BRICS 2023 focused on global economic strategies

 

The fifteenth BRICS summit, taking place in Johannesburg from August 22nd to 24th, marks a significant milestone as the first in-person gathering since the emergence of the Covid-19 pandemic in 2019. It's noteworthy that South Africa held the preceding in-person summit in 2018.

Originating from an acronym, BRICS gained prominence through the efforts of Terence James O’Neill, a prominent economist and head of Global Economic Research at Goldman Sachs. Back in 2001, he introduced the term BRICs—representing Brazil, Russia, India, and China—in a paper titled "Building Better Global Economic BRICs." This acronym highlighted the growing significance of these nations, urging the G7 to incorporate BRIC representatives. Despite the suggestion, the G7 did not take this step. Subsequently, in 2003, another paper titled "Dreaming with BRICs. The Path to 2050" suggested that these nations could outpace major Western economies by 2039. This concept gained traction as India and China indeed exhibited substantial growth, with India growing at 6.89% and China at 10.35% between 2000 and 2009.

In response to these developments, the foreign ministers of the four nations commenced discussions during the United Nations General Assembly sessions in New York. This led to their inaugural dedicated meeting in 2009, which was succeeded by the first-ever summit in Yekaterinburg, Russia, during the same year. These summits became an annual occurrence, with South Africa joining the group in 2010.

Among the significant achievements of BRICS, the creation of the New Development Bank stands out. This idea was put forth by India in 2012. This bank materialized in 2015 and is headquartered in Shanghai, reflecting China's economic prowess. As time has passed, China's portion of the BRICS GDP has surged from 47% in 2001 to a commanding 70% today. This pattern is mirrored in trade, where China's portion has escalated from 55% in 2001 to 69% in 2022.

Another significant initiative is the Contingency Reserve Arrangement (CRA), designed to provide balance of payments support. Of the total $100 billion, China contributed $41 billion, while India, Russia, and Brazil each contributed $18 billion, and South Africa provided $5 billion.

China's economic predominance within BRICS draws a parallel with the United States' predominance in the G7. The U.S.'s share of the G7 GDP has grown from 40% in 1990 to 58% in 2022 only. While comparing BRICS and G7, it's important to consider that merely contrasting population and GDP figures between two groups lacks context unless the coherence of the grouping is also factored in. The G7 demonstrates a convergence of interests absent in BRICS.

Currently, BRICS exhibits significant interest convergence between Russia and China, while India and China maintain a noticeable divergence of interests. China envisions a unipolar Asia led by itself and perceives India as an obstacle. India, on the other hand, is striving to enhance its ties with the United States while concurrently maintaining a diplomatic equilibrium between Russia and China.

The impending summit in Johannesburg will address the growing interest in BRICS membership. Roughly 20 countries have expressed interest, although a formal list hasn't been released. Membership decisions in BRICS require unanimous agreement, but China's economic influence could play a pivotal role. Notably, it was China, not India, that sponsored South Africa's entry into BRICS.

Several nations, including Saudi Arabia, Iran, UAE, Argentina, Indonesia, Egypt, and Ethiopia, have sought membership. China and Russia seem open to expansion, whereas India displays some hesitancy. South Africa, as the chair, is likely to mediate. The possibility of a decision aligning with China and Russia's stance is plausible. India must be cautious not to obstruct expansion. Notably, Pakistan, preoccupied with internal affairs, hasn't applied for membership yet, though China could eventually sponsor its entry.

An essential question arises: Could rapid expansion compromise group coherence? Presently, the level of coherence within BRICS is limited.

A noteworthy topic not on the agenda is the idea of a common BRICS currency. Russian Foreign Minister Lavrov has advocated for a common currency to reduce reliance on the dollar for international finance, but this notion is met with skepticism. Establishing a common currency akin to the European Union's took considerable time and was met with various challenges. The summit is expected to promote trading and settlement in national currencies, with examples such as Brazil and Argentina adopting the renminbi. Russia, with substantial rupee assets in Indian banks, demonstrates concern in this context.

The summit will witness participation from 67 national leaders of non-members, alongside 20 other dignitaries, including the UN Secretary-General, the President of the African Union, and the President of the New Development Bank. Notably absent will be President Putin, who opted to send his foreign minister due to an arrest warrant issued by the International Criminal Court—an obligation South Africa must adhere to. India, however, is not legally bound by the court's warrant, so President Putin faces no arrest risk in Delhi if he attends the G-20 summit.

There is a notable disparity in the hosting approaches of South Africa and India. South Africa emphasizes economic and, to a lesser extent, political benefits, avoiding the "Vishwa Guru" portrayal embraced by India. The focus is on gaining BRICS' endorsement and support for the Africa Continental Free Trade Area.