Seppo Niemi 19.9.2023: BRICS 2023

Tämä artikkeli perustuu keskusteluihin, myös seuran jäsenten kanssa, joissa on ilmaistu kiinnostus BRICS-formaattia kohtaan ja pyydetty tarkempaa arviota, mitä äskeinen Johannesburgin kokous oikein tarkoittaa.

Seuraavassa esityksessä ensin kerrotaan tiivistetysti kansainvälisten suhteiden teoreettinen viitekehys ja eräitä keskeisiä käsitteitä pelkistetysti. Sitten kuvataan, mitä BRICS ja muut ”uudet” organisaatiot oikein ovat, ja lopuksi arvioin, mitä äskeinen BRICS Summit tarkoittaa sijoitettuna kansainväliseen viitekehykseen.

Olen julkaissut runsaasti aiheeseen liittyvää materiaalia, sekä teoreettista että käytännöllistä, englanninkielisellä verkkosivustollani: www.greatpowerrelations.com

Seppo Niemi

Kansainvälisen politiikan tutkija

 

BRICS-format and its expansion on today’s international scene

Theoretical framework of polarity and world order in International Relations (IR)

World order is created and maintained by great powers based on their power and political will or political project (some writers use terms like political message or doctrine). The number of great powers, that is polarity, provides the link in terms of the distribution of power in the system. The other dimension is the political projects undertaken by the great powers. Those projects are described by specific combinations of politics, economy and ideology promoted by great powers. Number of powers and their political projects constitute a world order.

In other words, the world order is defined as the combination of polarity and the respective political projects/messages/doctrines undertaken by the great powers that create the direction for political leadership and constitute the political agenda on the international scene.

There is a great difference between spreading a world order in a unipolar, bipolar, tripolar or multipolar international system, both with respect to political projects and the leadership/power dimension. In the case of unipolarity, the world order holds or is closely holding a hegemonic position, although not unchallenged, as many states may have incentive to counter the influence of the sole superpower.

In a unipolar system, the leadership capability of the lone superpower is closely linked to its management efforts. If the leading power does not lead, the others cannot follow. The superpower exercises its leadership by presenting its political project to the other states and organizing its friends, delimiting its foes and setting the agenda to proceed.  In other polarities (bi-, multi-, etc.), the great powers achieve their position of leadership due to their alliances and their capability to guide their alliances.

Grand strategy of the unipole

Professor Monteiro’s Theory of Unipolar Politics (2014) is a generally-accepted basic structure in researching the unipolarity. When the unipolarity prevails in the world, the grand strategy of the unipole is the most important variable conditioning both the prospects for peace and the durability of a unipolar system. The grand strategy is also significant factor mediating between the structure of international system and on the other hand conflict-producing and competition-inducing mechanisms.

The grand strategy covers both military and economic issues. Monteiro defines three broad military strategies and their sub-categories as well as two broad economic strategies:

• military strategies: offensive dominance, defensive dominance, disengagement

• economic strategies: accommodation, containment

Finally, he analyses and compartmentalizes the US selected foreign policy 1990–2010.

Monteiro’s recommendation of the Grand Strategy for the US is “defensive accommodation”. This strategy combines a military strategy aimed at maintaining the international status quo with an economic strategy that makes room for accommodating the interests of rising major powers.

However, since 2014 the US has adopted another grand strategy, that of “offensive containment”, especially towards its two main competitors – China and Russia.

This fundamental change in the grand strategy has been a key factor behind increasing international tensions, crisis and wars. The question, why this change has taken place, is out of the scope of this article, but is analyzed in many articles on my website.

Changing polarities

After the WWII, the bipolarity and fierce competition of two ideologies were prevailing up to the collapse of Soviet Union, in 1990. Since then, the unipolarity of the US began and the cornerstones of the US political projects have been liberal democracy and the free market.

Ukraine crisis 2014, Syrian war 2015 (since Russia started there as active participant) as well as China’s robust progress in economic and military posture, meant the start of declining process in the American sole power. The growing and warming cooperation between China and Russia has created new challenges to the American hegemon.

