BRICS leaders - between de-dollarization and expansion of the economic bloc

Lavrov came out of the matryoshka, although the other BRICS leaders were waiting for Putin. The Russian president is absent for reasons of fear of the international arrest warrant. (Photo source: facebook / BRICSza)

The BRICS (Brazil, Russia, India, China and South Africa) summit, which kicked off last night in South Africa with an official dinner, and whose plenary session will take place today starting at 11 am, takes place in a context geopolitical which led to the outline of two major topics of discussion: de-dollarization - that is, the break from the reference to the dollar of commercial exchanges between the member states of this economic bloc - and the expansion of the organization by accepting new members.

At the BRICS summit, among the more than 40 participants from several countries of the world, there are the leaders of the member states of the economic bloc - Chinese President Xi Jinping, Brazilian President Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi, South African President Cyrill Ramaphosa, but absent is Vladimir Putin, the president of the Russian Federation, who will be represented at the event by Sergey Lavrov, the minister of foreign affairs. Even if President Putin will not be physically present at the meeting, because there is an international arrest warrant for war crimes in Ukraine in his name - issued by the International Criminal Court in The Hague -, the leader of the Russian Federation will participate in the virtual summit, online. In his speech, Vladimir Putin will present the priorities of the Russian BRICS presidency for the summit it will host next year, the Kremlin press service announced. The President of the Russian Federation will refer to the possible expansion of the bloc, to the global and regional agendas and to the further development of the BRICS partnership in the political, economic, cultural, humanitarian and other fields, the cited source also states.

Regarding President Putin's online participation, we note that in recent years, from 2020 onwards, all annual BRICS summits have been held in videoconference format due to pandemic restrictions in 2020 and 2021 and due to the conflict in Ukraine, in 2022. In fact, this year's summit is the first time BRICS leaders will meet physically after four years.

Although the Russian Federation and Brazil wanted de-dollarization to be the main topic of this year's BRICS summit, organizers of the event in South Africa said there would be no discussion of a BRICS currency as an alternative to dollar dependence. but only the stimulation of the use of the national currencies of the member states in commercial exchanges will be debated. So instead of a broader push toward de-dollarization, the summit will focus on seeking an agreement that BRICS members should increasingly regulate trade with each other in their local currencies, officials close to the event said, citing by the Financial Times.

Under these conditions, the hottest point on the agenda of the summit is the reception of new members. Regarding this aspect, Cyrill Ramaphosa, the President of South Africa, said: "An enlarged BRICS will represent a diverse group of nations with different political systems who share a common desire for a more balanced global order."

According to South African officials, more than 40 countries have expressed interest in joining BRICS, of which 23 have also sent formal requests to do so. The 23 countries include Iran, Saudi Arabia, United Arab Emirates, Argentina, Algeria, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, Democratic Republic of Congo, Comoros, Gabon, Belarus and Kazakhstan.

"The BRICS leaders will draft a declaration on the expansion of the group. This will trigger a decisive change in the global world order," announced Anil Sooklal, South Africa's BRICS representative, quoted by Bloomberg.

Expanding BRICS is a long-standing goal of China, which hopes the organization will become more influential as its membership grows, especially since the group currently accounts for about 42 percent of the world's population, a quarter of the country's GDP global level and 18% of international trade. The Russian Federation also wants to welcome new members to BRICS to counter its diplomatic isolation and the international sanctions it is subject to due to the invasion launched in Ukraine. South Africa is also on the side of BRICS expansion, but India - which fears Chinese dominance - has warned that there is no need for a rapid expansion of the organisation. Moreover, India fears that, with the expansion, BRICS could turn into an organization where the voice of Islamist states will count, given the fact that most of the countries that want to join the economic bloc are countries where the Muslim religion is the official religion.

Reluctant to welcome new members is Brazil, which is concerned that BRICS expansion will diminish its influence within the economic bloc. That is why the representatives of Brazil do not want an immediate expansion of this block, but a period in which the future members to only have observer status and, after meeting several requirements, to obtain membership of the international organization.

China wants that, based on the expansion, BRICS - which will contain the emerging markets of several states (leaders from 60 countries were invited to the summit) - will become a strong rival of the G7 (the group of the world's main industrialized countries) . However, it has not yet been determined whether BRICS will be the club that will protect interests

economies of developing countries or a political force that will openly challenge the West.

"If we expand BRICS to represent a similar share of world GDP as the G7, then our collective voice in the world will become stronger," said a Chinese official, quoted by the Financial Times.

Naledi Pandor, South Africa's foreign minister, recently said it was "wrong" to see a potential BRICS expansion as an anti-Western move, the source said. However, Western capitals will consider the possible admissions into BRICS of Iran, Belarus and Venezuela as a move to integrate the allies of the Russian Federation and China. Argentina, Saudi Arabia and Indonesia have wanted to be BRICS member states since 2010, when South Africa was invited to the original group of Brazil, Russia, India and China.

The acronym BRIC was coined in 2001 by economist Jim O'Neill, from the American investment bank Goldman Sachs, to group four of the fastest growing economies of those times. O'Neill wanted to highlight how four nations - Brazil, Russia, India and China - could collectively become a global economic force in the next decade.

Investors got the message, and so did the decision makers in the countries concerned. Putting aside their political and social differences and based on a common desire to restructure the global political, economic and financial systems led by the United States, the four nations committed themselves to an ideal of "fairness, balance and representation".

The first BRIC annual meeting was held in 2009 in Yekaterinburg, Russia. A year later, they invited South Africa to join the political group, and an "s" was added to the end of the acronym, becoming BRICS.

From 2010 until today, there has been no further expansion of that international organization.

Among the most notable achievements of the organization is the creation of the New Development Bank (NDB) - or Banco BRICS - which is currently chaired by Dilma Rousseff, the former president of Brazil. The multilateral development bank has a subscribed capital of 50 billion US dollars (approximately 250 billion lei) to finance infrastructure and climate-related projects in developing countries.

Since its establishment in 2015, the financial institution, which includes BRICS members as well as the states of Bangladesh, Egypt and the United Arab Emirates among its shareholders, has already approved more than $30 billion in loans. Comparatively, in the year 2022, the World Bank committed loans of over 100 billion dollars.

BRICS has also created a $100 billion Contingency Reserve Arrangement, a foreign currency liquidity facility that members can tap into during any phases of global financial turbulence.

The organization's economic influence has grown over the past two decades, thanks in large part to the economic growth of China - which is the world's second largest economy by Gross Domestic Product - and the rise of India to become the world's fifth largest economy. The economies of Russia and Brazil lost their growth potential and returned to the situation of 2001 in terms of their share of global GDP, and the South African economy struggled to catch up with the other member states of the organization. Although the economic bloc is now a major force in international trade, trade among its members has remained relatively low in the absence of any intra-BRICS free trade agreement.