Will a confrontation between BRICS and the G7 split the world?

The expansion of the BRICS membership has led to an increase in the union's share of global production, from 32 to 37%, according to the World Trade Organization (WTO). This has resulted in the BRICS share becoming larger than that of the G7. The BRICS Digital Bank is confident that the influence of the alliance on the WTO and the IMF continues to grow. At the same time, the BRICS countries advocate reform of these institutions to make them fairer and more representative of developing countries. However, according to experts, it is worth considering that the division of the world economy into two blocks could lead to increased trade barriers and increased geopolitical tensions.

The expansion of the BRICS has led to an increase in the share of the interstate association in global economic output, from 32 to 37%. This was revealed by Ngozi Okonjo-Iweala, the head of the World Trade Organization, at the spring conference of the IMF and the World Bank.
Furthermore, she noted that the G7 countries currently control 30% of world production, while the BRICS countries account for 32%. The head of the WTO noted that, when taking into account the new additions, the figure is 37%. She also highlighted that the growing fragmentation of the world economy and its division into two trading blocs could potentially lead to a loss of 5% of global GDP.

More recently, Russian President Vladimir Putin noted that currently more and more states are actively joining the work of the EurAsEC, SCO, BRICS and other associations with Russia’s participation. Vladimir Putin also highlighted the potential for establishing a Greater Eurasian Partnership, which would combine the integration processes of the Eurasian Economic Union and China’s ‘One Belt, One Road’ initiative. This was reported by TV Brics.
At the BRICS summit in August 2023, 40 countries expressed interest in joining the alliance. 23 countries have submitted official applications to join. The final stage of the formation of BRICS+ is planned to be completed before 2030, which will make it possible to create an economic bloc of 45 countries.
The expansion of BRICS will have a significant impact on the global energy landscape. China, the world’s largest oil importer, will now have the opportunity to collaborate with the world’s two largest oil producers – Saudi Arabia and Russia, in addition to Iran and the UAE – in one organisation. This will enhance its ability to influence the policies of the OPEC cartel. — The press service of the BRICS Digital Bank told Izvestia.
However, Evgeniy Smirnov, Head of the Department of World Economy and International Economic Relations at the State University of Management (SUM), notes that it is not yet possible to say that “BRICS member countries are closely connected economically with each other.” The expansion could further erode the connection between BRICS member countries.
"Although, for example, several countries are key exporters of energy resources in the current BRICS format, which emphasises the geostrategic importance of the association in the global economy," says Evgeny Smirnov. Furthermore, the main oil importers – China and India – are also members of BRICS. This means that international trade in energy resources will largely revolve around this association in the future, which will partly determine the logic of the development of industry-wide global supply chains and international energy cooperation.

The expert further notes that the new composition of BRICS will reinforce the strategic partnership of countries in the world oil and gas markets, as well as in the field of renewable energy.
The Ministry of Industry and Trade of the Russian Federation has also said that it is important to expand interaction within the framework of the BRICS Partnership for the New Industrial (Digital) Revolution. The ministry is currently promoting the Russian initiative to create a BRICS Industrial Competence Center at the United Nations. The main functionality of the center will include attracting investments, technology transfer, promoting products to world markets, and harmonizing national standards with global ones.
The increase in production volumes in the BRICS countries reflects their growing influence and economic maturity, which may cause a shift in the distribution of world production, according to experts from the Russian Research Institute of Economics, Politics and Law in the Scientific and Technical Sphere (RIEPP, a subordinate of the Ministry of Education and Science).

— The G7 economies, including the United States, have a developed service sector that can provide a significant part of the GDP of these countries. At the same time, the share of the real sector is dominant in the economies of the BRICS countries, which indicates the production capacity and production potential of these countries. Currently, the BRICS countries have advantages in the field of industry, export of goods and infrastructure development.

Meanwhile, from the point of view of the balance of GDP volumes, it is hardly possible to speak of a balance between the BRICS and the G7, according to Roman Volkov, leading expert at the Center for Macroeconomic Analysis and Short-Term Forecasting (TSMAKP). Indeed, in general, comparable volumes of GDP in terms of purchasing power parity of the two associations are formed by participating countries with extremely different economic structures, populations, etc.
According to the CMAKP estimates, Russia and the BRICS members lack the following to confidently exist in the global economic space:

• high-tech industrial production (basic electronic component base, mass civil aircraft manufacturing, biotechnology for agriculture, etc.);

• the service sector, from rating agencies (like S&P, Fitch, Moody's) to insurance and tourism;

• infrastructure, including finance and cross-border trade.

Meanwhile, the tendency towards the formation of a bipolar (or even multipolar) world has already clearly emerged.
“Many critics of BRICS call it only a forum, and not an integration association of countries, and this is true,” says Evgeny Smirnov. — The association was originally conceived as a forum, but member countries can create political conditions (including within the framework of diplomatic mechanisms) for solving specific problems of economic interaction. These problems relate to a wide range of issues, including international energy and infrastructure cooperation, as well as the de-dollarisation of payments between countries.
According to Smirnov, the BRICS will play a pivotal role in the future. By expanding and attracting attention, it will send a clear signal to both developed countries and international organisations about who will largely regulate the new world order.
The strengthening of the BRICS' international influence is already evident, particularly in its ambitions for reforming the global monetary system. This is centred around the abandonment of the dollar in payments between member countries.
Roman Volkov, in his analysis of the future prospects of BRICS, identifies two levels.

The "broad" BRICS, which includes all participating countries, has the potential to become a platform for developing common norms and principles for the interaction of a large number of "non-Western" countries and protecting their interests in the context of fragmentation of the world economy and the formation of economic and political blocs. The BRICS core, which includes, first of all, China and Russia (perhaps not entirely India), can lay claim to the role of one of the two, together with the G7, economic poles of the world. However, it is unlikely that a bipolar economic world with the main support on BRICS will be created, as its individual participants are too geographically and economically distant from one another, according to the TsMAKP economist.
The impact of the division of the world economy into two trading blocs on GDP will depend on the scenario of such division, according to Volkov. A fall in the global economy is possible in the event of a rapid and sharp division (for example, as a result of China’s military operation against Taiwan). However, a more likely option (and one that is currently being implemented) is a slowdown in the global economy with a relatively smooth formation of poles and blocks.
The expert adds that the real risks in the formation of a new bipolar world are already apparent – these will be trade and sanctions confrontations.

According to Evgeny Smirnov, the likely threats in this case are: deterioration of international relations and increased tension; restricting the freedom of movement of capital, technology and people between blocs; unequal terms of trade for countries not included in any of the blocs.