The latest challenger, but not the least one, to America’s diminishing remnant of unipolar position is the rise of the Global South, especially in the format of BRICS.

 

BRICS Summit 2023 – its importance and aftermath

BRICS is a formal alliance of Brazil, Russia, India, China, and South Africa. Its Summit 2023 scheduled to be held on 22–24 August in Johannesburg, South Arica. Western media has been very reserved in reporting the BRICS Summit and has tried to downplay the meeting both in advance and afterwards.

South Africa was hosting this summit at a time of acute tensions between the United States and its great power rivals China and Russia. But another context for the meeting is the increased salience of the Global South, most sharply revealed by the nuanced reactions in Asia, Africa, and Latin America to the Ukraine war.

 

Organizations and Ideas of New World Order

BRICS and BRICS New Development Bank (NDB). BRICS is the acronym coined for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. Originally the first four were grouped as “BRIC” before the induction of South Africa in 2010. The BRICS members are known for their significant influence on regional affairs, all are members of G-20. Since 2009, the BRICS nations have met annually at formal summits.

The New Development Bank (NDB) is a multilateral development bank operated by the BRICS states. The bank’s primary focus of lending is infrastructure projects with authorized lending of up to $34 billion annually. The bank will have starting capital of $50 billion, with capital increased to $100 billion over time.

Shanghai Cooperation Organization (SCO) is the successor to the Shanghai Five, formed in 1996 between the People's Republic of China, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. SCO was announced on June 15, 2001 and its charter was entered into force on September 19, 2003. The current full membership: China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India, Pakistan and Iran. The current observers: Afghanistan, Belarus, Mongolia. The current dialogue partners: Armenia, Azerbaijan, Cambodia, Egypt, Kuwait, Maldives, Myanmar, Nepal, Qatar, Saudi Arabia, Sri Lanka, Turkey and United Arab Emirates

Belt and Road Initiative (BRI) and Asian Infrastructure Investment Bank (AIIB). The massive Chinese initiative, which was announced by President Xi Jinping in 2013, aims to boost connectivity and cooperation between East Asia, Europe and East Africa. China will expand the use of the Chinese currency (renminbi/yuan) in countries and regions related to the BRI by improving cross-border payment and settlement facilities for the currency. BRI includes 71 countries that account for half the world’s population and a quarter of global GDP. At the centre of the plan are two physical routes: The Silk Road Economic Belt stretching from Asia to Europe, and the Maritime Silk Road that begins in China and passes along the Indian Ocean littoral to East Africa and then Europe.

AIIB is a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region. The bank currently has 87 member states from around the world.

Eurasian Economic Union (EAEU) is a political and economic organization of states located in central and northern Eurasia aiming for regional economic integration. The treaty for the establishment of the EAEU was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan and Russia and came into force on 1 January 2015. Treaties aiming for Armenia’s and Kyrgyzstan’s accession to the Eurasian Economic Union were signed on 9 October and 23 December 2014, respectively. Armenia’s accession treaty came into force on 2 January 2015. Kyrgyzstan’s accession treaty came into effect on 6 August 2015.

Great Eurasian Partnership. Both Chinese President Xi Jinping and Russian President Vladimir Putin have openly discussed the possibility of uniting Eurasia and developing something wholly new entity, known as the Great Eurasian Partnership. This concept brings together the members of the Eurasian Economic Union (EAEU), Shanghai Cooperation Organization (SCO), and ASEAN as a huge free trade bloc.

Great Eurasia Partnership is set to integrate them all – from the SCO, EAEU, and BRICS to emerging new currencies – in order to replace the 'rules-based order', set by the US.

It is essential to realize that China’s BRI is globally the most awesome economic-political project, around which all other “non-western” endeavours are spinning. By January 2023, up to 150 nations had already signed up to the BRI; No less than 75 percent of the world’s population that represents more than half of the global GDP. Included in the Chinese Constitution since 2018, BRI constitutes the de facto overarching Chinese foreign policy framework all the way to 2049, marking the centenary of the People’s Republic of China.

