Now that the dust has somewhat settled on the 15th BRICS summit which took place in Johannesburg, South Africa from August 22-24, 2023, it is perhaps time to take a long-term, dispassionate view of the outcomes of the summit.
The summit attracted unusual attention and was at the focus of international media not only because it was the first in-person summit being held after three years of virtual summits during the Covid period, but more so because of the enormous interest of about 40 countries to become members of the Organisation, more than 20 of which applied in writing for the same.
In the period since the first summit in 2009 in Yekaterinburg, Russia, BRICS has maintained a low profile somewhat in the shadow of the rise of China and India. Summits have been organised every year since the first gathering and all leaders have attended them. This is testimony to the importance that these countries attach to this grouping. In the interim, it has steadily grown and in the process, broadened its role, most notably with the formation of the New Development Bank and the BRICS Contingent Reserve Arrangement (CRA) in 2015.
The Summit
In the run-up to the summit, BRICS became the cynosure of global attention as never before in its 15-year history. The grouping also experienced an unprecedented disagreement over enlargement. The growing East-West confrontation in recent years, particularly between the US and China, on trade and technology issues, and between the West and Russia on account of Russia’s invasion of Ukraine, has energised China and Russia to expand the BRICS grouping and try to move it in a pronouncedly anti-Western corner. This is not to the liking of the other three members.
It would appear that in the wake of tumultuous geo-political, geo-strategic and geo-economic changes taking place, an increasing number of countries wish to hedge their bets and keep one foot in the boat dominated by China. As some of the large countries face the debilitating economic impact of the Russia-Ukraine conflict and the lingering effects of Covid, they feel comfortable in a grouping where they will be more easily able to gain access to Chinese funds for their economic projects and overcome the growing debt and inflation pressures.
In the summit last year, a decision had been taken to evolve guiding principles, standards, criteria and procedures for admitting new members. It appears that this has been agreed upon although the details have not been made public. Out of more than 40 countries that had expressed interest in joining, it was decided to admit six countries by consensus.
South African President Cyril Ramaphosa announced at the summit the decision to include Argentina, Egypt, Ethiopia, Iran, the UAE and Saudi Arabia as the new members. Their membership will become effective from January 1, 2024.
The 26-page, 94-para Johannesburg Declaration also focuses on promoting multilateralism, reform of the WTO, expansion of the UN Security Council with membership of Brazil, India and South Africa, promoting peace and security in the world, enhancing economic growth and development, achieving Sustainable Development Goals, combating climate change, cooperation on space matters, deepening people to people exchanges, and many more.
New Members
It is clear that like South Africa, none of the six new members satisfy the original criteria stipulated by Jim O’Neill of large territory, large population and large economy for membership of BRIC. It is evident that while the focus of the original grouping was to seek a better deal and greater voice in the Western-dominated financial and economic world, the emphasis now appears to be more on political compatibility and acceptability. Some of the larger countries and bigger economies like Indonesia, Mexico, Turkey, Nigeria etc. were not included. Possibly they did not press their case hard enough!
Some of the additional members diversify BRICS’ global presence but have little to contribute in the way of financial or economic heft. Argentina is on the brink of bankruptcy as it faces over 100 per cent year-over-year inflation. Meanwhile, there are growing fears about Ethiopia’s debt instability amid its ongoing talks to secure a $2 billion loan from the International Monetary Fund. Egypt is mired in its own economic crisis amid a severe dollar shortage and struggling currency.
With the addition of Saudi Arabia, the UAE, and Iran, this expanded group has added three of the world’s largest oil exporters and would constitute 42 per cent of the global oil supply. Saudi Arabia was ranked as the second-largest oil producer in the world in 2022 while the UAE and Iran are ranked sixth and ninth, respectively. Along with Russia, which ranks third in global oil output, BRICS now covers four of the world’s top 10 energy exporters. Oil market management will remain the purview of the Organisation of the Petroleum Exporting Countries and allied producers (OPEC+). But over the long term, an expanded BRICS grouping could be significant for energy markets.
