Coined by Goldman Sachs’ chief economist Jim O’Neill in 2001, the acronym BRIC was first used to abbreviate the bullish growth trajectory of Brazil, Russia, India, and China, each of which was tipped to dominate the global economy by 2050.
Conceptualised as an informal organisation that sought to further multilateral cooperation while increasing its economic and political clout, the group didn’t formally meet until June 16, 2009 at its debut summit in Yekaterinburg. In attendance, Luiz Inácio Lula da Silva, Dmitry Medvedev, Manmohan Singh, and Hu Jintao discussed how each nation could play a more strategic role in global affairs while suggesting the requirement for a new global reserve currency.
A year later, South Africa was formally invited to join the group, expanding its moniker to BRICS.
In accordance with the African proverb ‘If you want to go fast, go alone; if you want to go far, go together’, the BRICS leaders have demonstrated their understanding of collective strength, as illustrated through the launch of its own New Development Bank in 2014, which has already approved more than $32.8 billion in loans for development and infrastructure projects without the fiscal austerity and high-interest rates offered by organisations such as the IMF.
Today, the blocs’ collective reach covers 26.7 per cent of the world’s surface area, 41.5 per cent of the population, 25 per cent of the world’s economic output and a combined GDP of $25 trillion, almost $2 trillion more than the US. From what started as an observation of fast-growth markets, the BRICS nations have formalised themselves into an organisation that has already eclipsed the EU in terms of percentage share of global GDP.
And on track to surpass the G7 within a matter of years – an outcome made all the more likely following its announcement to more than double its membership during its 15th annual summit held in Johannesburg at the end of last month.
Chosen from an application pool of 23 countries, the BRICS leaders announced the invitation of six new members, namely Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. A collection of nations that at first may seem abstract, however, under closer scrutiny reveals a strategic selection that not only highlights the bloc’s ambitions to enhance trade and cooperation but reform the geopolitical establishment.
Starting with what many considered the wild card, Iran’s inclusion in the six was certainly unexpected. However, as the world’s second-largest natural gas reserve, combined with its increased military and economic ties with both China and Russia, as well as being on the receiving end of decades of Western-led economic sanctions, its participation is seen as an opportunity for investment, while providing a chance to rehabilitate its long-standing isolation from the international community.
Saudi Arabia’s position as a major oil producer in the process of diversification makes it an ideal partner for both exports and foreign direct investment. It is more likely that the country sees BRICS as an opportunity to balance its relationship between East and West while ‘respecting the independence and sovereignty of states, and not interfering in their affairs’, as stated by Saudi Foreign Minister Prince Faisal bin Farhan.
Similarly, the UAE echoed the same sentiment with Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs, stating, “The UAE has consistently championed the value of multilateralism in supporting peace, security, and development globally.”
As a strategic trading hub with far-reaching, multi-modal connections between East and West, the UAE has already demonstrated its ability to provide significant value while acting as an impartial catalyst for trade and becoming a global centre for a wide range of commodities, including diamonds, gold, and tea in the process.
South America gets its place
As the only South American inductee, Argentina, the third largest economy on the continent, was recommended following backing from India, China and Brazil, its largest trading partner. Its invitation comes at a time as the country endures triple-digit inflation and a deepening economic crisis.
Speaking on the announcement, outgoing President Alberto Fernández said, "We open up possibilities of joining new markets, of consolidating existing markets, of raising investment coming in, of creating jobs and raising imports."
As the rising star of Africa, Ethiopia’s inclusion is only damped by the country’s Tigray War, which ceased on November 3 last year. With close ties between Russia and China, its main trading partner, and an estimated growth rate of 6.4 per cent, Prime Minister Abiy Ahmed wrote on X: “An important moment for Ethiopia, the BRICS leaders accepted our entry into the group. Ethiopia stands ready to cooperate with all for an inclusive and prosperous world order.”
Egypt’s admittance is certainly well-timed from an economic perspective with President El-Sisi stating, “I appreciate Egypt being invited to join BRICS and look forward to cooperating with the group to achieve its goals in supporting economic cooperation.”
While a significant recipient of US aid, Egypt's experience of relying on the dollar, followed by the Russian invasion has caused the Egyptian pound to depreciate by nearly 50 per cent since March 2022 and witnessed a headline inflation surge of 25.8 per cent in January, the highest level for five years.
Indeed, the hope and expectation will be that BRICS membership will not only stimulate a fresh stream of foreign direct investment but also support economic reforms, increase production volume, and enhance competition for Egyptian goods abroad.
Similar to Ethiopia and South Africa, Egypt could also benefit as a gateway to the continent, particularly with the imminent and complete launch of the African Continental Free Trade Area agreement.