The BRI advances along several overland connectivity corridors, BRI gives more political clout to the Global South and new international finance institutions (NDB, AIIB) get more “dealing power” via Chinese project. From this viewpoint, the US/NATO proxy war against Russia in Ukraine can be seen simultaneously a war designed to interrupt the progress of China’s Belt and Road Initiative.

All these above-mentioned aspects appear to be consistent with views in Zbigniew Brzezinski’s “Grand Chessboard”, the essence of command and control of Eurasian continent.

 

De-dollarization

The status of US dollar as the main international reserve currency has been and is today even more than ever the most important single factor behind the great power competition and changes in the polarity of the international system. The reserve currency status has enabled the US to pile up a towering mountain of federal debt of over $32 trillion – without having to worry about its own financial stability or repayment, at least until now. The US debt-to-GDP ratio exceeds 130%, bringing the US in “banana-state category”.

This “limitless running into debt” has enabled the US nearly “limitless military spending” as well as setting different arbitrary sanctions worldwide, according to its political purposes. The US military budget is accounting for more than the combined next ten in the world and representing approx. 40% of the annual world total.

At the forefront of the world de-dollarization process are America’s main economic competitors and political rivals: China, Russia and Iran. Moscow has dropped the US dollar in major arms and energy deals and is switching to the Russian ruble and the national currencies of its partners. The euro is currently an alternative to the dollar, when there is no other way. Now, among BRICS countries, there is a serious attempt to speed up the process of de-dollarization within the internal trade of the bloc.

I have analyzed this process several times in my articles, the latest “De-dollarization goes on, April 2023”, April 12.

 Progress and Decisions of the Summit

The Johannesburg-hosted BRICS Summit was running from August 22 to 24, with the leaders of China, India, Brazil and South Africa in attendance. Russia is represented by Foreign Minister Sergey Lavrov, while Russian President Vladimir Putin was taking part in the event via videoconference.

This Summit can be characterized by the following short expressions: Block Expansion, Voice of Global South, Drift Away from US dollar, the UN reform.

Expansion and membership

Today, there are nearly 50 countries indicating interest in the block but 23 nations have submitted their official application to BRICS.

Decision of new members. The BRICS leaders have decided to invite Argentina, Egypt, Iran, Ethiopia, the UAE and Saudi Arabia to join the group.

The BRICS expansion is historic and a new starting point for BRICS cooperation demonstrating the determination of the BRICS countries to cooperate and serve the common interests of emerging markets and developing countries. The expansion of the BRICS not only demonstrated the vigorous trend of the BRICS mechanism but also promote new multipolar order.

The six new members, who have been invited to join, come from Asia, Africa and Latin America. They are all regional countries with a certain scale and important influence. With their participation, the representativeness and influence of the BRICS cooperation mechanism will further increase, making it one of the largest representative organizations for emerging markets and developing countries to actively participate in global governance.

 

Johannesburg II Declaration

The leaders of the BRICS five countries have adopted the final declaration of the 15th Johannesburg II summit. The 94-point document is devoted mostly to economic issues and cooperation, while Ukraine is mentioned once. The decision to expand the group was the summit’s main outcome.

The member states committed to strengthening the framework of mutually beneficial BRICS cooperation under the three pillars of (1) political and security, (2) economic and financial, and (3) cultural and people-to-people cooperation. They also committed to enhancing strategic partnership for the benefit of their people through the promotion of peace, a more representative, fairer international order, a reinvigorated and reformed multilateral system, sustainable development and inclusive growth.

BRICS expansion. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE will become full members as of January 1, 2024. The BRICS foreign ministers were instructed to draw up a list of likely partner countries. A report on this issue should be presented at the next summit to be held in Russian city Kazan in 2024. The admission of new members to BRICS in this summit is just the first phase of the group's enlargement process.

