Evaluating The 15th BRICS Summit – Analysis

The 15^th BRICS Summit 2023 was held in Johannesburg, South Africa, from 22 to 24 August 2023. Indian Prime Minister Narendra Modi was invited by the South African President Matamela Cyril Ramaphosa, the host, to participate in the meeting. BRICS denote the group of fastest-growing economies (Brazil, Russia, India, China and South Africa). These five countries are projected to collectively dominate the world economy by the year 2050.

The term BRIC was first introduced in the 2001 publication, Building Better Global Economic BRICs by Jim O’Neill, who was the chairman of Goldman Sachs Asset Management at that time. (1) The leaders of the four countries held their first meeting in July 2006 at St. Petersburg, Russia, in an 8 Outreach Summit. Thereafter, the first formal BRIC Summit took place in Yekaterinburg, Russia, on 16 June 2009, after conducting a series of high-level meetings.  When the BRIC country Foreign Ministers held a meeting in New York in September 2010, they accepted South Africa as a full member and then the BRIC was renamed as BRICS. Subsequently, South Africa attended the 3^rd BRIC Summit held in Sanya, China, on 14 April 2011.

What is the significance of the BRICS? If viewed in comprehensive terms, it qualifies as an important organisation by virtue of collectively having 41 per cent of the world population and 24 per cent of the GDP, with more than 16 per cent share in world trade. (2) Such credentials make BRICS to be the main driver of the world economy in the coming years. Subsequent summits have focused, besides on economic issues, on political and security, people-to-people exchanges, and financial and cultural issues. 

The main agenda of the 15^th Summit in Johannesburg was expansion of the bloc by inducting new members and the criteria thereof for qualifications. Other issues in the agenda included discussion on how to reduce the dominance of the US dollar in world trade as some BRICS nations had already begun trading in their local currencies. This need was felt because trade by BRICS nations surged by 56 per cent to reach $422 billion in the last five years. (3) In these transactions, New Development Bank, earlier known as BRICS Development Bank, is working as a medium for such transactions. India proposed the idea of setting up a bank at the 4^th BRICS summit held in New Delhi in 2012. 

Inducting New Members

Though the theme of the 15^th BRICS 2023 Summit was “BRICS and Africa: Partnership for mutually accelerated growth, sustainable development and inclusive multilateralism”, what hogged the world’s attention was embracing some new members into the bloc and the purpose to serve thereof. Several opinions were aired in the media where scholars and analysts aired their opinions on the issue of having new members to the group and how that decision is good for the world. There were also editorials in the leading media outlets offering different views and perspectives.

The 15^th BRICS Summit decided to invite six new members; Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates and Saudi Arabia to join the bloc from 1 January 2024. This would mark the biggest enlargement since its formation in 2006. This would mark the biggest enlargement since its formation in 2006. With this expansion, it will make the group accounting for 47 per cent of the world’s population and accounting for 36 per cent of the world GDP based on PPP as one of the most powerful blocs in the world. In comparison, the G-7 nations with 30.7 per cent are far behind. (4) However, a bigger bloc in terms of number and size need not necessarily mean the pillar of a multi-polar world as differences are bound to occur and consensus building on all issues would be a herculean task. (5) It is to be seen if the objective is to counterweight the world and acquire respect and influence can be met with this expansion.        

At the time of the creation of the bloc, the West was unable to realise the economic strength of the grouping. However, the situation has dramatically changed after Russia’s military operations in Ukraine as Russia is now struggling under the weight of economic sanctions. China’s condition is no better either as its economy has stumbled after the Covid-19 hit the world. While South Africa suffers from corruption, Brazil has underperformed as a result of mismanagement. Despite innumerable problems, India’s performance is appreciable and on a high growth path.  

What is more at stake is that the five countries in the group are not comfortable that the West has been trying to impose its values upon them. As a counter measure to that, the BRICS Development Bank was created. Renamed it later as the New Development Bank, it serves as a counterweight to the lending policies imposed on recipient nations through traditional instrumentalities and development agencies such as the World Bank and the International Monetary Fund.

Being dissatisfied with the existing world economic structure dominated by the West, it was reported that over 40 countries expressed interest to join BRICS and two dozen applied to join. Among  them six countries viz Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE were finally chosen to join from the start of 2024. This year, the Russian President Vladimir Putin under indictment by the International Criminal Court for actions in Ukraine did not join but delivered a speech over video wherein he accused the West of continuing neo-colonialism. 

