the meeting.

Any G20 decision on Syria would not be binding but Putin would like to see a consensus to avert military action in what would be a significant—but unlikely—personal triumph.

Obama used a visit to Sweden on Wednesday to build his case for a military response, saying, "The international community's credibility is on the line." Putin increased the volume as well, accusing Secretary of State John Kerry of "lying" by playing down the role of the militant group al-Qaeda with rebel forces.

Loss of harmony

The G-20 achieved unprecedented cooperation between developed and emerging nations to stave off economic collapse during the 2009 financial crisis, but the harmony has now gone.

There are likely to be some agreements—including on measures to fight tax evasion by multinational companies—at the summit in the spectacular, 18th-century Peterhof Palace complex, built on the orders of Czar Peter the Great.

An initiative will be presented to leaders on refining regulation of the $630-trillion global market for financial derivatives to prevent a possible markets blowup.

Steps to give the so-called shadow banking sector until 2015 to comply with new global rules will also be discussed.

But consensus is proving hard to achieve among developed economies as the United States takes aggressive action to spur demand and Europe moves more slowly to let go of austerity.

(Read more: Attack on Syria: The worst and least-bad scenarios)

Meanwhile, emerging economies in the BRICS countries—Brazil, Russia, China and South Africa—are divided over the role of the U.S. dollar in the world economy. And there has been no sign of them rallying behind the fifth BRICS member, India, after it called on Friday for joint currency intervention.

Russia and China also joined forces in warning about the potential impact of the Fed ending its bond-buying program to stimulate the economy. Zhu urged the United States to be "mindful of the spillover effects and work to contribute to the stability of the global financial markets and the steady recovery of the global economy."

The International Monetary Fund will call at the meeting for strengthened global action to revitalize growth and better manage risks, according to an IMF document seen by Reuters.

But with the United States and other advanced economies picking up speed, the IMF said it still expected global growth to accelerate in 2014 from this year, helped by the highly accommodative monetary conditions in the rich world.

Further friction on the fringes of the summit could be caused by Obama's plans to meet human rights activists including members of a gay rights group which staged protests against a law Putin signed banning "gay propaganda" among children.

—By Reuters.

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