Amit Agnihotri assesses whether expansion of the BRICS grouping presents a challenge to US global influence and the dominance of the dollar
In an increasingly fragmented world, a bigger BRICS is being seen as a challenge to the United States and its currency. Yet the move to expand the grouping might, in fact, be a reaching out to the developed world.
BRICS – which originally comprised Brazil, Russia, India, China and South Africa, since the group’s formation in 2009 – will, from January 1, 2024, include Saudi Arabia, the United Arab Emirates, Iran, Ethiopia, Egypt and Argentina.
The inclusion of six new members seems to be drawing the attention of the US and its European allies towards the changing face of geopolitics across the world, and urging those wealthy nations to address the concerns of developing countries.
These nations do not wish to be bracketed with a particular power bloc. Rather, they are more interested in pursuing stable growth trajectories for their populations.
Nevertheless, the expansion of an economic bloc such as BRICS is being projected as a political challenge to the United States, and this is due to several factors.
First, one of BRICS founding members, China, is today the second largest global economy and may soon replace the US as the world’s number one economy –a prospectthat Washington views with concern.
Second, China and another founding member, Russia – a sworn enemy of Washington – have been moving closer towards countering US global influence since Moscow invaded Ukraine in February 2022 and challenged the existing world order.
Third, three of the six new BRICS members come from West Asia, where the US has huge geopolitical interests. Two of them, Saudi Arabia and the UAE, are allies of the US, while the third, Iran, is Washington’s bêtenoir. Interestingly, all three new members are major oil-producing nations and bring energy heft to BRICS.
Further, Iran angered the US in 2021 when it signed a historic 25-year cooperation deal with China, paving the way for the Asian Dragon to get a foothold in the strategic region that Washington sees as its area of influence.
However, there are some balancing factors within the economic bloc.
India, seen as a challenger to China in Asia, has deep strategic ties with the United States and will continue to pursue that path. New Delhi is also one of the four members of the anti-China Quad group and has not-so-friendly ties with the Asian Dragon over a bloody border row in the Himalayas. In these circumstances, India would never allow China push an anti-US agenda within BRICS, even if Beijing so desires.
New Delhi also has historic ties with Iran and has been deepening its relations with both Saudi Arabia and the UAE over the past years. For its part, Brazil too wants to work closely with Washington in the longterm.
Indeed, while both China and Russia are keen, for their own reasons, to play up the anti-US angle behind BRICS expansion, members including Brazil, India and South Africa prefer to link the development with a multi-polar world.
In light of these factors, the expansion of BRICS seems to be closely linked to these developing countries’ long-standing demand that the United Nations-centric international order be reformed – a demand that has generated no action from the developed world.
‘BRICS has embarked on a new chapter in its effort to build a world that is fair, a world that is just, a world that is also inclusive and prosperous,’ said South African President Cyril Ramaphosa, while explaining the move to open the group to six new members. ‘We have consensus on the first phase of this expansion process and other phases will follow.’
UN Secretary General Antonio Guterres, who attended the BRICS expansion announcement, also acknowledged the need to reform the UN Security Council, the International Monetary Fund and the World Bank.
‘Today’s global governance structures reflect yesterday’s world. For multilateral institutions to remain truly universal, they must reform to reflect today’s power and economic realities,’ Guterres averred.
The world’s developed countries cannot ignore the fact that the expanded 11-member BRICS will be home to 42 percent of the global population and represent around 35 percent of the world’s Gross Domestic Product.
Although the enlarged grouping will offer greater economic leverage to its members, the differences in the scale and size of their economies and the divergent systems of government would pose no immediate strategic threat to the US and its European allies, who are mostly democracies with common governance structures.
Also, BRICS has been around for over a decade but is yet to be counted as a major political and economic force in the international system. Against this backdrop, how the expanded bloc behaves in the future, and whether it can bringabout convergence in the policies of its member nations, remains to be seen.
Besides the political challenge to the US, BRICS expansion has also been linked to de-dollarisation, a term used to describe the desire by many countries to shift their international trade from the American dollar to some other currency.The US dollar amounts to roughly 60 percent of all foreign exchange reserves and around 80 percent of all foreign exchange trade, making it the world’s dominant currency.
There has been talk of a common BRICS currency which would facilitate trade between the member nations and pave the way for de-dollarization.
However, this is easier said than done. The reason is that no BRICS member wants to buy Russian roubles, given the stress on Moscow’s sanctions-hit economy. Further, China’s currency, theyuan, has not gathered enough global traction, in light of its closed capital markets, while the European euro, introduced in 2002 to much fanfare, has had little impact on the US dollar, which continues to dominate international trade.
For most developing countries, also referred to as the Global South, trying to find a balance, given the increasing power tussle between the US and China, remains a challenge.
The developing nations find BRICS an attractive platform as it does not require them to take sides with the competing world powers. During the Cold War era, when the developed world was divided between the US bloc or the Soviet bloc, the Non-Aligned Movement was the only diplomatic refuge of the developing countries. But it did not offer any solutions to their developmental issues.
Today, the neutrality associated with BRICS provides these nations with more options to choose their economic partners without worrying much about the security angle.
Amit Agnihotri is a Delhi-based journalist who has worked with several national newspapers and focuses on politics and policy issues