For years, OPEC+ states and large consumers like India and China have complained that Western energy sanctions on Iran and Venezuela have constrained investment and export flows. More recently, the EU embargoes on Russian seaborne crude oil and petroleum products and the EU-G7 price caps have created a new sanctions mechanism that targets revenues rather than export volumes. Other exporters worry that new sanctions tools could target them in the future, and they are wary of G7 interventions that have reshaped energy flows.
The enlarged BRICS would include both oil and gas exporters and two of the largest importers, China and India—both of which refused to join the “price cap coalition” targeting Russia. Producers and consumers in this group have a shared interest in creating mechanisms to trade commodities outside the reach of the G7 financial sector. This is no mean task, particularly due to the dollar-denominated energy trade. For energy markets, the enlargement of BRICS is largely symbolic for now—but it is another early warning signal that countries are exploring ways to skirt the US financial system and the reach of the dollar.
The economic heft and muscle of the BRICS grouping has been growing progressively over the years, led chiefly by the rapid growth of China and India. However, in nominal dollar terms, the group is nowhere close to challenging the dominance of the G7 over the global economy. The original 5-member BRICS grouping accounts for a total GDP of USD 27.72 trillion (IMF 2023 figures) which represents 26.1 per cent of the world economy. As against this, the G7 members account for a total GDP of USD 45.97 trillion which is 43.8 per cent of the world economy. These figures also need to be seen in the context that the BRICS countries account for about 42 per cent of the world population while the G7 have a population of just 10 per cent. Even with the addition of six new members, the total nominal GDP of the 11-member grouping rises to USD 30.86 trillion, accounting for 29.1 per cent of the global economy, which still falls far short of the total GDP of G7 countries.
The situation changes dramatically when considering the GDP in Purchasing Power Parity (PPP) terms. The G7 account for USD 52.23 trillion which is about 30 per cent of the global GDP. On the other hand, the original BRICS account for USD 56 trillion which is 32 per cent of world GDP. With the addition of six new members, the total GDP rises to USD 64.4 trillion which accounts for 36.8 per cent of the global economy in PPP numbers.
The addition of Argentina will strengthen the bloc’s lithium supply. Argentina has the third-largest lithium reserves in the world. According to an August 2022 JPMorgan forecast, Argentina’s share of global lithium supply would rise from 6 per cent in 2021 to 16 per cent by 2030, surpassing Chile to be the second-largest lithium producer in the world by 2027. The addition of Argentina would position BRICS with three of the five largest lithium producers in the world, alongside China and Brazil. BRICS could seek to increase public and private investments in critical minerals supply chains among allies. Saudi Arabia, another new entrant, is already making significant investments in lithium and other critical minerals in Brazil.
The inclusion of members like Iran has given rise to apprehension that the grouping might seek to adopt an anti-Western stance which appeared to be the original intent of China and Russia. This, however, appears quite unlikely because of the presence of other countries like India, Brazil, Saudi Arabia, the UAE, Egypt etc. who value and would like to safeguard their relations with the US and the West. It is clear that due to the wide divergence of views on critical issues between the various BRICS countries, it would not evolve into some kind of geo-political rival or adversary to the United States.
Conclusion
Going into the summit, India wanted the expansion to take place in a gradual, progressive manner on the basis of certain guiding principles and criteria. China, supported by Russia, was however keen on a big-bang expansion. Brazil also harboured reservations about a large, quick expansion. South Africa as the Chair of the summit was more favourably inclined toward the Chinese position because of its gratitude to China for having shepherded its admission into the grouping in 2010. A consensus was arrived at the last minute on the six countries whose names were announced by the South African President.
India has excellent relations with all the new members. Membership of Iran could provide a further impetus to the full operationalisation of the Chahbahar seaport thereby strengthening connectivity with central Asia.
The new avatar of BRICS offers good possibilities for realising and promoting the interests of the Global South as long as China and Russia don’t try to build it into an anti-West bloc. It is imperative for the grouping to maintain and strengthen its coherence and cohesiveness to realise its objectives of greater say in global economic and financial affairs.
The writer is executive council member, Manohar Parrikar Institute for Defence Studies and Analyses, president, Institute of Global Studies, Distinguished Fellow, Ananta Aspen Centre, and former Ambassador of India to Kazakhstan, Sweden and Latvia. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18’s views.
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