There were reports that Indian Prime Minister Narendra Modi and Brazilian President Luiz Inacio Lula da Silva were reluctant to expand the group and dilute their power. Both had reservations that China and Russia would use an enlarged group, thereby consolidating its status as a centre of power in a multi-polar world. The talk of creating a new financial and payment system with the aim to weaken America’s grip on the global economy has the hidden objective to weaken reliance on the dollar as the main reserve currency. This proposal received support from many including Russia, Brazil and others as the Western system was seen from the prism of great power contestation.  

Opinions around the world and among the emerging economies have been building up against the domination of the US dollar as the primary reserve currency. At the same time, finding a substitute currency has not been easy either. Even in the past BRICS groupings, the issue of finding a replacement has been discussed but with no tangible outcome. Critics have dubbed the concept as ‘ridiculous’ and that BRICS does not have the credentials yet to create a common currency that can possibly try to replace the dollar. Any new currency that is tradable must gain the trust of the third parties. That has not happened. Chinese yuan and Japanese yen have been cited as possible alternative currencies. While China retains too many restrictions on its currency’s convertibility to be used more widely, the recent strain in the Chinese and Japanese economies have lost the claims of their currencies as alternatives. In recent times, Japanese yen has also lost its value. Moreover, most of China’s policies around the world are viewed suspiciously because of opacity and intent. 

Even before BRICS expansion, there were already rifts between some of the existing five members of the bloc. Problems between India and China are all well-known and needs no reiteration. As regards between Russia and China, while the Ukraine crisis may have drawn the two closer, the existing irritants could be dormant temporarily but could flare up again. Even when expanded, it is difficult to expect Saudi Arabia and Iran on the same page. These issues would make consensus building more difficult. This makes the search for an alternative currency to the US dollar a mere will-o-the-wisp. It remains unclear if an expanded bloc of 11 members wants to be a counterpoint to the G-7, G-20 or the US. The Johannesburg summit did not answer this question. The political rifts between member states would make the expanded bloc a mere talking shop.   

China’s Reaction

China reacted by remarking that the membership expansion is historic and that the move is a new starting point for BRICS cooperation. In fact, China has been the main votary for the bloc’s enlargement as it seeks to rapidly strengthen the bloc to counter Western dominance. After 1 January 2024, the possibility of another expansion may not be ruled out as dozens of more countries have expressed interest in joining the group. If seen as a shift from a unipolar world to a multipolar world, an expanded BRICS may be a welcome addition. But given the divergent policies of some key members as mentioned before, its effectiveness may lack bite. 

Even the admission criteria remain unclear. Issues of differences centred over including authoritarian countries such as Saudi Arabia and democracies such as Indonesia or Nigeria showed signs of fracture in the discussion stage. Even with the agreement to welcome six more countries to the bloc would be seen as a victory for China and Russia. China accounts for about 70 per cent of the grouping’s total GDP, which would help it to increase its geopolitical clout in an era of strategic competition. As regards Russia already under sanctions because of its military operation in Ukraine, the enlargement news would be a morale booster. Both India and Brazil may also rejoice the inclusion of Iran as they could be seen as isolating Western partners and risk being perceived openly as anti-Western.  

The question then arises is, what were the propelling factors behind the expansion move? Though the criteria of selecting the six for inclusion were shrouded in mystery, one can hazard some contributing factors that played their part. Some of the new members chosen to join could expect to gain some leverage on Western economies as they are not aligned with the G-7. Some of the original five members may be also following a dual hedge strategy as democracies they might be reluctant to deviate too far from the established order. Individual country interests also could have played some role. For example, while China may have pushed for the admission of Saudi Arabia and the UAE, Brazil openly lobbied for Argentina’s entry. Despite such individual country interests, what probably was the most critical driving factor, was the expectation that an enlarged bloc would boost its financial heft and increase the amount of trade between member states. 

There are two areas where the induction of new members could possibly help the bloc in increasing its economic clout vis-a-vis the IMF or the World Bank. Inclusion of wealthy countries such as the Saudi Arabia and UAE can provide some heft in the BRIC payment system or boost trade in local currencies. Since some new members control some key commodities, geostrategic considerations could have factored in their inclusion. For example with the inclusion of  Iran, the UAE and Saudi Arabia, the BRICS can hope to exercise some influence in crucial oil and gas markets. Similarly, by including Ethiopia and Egypt, BRICS gets access to the Red Sea, and with it, the Suez Canal, through which most of the world’s commodities transit. 

