Cementing BRICS alliance requires a Chinese turnaround to enhance its global influence

BRICS will always remain a lot less than effective, unless Beijing wisely decides that settling the border makes sense for its own global ambitions

Tara Kartha

So as the leaders of a large group of nations departed Johannesburg, it would seem that the BRICS is being built up brick by brick. The trouble is that the structure itself is rather shaky. Certainly, the addition of six new members has given it more clout, and it seems everyone wants a seat at the table. But while the Brazil Russia India China South Africa (BRICS) Summit provided photo-ops – sometimes not even that as President Xi Jinping inexplicably disappeared from the main event – it doesn’t seem to have anything concrete to go on. That’s not Delhi’s fault. India had much to offer, but it may as well propose the same thing to the India Africa Forum, where it might resonate equally, if not more. The answer to the question as to why BRICS, is however one that might resonate in future, provided some conditions are met.

BRICS by the numbers and by intentADVERTISEMENT

On the face of it, the rationale for BRICS may seem obvious. After all, 22 nations have called for membership and another 20-odd are waiting on the sidelines. The summit saw the inclusion of six more. Moreover, the now-usual statistical analysis is also impressive. As Russian media notes, the expanded group now represents 37 per cent of the world’s GDP in PPP terms, comparing it rather gleefully with the G7 whose share is at 29.9 per cent, down from 46 per cent in 1992. And if all those wanting to join down the road it added, it will rise even further. That’s certainly nice. But if economic weightage alone is a criterion, just the four countries of the Quad (comprising the US, Australia, Japan and India) account for about 30 per cent of global GDP, and if the Quad Plus are added, this could rise hugely. The Quad seems to have a lot more going for it, especially in terms of military activity and a lot of coming and going between them.

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True, BRICS is not meant to have a security angle, (though President Xi mentioned the word ‘security’ ten times in his delivered speech) but neither does it seem to have a common purpose. While Russia and China were all about the encroaching West, the others had nothing much to say on this. What the grouping intends to do about an undoubtedly turbulent world, is as yet unclear. China’s ‘Global Security Initiative’ and other such grandiose Initiatives are all very well, except that Beijing doesn’t practice what it preaches. In all fairness, nobody else does either, the US included. But China is a slowly gathering threat for many. To us, it’s a clear and present threat.

The original group and the newbies

Let’s consider the original members. Brazil, once seen as a pacesetter, is now in the economic doldrums, with real GDP growth at 0.8 per cent according to the World and high debt expected to be 78.5 per cent of GDP by 2025, due to higher refinancing costs, and higher social expenditure. Brazil suffered the most from the pandemic and its recovery does show a good forecast, provided the global economy stabilises. China’s economy is (unofficially) in serious trouble as its real estate giants collapse, and GDP improved by just 0.8 per cent. China’s power arises as a growth engine, and that is spluttering. South Africa has grown by 0.4 per cent, and is facing crippling power shortages and has the highest debt among emerging markets. India’s growth is projected to be at a hefty 6.1 per cent, but like South Africa, its most serious problem is high food inflation.You May LikeThe New Kitchen Remodel Trends Coming in 2023 Might Surprise YouKitchen RemodelingLearn More  by Taboola Sponsored Links 

Now consider the new entrants. Ethiopia is struggling with a $14.3 billion debt repayment to China. That has been suspended for now, but it’s not a great sign. Argentina plans to tap a $7.5 billion disbursement from the IMF to repay China part of the money it borrowed through a currency swap line. Earlier it used $2.8 billion equivalent of yuan to cover part of a 2018 IMF loan, in order to avoid a default. Egypt’s economic trajectory is similar to Pakistan with debt likely to reach more than $180 billion, with China as the fourth largest creditor. It also has a huge Chinese presence. China is the largest user of the Suez Canal and the largest investor in the Suez Canal Economic Zone with some 1,500 Chinese companies registered, functioning as an important jump-off point for the Belt and Road initiative, into Europe and Africa. In other words, at least three of the new members’ economic health is closely tied to the well-being of the Chinese economy.

