The consortium of major emerging economies under BRICS (Brazil, Russia, India, China, and South Africa) held their 15th summit in Johannesburg from 22nd to 24th August 2023. The meeting is held annually, where leaders of respective countries participate. Alongside constituting 40% of the world population, this grouping accounts for 32.1% of global GDP as it recently surpassed G-7 countries in their combined GDP share at the global level.
This year, the summit was attended by South African President Cyril Ramaphosa, Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, and Brazil’s President Luiz Inacio Lula da Silva. The absence of Russian President Vladimir Putin was due to an arrest warrant issued by the International Criminal Court for the alleged execution of war crimes in Ukraine. On his behalf, the summit was attended by Russian Foreign Minister Sergei Lavrov. The summit was hosted by South Africa with a focus on the theme of “BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development, and Inclusive Multilateralism.”
Though there are internal challenges in the BRICS, the very existence of this grouping demonstrates a need for a comprehensive and more representative form of global order. It advocates a system where voices that deviate from a Western perspective must also be heard. The most recent example of such deviation is the Russian invasion of Ukraine, which was highly condemned by G-7 members. However, none of the BRICS members seemed willing to impose sanctions while denouncing Russian behavior. This year, multiple issues were under discussion. However, the most contentious matter was the expansion of BRICS and the varying views of respective members on its expansion. This article will discuss the interests of BRICS members in its expansion while analyzing the key takeaways.
On 24 August, six countries, namely Iran, Saudi Arabia, United Arab Emirates(UAE), Egypt, and Ethiopia were invited to join BRICS. Expansion was aimed at granting this block a greater weight in International affairs. With the addition of these countries, BRICS now accounts for a total of 31 trillion of GDP. The most important development to notice is that BRICS now consists of countries that control 90% of the oil exports. Besides this development, 40 countries have shown interest in being a part of this block. The expansion comes with difficulties that this grouping already faces as decisions are made on a consensus basis. For India and Brazil, the expansion of BRICS will lessen their influence in this block while challenging their non-aligned foreign policies. As per pre-dominant notions in West Russia and China, this expansion is an effective counter-weight to Western-led G-7. Such notions were denounced by Chinese Premier Xi Jinping as he stated that “China doesn’t want to engage itself in block confrontation.”
This year’s summit highlighted several takeaways that can possibly reshape the future of International trade and cooperation. The first thing was de-dollarization, which was aimed at reducing dependence on the US dollar for trade. In a pre-recorded statement, Russian President Vladimir Putin stated that “De-dollarization is irreversible within this block and is gaining m momentum.”
Currently, China and Saudi Arabia are exploring possibilities where they can carry out their oil trade in yuan, which, if materialized, can be a significant step towards oil’s de-dollarization. The possibilities towards de-dollarization were discussed, and the suggestion of creating a common currency topped the debate. While this debate is valid, to which extent de-dollarization is possible is debatable. As per the US Federal Reserve Research, 88% of global trade is performed in dollars. Alongside this, the presence of India in the block prohibits the chances of any such development as it is more inclined toward the West. The second important thing on the agenda was the expansion of BRICS.
Other things on the agenda are trade and investment, Agriculture, green economy, entrepreneurship, and SMEs, as well as the African Continental Free Trade Agreement (ACFTA). All these discussions were aimed at enhancing unity and cooperation within the group. In this particular setting, one important institution is The New Development Bank(NDB) or BRICS Bank, which will enhance this integration. The objective of this financial institution is to mobilize resources for infrastructures and sustainable development projects not only within BRICS but also for other Emerging Markets and Developing Countries (EMDCs).
Xi Jinping announced that the financial institutions of China will contribute a fund of $10bn for development purposes, which was a significant development. One factor here that is worth mentioning is that the BRICS bank works on a no-strings-attached lender process contrary to the conditionalities of International Monetary Fund(IMF) and other western financial institutions. Dilma Rousseff, president of NDB, in her statements, mentioned that this bank will finance projects in local currencies in order to protect borrower countries from fluctuations. In 2021, the bank officially ceased to provide loans in USD and Euros. This is attractive, especially for smaller and developing nations.
While BRICS countries suggest an alternative to the Western-dominated international financial system, the interests of countries within this group are divergent. Though the expansion of BRICS is a win for major players Russia and China, other countries like India and Brazil may face challenges while they welcome ‘clearly anti-west countries’ in the block. There is growing skepticism about BRICS as countries within the block have profound differences that can hinder its progress. Such differences can definitely obstruct its progression into a cohesive identity.