The void left by the Eastern bloc since the early 1990s in terms of political, economic and military clout was well felt. Such a situation created an imbalance in geo-political equations. But Russia has since regained its influence and while China consolidated its status as an economic powerhouse.
After overtaking France and Britain earlier, the Chinese economy moved past Germany and Japan last year to occupy the second spot after the US. It will not stop at that as it seeks to overcome the US and march towards that goal one careful step after the other. In 2012 it became the biggest oil importer in the world.
India is also treading in the same direction, having achieved high growth rates (until recently). Traditional economic supremos such as the US and the EU now seem to be trying to impede this repositioning of global influence.
Emerging powers such as China and India as well as a newly assertive Russia regard the continuation of matters as they are as impossible. They regard a change in the status quo as apt and reflective of the new realities.
BRICS is the acronym for a grouping of five emerging economies and represented through Brazil, Russia, India, China and South Africa. They are represented over four continents and include two countries who are permanent members of the UN Security Council. The five countries make up 43 per cent of the world’s population and has a combined nominal GDP of $13.6 trillion, which is 18 per cent of the global economy. This is only slightly less than that of the US.
Since its first summit in Yekaterinburg (Russia) in 2009, BRICS has advanced with steady steps to change the nature of the world economic regime and emerge a better representative of the new global power equations. The group strives to influence the functioning of global economy, especially in finance and banking.
The group accuses the West and its establishments of being responsible for the financial crisis and the subsequent turmoil in world markets. The perception is that the West’s lax financial policies led by an alliance of business and politics dominate decision-making and created conditions for the turndown.
The group’s perspective finds support from many other countries whose interests were similarly impacted by losses sustained since the collapse of Lehman Brothers in 2008. The repercussions were there for all to see in the euro zone which resulted, among others, in the Cyprus crisis where depositor funds in banks were confiscated.
Among the key decisions taken by BRICS was one to create a financing and development bank with a $100 billion capital, taken during its fourth summit in New Delhi. In March, in Durban, the formal approval was received.
The bank is expected to play an important role in enhancing BRICS’ status in global trade and finance and contribute actively in providing credit to the group’s countries and develop trade exchanges between them. Intra-regional trade between member countries is expected to rise from $230 billion in 2012 to $500 billion in 2015.
The bank will also have an operational role similar to those of the World Bank and IMF. India’s Finance Minister Chidambaram has said the bank aims to complete the gaps in financial institutions controlled by the West. It would also challenge the rules set up by the existing multilateral organisations, such as the World Bank. The Minister has emphasised that BRICS members are now more able to face global economic crisis.
In another bold move, they have decided to use their national currencies in commercial trade between themselves instead of the dollar or the euro. This will enhance the status of their currencies in international financial markets and help with the stability needed to control economic indicators that are now subject to extreme fluctuations.
BRICS had growth of four per cent on average for 2012 as against 0.7 per cent for the G7 nations. It is expected to emerge as the strongest economic bloc by 2050 followed by the G7 and then the US economy.
There are others groups on their way to making an impact and realign equations on the international stage. This includes the MIKT group which refers to the economies of Mexico, Indonesia, South Korea and Turkey.
Turkey seeks to be a part of the EU because of its geographic position and as a result of mutual interests. Negotiations started during the past decade but have stalled due to many reasons.
In the midst of these historical transformation, a redistribution of roles and of economic influence is expected to take place. Hence, GCC countries must make use of the shifting dynamics through pragmatic relationships defined according to mutual interests.
GCC markets have fast growing economic and trade relations with the BRICS grouping. India and China have occupied the first and second ranks in trade relations with GCC countries over the past five years. They are also the biggest importers of Gulf oil and petrochemical products.
Compare this with the EU’s discrimination policy against the GCC when it comes to petrochemical and aluminium products, even despite the fact that such exports are quite limited.
This means the BRICS nations are closer in their shared interests with the GCC. There is India and China and their growing reliance on oil imports from the GCC to cover their needs.
There are two ways the GCC countries can restructure its economic relations in ways that will better serve its interests. The first is to sign free trade agreements with the BRICS group which will facilitate higher export volumes to the prime emerging markets. This will contribute to swiftly accomplishing strategic shifts in diversifying income sources.
The BRICS bloc will also guarantee a continuous offtake, while its commodities will enjoy competitive capabilities in gulf markets.
The second assumption is that the Gulf grouping join BRICS so that it can emerge as GBRICS. This will lead to a stronger global economic powerhouse emerging before 2050.
It shall changed many givens in international relations and enhance the status of all in the new grouping, as well as guarantee security and stability.
The GCC must seriously take into consideration these strategic directions along with other elements that govern its future international relations.