The participants of BRICS have also agreed that the name of the group will not change after the new countries join it, as this will demonstrate continuity, as Russian Foreign Minister Sergey Lavrov specified on the same day.

Economic cooperation. Commitment to strengthening macroeconomic coordination and deepening economic cooperation was reaffirmed. The participants in the association announced plans to enhance cooperation in agriculture to ensure food security. It is noted that the BRICS countries account for a third of the world's food production. BRICS advocates the use of national currencies in trade and financial transactions between the countries of the association.

The association is against trade barriers, including those imposed by a number of developed countries under the pretext of combating climate change. It is expected that the expansion of BRICS will enable an increase in mutual investments between the member states.

BRICS called for maintaining the "open, transparent, fair, predictable, inclusive, equitable, non-discriminatory and rules-based multilateral trading system with the World Trade Organization (WTO) at its core. Previously, BRICS leaders placed special emphasis on the rising role of the New Development Bank, founded by the group in 2015 to facilitate funding new infrastructure projects and various endeavors by developing nations.

Call for the UN reforms. The UN is seen as a cornerstone of the system of international relations. The BRICS members reaffirm their commitment to multilateralism and international law. At the same time, the BRICS support the idea of reforming the UN, including the Security Council and support wider representation of the developing countries in the Security Council. The World Trade Organization and Bretton Woods financial institutions, including the International Monetary Fund, should also be reformed.

Commitment to dialog. The BRICS countries are concerned about conflicts around the world and advocate their peace resolution through talks. The association supports diplomatic solutions to conflicts in Niger, Libya and Sudan on the basis of the UN and the African Union. BRICS also welcomes all efforts to promote a political and negotiated solution to the Syrian crisis. The resolution of the Iranian nuclear issue should be peaceful and diplomatic.

Ukrainian conflict. BRICS members noted with appreciation the "mediation proposals" aimed at a peace settlement of the Ukrainian crisis, including an African peacekeeping mission.

G20 maintains its leading role as a multilateral forum for international economic and financial cooperation, bringing together industrialized states, emerging market economies and developing countries alike, where the leading economies jointly seek solutions to global challenges. The BRICS countries are committed to a balanced approach aimed at strengthening and integrating the voice of the Global South into the G20 agenda during the Indian presidency in 2023 and the Brazilian and South African presidencies in 2024 and 2025.

Confronting pandemics. The unbalanced global economic recovery after the pandemic is increasing global inequalities. The BRICS countries are committed to intensifying efforts in pandemic prevention, preparedness and response. In this regard, the BRICS members consider it important to continue supporting the virtual BRICS Vaccine Research and Development Center.

Fighting corruption and terrorism. There is a need to enhance international cooperation to combat illicit financial flows as well as to increase joint counter-terrorism work. The BRICS countries called for the early adoption of a Comprehensive Convention on International Terrorism by the UN members, as well as the launching of negotiations on an international convention on the prevention of acts of chemical and biological terrorism on the platform of the Conference on Disarmament.

Conclusions and implications

Expanded “BRICS 11” will create a powerful bloc with a strong say in international politics

BRICS’ decision to expand will lead to the creation of a strong grouping that will be able to influence the international situation, by defending the interests of developing countries. An expanded BRICS is a challenge to Western countries. Time will show, whether this will be a historical turning point but obviously the decision was "a victory for Beijing and Moscow." Now, the developing nations know that they will be able to turn to an institution, other than the World Bank (WB) or the International Monetary Fund (IMF), called “BRICS 11”.

BRICS leaders decided to invite Argentina, Egypt, Iran, Ethiopia, the UAE and Saudi Arabia to join the group, with the admission of the new members just the first phase of the expansion process. Integration of new members into BRICS will facilitate the advent of a new world order. With two of the new countries located in the Middle East, two in Africa, and the rest - previously neighbors of the current five nations, this expansion is a significant event on the international scene.

