BRICS – the opponent that the West fears;
The force that will change the new world order imposed by the West;
BRICS – the new global power that will change the world.
With similar headlines, Bulgarian media and publications on social media suggest that the informal group of countries, known by the acronym BRICS, is a real alternative to the existing economic and political order in the world.
But what is BRICS, how significant is this “power” and what is its potential to “change the world”?
China et al.
The BRIC acronym was first used in 2001 by Jim O’Neill, chairman of the global economy research team at Goldman Sachs. With it, he described the group from the so-called “emerging markets” Brazil, Russia, India, China, which stand out with their rapid economic growth and claim a more substantial place in global economy. In 2010, at the suggestion of China, the Republic of South Africa joined the group, and another letter was added to the acronym – S.
Although very different, the four initiator countries set a common goal – to find a place among the world’s economic and political elite, dominated by the “old” developed countries. Although not part of the Group of 7 (G-7), all BRICS countries are members of the G-20 – the group of the world’s 20 largest economies. Only Russia was briefly accepted into the G7 (then G8) club, but was expelled after it annexed Crimea in 2014.
The total population of the BRICS countries represents 3.27 billion people or 42% of the world population. Their combined GDP is $26 trillion, which is slightly more than the GDP of the United States and accounts for a quarter of the world economy.
However, the respectable economic indicators are due almost entirely to China. China’s GDP is more than twice that of the rest of the BRICS countries combined.
It would be unkind, but not unfair, to note the similarity to the famous line attributed to Albanian communist leader Enver Hoxha: “Together, the Albanians and the Chinese make up a quarter of the world’s population,” analyst Paul McNamara notes in a commentary for the Financial Times.
The sensational rates of economic growth that drew attention to the BRICS in the first decade of the 21st century, however, began to calm down in the second, and in the case of Brazil and Russia, the economic performance was “disappointing”, in the words of BRICS godfather Jim O’Neill.
Regardless of the ambitious goals, set during the first decade of its existence, BRICS remained a loose coalition without much influence on the processes in the global economy. The main reason is that the countries in the group are more different than they are alike – they are geographically distant, their economies are at different stages of development and they are quite different ideologically.
According to Freedom House’s 2023 Global Index, Brazil and South Africa are free, India is partly free, and Russia and China are not free. The Economist Group’s Democracy Index ranks Brazil, India and South Africa as “trouble democracies” and China and Russia as authoritarian regimes.
Each country has its own motivations for participating in the group.
Russia sees BRICS as a geopolitical counterweight to the expansion of US and EU influence in the East. For South Africa, BRICS is a means of legitimizing its role as an economic and political leader on the African continent. Brazil, in turn, is given the opportunity to play a key role in shaping the forces of the Global South. For India, BRICS is a useful bridge between its quest to establish itself as a leading power and its former glory as a leader of the developing world. For China, the group is a means to achieve political influence proportionate to its growing economic weight.
Prof. Martin Binder, professor of political science and international relations at the University of Reading, commented to BNR (Bulgarian National Radio):
“This has always been one of the main goals of the BRICS countries – to build an alternative world order that is not dominated by the United States and its Western allies – by their norms, rules and institutions – and in which non-Western emerging powers play a bigger role. The big question, of course, is how realistic it is for these countries to build such a world order.”
Reformers or an alternative
In 2009, then Russian President Dmitry Medvedev called on the participants of the first BRIC summit in Yekaterinburg to discuss establishing a fairer international system and the parameters of a new financial system. Thus, from the very beginning, the two approaches that the group applies to achieve its goals are laid down: to change the system from within and, at the same time, to create an alternative system.
So far, the second approach has emerged as more successful, with the most significant achievements being the establishment in 2014 of the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA).
NDB members, apart from the BRICS countries, include Bangladesh, UAE and Egypt. The Development Bank acts as an alternative to the IMF and the World Bank for a number of countries that do not agree with the policies of the two institutions and with the “money for reforms” principle. The Contingency Reserve Agreement aims to assist group members in financial difficulties.
Some researchers and analysts see the BRICS as a geopolitical phenomenon that tries to present itself as a leader of the “Global South”, providing an “alternative model to the G-7”.
Course to “de-dollarization”
The newly appointed chairman of the New Development Bank, the former president of Brazil, Dilma Rousseff, promised that 30% of the bank’s loans will be in national currencies by 2026. This is part of the institution’s strategy to break away from the US dollar.
According to the IMF, by the end of 2022, more than 58% of the world’s foreign exchange reserves are in dollars. One fifth are in euros, nearly 5% in British pounds, and 2.69% in Chinese yuan (renminbi).
The BRICS’ minuscule currency share of global markets is currently disproportionate to their combined weight of roughly 16 percent of global trade, researchers at Boston’s Tufts University note. This disparity shows both the global dominance of the dollar and the difficulty of breaking away from the US currency.
The reasons for these difficulties are again found in the differences between the members of the group – not all are looking for a break with the dollar and not necessarily immediately.
For Russia, “de-dollarization” is inevitable and urgent, in an attempt to circumvent the international sanctions imposed on it. It is understandable why she is so actively pushing the issue and using BRICS as a multiplier of its policies and goals. China also has an interest in making its political agenda look like a widely supported initiative for a “new world order”, “multipolar” and “just” – to whom is another question.
But other BRICS members, such as Brazil and South Africa, are less vulnerable to US sanctions and have economies that are more integrated into the dollar system. The US is the largest investor in the BRICS countries, according to data from the United Nations Conference on Trade and Development in 2023.
While all BRICS members express a desire to reduce their dependence on the US dollar, not all want to be separated from the US-led global financial system. Most BRICS members still hold large amounts of US dollar assets in their reserves, so a weakening US dollar would automatically mean losses for them too. For now, “de-dollarization” means agreements between some countries to use their national currencies in bilateral trade.
And if breaking away from the dollar is difficult, the idea of a BRICS “common currency” seems downright unrealistic, as it is not supported by any existing economic assumptions or policies. A possible option would be to use the Chinese yuan, but economists believe that China is not ready to make its currency fully convertible and relinquish control over it.
For other countries, this would mean becoming overly dependent on China. This applies with particular force to Russia, which is aware of the risks and is probably therefore loudly trumpeting that the creation of a “new international reserve currency” is imminent. The topic of the common currency is expected to be central to the summit in South Africa in August.
Political barriers will always limit the full economic potential of this partnership, Samir Saran, president of the ORF Research Center in India, wrote in 2017.
However, this forecast did not foresee the Russian invasion of Ukraine, which began on February 24, 2022. According to Prof. Martin Binder, the exact opposite is happening – BRICS is increasingly transforming into a political bloc.
The “political barriers” do not seem so insurmountable against the backdrop of sanctions imposed on Russia by the EU and the US, and fears that the same could happen to other countries.
None of the BRICS countries have supported sanctions against Russia.
Increasing interest in membership of the group has been reported from other countries, including Iran, Saudi Arabia, the United Arab Emirates (UAE), Egypt, and others.
Undoubtedly, a possible alternative financial system would attract countries subject to US sanctions and even US allies hoping to boost their own currencies, notes Foreign Affairs.
It is exaggerated and misleading to claim that the BRICS is the new, alternative center of power in international relations, as the countries of the group, especially China and Russia, try to convince us. However, we are certainly witnessing profound shifts. Leading economists expect two camps to form in the world economy – around the US and around China. According to the IMF, such geopolitical division will negatively affect the world economy in the long term. If this is the “new world order”, the question is for whom it is better and fairer.
Ralitsa Kovacheva also worked on the text
Translated by Vanessa Nikolova