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)

Not just another brick in the wall

At its fourth summit, BRICS presented an alternative to the Western narrative of international affairs. It was more representative of the developing world's concerns, and was needed not only to counter the West, but also to give a voice to the rest who are usually excluded

As the fourth annual BRICS summit concluded in New Delhi last week, one of the most significant questions that emerged was: Will it shift the global power centre from the West to within itself? In response, however, much of the same observations made in the past years about this odd five-country grouping, that includes Brazil, Russia, India, China and South Africa, were repeated. Yes, the group presents an emerging global force; no, the members are too disparate to make an impact; yes, they will work together to further their economic interests; no, they will be held back by their competing, even conflicting, interests. The fact remains that even four years after BRIC came into existence — the ‘S’ for South Africa was added a year later in 2010 — the world still seems to be largely undecided about how the group will shape up.


As of now, the developed world is unsure if the group will eventually morph into an alternative power structure that could potentially challenge its own authority (that, many believe, is already on the wane) in the international arena. That explains the West’s lukewarm response to the New Delhi summit. The developing world, on the other hand, remains sceptical about the group’s effectiveness; many are convinced that BRICS will devolve into a SAARC-like regional organisation with limited influence rather than become the EU-like power bloc it imagines itself to become.


It is still too early to either hail BRICS as the ‘next big thing’ in international politics or write it off as, well, just another brick in the wall. Still, there is a general agreement that, for the most part, BRICS has been making the right kind of noises. The group’s focus on greater economic cooperation and improved trade relations within the bloc, for instance, is bang on target.


As emerging global powerhouses (even though South Africa is still only a regional player at best and Russia’s growth rate is no longer as promising as it was when Goldman Sachs included that country into the group) these countries together account for 40 per cent of the global GDP and have been credited for 50 per cent of the world’s economic growth in the past decade. As they strive to find their niche in the global arena, it is imperative that they strengthen their economic relations. Towards that end, BRICS’ decision to settle trade transactions within the group in local currencies is also a game changer. Already, stock exchanges in BRICS countries have begun cross-listing their equity benchmark index derivatives since March 30. Not only does this encourage trading within the group, it also significantly protects the countries from financial pressures originating in the West.


Furthermore, the plan to set up a BRICS development bank is a step in the right direction. If well executed, such an institution will have the potential to challenge the International Monetary Fund and the World Bank — two multilateral financial institutions that not only dominate global finance but also serve as monetary levers to further Western interests.


But, if BRICS hit the mark with intra-group economic cooperation, it failed to stand up the challenge when it came to demanding reforms within the global financial architecture. For instance, even though, the Delhi Declaration calls upon the IMF and the World Bank to choose their heads on the basis of merit, it steers clear of endorsing the ‘developing world candidate’ — Nigerian Finance Minister Ngozi Okonjo-Iweala — for the post of president of the World Bank. This is most disappointing.


A reputed economist, Ms Okonjo-Iweala, has extensive experience in development economics and boasts of a stellar record for the years that she served the World Bank as its managing director. In any other situation, she would have gotten the job of president hands down. But, given the skewed structuring of the World Bank, it is the candidate endorsed by the US — Mr Jim Yong Kim, a Korean-American global health expert — who will probably take over from outgoing president Robert Zoellick. By shying away from putting its full weight behind Ms Okonjo-Iweala, BRICS has lost a golden opportunity to show to the world the kind of power it can collectively wield.


But then again, if BRICS has faltered in its response to the World Bank situation, it has gained brownie points for taking a unified stand on the Syrian crisis and the Iranian dispute. By insisting on a Syria-led democratic transition process in that country, BRICS has made clear that it does not favour a Western military intervention of the kind that was carried out in Libya. In the case of Iran, it has warned against escalating tensions and underlined Tehran’s right to pursue a peaceful nuclear programme. Overall, BRICS has successfully presented an alternative to the Western narrative of international affairs that no doubt is much more representative of the concerns of the developing world. This was much needed — not really to counter the West but to give voice to the rest.


In many ways then, the BRICS summit presented a two step forward-one step backward kind of situation, particularly with regard to the group’s equation with the West. This equation must also be balanced against the bilateral relations of each of the member nations with the West. Will India upset the US to stand by, let’s say, Brazil? We don’t know that yet.


But as we look for answers, it would perhaps be best to discard the unipolar lens through which we still tend to view world politics for that lens will soon be obsolete as the world inches towards a multi-polar global order. The 21st century is no longer the American century in the manner in which its predecessor was. At the same time, it will not even be the Chinese century or the Indian century or even the Asian century, as many predict it to be. It will however be a more global century where smaller power centres will emerge all over the world, and it is within this new multi-polar world order that BRICS will truly come into its own.


(This article was published in the Op-ed section of The Pioneer on April 06, 2012.)