10/18/2024 - 14:53 PM
The Battle for Economic and Political Dominance in an Era of Transformations
By Yazeed Al Rashed Al Khuzai *
The BRICS coalition comprises a group of emerging countries representing the new global economic powers. The idea of this alliance started with an article by British economist Jim O'Neill in 2001, highlighting the immense economic potential of Brazil, Russia, India, and China. Initially referred to as "BRIC," South Africa officially joined in 2010, and the bloc became known as BRICS.
The BRICS group was formally established in 2006 during a meeting of the foreign ministers of the member states on the sidelines of the United Nations General Assembly, with the first BRICS summit taking place in 2009. From the start, BRICS aimed to enhance economic and political cooperation among its members, seeking a more just global economic system that would allow greater participation from developing nations.
Since the first BRICS summit in 2009, the alliance has witnessed significant developments. Initially, the summits focused on boosting trade cooperation and strengthening bilateral relations between member states. However, the goals evolved to include seeking alternatives to the Western-dominated global economic system, particularly the one led by the United States. With the rise of economic power in China and India, alongside Russia’s international isolation due to its military interventions, BRICS gained political momentum, starting to play an increasingly important role in global geopolitics.
Over the years, BRICS has evolved into a major force not only in economics but also in political and social arenas, focusing on issues like sustainable development and bridging the gap between developed and developing countries. It has also created independent financial institutions, such as the New Development Bank and the Contingent Reserve Arrangement, designed to reduce reliance on Western financial institutions like the International Monetary Fund (IMF) and the World Bank.
The Economic and Political Structure of BRICS
BRICS includes economies of varying sizes and performances. China, for instance, is the second-largest economy globally and wields vast economic influence worldwide. In contrast, South Africa is one of the smaller economies within the group, while Brazil and Russia rely heavily on raw materials and energy exports. India, on its part, is the fastest-growing economy in the group, striving to cement its role as a regional and global economic power. Despite these countries' significant economic potential, the disparity in growth and development levels poses challenges for BRICS. While China dominates as the economic powerhouse, countries like South Africa grapple with structural economic issues, including unemployment and poverty. This imbalance affects the bloc’s ability to make unified and consistent decisions on global economic issues.
On the political level, the goals and positions of BRICS members vary widely. Russia, for instance, seeks to strengthen its position as a global political power through BRICS, especially amid Western sanctions over its interventions in Ukraine and Syria. Meanwhile, China employs a strategy of "strategic patience" to expand its economic and political influence quietly through trade and investment rather than direct confrontation with the West. India, which aspires to expand its regional influence in Asia, sometimes finds itself in direct competition with China, complicating relations within the bloc.
As for Brazil and South Africa, they have adopted less confrontational political stances toward the West, focusing more on enhancing economic cooperation without entering political conflicts. Despite these differences, BRICS members seek common ground to bolster political cooperation, particularly on issues concerning the Global South and the desire to enhance the role of developing countries in international institutions.
The Economic Role of BRICS on the Global Stage
Trade and investment are essential pillars of BRICS, with member states striving to increase intra-bloc trade and reduce dependence on Western countries by boosting bilateral trade volumes. China plays a pivotal role in this context, serving as the largest trading partner for India, Russia, and Brazil. The BRICS nations also aim to boost investments in infrastructure and economic development.
One of BRICS's goals since its inception has been to reduce reliance on the U.S. dollar for settling trade transactions among member states. In this context, initiatives have been launched to promote the use of local currencies in intra-bloc trade to mitigate the impact of exchange rate fluctuations and dependence on Western currencies. Despite these efforts, BRICS faces significant challenges in enhancing intra-bloc trade due to the considerable disparity in the size of its economies and the varying levels of development. Although China is the dominant economic force, countries like India and South Africa struggle to balance trade with China due to the latter's export dominance.
The New Development Bank (NDB), established by BRICS in 2014, aims to enhance economic cooperation among member states and finance development and infrastructure projects in developing countries. The bank offers loans with flexible terms, making it a potential alternative to traditional global financial institutions like the World Bank and IMF. Founded with an initial capital of $50 billion, the NDB grants equal voting rights to all member states, promoting balanced cooperation within the bloc. The bank's primary role is to finance infrastructure and sustainable development projects, such as building roads, bridges, and renewable energy plants, fostering economic integration among BRICS nations.
