In January, Russia took over the rotating annual chairmanship of BRICS – an intergovernmental alliance it helped found in 2009 with Brazil, India and China. South Africa joined a year later, forming “BRICS.” The group was designed to bring together, the world's most significant developing countries, to challenge the political and economic stranglehold of America and its European partners. The founding summit was held in the Russian town of Yekaterinburg.
The assumption of current Russian chairmanship is accompanied by the first real expansion of BRICS (Now BRICS+) with the formal inclusion of Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. Argentina was also invited but the incoming right-wing government of President Javier Milei, who assumed power in December 2023, chose to stay out.
The term “BRIC,” coined as an acronym for these countries by Jim O'Neill, then head of Goldman Sachs global economic research, has now acquired strong political and economic undertones. With none of the leaders missing any of the annual summits, the grouping is now considered an insurance against diplomatic isolation. The association has come out handily for Russian President Putin, who the West has attempted to ostracize after the war began in Ukraine. It is already an important element of its members' foreign policy identity.
The expanded BRICS will represent 45 percent of the global population and shall account for about 36 percent of global GDP in purchasing power parity (PPP) terms. The G-7, the world's industrialized countries in comparison, will be left with 30 percent. With the addition of the new five members, including three of the top oil producers, the BRICS is already a formidable competitor to the American led international financial system.
Since its transition from an investment category to a political/economic club, the organization has lived with many skeptics – almost entirely from the West, over its future and its impact. Yet, BRICS, in the 15 years of its existence has not only defied such projections but with five new members and 40 lined up for membership BRICS+ is now poised to expand into a much stronger and a wealthier organization. This is a step towards a multi-polar world with middle powers collectively preparing to challenge the American-led global order.
The bloc was derided, since its inception, by Western powers as an upstart challenge to Western economic hegemony. This derision was sometimes reinforced by underperforming members within. But the rapid growth of the Chinese and Indian economies – arguably the fastest major economies – has catapulted BRICS as a serious challenge to G-7 countries.
Each of the original member states share a profound sense of unease surrounding the American-led world order. They bemoan and resent selective application of international rules and norms. Clearly there are different standards for those who are ready to kowtow to the U.S. and for self-respecting nations, who face the wrath of American power through sanctions and other punitive measures. BRICS now allows such nations space and freedom to make non-aligned choices. China and Russia apart, the other three members, India, Brazil and South Africa, buoyed by the strength of the bloc, demonstrate an independent, non-aligned foreign policy.
There is no doubt that the Bretton Woods economic system, created after World War II and dominated by the U.S., is no longer relevant. Of the two main financial institutions, the World Bank is headed by an American citizen. The IMF managing director is always a European but the deputy is American. The global economic balance continues to shift towards the east, but the voting weightage and operational power still remains with the U.S. and Europe. With that, these institutions have not been able to adequately reform due to Western resistance.
Unable to find space within the existing structures, China has indeed been instrumental in setting up the New Development Bank (NBD), initially called BRICS Development Bank, which started its operations in 2016. Similarly, China has also sponsored the Asia Infrastructure Investment Bank (AIIB) as an instrument for promotion of the Belt and Road Initiative (BRI). Both banks are headquartered in Shanghai and had Indian bankers as the first head.
The NDB was designed to lend money to member states to boost infrastructure, and demonstrates weariness with the Western sponsored financial institutions like the World Bank, IMF and others. The bank disbursed around $29 billion loans for member countries during 2017 and 2021 period, and now targets another $30 billion credit disbursement between 2022 and 2026.
Calling for “greater representation of emerging markets and developing countries” in international institutions, from the United Nations and its Security Council to the International Monetary Fund (IMF) and the World Bank, BRICS is also emerging as the collective voice of the developing nations. The US considers this development as a direct attack on its imagined unipolarity.
The BRICS expansion and the long waitlist reinforces China's offer of an alternative world order in the countries of the Global South, where many countries feel marginalized in the financial system dominated by the U.S. and its European allies. Being a leader of non-Western forums and the Global South, which in general is dissatisfied with the U.S.-led institutions, “will invariably help China become a counterweight to the U.S. and the world order led by the US,” says Professor Happymon Jacob at the Jawaharlal Nehru University, New Delhi.
Nearly all the original BRICS members are uncomfortable with America's use of the dollar as a weapon. Breaking dollar dominance as a reserve currency therefore, has been one of the important considerations within BRICS since its inception. These concerns have grown louder with interest rate increases in the advanced economies. Such a development, warned the South African central bank governor in 2023, means that emerging markets “run a serious risk of becoming permanently more prone to currency depreciation and higher inflation.”
A paper published by India's central bank the same year, also pointed towards the “inherent defect” of the U.S. dollar's global role, which means that 'any weakening of the U.S. economy could result in disorder and consequent disproportionate losses outside the U.S.'
Within the group and generally amongst developing nations, the dollar and the euro are increasingly viewed as being exposed to geopolitical risks due to increasingly broad American and European sanctions. These concerns were reinforced when the U.S. and its allies froze half of Russian central bank gold and currency reserves and cut off Russian banks from the financial messaging system SWIFT.
“As the US weaponizes the dollar in the Russian and Iran sanctions, there is increasing desire by other developing countries to seek alternative currencies for trade, investment, and reserves, as well as developing alternative multilateral clearance systems outside of SWIFT,” says Shirley Ze Yu, a senior visiting fellow at the London School of Economics. https://www.aljazeera.com/features/2023/8/24/can-brics-dethrone-the-us-dollar-itll-be-an-uphill-climb-experts-say
Notwithstanding Chinese and Russian geo-political objectives, the focus of BRICS remains economic, which continues to pull countries towards its membership. China's ability to provide development assistance much more than others places China at an advantageous position.
The international community is growing to notice that the U.S. tends to join and encourage military alliances, largely opposing China, while on the contrary, Beijing often promotes and joins economic alliances aimed at increasing global well-being.
BRICS is part of this pattern, which is becoming a norm in the new world order.