These are impending benefits that can derive from the expansion of the bloc. Such is the positive side of the enlarged bloc. There are geopolitical challenges, however. While an enlarged bloc might hope to counterbalance the G-7 on economic and climate issues, there is also the possibility of exacerbating inter-bloc divisions. While relations between India and China show no sign of permanent (re)solution, Iran and Saudi Arabia, and Egypt and Ethiopia are frequent rivals. The close defence ties of the UAE and Saudi Arabia with the US could negate the wish of the bloc to act as a counterweight to the West. The group lacks political coherence required to tackle major international political issues. Coordination of policies between democracies and autocracies could hinder governance issues. These factors would make consensus building processes on critical issues difficult. 

China, however, hopes to use the forum as an instrument to deal with the Western hegemony and therefore calls the expansion decision as a ‘historic milestone’. (7) China believes that the expansion of the BRICS is a new starting point for multilateral cooperation, and would play a positive role for more equitable and just global governance. China further believes that the expansion will also inject fresh vitality into the BRICS cooperation mechanism, and further strengthen the forces for world peace and development, and hopes that a promising future awaits the BRICS countries. Among other highlights of the summit was a consensus reached on “partnership for inclusive multilateralism, fostering an environment of peace and development, partnership for mutually accelerated growth, partnership for sustainable development, deepening people-to-people exchanges and institutional development”.

By adding six new heavyweights boasting oil and deep pockets, key oil exporters, and countries with booming populations and strategic locations, the bloc can expect to have a greater heft in global affairs. (8) Agreeing to address global financial architecture, the BRICS finance ministers and central bank governors will discuss the possibility of launching national currencies-based payment instruments and platforms and are expected to report to the leaders at the next summit. When major oil producers such as Saudi Arabia and Iran join the BRICS, the oil trade will easily “undergo de-dollarization,” something the West is worried about. Iran already sells a substantial amount of petroleum using currencies other than the US dollar. After Saudi Arabia joins the BRICS, it might as well see merit to move away from transaction in dollars and align its interests with other BRICS member states. (9)

This shall be in tune with the shared vision of the BRICS to be a champion of the need and concerns of the people of the Global South. Regional balancing and domestic and economic interests were probably factors in the selection of the new BRICS members. In particular, by welcoming the three oil-rich nations Saudi Arabia, Iran and UAE; with strong prospects of oil and energy products could provide liquidity for BRICS nations. These three nations sell most of their oil to East Asia and India as the US did not buy any more. 

As regards Egypt, it is an important trading partner of Russia and China because of the Suez Canal. Iran is important to Moscow, as it could help create a North-South corridor to allow Russia, a major grain and oil exporter, to send goods through the Persian Gulf on their way to Asia and Africa without passing through the Black Sea or northern Europe.  

Concerning Argentina, it is a sizable middle-income country but it is facing a currency crisis as it has lost value in recent times. As for Ethiopia, it has a large population. Its economy is growing. With its strategic location in the Horn of Africa and as the seat of the African Union, Ethiopia has acquired relevance in regional issues. Both Egypt and Ethiopia are big demographic players in Africa and their inclusion is a way of future-proofing the BRICS project. 

Thus the expansion of the group could help boost its global heft and counter the dominance of the G7. The enlargement will see BRICS gross domestic product rise to 36 percent of global GDP in terms of Purchasing Power Parity and 46 percent of the world’s population. When Saudi Arabia and the United Arab Emirates, the Middle East’s two largest economies, finally join the BRICS group, it would strengthen their ability to act independently of their long-standing security guarantor the United States. (10)

Some Aspirants Left Out

Some countries in Asia, Indonesia in particular, which was expecting an invitation to join the bloc, felt disappointed to have missed. Some 40 countries had evinced interests to join the bloc. Indonesia’s case was a bit surprising as the country is Southeast Asia’s biggest economy and the world’s fourth most populous nation. (11) It transpired later that Indonesia wanted its accession to be delayed as it wanted to consult its ASEAN counterparts. Probably, Indonesia has apprehensions that the other members of the ASEAN grouping would feel  uncomfortable in Indonesia’s joining the BRICS bloc. Most likely, Singapore and the Philippines would have felt uncomfortable as both these countries have strained ties with China. Indonesia may have factored this as well. It is also possible that Indonesia did not want to jeopardise its engagement with China in the infrastructural projects as a part of China’s Belt and Road Initiative, which would have been detrimental to its interests. 

The present Indonesian leadership did not probably create a controversy domestically by pursuing the idea of joining the BRICS bloc and preferred to defer the decision to his successor as the elections are due in 2024. Had the Widodo administration chosen to pursue a forward-looking policy in its bid to be in the BRICS grouping, Indonesia could have been in a more favourable position to gain international investment and trade prospects. This, however, is a hypothetical question.