Additionally, the bank focuses on renewable energy and green economy projects, attempting to tackle climate change challenges and support a transition to low emissions, sustainable economy. However, despite its achievements, the bank faces many challenges, including differing needs among member countries. For example, while China boasts robust infrastructure, other nations like South Africa and Brazil require more funding. Moreover, Western financial institutions still wield significant global influence, making it harder for the NDB to compete and achieve its economic and development goals effectively.
Challenges Facing the BRICS Coalition
Despite more than a decade of its establishment, BRICS's biggest challenge is the lack of economic integration among its members. Unlike the European Union or the G7, BRICS does not have unified economic or trade policies governing relations between its members. Instead, BRICS relies heavily on bilateral cooperation between its members. This complicates efforts to enhance intra-bloc trade and investment, given the varying economic structures and financial policies of its members. For instance, China seeks to promote high-tech industries and value-added exports, whereas countries like Russia and Brazil depend heavily on raw materials and natural resources exports.
The Unified Currency Proposal
One of the key topics discussed at recent BRICS summits, particularly the South African summit in 2023, was the issue of creating a unified currency for member states. The primary objective of this proposal was to reduce reliance on the U.S. dollar in international trade and financial settlements among BRICS nations, achieving a level of financial independence that protects their economies from global currency market fluctuations and imported inflation. However, despite the media excitement surrounding the idea of a unified currency, numerous challenges stand in the way of realizing this ambition. As a researcher in this field, I believe that issuing a unified currency among BRICS nations requires deep political and economic coordination among member states, which would take years of hard work on monetary, trade, and investment policies. A unified currency requires aligned economic policies, particularly concerning inflation rates, government debts, and financial coordination between central banks.
It should be noted that China, as the largest economy in BRICS, plays a pivotal role in the discussion on a unified currency. However, some member states, like India and Brazil, may be hesitant to relinquish their monetary sovereignty for such a project, especially given the differences in their economic structures and policies.
Given the lack of readiness for a unified currency, some BRICS member states have already begun using local currencies in trade between themselves. This interim solution helps reduce dependence on the U.S. dollar and mitigate the impact of global financial volatility on their economies. For example, India and Russia have started using the rupee and ruble in some trade transactions, especially after Western sanctions on Russia limited its access to the U.S. dollar.
Political Challenges within BRICS
While BRICS members share many economic and political objectives, the rivalry between China and India represents one of the bloc's biggest challenges. Border tensions between the two, along with their competition for regional influence in Asia, create periodic strains that affect the unity within BRICS. In recent years, relations between the two countries have been strained due to military clashes in the Himalayan region, complicating cooperation between them within the BRICS framework.
Since Russia's intervention in Ukraine in 2014 and the imposition of stringent economic sanctions by the West, Russia finds itself in a complicated diplomatic position. Moscow seeks to leverage BRICS as a way to circumvent Western sanctions and strengthen its economic ties with member states. This is evident in Russia’s efforts to increase bilateral trade with China, India, and Brazil and promote the idea of an alternative financial system based on local currencies. However, despite these efforts, some BRICS members, like India and Brazil, seek to maintain good relations with the West and are unwilling to follow Russia’s political agenda, adding complexity to reaching unified positions within BRICS on major international issues.
Expansion of Membership and New Challenges
A recent development in BRICS is the expansion of its membership to include new countries like Saudi Arabia, the UAE, and Iran. This expansion increases the diversity of the group and enhances its economic and political weight on the global stage. However, it also raises new challenges related to managing relations between old and new members. Saudi Arabia and the UAE heavily rely on oil and gas exports, while countries like China and India aim to reduce dependence on fossil fuels in light of global climate commitments. These differing economic interests could lead to increased tensions within BRICS as countries vie for influence in sectors like energy and trade. Additionally, Iran, facing international sanctions due to its nuclear program, seeks to strengthen its economic relations with BRICS nations to break its international isolation. This complex situation may put other BRICS nations, particularly those seeking to maintain good relations with the West, in a difficult position.
Institutional Reforms Needed to Strengthen BRICS
One of the main obstacles facing BRICS in achieving its economic and political goals is the absence of strong regulatory institutions managing cooperation between member states. Unlike the European Union or the G7,
BRICS does not have unified economic or trade policies, nor are there permanent institutions managing relations between members comprehensively. To date, BRICS cooperation relies heavily on bilateral relations between members. For instance, trade and investment deals are made between China and Russia or between India and Brazil without a shared regulatory framework that binds all member states. While this form of cooperation may be effective in the short term, it does not support long-term economic integration between the countries, in my view.
