As the leaders of Brazil, Russia, India, China and South Africa gather for their annual BRICS summit which begins Tuesday, there is no doubt that the group has gained new importance in a context of intensifying competition between the great powers.
Russia’s invasion of Ukraine and the West’s increasingly aggressive sanctions campaign against Russia and China provide the context in which the global diplomatic community will observe the Johannesburg conclave.
Indeed, the war in Ukraine has already cast its shadow over the meeting. Russian President Vladimir Putin is only present virtually to avoid embarrassment for South Africa: the African nation is a member of the International Criminal Court, which has issued an arrest warrant for Putin on conflict-related charges, and would be legally required to seize Russian power. leader in detention if he were to visit the country.
However, with the possibility of such a tragedy now ruled out, two other important and interrelated developments will take center stage. at the top.
China and Russia have expressed interest in expanding the group to give it greater weight in international affairs. More than 40 countries have expressed interest in joining the BRICS group, and 22 of them have officially applied for membership. These include the United States’ Arab allies like Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, as well as rivals like Iran. The list also includes countries in Africa, South America and Asia.
The second problem is dedollarization. China and Russia appear determined to use a broader BRICS forum as the focal point of their efforts to reduce their dependence – and that of the global economy – on the US currency, which dominates invoicing and payments. cross-border settlements since the Second World War. Beijing and Moscow already conduct most of their trade in local currencies, particularly the Chinese yuan. Russia has argued for a new BRICS currency, perhaps backed by gold, that would be used as a medium of international trade between members in place of the dollar.
For Russia and China, dedollarization has taken on new importance as they increasingly face sanctions from the West. Fear of how U.S. and Western economic policies can harm their economies and limit their national security autonomy is a major topic of debate in both Moscow and Beijing.
But if South Africa, Brazil and India maintain better relations with the West, they also consider that less dependence on the dollar is positive for their economic growth and their commercial potential. Brazilian President Luiz Inacio Lula de Silva recently declared that “every evening, I wonder why all countries must base their trade on the dollar”.
For them, dedollarization is less of a question overthrow King Dollar from the top of the reserve currency hierarchy and more about creating a distinct method for transacting between member states without the need for the dollar, the Western-based SWIFT messaging system and the services of New York banks. That said, BRICS, in its current form, already represents 26% of global gross domestic product (GDP) and 16% of global trade. A successful effort in this regard will therefore likely have ripple effects.
But will be This does a new money ploy work?
Too little is known about this project to be able to draw definitive conclusions. The BRICS record on dedollarization is mixed. China and Russia have managed to reduce their dependence on the dollar for cross-border trade. On the other hand, the New Development Bank, created by BRICS largely to facilitate the dedollarization of state loans, is largely dependent on the dollar and is now struggling to increase that currency due to Russia as a founding member . Its financial director recently recognized that “you can’t step out of the dollar universe and operate in a parallel universe.”
The current hegemony of the dollar relies on an intensive network effect and convenience factor. The stability of the dollar and the depth of dollar-denominated markets allow for predictability, ease of use and a reduction in cross-border transactions. A new BRICS currency could address some of these challenges, but certainly not all. There is also a significant imbalance in determination regarding dedollarization within the group. Where sanctioned countries like Russia and China, as well as potential members like Iran, are eager to disabuse the United States of its ability to impose costly financial sanctions, others will be less inclined to bear the cost of such a transition.
As the Shanghai Cooperation Organization – which also includes China, Russia and India among its members – a key issue undermining the political impact of BRICS as a bloc is the complex nature of the relationships between its nations and their different approaches towards the West.
Although they do not like being called upon to respect Western sanctions, many of them maintain close relations with Western countries that they do not wish to harm. India and China are strategic rivals who disagree on many issues. At last month’s SCO summit, India refused to sign on a key economic document because it included Chinese diplomatic language such as references to the Beijing Global Development Initiative.
India has largely aligned itself with Western interests against China. The availability of Western economic support and access to technology has increased significantly and India-West relations are entering a new era. This has significant economic benefits for India that make Modi very sensitive to being seen as a counterweight to the G7.
Brazil is led by a left-wing president who fears alienating Washington as a trading partner and who knows how the United States tends to take an aggressive stance toward South American leaders who question question their hegemony in the region.
South Africa fears that increased BRICS membership could further reduce its influence in the bloc. Officials in Pretoria are already concerned that other BRICS countries have far more influence within the group, whose economic and social progress has stalled in recent years. South Africa is also very concerned about having to take sides in the new Cold War that is emerging between the United States and China – although it is under significant pressure on South Africa to take sides. aligned with the West.
This is what requests fueled by India, Brazil and South Africa for stricter rules to determine whether an aspiring member should be allowed to join or even become an observer. India, in particular, has argued that democracies should be central to membership considerations.
Such differences have also undermined the work of other major global balancing organizations, such as the Organization of Islamic Cooperation, the G77 and the Non-Aligned Movement.
The rise of various other countries like Argentina, Saudi Arabia and Nigeria, with their own complex foreign policy preferences, would not be viewed favorably by Washington. But a rapidly expanding BRICS will not necessarily be more powerful. Indeed, it could make the organization more incoherent and unable to reach a clear consensus on anything important.
The opinions expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.