NAM in New Clothing?

As was in the post-War period, newly liberated colonies that gained independence were reluctant to align themselves into either of the two blocs when the world was divided into two camps based on ideological grounds and chose a middle path such as the non-alignment movement (NAM) as an expression of post-colonial grievances, a similar situation seems to be unfolding. Since many developing economies are on a consistent growth path, there is a clamour for seeking their own identity and a greater say in world affairs. With the rise in their economic heft, these nations seek now a voice of the aspirations of the Global South and this is backed by the financial firepower which they have acquired after relentless years of planning and struggle. (12)    

Comparisons of an expanded BRICS are bound to happen with the Asia Pacific Economic Cooperation (APEC), which with 21 members since its formal founding in 1989 has remained a lacklustre organisation and often seen as a talking shop and toothless. Critics have often tried to find out what binds the original five of the BRICS grouping. A layman would not find many things that are not common between them. This issue would assume a greater salience when the six new members are inducted into the grouping on 1 January 2024.   

An expanded BRICS, though would take place on 1 January 2024, is already being interpreted as the new incarnation of NAM in the modern form. NAM was born out of the 1955 Bandung Conference in Indonesia consisting of newly independent nations. Subsequently, it swelled into 120 members grouping. The world situation has dramatically changed now. Nations are seeking their own voices to be heard in world forums. These countries seek a world that is more equitable, balanced and governed by an inclusive system of global governance. The bloc representing a diverse group of nations with different political systems has a common desire to have a more balanced global order. 

When six new members are inducted into the BRICS group and Russia hosts the next summit in 2024, there could be a need to find a new acronym as BRICS would have outlived its life, says David Dodwell. It is to be watched carefully what role India plays in this expanded group. It is to be hoped that like the APEC, BRICS should not be seen as a mere talking shop.  

Endnotes

1.  Daniel Will,  “A BRICS currency replacing the dollar is a ‘ridiculous’ idea, says the top economist who named the group—unless China and India become allies”, https://fortune.com/2023/08/15/when-will-dollar-be-replaced-brics-currency-ridiculous-china-india/ , 16 August 2023.
2. Ibid
3.  Hancock, Tom, “How BRICS Became a Club That Others Want to Join”, https://www.washingtonpost.com/business/energy/2023/08/17/how-brics-became-a-real-club-and-why-others-want-in/721431ce-3d06-11ee-aefd-40c039a855ba_story.html ,17 August 2023. 
4.  Dominguez Gabriel, “BRICS expansion to boost bloc’s clout, but political rifts remain”, The Japan Times, https://www.japantimes.co.jp/news/2023/08/25/world/politics/brics-expansion-analysis/?utm_source , 25 August 2023.
5.  “Bigger isn’t necessarily better for the future of BRICS”, The Japan Times, editorial,  https://www.japantimes.co.jp/editorials/2023/08/26/brics-summit/?utm_source, 26 August 2023.
6.  Dominguez Gabriel, “BRICS expansion to boost bloc’s clout, but political rifts remain”, The Japan Times, https://www.japantimes.co.jp/news/2023/08/25/world/politics/brics-expansion-analysis/?utm_source , 25 August 2023.
7.  “BRICS to welcome six new members, a ‘historical milestone’, editorial, https://www.globalsecurity.org/military/library/news/2023/08/mil-230824-globaltimes01.htm, 24 August 2023.
8.  Jevans Nyabiage, “BRICS adds 6: new ‘heavyweights’ boast oil and deep pockets, while others help ‘future-proof’ the bloc, analysts say”, https://www.scmp.com/news/china/diplomacy/article/3232153/brics-admit-6-new-members?module=top_picks&pgtype=article , 24 August 2023.
9. “BRICS to welcome six new members, a historical milestone”, editotial, https://www.globalsecurity.org/military/library/news/2023/08/mil-230824-globaltimes01.htm, 24 August 2023.
10.  Tom Hussain and Amy Sood, “New BRICS members Saudi Arabia, UAE taking ‘a step away’ from US, seeking global roles”, https://www.scmp.com/week-asia/politics/article/3232351/new-brics-members-saudi-arabia-uae-taking-step-away-us-seeking-global-roles?module=top_picks&pgtype=article, 25 August 2023.
11. Ibid
12.  David Dodwell, “Expanded BRICS could be successor to the non-alignment movement”, https://www.scmp.com/comment/opinion/article/3232157/expanded-brics-could-be-successor-non-aligned movement?utm_medium=email&utm_source=cm&utm_campaign=enl, 26 August 2023.