Is BRICS equipped to confront its challenges?

Russian President Vladimir Putin closed the BRICS summit, a bloc of developing economies, in the last week of October. Sanctions from the West have been aimed at cutting off Russia's economy from global markets. The conclave was the largest gathering of world leaders in Russia in decades. The 3-day summit attended by the highest officials of 36 countries was a testament to the West's failure of trying to isolate Russia and Putin globally.

The participants voiced or implicitly echoed their praise for the bloc's role as a counterbalance to the West. Russian media touted the summit as a massive showdown of consensus against the West's perverse methods of pressure and hegemony. The West has termed the summit and its outcomes ranging from a threat to democracy to a flailing attempt to dethrone the US dollar hegemony and anything in between.

The summit covered deepening financial cooperation, including the development of alternatives to Western-dominated payment systems, efforts to settle regional conflicts, and expansion of the BRICS group of nations. Russia, China, and other countries agree on creating a new payment system as an alternative to the global bank messaging network SWIFT, which has become a weapon of the US to impose sanctions and disrupt global and regional trade for nations. In the joint declaration of the conclave, participants specifically mentioned "the disruptive effect of unlawful unilateral coercive measures, including illegal sanctions." They underscored their commitment to enhancing financial cooperation within BRICS that will offer benefits of "faster, low-cost, more efficient, transparent, safe and inclusive cross-border payment instruments built upon the principle of minimizing trade barriers and non-discriminatory access."

BRICS Implication
At a minimum, BRICS+ creates a forum that allows emerging markets to align on global topics. It offers new opportunities for mutual economic development and growth. It is working towards building political and financial institutions and, more importantly, a payment mechanism for executing transactions. As such, there are significant implications for the future of international finance, monetary policy, energy trade, global supply chains, and technological research. This results in global companies needing to equate new geopolitical and economic realities to their investment strategies. Attending leaders underscored the importance of improving cross-border financial practices and deepening economic ties among member states. They also stressed the urgent need to reform the global financial system to make it more inclusive and equitable. Additionally, they emphasized that adopting local currencies in trade and financial transactions is essential to reducing vulnerabilities and mitigating the impact of external economic shocks on emerging and developing economies.

The group has accepted 13 new nations to join as partner countries in the BRICS initiative. These include Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Uzbekistan, and Vie nam. In 2023, BRICS expanded to include Iran, Egypt, Ethiopia, Saudi Arabia, and the UAE after these countries had applied for membership. Saudi Arabia has yet to join formally, but the others have. Argentina was also invited, but President Javier Milei's new government, elected in December 2023, is eager to bolster ties with the West. The BRICS members' central point of agreement is their discontent with Western-led institutions of global governance, especially regarding the global financial structure. Venezuela's potential accession to the BRICS was also discussed. Still, it requires the consent of all member countries, and Brazil would oppose this.

BRICS mainly wishes to challenge the supremacy of IMF and World Bank, which are, in a way, proxies of the West. The New Development Bank is central to this effort and is vital in funding infrastructure and sustainable projects. It started with an initial capital of $100 billion and extended its support beyond BRICS members to other emerging economies. BRICS has further weakened the relevance of the G-20, which seeks to align economic policy among the largest industrialized and developing economies. The G20's attempts at policy alignment will continue to undercut, with the G20's seven largest economies having a club of their own, titled G7.

Meanwhile, the G20's six large developing economies assert their influence within BRICS+. The increasing number of emerging economies must do much more before rivaling the IMF or challenging US dollar hegemony. However, the increasing willingness of nations to join the bloc and enthusiasm during the summit with its new members underlined its growing weight.

The recent conclave underlined some noteworthy geopolitical triumphs—the foremost is for P tin. The UN Secretary General's presence was another show of BRICS' growing influence. NATO member Turkey's Tayyip Erdogan expressing interest in joining the BRICS group and showing up at the conclave implies significant geopolitical implications. India and China began nurturing newer ties within this summit, which signifies increasing coherence and willingness for unity within the BRICS.

Putin's Message
Images of world leaders with Putin at the BRICS summit showcase his defiance toward the West. The conclave demonstrated that Russia has essential partners like India, China, and other major emerging powers and is far from isolated. The expanded BRICS represent about 45% and 25% of the world population and GDP, respectively. BRICS will continue to expand, and Southeast Asian countries want to join the bloc. Thailand and Malaysia have explicitly expressed their willingness to join, and NATO member Turkey has also asked to join recently. If another about a dozen countries with names like Vietnam and Bangladesh that have applied for membership are included, then BRICS would represent one-third of the global GDP. This indicates that Russia is not a pariah, and the countries are reluctant to be dictated by the West to choose between parties. As attention is focused on Eastern Europe and the Middle East, the global order sees a structural shift. Large developing nations are willing to exert more influence in world economic affairs and build an alternative to the Western-led institutions.

Boon for India
India enjoys deep ties with most new BRICS members. Egypt is a growing trade and security partner, and the UAE and Saudi Arabia are India's most important partners in the Middle East. India's relationship with Ethiopia is also remarkable. Despite the West's attempts to isolate Russia, Delhi can leverage BRICS to continue its engagement with Moscow, a close ally. BRICS also facilitates India's advancement of its foreign policy and the maintenance of its strategic autonomy principle. It also allows India to balance relations with major geopolitical players. With Delhi's essential bilateral and multilateral partnerships inside and outside the West, its membership in an increasingly influential BRICS and member states can be balanced with its participation in the Indo-Pacific Quad and ties with the US and other Western countries.

