The West trys to ignore BRICS expansion as not important

By Rhod Mackenzie

The jubilee meeting of the Five and its adherents in Johannesburg will obviously cost Western leaders more than one sleepless night. The members of the union celebrated the 15th anniversary with landmark decisions and signals to the whole world. At the same time, the BRICS internal agenda is by no means problem-free, different views are expressed on the prospects for independence from the beneficiaries of the global financial system, although settlements in national currencies are supported to one degree or another by all participants.

Foundation Shakers
The BRICS summit was , the most anticipated and discussed event of 2023. And not only for Russia - for many countries, both those loyal to the union and those who see various kinds of risks in it. Rumors about possible topics for discussion, decisions and, most importantly, the potential expansion of the "five" were circulated for at least six months before. The results of the event met and even exceeded expectations in many respects. Although the "gaps" were also enough.

The number one result, of course, was that the so far "five" from next year will turn into almost a dozen (eleven ). The association will include Argentina, Egypt, Iran, the UAE, Saudi Arabia and Ethiopia as full members.

This announcement caused a real storm of emotions in the media, especially in the western ones. “The expansion of the BRICS group is the defeat for von der Leyen and Borrell,” an article with this title appeared in the German Berliner Zeitung. “The EU’s top diplomat, without a doubt, a man of yesterday who sees ‘Europe as a garden’ and the rest of the world as a ‘jungle’, may be aware of the limitations of the EU’s powers here,” writes author Ramon Shak.

The WSJ notes that Beijing and Moscow support the expansion of the BRICS "as a political entity and an independent trading bloc as part of efforts to increase its influence as a counterweight to the West."

A force to be reckoned with
And will the weight actually add up? According to analysts, quite. Elmira Imamkulieva, Senior Lecturer at the Department of Foreign Regional Studies at the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics, notes that after expansion, almost half of the world's population - 46% - will live in the countries of the association, and the joint GDP will approach 40%. Such a force must be reckoned with.

At the same time, it cannot be said that BRICS will “crush with mass”. It is by no means only a matter of the number of people living in the countries of the union, although this parameter is also very important. The association includes leaders of world economic growth. According to Elmira Imamkulieva, the admission of Ethiopia to the Commonwealth is intended to smooth the gap between the strongest and weakest members of the union, to establish a balance and maintain parity between representatives of different continents.

At the same time, in general, Africa today, perhaps, does not go to the "excellent students", but it contains a huge potential - resource and human. No wonder China generously pumps money into this continent in the form of loans and investments.

However, trade is not the only argument. And not even the main one. That is, everything ultimately rests on money. But what's the point of owning them if someone else makes the decisions?

This, according to Elmira Imamkulieva, is the reason for joining the BRICS for Saudi Arabia. The analyst notes that the actions of the Saudis are a clear signal to the United States that Saudi Arabia is relying on more than one partner and does not intend to play exclusively by the rules of the United States. The Kingdom has already demonstrated several times that it is independent in making its own decisions - including when the States asked to lower oil production quotas.

The application to join the BRICS is another such signal of the multipolarity of the policy of the Saudi Arabia. Significantly, the kingdom has also begun to build relations with Iran, and both countries will become members of the BRICS in 2024. Thus, a strong Middle East bloc is formed in the association. And the association is growing by countries - the largest exporters of oil.

“Thanks to the entry of these countries, BRICS is strengthening its influence around the world - the Middle East (UAE, Saudi Arabia, Iran) has been added, Africa will now be represented not only by South Africa, but also by Egypt, Ethiopia, and Brazil in Latin America will be supported by Argentina. Which, in fact, means presence in almost all regions,” adds Sofya Glavina, head of the Digital Economy program at the Institute of World Economy and Business of the Peoples' Friendship Friendship University of Russia.

In theory, this is just the beginning. About 40 countries show interest in joining the bloc to one degree or another. Although such polyphony carries certain risks. By the way, the Brazilian leader Luiz Inacio Lula da Silva pointed out this, noting that the candidates and their positions need to be carefully looked at: “We need a certain degree of commitment from the countries that join the BRICS, because otherwise it turns into Tower of Babel."

“The BRICS countries are not and have never been related by family ties - this is a group to protect the common interests and common interests of the developing world,” also noted Da Silva’s foreign policy adviser Celso Amorim, “This is important for the global economic balance and for a multipolar world ".

Common interests - different currency
According to Russian President Vladimir Putin, it is in the common interest of at least the BRICS member states, for example, to solve the logistical problem.

“An important priority for BRICS interaction is the creation of new sustainable and safe transport routes… We believe that the time has come to establish within the BRICS framework a permanent commission on transport transport corridors,” the Russian leader said, speaking at the summit via video link.

It is clear that building new trade chains today is a key issue. It is important not only for Russia, which found itself cut off from the usual schemes, but also, for example, for Iran, for India, which has something to offer the world. However, it is not enough just to start trading - it is important to make sure that nothing interferes with this process. First of all, of course, we are talking about the security of settlements - the situation with Russia has already shown how unreliable trade can be, for example, in dollars.