Obviously, Africa is emerging and that is very important but the main news is Saudi Arabia and the UAE. Basically, this will change the balance of power in the world and it will be the beginning of the end of the petrodollar. Saudis will begin to price more and more oil only in local currencies, in yuan and less in dollars and other currencies.

Taking Saudi Arabia and the UAE in the bloc, their own contribution to the global economy could accelerate the de-dollarization of this part of the world, with all the ensuing geopolitical consequences that could actually accelerate the creation of a multipolar economic system at global level.

The aggregated gross domestic product of BRICS 11 and the group's aggregated population account for significant share of the world total. The new bloc is to challenge the US dollar hegemony and to go through a clearing system that would secure an independence of those countries. They want to avoid the use of the weaponized US dollar.

At the same time, BRICS' strengthening position will give voices to those emerging economies of the Global South, which have long been underrepresented in Western-centered international organizations. In the UN Security Council, there is no African countries. Maybe BRICS could be the new foundation for the future UN.

These things reflect the changing world order, in which US power must adjust to losing some of its allies like Saudi Arabia and possibly also Egypt and the UAE. Ethiopia has also embraced a more independent foreign policy, despite the country's longstanding ties with the West. Ethiopia also wants to drift away from the dollar and participate in the creation of a multipolar system of international relations.

The historic 15th BRICS Summit has apparently become a watershed, showing the Global South a new alternative model of development and offering freedom of choice. It can be called “BRICS 11” and that’s just the beginning.

Starting with the rotating Russian presidency of BRICS on January 1, 2024, more partners will be progressively included and most certainly a new round of full members will be announced at the BRICS 11 summit in Kazan in October next year. The bloc may soon become a BRICS 20 and even more.

BRICS 11 – a powerhouse with oil/gas trade & strategic corridors and initiatives

It is historically interesting to realize the BRICS Summit 2023 as a kind of counterpoint to the 1973 oil shock, after which Riyadh made a secret agreement with the US and started the era of petrodollars. Now Saudi Arabia, under Crown Prince Mohammed bin Salman (MBS), is in the process of becoming strategically aligned with Russia-China-India-Iran. This is the second stage of the Russian-initiated and Chinese-finalized rapprochement between Riyadh and Tehran, recently sealed in Beijing. The Russia-China strategic partnership appears working effectively.

From the strategic viewpoint, BRICS 11 is now on the way to dominate over the strategic corridors and initiatives like the Arctic Sea Route, the International North South Transportation Corridor (INSTC), BRI’s East West Corridors, the Persian Gulf, the Red Sea and the Suez Canal.

That blends several overland corridors with several nodes of the Maritime Silk Roads, nearly a complete integration in the “Heartland” and the “Rimland” (Mackinder-Spykman theories). All with just a single strategic move in the geopolitical/geoeconomic chessboard. Please, note also Brzezinski’s “Grand Chessboard”.

The top geopolitical and geoeconomic breakthrough is, how BRICS 11 is about to “break the bank” on the energy and commodities market fronts. By incorporating Iran, Saudi Arabia and the UAE, BRICS 11 instantly constitutes a global oil and gas powerhouse.

BRICS 11 now controls about 40% of global oil exports, about 45% of proven reserves and nearly 50% of all oil produced globally. With BRICS 11 possibly including Venezuela, Algeria and Kazakhstan as new members as early as in 2024, it may control as much as 90% of all oil and gas traded globally.

By choosing Ethiopia, BRICS expands its African reach on mining, minerals and metals. Ethiopia is rich in gold, platinum, copper, niobium and offers vast potential in oil and natural gas exploration. Saudi Arabia and the UAE, incidentally, are also involved in mining. Egypt and Ethiopia are finding completely new regional and bilateral opportunities for cooperation. This all spells out fast, progressive integration of North Africa and West Asia.

Inevitable corollary from this factual situation is that trade operations are settled in local currencies bypassing the US dollar. This will lead to unavoidable conclusion: rapid declining of petrodollar.