The joint statement from the summit reflects the same principles and goals that Delhi shares in its messages and policies. These include engaging with countries in the Global South, promoting multilateralism and a multipolar world, pushing for UN reforms, and advocating for a permanent seat on the UN Security Council. Delhi also criticizes Western sanctions that affect its trade with Russia and its infrastructure projects in Iran.

The BRICS group is welcoming new members such as Iran and possibly Belarus and Cuba in the future. This change could shift the group toward a more anti-Western stance. However, India is trying to balance its relationships with Western countries and those not aligned with the West. India is careful not to join any alliance that would oppose Western interests.

BRICS, especially with its new members, is unlikely to become anti-Western. Apart from Iran, the new members have strong relationships with the West. Many countries rumored to join in the future, like Turkey, a NATO member, and Vietnam, a key partner in trade with the US, also do not indicate an anti-Western bloc. Even if BRICS adds more members against the West, the group would likely find it hard to carry out initiatives that could be deemed anti-West.

India - China Detente?
China and India remain the principal economic engines of BRICS, fueled by China's BRI and India's increasing role as a prominent global manufacturing hub. Russia complements them with the leverage of its vast energy resources. Brazil supplements the group with significant agricultural and natural wealth, while South Africa facilitates the group's outreach to the African continent. This strategic diversity enables BRICS to wield considerable influence in shaping global economic and political agendas.
Collaborating with China in the BRICS group helps India reduce tensions between the two countries. This is particularly important following India's recent announcement of a new border patrol agreement just before the summit.

The bilateral talks between PM Modi and President Xi Jinping at the BRICS Summit signify a potential thaw in India-China relations. Both leaders expressed a commitment to constructive dialogue and cooperation in the future.

The recent improvement in relations between China and India is a positive sign for BRICS. However, India's relationship with China is still strained despite a new agreement on their borders. Ongoing border disputes, growing competition in South Asia and the Indian Ocean, and China's strong ties with Pakistan make it unlikely that these two countries will find common ground soon.

Palestine Issue in BRICS
During the BRICS Summit, the consortium released the "Kazan Declaration," which reaffirms member states' commitment to advocating for the full membership of the State of Palestine in the United Nations, emphasizing adherence to the two-state solution framework.

The Palestinian leadership articulated that the increasing engagement of various nations with BRICS is driven by aspirations for a more equitable and balanced global order. Furthermore, they underscored the urgency of actualizing the UN Security Council's resolutions concerning a ceasefire, ensuring humanitarian access, and the complete withdrawal of Israeli military forces from the Gaza Strip at the earliest opportunity.

President Mahmoud Abbas of the Palestinian Authority announced Palestine's intention to join BRICS, aligning with the bloc's shared values, during the inaugural plenary of the summit.

Alternative to US Hegemony - Easier Said Than Done!
The Sino-Indian tension strengthens the US dollar's global role. Disputes over borders, violent clashes, and economic sanctions on certain Chinese exports to India make it harder for these two major BRICS countries to agree on a common currency that could challenge the dollar. Also, a significant change in the dollar's global power will likely happen when oil and gas prices are no longer based on US dollars. This would benefit large producers and exporters like many BRICS nations while hurting countries that rely on importing these resources.

Although the dollar's share in central banks' currency reserves has decreased, the use of the US currency remains exceptionally high in trade, debt issuance, and generally in the global currency market. Thirdly, the increasing use of alternative currencies does not threaten the dollar at present; rather, it enhances competition among regional currencies due to the fragmentation of trade and capital flows: the de-dollarization of the system would probably lead to a more diverse market, rather than a direct increase in the role of one national currency. Lastly, another factor hindering the BRICS de-dollarization processes is the lack of synchronization among regional trade, capital flows, and currency markets.

BRICS wants to work out a payment arrangement with the cooperation of central banks affiliated with the group's member countries. Before BRICS will ever launch a payment system that could be treated as a serious alternative to SWIFT, there is still a long way to go. The Kazan Declaration was vague about the BRICS Cross-Border Payments Initiative, which is supposed to strengthen corresponding banking networks within BRICS and enable settlements in local currencies of BRICS members. Bankers are not convinced that BRICS has been able to develop a technical support system for creating and sustaining an alternative to the SWIFT system. Companies in India, China, South Africa, and Brazil may find it challenging to make and receive payments from business partners in countries outside the BRICS club. Though the BRICS do not appear ready with the mechanism to implement the idea, Washington has concerns about the de-dollarization campaign launched by some countries.

The de-dollarization initiative is the most concrete proposal to emerge from the summit. A BRICS currency would require significant political compromises, including a banking union, a fiscal union, and general macroeconomic convergence. Many experts doubt that a new BRICS reserve currency would be stable or reliable enough to be widely trusted for global transactions.
It is hard to imagine the widespread development and adoption of BRICS financial tools globally at this stage. The US dollar's domination of the global currency landscape is entrenched in trade transactions and foreign exchange reserves; more than 80% of global trade transactions are invoiced in US dollars, accounting for nearly 60% of central banks' reserves.

Take-Away
Many people in Asia, Africa, and Latin America still prefer not to align with the US, and the reluctance is increasing seeing the US patronizing a genocide in Gaza. This interest in the BRICS group offers a different choice from Western alliances. While the BRICS members are quite different, bringing their leaders together can have an impact. The meeting in Kazan was also significant because it was the first time in two years that Chinese Premier Xi Jinping and Indian PM Narendra Modi met in person. This meeting could help improve their relationship but doesn't fully resolve their issues. And the primary aspiration of breaking the US dollar hegemony requires much more from all BRICS members.

Simon Mohsin: Political and International Affairs Analyst.