The Art of Balancing

AS IS WELL KNOWN, the acronym BRIC was coined by the then chairman of Goldman Sachs, Jim O’Neill, to describe Brazil, Russia, India, and China as emerging economic powers, and BRIC began with the first summit in Russia in 2009, with South Africa adding the fifth country a year later. So was born the current acronym BRICS.

The BRICS group was originally created as an alternative to the US-led international order, with the aim of counterbalancing Western institutions and Euro-Atlantic global hegemony. The addition of five more countries this year reflects this, showing the emergence of a multi-polar world where no one country or bloc should dominate.

BRICS now comprises 10 nations, the original five being joined by Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). South Africa’s ambassador to the European Union (EU) emphasised BRICS’ role in fostering mutually beneficial partnerships, particularly in industrialisation on the African continent, saying, “When BRICS emerged, it amplified the voice of the South.”

BRICS members vary in size, economic weight and importance in world politics: wealthy Saudi Arabia joins dysfunctional Ethiopia; Iran, subjected to multiple sanctions by the West, has a sea border with the UAE where a US air force base exists. But all members are trying to revise the unjust international order that emerged after the end of the Cold War. BRICS is too big a unit to be ignored, both individually and collectively. It promotes diversity, respect for national choices, and just and equal global financial and trading systems. It offers consensus-based, equal, mutually beneficial and non-politicised cooperation, without domination, confrontation, double standards, illegal unilateral sanctions or weaponisation of finance.

What sustains BRICS is the political will of its members who together constitute 42 per cent of the world population and, using the purchasing power parity method, almost 37 per cent of the world’s GDP while the G7 represents 30 per cent. Brazil, Russia, and India have caught up with the smallest G7 economy (Italy) in terms of nominal GDP, while China has overtaken Japan to become the second-largest economy. Perhaps Saudi Arabia is economically the most consequential of the new members, while the UAE and Iran are the world’s seventh and eighth-largest oil producing nations. BRICS’ share of global oil production goes up from 19 per cent to 41 per cent.

BRICS has an informal character. There is no charter, no secretariat, and no budget to finance its activities. The chair convenes meetings of senior officials; there were 150 meetings during India’s chairmanship in 2021, on health, water, terror, agriculture, remote sensing, tourism, women, supreme courts, banking and other fields of human activity. Russia plans to hold more than 200 events this year during its chairmanship.

It is not clear how far BRICS’ common interests will act as a counterweight to the Western-led world. Adversaries of the West exist within the group, like Russia, China and Iran, as do friends and economic allies like India, South Africa, Egypt, the UAE, and Saudi Arabia. Some BRICS nations have economic interests more or less evenly split between the Western and Eastern camps. As such, compromise will be necessary for this expanding bloc to move forward. US National Security Advisor (NSA) Jake Sullivan has unsurprisingly played down BRICS, saying that given the divergence of views on critical issues, he did not see it as “evolving into some kind of geopolitical rival to the United States or anyone else.” To counter such scepticism, BRICS should offer an alternative direction of development without decoupling the West from the rest, but coexisting as equals.

For Russia, strengthening BRICS after enlargement will be an important task this year. Russia’s presidency may set new standards and structures, coupled with a drive towards de-dollarisation of economy and trade with more countries ready to use national currencies in international settlements, and reshaping global politics in a fair and equitable manner where issues can be resolved on the basis of a balance of interests.

According to Russia, 30 countries are interested in applying for membership—16 have reportedly applied already—but care must be taken to avoid the fate of the Non-Aligned Movement (NAM), the G77, the Commonwealth, and other multilateral bodies which are larger than desirable, unfocused and unwieldy.

Pakistan is believed to have formally applied for BRICS membership, and will have backing from China as well as Saudi Arabia, Iran, and UAE. Nigeria’s foreign minister has announced that the country intends to become a member of BRICS within the next two years. As the biggest African country, it would bring economic and political leverage.