Already in the horizon, direct BRICS 11 & OPEC+ symbiosis is likely and OPEC+ is effectively run by Russia and Saudi Arabia.

Political-economic tectonics are in staggering move and a ground-shaking geoeconomic reorientation is at hand, involving everything from trade routes plied by global supply chains and new BRICS roads to the progressive interconnection of BRI, the Saudi Vision 2030, massive port expansion in the UAE and finally covering “Great Eurasian Partnership”.

BRICS 11 as instigator to worldwide process of de-dollarization and the use of national currencies

Besides BRICS expansion, reducing the dependence on the US dollar has also been the focus of the summit, especially after Russian President Vladimir Putin criticized Western sanctions in an address on Tuesday, saying "de-dollarization" is an "irreversible" process and "is gaining pace." 

However, introducing a BRICS currency will require overcoming significant challenges of building trust and acceptance over time. The single BRICS currency is a long way to go but what really matters, in short and medium term, is expanding intra-BRICS trade in their national currencies. That was stressed by New Development Bank (NDB) president Dilma Rousseff in her report to the Summit – even as Brazilian President Lula once again emphasized the importance of setting up a work group to discuss a BRICS currency.

With Iran, Saudi Arabia and the United Arab Emirates joining BRICS, the multilateral mechanism now includes major global oil producers and importers. Analysts said that a wider adoption of local currencies for trade among BRICS countries, rather than using the US dollar, seems more natural.

BRICS leaders stressed the importance of encouraging the use of local currencies in international trade and financial transactions between BRICS countries as well as their trading partners and encouraging the strengthening of correspondent banking networks between BRICS countries and enabling settlements in local currencies, according to the Summit Declaration.

When oil and other commodities are traded directly in non-dollar currencies, the function of US Treasury bonds as foreign exchange reserves will be irreversibly weakened, as oil, the most important energy commodity traded, has always been linked to the status of the global reserve currency. The out-selling of US dollars and US Treasuries will be accelerated and in fact, a trend of reducing holdings of US Treasuries has gradually emerged.

Analysts noted that the de-dollarization trend is actually the bitter fruit of the US' own making. In recent years, the US' successive unilateral financial sanctions have reminded more and more countries of the necessity and urgency for de-dollarization. Meanwhile, the US has damaged the rest of the world's economy through unlimited quantitative easing and sharp and massive interest rate hikes. The status of the dollar is affected by political and economic instability in the US.

Once the new BRICS currency comes online, all those excess dollars being held all over the world, will start to come back to the US, the value of dollar will drop against those other currencies and therefore the interest rate will skyrocket in the US causing a hyper-inflation. BRICS expansion can be seen as “main catalyst of New World Order”, which also means “End of Petrodollar”.

The global world order is on the verge of a radical transformation.

Thirty years ago, Western powers saw in the collapse of the Soviet Union, which resulted from its internal weaknesses and mistakes, an unprecedented opportunity to dominate the world by way of deterring possible competitors by any means.

Now, the unipolar moment of the US is irreversibly over now. Perhaps one of the most important features of the current times is the new dawn of the so-called Global South. The new and strengthening trend in today’s world is manifested in the desire of many developing countries to join BRICS or to agree with this association on joint actions.

At the same time, the most attractive idea is the de-dollarization of the world trade, the transition to international trade settlements in national currencies. The idea of creating a new joint currency is being discussed actively among the members of BRICS.

Besides, all political tectonics are shaking and moving in new positions, in the Middle East and in MENA region as a whole, in Africa and in many regions of Asia as well as in the Pacific.

No doubt, in the near future the whole humanity will witness fundamental changes in the balance of power on the world stage. Polarity of the international system is transforming together with the world order.

Transition from the US led unipolarity with liberal political doctrine is going towards China and Russia led multipolarity and multifaceted political ideology, where some new “great power candidates” like India, Brazil, Iran, Pakistan, Indonesia and South Africa are willing to play “a high profile role”. The political tectonics are in robust moving.