One of BRICS's major goals is to push for reforms in the global economic system dominated by Western powers, particularly regarding the IMF and World Bank. BRICS countries argue that these institutions do not fairly reflect the interests of developing nations and remain tools in the hands of major economic powers to impose economic policies that may not align with developing countries' needs. In this context, BRICS seeks to strengthen the role of developing countries in decision-making within these institutions. At the same time, BRICS members are working to develop alternative financial institutions, such as the New Development Bank and the Contingent Reserve Arrangement, which serve as tools for financial cooperation among member states and reduce dependence on Western financial institutions.
Achieving reforms in global financial institutions requires a collective effort from BRICS countries, but it faces significant political and economic challenges. BRICS members need to strengthen coordination among themselves to unify their demands within these institutions. Moreover, they must develop genuine alternatives that achieve financial and economic independence for developing countries.
Future Directions for BRICS
BRICS faces significant challenges in the future, both economically and politically. On the economic front, member states need to enhance economic integration by developing joint trade and financial policies and expanding cooperation in areas like technology and renewable energy. On the political front, BRICS must address internal challenges that could hinder cooperation, such as the tensions between China and India and Russia’s attempts to expand its influence under international sanctions. Globally, BRICS needs to strengthen its role on the world stage by building stronger relationships with developing countries and pushing for reforms in international institutions.
One of BRICS's grand ambitions is to contribute to building a new global economic system that is more just and transparent. Such a system should be based on principles of cooperation and partnership among nations and enhance the role of developing countries in making global economic decisions. To build this system, BRICS needs to strengthen its institutional capabilities and develop new financial tools that achieve financial independence for member states.
Economic and trade cooperation is the backbone of BRICS. Since its inception, member states have sought to boost intra-bloc trade and reduce their reliance on Western markets. Intra-BRICS trade offers immense opportunities for member countries to strengthen their economies and develop economic partnerships that yield mutual benefits. China, as the largest economy within BRICS, is the major trading partner for the other members. In recent years, trade relations between China and Russia have grown significantly, particularly following Western sanctions on Moscow, which have pushed it to increase its reliance on China as a key economic partner. Similarly, trade between China and India, despite political tensions, is also an important element in strengthening economic ties within the bloc.
Despite the growing intra-bloc trade, there are many challenges preventing full economic integration. Among the most prominent is the significant disparity in economic structures between member states. While China heavily relies on manufacturing and high-tech industries, countries like Brazil and Russia depend on the export of raw materials and energy. This stark difference makes achieving trade balance among member states difficult. Additionally, challenges related to infrastructure and tariffs imposed by some member states also hinder trade flow. For instance, India struggles with logistical challenges in transporting goods across its borders due to weak infrastructure, affecting trade with other BRICS countries. Addressing these issues requires substantial investments in infrastructure projects, one of the New Development Bank's goals.
It is worth noting that Brazil and South Africa are rising powers in agriculture and natural resources. Brazil, as one of the world’s largest agricultural producers, views BRICS as an opportunity to boost its exports to Asian markets, particularly China and India. Meanwhile, South Africa seeks to enhance its exports of natural resources, such as minerals and gold, to other BRICS countries.
Climate Change and BRICS's Role in Addressing Environmental Challenges
Climate change is one of the biggest challenges facing the world today, and BRICS countries are not immune to these challenges. The BRICS coalition seeks to provide innovative solutions to address the climate crisis by adopting joint policies to promote environmental sustainability and reduce carbon emissions. Both China and India aim to increase the use of renewable energy and reduce reliance on coal and fossil fuels. China, the world's largest emitter of carbon dioxide, is leading significant efforts to transition toward a green economy through massive investments in solar and wind energy. Meanwhile, India, facing environmental challenges due to high pollution levels and a growing population, is also striving to enhance the role of renewable energy in its national energy mix.
The New Development Bank plays a crucial role in financing sustainable infrastructure projects aimed at addressing climate change. The bank provides funding to support renewable energy and sustainable transport projects in member states, such as building solar power plants and hydropower projects. These projects not only contribute to BRICS's efforts to combat environmental challenges but also foster economic growth and create new job opportunities within member states. Despite the progress made by BRICS countries in this area, environmental challenges persist. The heavy reliance on natural resources, such as oil and gas, in some member states like Russia and Brazil complicates efforts to shift toward cleaner energy. Addressing these challenges will require greater coordination among BRICS countries to achieve sustainable development goals.