Aside from the apparent benefits of reasonable loans and optimised trade tariffs, the cooperation amongst BRICS countries, including its forthcoming members, most significantly means a movement in the aggregated balance of resources, a factor that is already causing a seismic shift in economic power. For example, once the new members of Saudi Arabia, the UAE and Iran formally join on January 1, 2024, BRICS will include three of the world's largest oil exporters and about 42 per cent of the global oil supply.
A smoother flow of oil and more
While OPEC+ will likely retain its influence as a market coordinator, an internal trading mechanism could see BRICS members circumnavigating the long-held Western sanctions against countries such as Iran and Venezuela or the more recent EU embargoes placed on Russian crude and petroleum products without fear of reprisal – and it doesn’t stop with oil.
Together, the newly enlarged BRICS will control 72 per cent of rare earth minerals, including 75 per cent of the world’s manganese and 50 per cent of the world’s graphite. Other mutual benefits include investment access to previously ostracised nations such as mineral-rich Iran, host to the world’s largest zinc reserves and second-largest copper deposit in the Sarcheshmeh mine.
Argentina’s rank as the third largest lithium producer will give the bloc a controlling majority over the resource while aiding the ambitions of member-states such as Saudi Arabia, which aims to deliver half a million electric vehicles annually by 2030.
It is important to note that this shift in collective resources also represents a counterpoint to the US-led Minerals Security Partnership, which aims to bolster critical mineral supply chains for its partners, none of whom are either existing or soon-to-be BRICS members.
It is easy to observe that despite being a nascent organisation, BRICS’ ability to rapidly overcome or perhaps overlook long-standing grudges or political issues in favour of cooperative policies has been a surprising cornerstone of its rapid development. By providing an alternative to the post-colonial, Western-dominated hegemony of aid or trade with unfavourable conditions, the bloc has searched for and identified win-win situations that strengthen its members to the collective benefit of the group.
Examples include China’s role as a reconciler between Saudi Arabia and Iran and Russia’s role as a mediator between China and India. It is, however, the discussion around de-dollarisation which may likely have the most far-reaching implications both in the short and long term.
Looking beyond the dollar
As Brazilian President Luiz Inácio da Silva summarised in April this year, “Every night I ask myself why all countries have to base their trade on the dollar. Why can’t we do trade based on our own currencies? Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”
As a nation that has reaped the benefits of controlling the global reserve currency, the US already held what the former French Finance Minister, Valéry Giscard d'Estaing, referred to as ‘exorbitant privilege’. However, it is the persistent weaponisation of its currency since the end of the gold standard through legislation, sanctions and control over the Society for Worldwide Interbank Financial Telecommunication, or SWIFT system, that has incentivised several nations into divesting away from the dollar or finding new ways to operate without it.
To date, this includes trading in Renminbi and Rupee, through to speculation over the creation of a BRICS currency. While not without its challenges, the bloc’s significant natural resources could present a unique opportunity to return fiscal stability through a commodity-backed system.
Another alternative could be creating something akin to the IMF’s SDR (Special Drawing Rights), which would act as an international reserve asset to all BRICS members. In either case, the common solution would also require the creation of a hedge through the launch of something like a BRICS Coin Futures Contract, which would certainly be well suited to the UAE’s increasingly sophisticated financial sector and trade base.
Whatever the future outcome, BRICS’ expansion has, at the very least, hit home with some politicians in Europe and the US, with EU’s Green politician Reinhard Bütikofer stating, "We don't have many years to prove that Europe wants to be a credible, reliable and fair partner for poor and developing countries. If we don't succeed, then many of these countries may turn to BRICS instead."
Still room for more members
With over 40 countries having expressed an interest in joining BRICS - including Algeria, Indonesia, and Kazakhstan - it appears the bloc’s progress over the past 14 years, as well as a prevailing interest to wean away from American dependence, has attracted a highly diverse group of growing nations who are each seeking similar opportunities to collaborate and expand.
Unlike the expanded EU, which formed shortly after the fall of the Iron Curtain and evolved through the era of globalisation, the war on terror and increasingly draconian authoritarianism, BRICS is almost certainly a collective rejection of these policies and potentially the swan song of American hegemony.
If BRICS nations were initially motivated by the carrot of collective growth, there is no doubt Western-led foreign policy has been the catalysing stick, which has not only promoted more competition-based policies but incentivised other high-growth nations to rally as a counterpoint to the political and economic stalwarts of the G7, IMF and World Bank, as well as an uncontrollable dollar.
Equipped with all the necessary resources, skills and technologies, BRICS' potential could be substantial. The only question remains whether this group of highly diverse nations can continue to put aside their differences and work as a bloc to achieve their collective, long-term ambitions without falling into the Orwellian trap of some countries becoming more equal than others.