There are reports that Saudi Arabia has not yet formally joined and might be having second thoughts. Argentina, with a new far-right president in the Donald Trump mould, has little interest in non-Western multilateralism and has placed its application on hold. This shows that action to undermine BRICS is under way and such attempts will increase the more unified and effective BRICS becomes. Expanding BRICS membership will also render the body more inchoate and vulnerable.

The International Monetary Fund’s (IMF) estimated finances of over $1 trillion dwarfs the New Development Bank’s (NDB) initial capitalisation of $50 billion, but the BRICS bank’s focus on infrastructure projects and sustainable development, as well as its ethos of inclusivity, equality and cooperative ownership, could stand as a model of multilateral financing for developing nations and one which could free them from onerous requirements. It is believed that $30 billion has already been committed with the main beneficiary being India.

BRICS constitutes an upcoming battle between local currencies and the dollar. Moscow and Beijing have increasingly carried out trade in roubles and yuan and Presidents Vladimir Putin and Xi Jinping stressed that it was important to build a “financial infrastructure that ensures reliability of payments”. Brazil, Russia, and South Africa have also agreed to work together on this.

Members wish to curb dependence on the US dollar and are signing trade agreements giving more importance to local currencies. China and Saudi Arabia signed a three-year agreement that allows trade in local currencies with a cap of $7 billion and a similar though smaller agreement is reported between China and the UAE. Members plan to seek non-dollar arrangements with alternative financial pathways and payments systems.

However, there is no chance of dethroning the dollar as the world’s reserve currency anytime soon, because it still represents 59 per cent of global foreign exchange reserves, and on one side of 88 per cent of all foreign exchange transactions, and the currency is used to price over 50 per cent of global trade. But there could in time be lower exposure to this currency which is increasingly weaponised through illegal unilateral economic sanctions, and burdened by US debt and deficit spending.

A BRICS currency is unlikely for many reasons; it implies that members would hold larger amounts of each other’s currencies, and it is doubtful if any member would now wish to buy Russian roubles. The Chinese yuan struggles to internationalise meaningfully due to its closed capital markets. Even the introduction of the euro in 2002 had little impact on the dominance of the US dollar and it seems unlikely that any alternative could succeed. NDB has suffered from the India-China border dispute and BRICS may fall victim to similar political disruption. With competing views, expansion could introduce more challenges than opportunities, especially for creating alternative institutions to the current world order. BRICS will serve as an important forum for middle-income countries, but that might prove to be its biggest impact on global affairs.

Iran’s admission creates minor headaches, as it reinforces the group’s anti-West reputation, and saddles the bloc with another member facing multiple unilateral US sanctions. South Africa was the most economically insignificant member of the original club and the expansion of BRICS might diminish its significance further. China is important to South Africa but is overshadowed by Pretoria’s longstanding trade and investment ties with the EU and the US. BRICS is an important forum for Moscow to demonstrate it is not internationally isolated, since 85 per cent of the global population live in countries that have not imposed sanctions on Russia.

Closer ties between China and Russia as well as India’s proximity to the US might lead to dissonance which needs to be carefully managed on the basis of a balance of interests. Close India-US ties have led to questions whether India will now be a reluctant member of BRICS. Perhaps the more BRICS seeks to remodel the current US-dominated financial and trade architecture, the greater may become India’s reservations; but at this time, leaving BRICS is not an Indian option that can be contemplated, let alone implemented.

BRICS should not reduce itself to a platform that merely mirrors the conflict between Washington and Beijing; nor should it resemble an echo chamber of the Sino-Russian axis. India is in an excellent position to prevent this. Given its strategic aspirations, goodwill in Washington, and legacy ties with Russia, South Africa and Brazil, India has the potential to be the stabilising factor that, despite the manifold challenges, makes the future of BRICS brighter than its past.

About The Author

Krishnan Srinivasan

Krishnan Srinivasan is a former foreign secretary and the author of both fiction and non-fiction books