BRICS: Getting Back to Business

The group's annual summits have been low on substance in recent years. Still, the upcoming gathering in Brazil has piqued some interest. It is Narendra Modi's first engagement at a multilateral forum and will probably see the finalisation of the BRICS development bank

Over the past few years, the six-country grouping of emerging market economies BRICS (Brazil, Russia, India, China and South Africa) has lost much of its sheen. Home to 40 per cent of the world’s population and accountable for a quarter of the global output, BRICS was trumpeted to be the next big thing on the global stage — both economically and politically — but it seems to have been unable to live up to the hype in either case.

Economically, growth rates in all these emerging markets, except China, have dropped considerably. When Jim O’Neill of Goldman Sachs came up with the acronym in 2001, it was expected that, by 2050, the BRIC economies (South Africa was added to the group much later in 2010) could rival the G7 (the United States, United Kingdom, France, Germany, Italy, Canada, and Japan) in terms of global growth. However, in August 2013, Mr O’Neill conceded that the group’s performance had been below par, that he was most disappointed with India’s record and the only country that deserved BRICS status was China.

Politically, the group was supposed to mark the turning point from a unipolar to multipolar global order. But here too BRICS had failed to consolidate its position primarily due to internal disagreements stemming from the group’s inherent dichotomies.
Consequently, the group’s annual summits that bring together the heads of all five member states, though high on style and show, have been low on substance in recent years. Nevertheless, the upcoming BRICS annual summit in Brazil has piqued some interest. This is not to say that there has been a drastic change in course for BRICS but recent developments in India and abroad give enough reason to keep an eye on the happenings in Fortaleza.

For India, the summit is of particular interest because it is Prime Minister Narendra Modi’s first foreign engagement at a multilateral forum. He has been in office for less than two months during which foreign policy initiatives have received much attention. Mr Modi has made clear that his administration will focus on South Asia but outside of that there is little clarity on how he will script India’s engagement with the rest of the world. The BRICS summit is, therefore, his opportunity to add more substance to his foreign policy.
Much attention will also be on Mr Modi’s meetings with Russian President Vladimir Putin and Chinese President Xi Jinping — he has met neither leader since taking over as Prime Minister, so this will be a power-packed first. It will be interesting to see how the meetings play out because they will serve as a precursor to state visits scheduled for later in the year. President Xi is expected to visit India in September and President Putin in the coming months.

Another area of interest during Mr  Modi’s Brazil tour will be his meetings with a host of South American leaders. On the invitation of Brazilian President Dilma Rousseff, who is seeking to reiterate her country’s position as the regional leader, all BRICS heads of state will be travelling to Brasilia after the summit to meet with their counterparts from Argentina, Bolivia, Ecuador, Paraguay, Uruguay, Venezuela and Suriname.

It is unclear whether Mr Modi will have bilateral meetings with some or all South American leaders but his interactions will be closely monitored for clues on how India’s relationship with that region may evolve under the new regime in Delhi. Traditionally, India has not had close ties with South America but this has been changing, and in some cases rather rapidly so.

Across the world, the one announcement that has created much excitement about BRICS is that of the development bank. There has been talk of such an institution for a while now but given the many differences between the BRICS member states on key issues, including who would fund the bank and by how much, few had expected that the project would have a real presence outside the communiqués.
However, earlier this month, Chinese Vice Foreign Minister Li Baodong announced that all five countries had reached a broad consensus on their $100 billion development bank. They have reportedly agreed to fund the bank equally — $10 billion each — to create a $50 billion corpus. Other details, such as the location of the bank (Mumbai, Shanghai and Moscow are all in the running although China’s commercial capital seems to be ahead in the race), however, are yet to be finalised.

Once established, the BRICS bank will serve as the developing world’s response to the International Monetary Fund and the World Bank which are dominated by the US and Europe. For long, emerging economies, who have to take out huge loans from these established institutions to fund their national infrastructure projects, have complained that such financial assistance often comes at a high cost — needless meddling in their sovereign affairs by Western powers. A BRICS bank may then allow emerging economies to sidestep these institutions altogether and, eventually, build their own global governance structures.
Providing an alternative to the existing Western-led political and economic international architecture has always been an important motif for BRICS. However, rarely has the mood of individual BRICS member states been so definitively anti-West. Brazil is upset about the snooping scandal, so is India. China does not appreciate Western interference in South China Sea while Russia is bristling about the sanctions imposed in the aftermath of the Crimean crisis.
President Putin, for one, has made a clear shift to the East. Apart from good relations with India, he has now sought to strengthen ties with Beijing in the hope that together they can take on an imposing West. Indeed, there is no denying that the Obama Administration is inadvertently pushing Russia into China’s arms. The landmark $400 billion gas deal signed between the China National Petroleum Corporation and Russia’s Gazprom is just one example. A decade in the making, it was finalised in May and paves the way for Russia to deliver about 38 billion cubic metres of natural gas a year to China’s burgeoning economy, starting around 2018 — thereby reducing Moscow’s dependence of the European market as well as diversifying China’s energy source basket. Similarly, a cash-strapped Russia’s decision to sell weapons to Pakistan, a friend of China’s may also be seen in this context.

Yet, not all is hunky dory in the blossoming China-Russia relationship. Moscow fears that it may be relegated to the position of a junior partner. In fact, China’s economic might is very much a matter of concern for all other BRICS countries, who worry that the grouping might become China’s fiefdom. In fact, this was one of the reasons why Russia, Brazil and India strongly opposed China’s offer to fund a larger share of the BRICS development bank corpus.

There are several currents and counter-currents at work here. The sixth annual BRICS summit will offer an interesting view into how they play out.

(This article was published in the op-ed section of The Pioneer on July 10, 2014)