BRICS Summit 2023 – Rebalancing the global order
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Cape Town, South Africa – The meeting of BRICS foreign ministers continues in Cape Town for the second and final day. The purpose of the meeting is to finalise the agenda for the 15th BRICS summit to be held in South Africa in August. The two main topics of discussion is the creation of a framework to discuss the expansion of BRICS, as well as exploring the adoption of a single currency among member nations.
Day one of the meeting reaffirmed the collective principle of BRICS nations, as well as a grouping of countries that have expressed an interest in joining the group to concretise the emerging multipolarity of the global order.
South Africa’s Foreign Minister, Naledi Pandor, said that the vision of the group was to provide leadership in an world that is fractured by geopolitical tensions. With a combined population of over 3 billion of the world’s population, BRICS is a counterpoint to the G7 group, which met in Hiroshima in May 2023.
The Indian Minister of External Affairs, Subrahmanyam Jaishankar, said the meeting must “send out a strong message that the world is multipolar, that it is rebalancing and that old ways cannot address new situations”.
“At the heart of the problems we face is economic concentration that leaves too many nations at the mercy of too few,” he said.
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Brazilian Foreign Minister Mauro Vieira described the Brics as an “indispensable mechanism for building a multipolar world order that reflects the devices and needs of developing countries”.
Chinese Vice Foreign Minister Ma Zhaoxu said the Brics group could be expanded to provide assistance to developing countries and emerging market economies.
Aspirant members
On the final day of the meeting, aspirant members who are attending the gathering as “Friends of BRICS” will be included in the discussions. Around nineteen countries are reportedly exploring the possibility of joining the BRICS group. These countries include Argentina, Nicaragua, Mexico, Uruguay, Venezuela, Nigeria, Algeria, Egypt, Senegal, Morocco, Saudi Arabia, the UAE, Türkiye, Syria, Kazakhstan, Bangladesh, Afghanistan, Indonesia and Thailand.
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The framework and process of admitting new members to the grouping is at an advanced stage. Foreign Minister Pandor told the media that it was hoped to conclude the framework by the time the summit of the BRICS heads of state convenes in August later this year.
“Once we have a document that offers clear guidance, we will then take that to the summit in August. We’d like that work to be concluded by the time the summit sits, she said.”
New international financial paradigm
In 2014, with $50 billion in seed money, the BRICS nations launched the New Development Bank that would break the monopoly of established international financial institutions such as the World Bank and the International Monetary Fund. A liquidity mechanism called the Contingent Reserve Arrangement was also created that would support member nations that were struggling with payments. Because of the punishing terms of loans from established international financial institutions such as adjustment programmes and austerity, this mechanism would incentivise potential new members to join the group.
De-dollarisation has been accelerated over the last few years. One of the most significant blows to the power of the greenback occurred at the end of last month when China and Brazil reached a deal to trade in their own currencies, dumping the US dollar as an intermediary. This follows on from the development in March when Banco Bocom BBM SA, a Brazilian bank, became South America’s first participant in the Cross-Border Interbank Payment System, China’s global clearing and settlement system for yuan-denominated payments, according to media reports. In 2018, China launched the world’s first yuan-denominated crude oil futures contracts to allow exporters to sell oil in yuan.
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Additionally, the percentage of the US dollar being held as a reserve currency has plummeted from 71% in 2001 to 47% in 2022.
Unintended consequences of sanctions
With the US and NATO alliance putting economic pressure by means of sanctions on Russia, these sanctions are having a diminished effect, and is in some cases resulting in significant blowback. Not only has Russia found a way to survive, but thrive. In 2022 the Russian ruble was the best performing global currency despite the sanctions following from the Ukraine crisis. After initially taking a hit, the ruble recovered the majority of the losses suffered at the outbreak of the Ukraine crisis.
South African FM Naledi Pandor said that one of the subjects being thoroughly explored is how a prospective new currency could shield member nations from the effect of unilaterally imposed sanctions.
She said that the grouping was examining measures to “ensure that we do not become victims to sanctions that have secondary effects on countries that have no involvement in issues that have led to those unilateral sanctions.”
Sanctions have also had unintended consequences on US and NATO allies, including Germany. With the country heavily reliant on Russian energy, the German government has found a loophole which the US and NATO have been willing to turn a blind eye to. Even though western countries have ceased to buy Russian energy, countries such as India have been buying discounted Russian oil and selling it on to others. The German ambassador to India has said that it is none of Germany’s business where India sources its energy. In a little over a year, India has gone from having near-zero imports of Russian oil, to just shy of 2 million barrels per day.
Refined fuel imports from Russia to India have skyrocketed during sanctions and the suspected US sabotage of the Nordstream pipeline. The move that was seemingly designed to drive Germany deeper into the entanglement of the US proxy war against Russia has had the opposite effect, with Germany having to balance the energy needs of an already strained domestic energy crisis and the economic knock on effects thereof, with its diplomatic and military obligations as the most economically powerful member of NATO.