That includes Iran, Saudi Arabia and the UAE. These countries bring about 54 per cent of world oil production into the BRICS grouping, a key issue in the highly sensitive energy market. Iran’s entry was huge for Tehran, allowing it to break its outcast status. With China bringing about the Saudi-Iran rapprochement, Beijing’s international reputation has gone up hugely, even as seemingly random reports declared (wrongly) that India was opposed to the entry of Saudi Arabia in particular. While the Ministry of External Affairs strongly denied this, the damage may have been done. More seriously, Saudi Arabia is in talks with China National Nuclear Cooperation for a reactor. That’s going to further raise Chinese clout, even though Riyadh has every right – as the others in West Asia are doing – to diversify its strategic portfolio. Meanwhile, the UAE is seeing a massive rise in the property market as Chinese investors pour in. As members of the BRI, both are seeing large Chinese investment inflows in the energy and construction centre in particular. One wrap-up. All new members are part of the BRI.

BRICS could break the bank

As of now, the major aspect of the summit is the expansion, and not much else. But the one strong point of BRICS has always been the New Development Bank (NDB) with a subscribed capital of $50 billion, and which has approved $30 billion in loans since 2015. A broad comparison is that the World Bank has disbursed some $100 billion just last year. But it’s a beginning, and India has got some $18 billion in ‘sustainable’ projects. With sanctions on Russia and the rise of the dollar, the emphasis is less on the much talked about ‘de-dollarisation’ and more about boosting local currency usage among members. An Indian rupee bond is on the cards, while South Africa already has issued this. Bank officials envisage also that the currency of one country could be used to finance projects in the other. With most of the large infrastructure projects likely to be by China, the use of the yuan will increase.

Meanwhile, Russia has reportedly refused further payments in Indian rupees for ‘cheap oil’, with billions lying in Russian banks. But there is immense potential in the grouping, as a UNCTAD report notes, with the original countries being both major sources of FDI and recipients. It also notes a steady rise in inward FDI stock, again mainly driven by China, though Brazil and India also benefitted, and Russia got very little. The report advises closer manufacturing in sectors with high complementarities, such as renewable energy, and “ensure mutual market access in these industries to address trade barriers and encourage intra-BRICS investment in the sector”. Though India is not specifically targeting Chinese companies – in fact, officials say the Chinese are welcome provided they keep to the rules – the earlier free entry to Chinese investment is no longer valid, following the Galwan misadventure. Chinese official investment in India is at about .38 per cent of the total, though it is quite likely that substantial sums are coming in from third countries.

The totals may be in the red

There’s no doubt that BRICS could grow significantly. First, as more countries join in, its Bank’s clout is going to go up, as total capital goes up. That’s something worth pursuing in a financially turbulent world. Second, the reason that some 40 countries are interested in joining, is the turmoil caused by the war in Ukraine, which everyone sees as US-led, and its tepid response to the pandemic. That does not necessarily mean that BRICS is ‘anti-west’. It’s not. It’s simply a lot of people looking at alternatives. That’s not going to change in the near future. Third, India is also actively seeking foreign markets. For instance, India has increased its signature in Egypt with plans to raise investments from the present $7 billion to $12 billion, and take an active part in the Suez zone. India-Argentina bilateral trade rose to $6.4 billion in the year 2022, with a growth rate of 12 per cent over 2021. That’s not a lot compared to China, but that together with investment from West Asia, is a factor that is powering Indian growth. The key here is that while all this is being done bilaterally, a grouping like BRICS could set new and better rules in finance and investment.

Fourth, BRICS was set up in response to a financial crisis. That crisis has returned with the triple whammy of Ukraine, Covid and Climate change. All that is to the good. But replacing the ‘West’ with Chinese rules is like the proverbial jumping from the frying pan into the fire, given the predatory nature of Chinese investment and its political overtones. The critical question is whether there is enough of a balance of interests within the group to moderate Beijing’s quest for power and influence. The presence of India is crucial in pushing for such moderation. That’s really what ‘Vishwaguru’ is all about. But Beijing may try to cut this image down to size before the elections. And that’s why we need the West. That’s why BRICS will always remain a lot less than effective unless Beijing wisely decides that settling the border makes sense for its own global ambitions.

The writer is a Distinguished Fellow at the Institute of Peace and Conflict Studies, New Delhi. She tweets @kartha_tara. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.