Food Security and Agricultural Cooperation Among BRICS Countries
Food security is a critical challenge for BRICS countries, with each country facing unique challenges in the agricultural sector. Brazil, one of the world's largest food producers, seeks to boost its agricultural exports to other BRICS nations, contributing to regional food security. Russia, heavily dependent on wheat production, aims to expand its agricultural exports to compensate for restrictions imposed by Western countries. Meanwhile, India and South Africa face challenges related to climate change and water scarcity, hindering their ability to achieve self-sufficiency in food production. As a result, BRICS members strive to exchange expertise and technology to promote sustainable agricultural production. This cooperation includes exchanging drought-resistant seeds, developing water-saving irrigation systems, and using modern technology to improve crop quality.
In addition to enhancing food security within the bloc, BRICS also aims to play a larger role on the global stage in addressing the food crisis affecting many developing nations. BRICS countries are working to provide technical and financial assistance to developing countries to improve food production and strengthen agricultural infrastructure. For instance, Brazil provides technical assistance to several African countries to enhance crop production, while China invests in sustainable agriculture projects in the Global South. Agricultural cooperation among BRICS countries helps build resilience to food crises that may arise from conflicts or climate change and strengthens the bloc’s position as an international force seeking sustainable development and global food security.
Education and Technology in the BRICS Strategy
Education is one of the sectors BRICS countries aim to enhance cooperation in by exchanging expertise and developing joint educational programs. Education is not only a tool for improving the quality of the workforce but also fosters cultural and political understanding among member states, contributing to BRICS's goals of promoting political and economic cooperation.
China and India, in particular, aim to expand student and researcher exchange programs with other BRICS nations to enhance scientific and technological research. This cooperation encompasses critical fields such as high technology, artificial intelligence, and medical sciences, where BRICS countries seek to be at the forefront of global innovation. Additionally, BRICS countries aim to strengthen their capabilities in space and military technology. Russia and China are working together to enhance cooperation in space exploration and satellite technology, contributing to BRICS's global technological advancement.
BRICS’s Geopolitical Influence on the Global System
BRICS represents a strategic alliance striving to achieve a new global geopolitical balance based on strengthening ties among the Global South. This alliance reflects the desire of its members to free themselves from Western political and economic dominance and offer real alternatives to developing countries seeking political and economic support without the harsh conditions imposed by Western financial institutions. On the geopolitical front, BRICS seeks to play a more influential role in key global issues such as food security, energy, and internet governance. Member states aim to establish a multipolar world order, redistributing political and economic power more equitably. This ambition reflects the bloc's rejection of the unipolar dominance imposed by the United States on the global system since the end of the Cold War.
The upcoming BRICS summit in Russia, scheduled to take place from October 22 to 24, 2024, comes at a sensitive time for the global order. With major developments like the U.S. adopting monetary easing policies and cutting interest rates, along with the impacts of the Middle East conflict on oil prices, this summit is expected to witness crucial discussions on strategies to address these challenges. The summit will also address several issues, such as boosting the use of local currencies instead of the U.S. dollar and managing oil price fluctuations that affect countries like Russia and Saudi Arabia. Moreover, the summit is likely to discuss practical steps toward launching a unified currency in the future, despite the financial coordination challenges among members. At the same time, leaders will also address the issue of expanding membership and the challenges accompanying the inclusion of new countries like Saudi Arabia, the UAE, and Iran.
My Vision as a Researcher on BRICS's Future Directions
The future path of BRICS largely depends on the ability of member states to overcome political and economic contradictions and foster genuine cooperation in addressing the rising global challenges, such as climate change, food security, and energy issues. With the current expansion of BRICS membership and the inclusion of new countries, this bloc seems to be striving to become more than just an economic platform; its ambitions are clearly geared toward reshaping the global system, which is currently dominated by the United States. But can this diverse coalition truly challenge American dominance and lay the foundation for a multipolar world? Or will it remain just a chorus of aspiring nations playing to their own interests without the actual capacity to change the global landscape? What do you think?
* Political Analyst and Poet
Email: vipyazeed@gmail.com
Comments