It is 15 years since its first summit. Back then. BRICS was BRIC. And now, it’s not just BRICS but BRICS+. The summit in Kazan is seeing the member nations go up from five to nine, with one more, Saudi Arabia, having been invited to join. According to Russian foreign minister Sergei Lavrov, there are 30 more countries that have been in touch over joining the BRICS+ in some format or the other.
When Goldman Sach’s economist Jim O’Neill coined the acronym BRIC and predicted that the economies of the four member countries – Brazil, Russia, India, and China – would dominate the global economy by 2050, his projection was based only on the growth of the four nations. The grouping now represents a combined GDP that exceeds the G7’s by “about 5 percentage points”, said the Russian Foreign Minister Sergei Lavrov on the eve of the Summit. A briefing note of the European Parliament, titled Expansion of BRICS: A Quest for Greater Global Influence, says that BRICS+ accounts for 37.3% of the world’s GDP. That is more than half as much as the European Union’s 14.5%.
“Artificial Efforts To Maintain Dollar’s Position”
Lavrov also lashed out at the US-led world order, saying, “The United States is unwilling to relinquish the reins of power that they have held since World War II through the Bretton Woods institutions and through the role assigned to the US dollar in the international monetary system, even after the free exchange of US dollars for gold had been cancelled. The leading position of this currency is maintained by efforts that are largely artificial.”
The BRICS+ is in the process of taking the first step to break the dominance of the dollar, by a proposed launch of an international payment system that can circumvent the dollar. India’s foreign secretary, Vikram Misri, confirmed that there had been discussions that had been underway on settlement systems and payment systems. However, he added that as per his understanding, no final agreements have been arrived at yet. “Yes, fundamentally, I think it is a fact that the countries have stressed the importance of the use of local currencies for settlement purposes especially as it comes to or as it pertains to trade. So, strengthening of correspondent banking networks amongst the BRICS partners and enabling settlements in local currencies is being encouraged,” he added.
The Threat Of Sanctions
With Western sanctions faced by Russia in the wake of its war in Ukraine, Moscow is most keen to push the idea through not just to break the dollar’s dominance but also to showcase to the West that it still has allies and partners on its side. Iran, the new BRICS+ member, also faces crippling US sanctions and Moscow hopes for support from the members that have increasingly felt that the West-dominated economic order has short-changed the rest.
Ahead of the Summit, Russian Finance Minister Anton Siluanov also called for new institutions, similar to the Bretton Woods institutions, saying the International Monetary Fund (IMF) and the World Bank are not performing their roles. However, the big question is whether a member country like China, which has been a beneficiary of the current global world order, will seek a new parallel system altogether when it is pushing for reforms along with countries like India.
Reforming The IMF
In a recent IMF publication by India’s former Governor of the Central Bank, Raghuram Rajan sought not just quota reforms in IMF but also a change in the body’s governance to make it both fair and more representative of the current global realities. He said if members reform quotas and governance simultaneously, an independent IMF could bring a fragmenting world together on key issues. “Such comprehensive reforms should happen soon; else the rest could well believe this is an attempt by the Western alliance to hold on to some influence just when power is finally shifting.”
However, the BRICS+ also has its task cut out. Much will depend on the US presidential election outcome too. For example, Donald Trump has said that he will penalise countries that move away from the dollar by imposing a 100% tariff on their goods.
According to the IMF, the dollar remains a dominant force, with 59% of official foreign exchange reserves in the first quarter of 2024, and the euro second at approximately 20%.
Amidst all the speculation, all eyes are keenly trained on Russia for any indication in this direction during the two-day event. The announcement, if any, will have even greater significance because it will come from a country that is at direct loggerheads with the Western world.
(Maha Siddiqui is a journalist who has extensively reported on public policy and global affairs.)
Disclaimer: These are the personal opinions of the author
