Newly expanded, can BRICS manage to upset US-led world order?

Posted on : 2023-09-10 09:16 KST Modified on : 2023-09-10 09:16 KST
BRICS added six new members, taking total share of global GDP from 26% to 37%
President Luiz Inácio Lula da Silva of Brazil, President Xi Jinping of China, President Cyril Ramaphosa of South Africa, Prime Minister Narendra Modi of India, and Foreign Minister Sergey Lavrov of Russia gather at the BRICS summit in Johannesburg, South Africa, on Aug. 23. (Reuters/Yonhap)
President Luiz Inácio Lula da Silva of Brazil, President Xi Jinping of China, President Cyril Ramaphosa of South Africa, Prime Minister Narendra Modi of India, and Foreign Minister Sergey Lavrov of Russia gather at the BRICS summit in Johannesburg, South Africa, on Aug. 23. (Reuters/Yonhap)

Can BRICS find an alternative to the US-led international order?

At a summit in Johannesburg from Aug. 22 to 24, the BRICS — a group consisting of Brazil, Russia, India, China and South Africa — welcomed Iran and five other countries as new members as of next year. The decision marks a crucial turning point in achieving their aim of an alternative to the US-led global order.

Major Western news outlets showed varied reactions to the expansion of the BRICS membership. The AFP said it was a “wake-up call, if not a threat.” The Financial Times predicted it would “struggle to challenge the west’s influence over the global economy.”

The Guardian read it as an “expression of concern at the way in which global disorder is growing.” CNN said it was a “big win for China,” but questioned whether it would “really work as a counterweight to the West.”

Reuters said investors would face a “long wait for [the] enlarged BRICS’ economic boon.” The New York Times said the BRICS invitation would allow Iran to “shrug off” its “outcast status in the West.”

The assessment is that the expansion of BRICS is more of a cosmetic change at present, with little in the way of content capable of shifting the global order. But the Western news outlets also said the potential to add substance beyond the packaging was undeniable.

Anti-American Iran joins BRICS

The latest BRICS summit also drew attention amid the rise of the so-called “Global South” — a term referring to emerging economies in Asia, Africa, South America and Oceania that are located in the Southern Hemisphere or lower latitudes of the Northern Hemisphere — in the wake of the war in Ukraine.

With the new BRICS ranks including developing countries and so-called “middle powers” like Saudi Arabia that have declined to take part in the US and other Western countries’ sanctions against Russia, observers are watching to see whether those countries will step with Beijing and Moscow in seeking out alternatives to the global order under Washington’s leadership.

Early on, observers predicted an agreement would not be easily reached, as India and Brazil remained cautiously opposed to an “anti-West” approach to expanding the membership. But the eventual list exceeded expectations: in addition to the five countries of Saudi Arabia, the United Arab Emirates, Argentina, Egypt and Ethiopia, it also included Iran, which is seen as more or less representative among anti-American states.

This could be rated as a victory for China and Russia, which had been more proactive about increasing the number of member countries.

Rather than simply being bulldozed by China and Russia, India and Brazil came away with enhanced bargaining power in and around the BRICS framework.

Indian Prime Minister Narendra Modi reportedly delayed the agreement until the last minute with his proposal of economic strength criteria for new members and the exclusion of countries facing international sanctions. Brazilian President Luiz Inácio Lula da Silva opposed the anti-Western approach, stressing that BRICS was not meant to be a “challenge” to the West. These were the reasons for predictions that Iran would not make the list of expanded members.

Nonetheless, the outcome with the six new members — including Iran — suggests that India and Brazil did achieve their aims of enhancing their bargaining capabilities in and around the BRICS framework.

As two countries practicing equidistant diplomacy between the Western side and the China-Russia bloc, they held the key to the membership expansion within BRICS. While keeping China and Russia in check, they also gained greater bargaining strength toward the West through the increased membership.

In an analysis entitled “India Can Benefit from a Bigger BRICS,” the international foreign affairs journey Foreign Policy wrote that the increased membership “may grant China more influence on the global stage, but it also means more influence for BRICS itself.”

“That is good for India, which has long viewed the bloc as an important entity,” the piece continued. The existing members share an interest in expanding their influence through the BRICS framework and have shown their intent to develop it as an important tool.

A break from US dollar hegemony in Saudi petroleum transactions?

The first test of the expanded BRICS is likely to come in the area of economic cooperation, and in particular with an increase in trade transactions among members using their own currencies. In addition to China and Russia, India and Brazil are also actively exploring alternatives to the hegemony of the US dollar.

In a speech delivered remotely at the summit, Russian President Vladimir Putin — whose country is facing sanctions from the West — stressed that breaking away from the dollar was a crucial first step toward a multipolar world, and one that is “already irreversibly in progress.”

Putin said that US dollars were only used in 28.7% of trade among existing BRICS members in 2022. The Western sanctions against Russia due to the Ukraine war have not only led to an increase in China and Russia’s use of their own currencies in transactions, but also India and Brazil’s in their trade with China and Russia.

During the summit, the BRICS leaders made plans to discuss the possibility of developing an integrated transaction system through discussions among their finance ministers.

During a weekly press conference on Aug. 29, Lula said the members had “agreed for our finance ministers to discuss whether we can agree upon establishing a transaction currency for trade.” He stressed that this approach was “not about opposing the dollar” and was intended “solely for the sake of Brazil and the real [its currency].”

South African Finance Minister Enoch Godongwana said the BRICS finance ministers would be discussing the expanded use of their own currencies in mutual trade during an annual meeting of the International Monetary Fund and World Bank this October.

Attention is now focusing on the actions of Saudi Arabia, which is joining as a new BRICS member.

Petroleum transactions are a major element behind the dollar’s hegemony. Saudi Arabia has already begun talking about expanding its non-dollar transactions, including its partial introduction of yuan-denominated petroleum transactions with China since the start of the Ukraine war.

Reuters said the admission of Saudi Arabia as a BRICS member was leading investors to speculate about a possible increase in non-dollar petroleum transactions.

Experts predicted that petroleum would be the area where the short-term effects of the BRICS expansion would be visible. Reuters also quoted asset experts as saying even a small increase in non-dollar petroleum transactions would be a big change.

US national security advisor Jake Sullivan downplayed the significance of the expansion, insisting that BRICS members differ markedly and do not share the same values.

“We are not looking at the BRICS as evolving into some kind of geopolitical rival to the United States or anyone else,” he said.

But another key Western leader, French President Emmanuel Macron, acknowledged that the BRICS expansion “shows a will to bring about an alternative order, in any case something which would replace what we have up to now called an international order, which is seen as too Western.”

The increase in BRICS membership raises the group’s total share of global gross domestic product (GDP) from 26% to 37%, its share of trade from 18% to 21%, and its share of the world’s population from 40% to 46%. As for whether it becomes an oversized exercise in bravado or the epicenter of a new global order, only time will tell.

By Jung E-gil, senior staff writer

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