How cohesive are the bricks of BRICS to shake the US-led global order?
Aside from a distaste for US clout in global finance, economics and geopolitics – the BRICS countries, arguably, have very little in common. So it begs the question, how much can it achieve as a coalition?
On paper, the stated goal of the BRICS (Brazil, Russia, India, China and South Africa) is to increase trade and investment among themselves. However, when the leaders of countries come together in Johannesburg, South Africa, for the 15th BRICS annual summit between August 22 and 24 - they have another powerful goal in mind - to dethrone the dollar as the global currency.
The development bank founded by the BRICS countries is planning to issue its first Indian rupee bond by October. The New Development Bank (NDB) issued its first rand bond in South Africa last week, and according to Vladimir Kazbekov, Vice-President and COO, it is considering local currency issuance in member countries Brazil, Russia and United Arab Emirates. All these steps are being seen as a precursor towards a single currency.
But promoting a single currency, like for example the Euro, is not easy.
A single currency is a step towards economic integration, but economic integration before political consensus is a difficult undertaking. Aside from a distaste for US clout in global finance, economics and geopolitics – the BRICS countries, arguably, have very little in common.
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In an op-ed published in several South African media outlets on August 21, Chinese President Xi Jinping said China and South Africa – as "natural members" of the Global South – should push for developing countries to have more sway in international affairs. In contrast to this view, India wants the process to be gradual and is concerned the group would become a mouthpiece for China, with which the country is opposed on a number of major issues.
This year, there is an awkward situation prevailing within the group over Russian President Vladimir Putin. Putin is facing war crimes charges for allegedly deporting children from occupied areas of Ukraine. So he will participate virtually to avoid being handcuffed on arrival in Johannesburg.
Time will tell how the hosts curate this delicate situation, and whether everyone in the room stays professional. But for now, we need to see whether the 15-year-old group has any chance to create a new world order after all.
Intra-BRICS cohesiveness: Is it an alliance or a political outfit?
In 2001, Jim O'Neill, an economist at the investment bank Goldman Sachs, coined the term BRIC (South Africa was not originally part of the club). Goldman Sachs used the term as a marketing tool to attract investment into four of the world's largest, fast-growing middle-income countries.
In 2006 the bank opened an equity fund for investors in the BRICS. In 2014, the group opened a bank called New Development Bank (NDB). In 2015, Goldman closed its BRICS fund.
Generally, alliances usually grow out of their members' common interests. As Bloomberg columnist Andreas Kluth says, in this more complicated world, countries assume they should belong to some sort of coalition, maybe several.
For example, Africa has AMU, Comesa, CEN SAD, EAC, Eccas, Ecowas and a few more, not to mention the African Union. Latin American countries are members of SICA, Caricom, Mercosur, USAN (the Union of South American Nations), Prosur etc. Bangladesh and other South Asian countries are members of SAARC, BIMSTEC, D8 etc.
But that was perhaps not the main purpose of BRICS.
According to Andreas Kluth, BRICS came out of the progression from a bipolar world during the Cold War to a unipolar moment of US hegemony and the presumptive return to multipolarity since then. The group's members are very different in their political identities.
They consist of three democracies in different stages of backsliding, and two arguably repressive autocracies. Brazil, India and South Africa are democracies. Russia and China are not. Russia, China and India have nuclear weapons. Brazil and South Africa do not. Brazil and Russia export commodities. China imports them. China's economy is larger than the others combined.
One pair, China and India, is as likely to fight each other. The countries have a long-running border dispute, which flared up in 2020, killing 24 soldiers.
China wants to displace the United States as a hegemon and keep seeding blocs it thinks it can dominate for that purpose. Those include the Belt and Road Initiative, a trans-continental infrastructure programme, the Shanghai Cooperation Organisation, a Eurasian grouping, etc.
On the other hand, the West has several strong confederations and groups where the countries actually have a shared interest and they have moulded into quite strong coalitions. The European Union comes closest to being a true bloc, in the sense of confederation. In trade and regulation, the EU is a world power. Also, the G7 (Group of Seven), is a club of rich liberal democracies with a shared sense of custodianship for the world economy.