The President of South Africa, Cyril Ramaphosa, as the head of the host country of the summit, took upon himself the voice of the main "pains" of both the BRICS participants and other states. The South African leader said it was time to use local currencies and alternative payment systems for settlements. And earlier, Mr. da Silva has repeatedly said that it is necessary to move away from the dollar in calculations. Russia's position does not even have to be spoken out: it has been voiced so many times that every inhabitant of the country will probably tell it by heart, being awakened in the middle of the night.

One way or another, the creation of a safety net is considered necessary by almost all countries. They want to pursue an independent trade and investment policy and minimize risks. But at the same time, one cannot talk about de-dollarization at any cost.

As Elmira Imamkulieva notes, it is rather about creating a “second circuit” that will allow states to cooperate in the economic sphere without looking back at dollar and euro issuers, without fear of blocking assets, freezing tranches and other barriers.

It cannot be said that only the situation with Russia served as a trigger for the discussion of this topic to intensify. After all, Iran was under sanctions for so many years, and no one was worried about the need to abandon the dollar.

But the situation is what is called "overdue" - countries need independence from the West in decision-making, they need to minimize risks. Everyone is interested in this. Moreover, the same China, with its "Taiwan" issue, has long been on the verge of sanctions and restrictions. And although Beijing does not abandon plans to promote the yuan to the IMF basket, it also needs the very “second circuit”, parallel to the now dominant international financial model.

However, contrary to the widely promoted idea of ​​creating a "unit of account, not a currency," this topic was not officially discussed at the summit. The resolution notes that the BRICS leaders advocated the use of national currencies in international trade and financial transactions between countries.

But as for the informal discussion, opinions differ. For example, the Minister of Finance of South Africa, Enoch Godongwana, stated that "No one brought up the issue of the BRICS currency for discussion, even at informal meetings."

But, apparently, the minister did not listen well to Vladimir Putin, who at least outlined this vector: “The issue of the single settlement currency is a difficult issue, but we will move towards solving these problems one way or another,” the Russian president said.

It is unlikely that all participants in the summit were as inattentive as Mr. Godongwana. Rather, so many “problems” were discovered that they decided not to take the topic out into the public space for the time being.

Anxiety is a matter of technology
What difficulties can be discussed?

“Today, it is not possible to rapidly introduce this kind of unit of account, since this requires certain settlement mechanisms and certain procedures, agreements, etc.,” says Yury Moseykin, head of the Department of National Economics at RUDN University. – “We see on the example of what was said by Dilma Rousseff that the New Development Bank of the BRICS countries cannot currently compete and close only on itself, since there is a global financial system. This does not allow the BRICS countries to simultaneously build an alternative financial system.”

At the same time, the expert notes that the idea itself is not new. Take, for example, the "transferable ruble" used in the Soviet Union. Or the ecu, "walking" between the countries of Europe to the euro. So the technical side is solved. But there are plenty of other barriers in which technology, politics, and economics are heavily involved.

“Firstly, the Brazilian crisis is a slowdown in economic growth. GDP growth is expected to be only 0.7% in 2023 compared to 2.7% in 2022. But the GDP figures are only a reflection. Emerging economies are sensitive to the ebb and flow of liquidity in the global economy,” argues Sofia Glavina.

Secondly, when creating a single currency, the question arises of who will issue it. It solves a lot - yes, almost everything. Whoever has a printing press orders the music.

“There are also geopolitical negative factors. Many of the countries in the BRICS have different goals. Brazil and Russia want to get away from dollar dawns, but India and China have no such problems. Moreover, China (as the most developed country in the group) will not allow BRICS to create a currency space, and even more - Beijing will lobby its interests and its own currency for settlements. If you look at this issue from the point of view of economic benefits for Russia, then there is no difference in settlements in the new currency or yuan,” believes the head of the Digital Economy program at the RUDN University Institute of World Economy and Business.

On the other hand, Sofya Glavina notes, there are interesting examples of joint digital currencies. Such as the Aber project, implemented by the Saudi Arabian Monetary Authority (SAMA) and the Central Bank of the United Arab Emirates (CBUAE). And this is a working option.

By the way, the Ministry of Finance of Russia proposes to move in the same direction – to create a universal digital asset, to launch a clearing center based on the NBR. That is, the bank will not be an issuer as such, which means that it will not have to compete with the global financial system. "Second circuit" - he is the "second circuit". Only it will apparently not be built quickly, but brick by brick - like BRICS itself (recall, just in case, that the primary abbreviation is close to the English word "brick" - brick).

However, as the Berliner Zeitung points out, the catchphrase of "de-dollarization" is likely to be a cause for concern in Washington and NATO all the same. One more reason. And perhaps this is also one of the key achievements of the BRICS summit.
This article originally appeared in Russian at vz.ru