The BRICS founders are also divided on the prospect of expansion. China and Russia want new members. The criteria and procedures for expansion were on the agenda of last year's summit. New members, especially stridently anti-American candidates such as Iran, would increase China's influence and make the BRICS more of an anti-American accord.
Putin sees a bigger BRICS as a way of offsetting the Western alliance against Russia. But for the same reasons, expansion is less palatable to Brazil and India. They do not want the club to be more China-centric, nor do they want it to become an overt rival to the West, with which they have better relations than China or Russia.
Putin is absent
It seems there is an awkward situation prevailing in the group. Following its invasion of Ukraine, $300 billion worth of Russian foreign exchange and gold reserves were frozen by the US and Europe. Earlier this year, on 17 March, the International Criminal Court (ICC) issued warrants of arrest for two individuals due to the events that unfolded in Ukraine after Russia's invasion last year – Vladimir Vladimirovich Putin and Maria Alekseyevna Lvova-Belova.
It feels like the group is almost forced to keep the company because, according to Andreas, "It never helps a club when one member can't show up because the International Criminal Court has a warrant out for their arrest."
De-dollarisation
About 42% of the world's population lives in these BRICS economies in around 40 million square kilometres, which is 30% of the world's total land. Although the per capita GDP of these countries are comparatively poorer than the developed Western countries, the cumulative GDP of these five nations is $26.03 trillion, almost 31.5% of the world's total GDP in 2021.
Based in Shanghai, the New Development Bank (NDB) had $25bn in assets in 2022, less than a tenth of the World Bank's total. Now the NDB is part of an attempt to challenge the dollar's global dominance. It aims to provide 30% of its loans in the currencies of its borrowers.
In 2020, the BRICS overtook the Group of Seven (G7) largest industrial countries in economic size when measured in purchasing-power parities.
But considering the economic factors and too many contradictions between the group's members, it seems a bit too ambitious. Economically, the combined trade of the BRICS block is about $9.03 trillion, 18% of the total global trade and it delivers just 23% of total global output
According to the Society for Worldwide Interbank Financial Transactions, the dollar is used for 42% of currency transactions. This means 58% of the population account for 77% of global GDP and 82% of global trade.
The Euro's share is 32% but it doesn't peddle similar kind of influence outside Europe and parts of North Africa. The Chinese Yuan contributes about 2% as its non-domestic usage does not extend significantly even within Asia, or outside of trade-linked finance.
The BRICS have the idea of a joint currency. But only one bloc, the EU, has ever achieved monetary union, and according to Andreas, that was "at the cost of recurring near-death experiences." The notion that the BRICS would pool their money, central banks, fiscal and monetary policy is "ridiculous."
There are also concerns that moves towards de-dollarisation could lead to overreach by Western countries, such as the freezing of foreign exchange and gold reserves, following Russia's invasion of Ukraine.
The Bangladesh perspective
The idea of a new world order and an economic bloc has piqued the interest of other countries.
According to South Africa's ambassador to the organisation, dozens are applying or thinking about joining. An adviser to Iran's president calls membership of the BRICS "the next step" in his country's foreign policy. Argentina, Indonesia, Saudi Arabia, Syria, Turkey and Venezuela are also said to have lined up in the queue.
On 19 June 2023, Bangladesh formally applied to join BRICS.
If all these countries joined, the bigger BRICS would account for half the world's population.
The motivation for Bangladesh to join BRICS comes from a political strategic rather than economic development perspective, according to Dr Debapriya Bhattacharya, a macroeconomist, public policy analyst, a member of the Centre of Public Dialogue (CPD) Board of Trustees and a Distinguished Fellow at the CPD.
"On the one hand, everyone agrees that the global system needs reform at the moment. Many multilateral mechanisms are not effective because of the US… At the same time, to increase the role of developing countries through the Southern Alliance is why Bangladesh is interested to join the group", said Dr Debapriya Bhattacharya.
He went on to add, "up until now BRICS is a collective Southern voice. Some of the countries of this group aspire to become members of the security council of the UN. If that is the case, the question is whether the small countries are being used here for that purpose or not."
