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BRICS increasingly seen as a 21st Century alternative
July 14, 2014, 3:43 am

The Sixth Summit of leaders from Brazil, Russia, India, China, and South Africa in Fortaleza, Brazil is a significant milestone as it signals the beginning of the second cycle of BRICS meetings.

BRICS has come of age and has already become a permanent and important feature of global geopolitics and economics. In the past decade, the “big five” have increased their combined GDP more than four-fold to stand at 21 per cent of total global output.

Meanwhile, GDP of developed countries during the same period has increased by 60 per cent.

The trade between BRICS countries has grown faster in comparison to global trade, and has increased by almost two times to reach $300 billion in just the past five years alone.

BRICS nations possess 30 to 60 per cent of the world’s most important mineral resources, and boast the biggest combined market of 2.9 billion people.

Above all, BRICS is a multi-civilizational union, which gives it additional legitimacy to determine the paths of mankind’s future development.

Since the group was established in 2006, there have been two dozen multilateral tracks in addition to Summit meetings and Foreign Ministers’ consultations. Last year, the Business Council and BRICS Think Tank Council were inaugurated at the Durban Summit.

The Business Council is comprised of five members representing each BRICS nation, and meets twice a year.

It functions to strengthen and promote economic, trade, business and investment ties between the business communities of the five BRICS countries, as well as facilitate technology transfer and cooperation in the areas of skills development, banking, the green economy, manufacturing and industrialization.

The BRICS Think Tank Council, meanwhile, is a joint consortium of designated think tanks from the five countries, tasked with carting out long-term BRICS strategy and exploring problems.

More and more countries wish to join BRICS – meaning this undertaking is not a failure.

Just earlier this week, Russian President Vladimir Putin said the expansion of BRICS to include newer members is an issue likely to be raised in the future as an increasing number of nations express a desire to join the powerful bloc.

“On the whole, today, more and more countries see the potential of this association. That is why, in the future, the issue of gradually expanding BRICS is likely to be raised,” Putin said in a joint interview to Itar-Tass and Prensa Latina on the eve of his trip to Brazil to attend the Summit.

The new geopolitic?

In 2013, Xi and Putin have overseen enormous Sino-Russian joint ventures including a massive oil deal with state-run Rosneft [PPIO]

In 2013, Xi and Putin have overseen enormous Sino-Russian joint ventures including a massive oil deal with state-run Rosneft [PPIO]

But this year’s Summit is being held during a time of global turbulence and shifting political realities which are far from trivial.

Since the last Summit in Durban there have been a number of international crises such as the Snowden affair, “end of spring” in Egypt, the civil war in Syria, the crumbling of Iraq and, of course the conflict in Ukraine – all of which have put global order and stability to the test.

The current stand-off between Russia and the West, as well as growing American dissatisfaction with China’s assertive policies, signifies a new era of geopolitical competition and great power rivalry.

And BRICS in fact is all about geopolitics, not only economics, as naïve, or too shrewd, commentators love to state.

As Putin clearly highlighted in 2012: “The creation of BRICS initiated in 2006 by the Russian Federation has been one of the most significant geopolitical events at the start of the new century”.

The foundation of BRICS, as Russian policy-makers believe, reflects a tendency “towards the formation of a polycentric system of international relations, which is increasingly characterized by the use of non-institutional mechanisms of global governance and network-based diplomacy”.

So BRICS is widely expected to demonstrate its role as an alternative center of power, a bearer of the banner of a more just international political and economic order, based on fair rules of the game.

Is BRICS ready to answer these expectations? Challenges may arise.

The current confrontation between one of its members – Russia – and the West could cast a shadow on the Summit and could lead other members to express a wider scope of opinions on topical international issues.

For example, as the Russia-China link grows stronger in response to Western pressures (economic and political against Moscow; containment against China), BRICS members who do not want to see the bloc becoming dominated by Beijing may voice their concerns.

The decision to house the BRICS Bank (named New Development Bank) – first proposed by India in 2013 in response to criticism from developing nations that existing multilateral lenders are too dominated by Western governments – in Shanghai could add fuel to such worries.

But BRICS Summit organizers have worked out a way of avoiding topics that may be inconvenient to some of the bloc’s members.

Nevertheless, Russia expects denunciation of the politics of sanctions used by the West as a weapon against global opponents.

On June 27, the European Union threatened additional sanctions against Moscow if pro-Russian rebels in east Ukraine did not put down their arms.

Just last week, Assistant Secretary of State for European and Eurasian affairs, Victoria Nuland warned Russia of stiffer sanctions if it did not sever its ties with the secessionist rebels.

The existing global governance system does allow for the prevention of such unilateral actions. It should also be said that political, economic and financial governance structures that have enabled the sanctions tool were designed within a different power configuration decades ago, but are today losing legitimacy and effectiveness.

The West, however, is not prepared to give up its dominant position easily.

Efforts to undermine BRICS from within, as well as to marginalize it, will probably increase unless the West is prepared to negotiate solutions proposed by the newly emerging countries.

Russia’s 21st Century alternative

Putin met with Cuban leader Raul Castro on July 11 - a move that Russian media said was a snub to Washington [PPIO]

Putin met with Cuban leader Raul Castro on July 11 – a move that Russian media said was a snub to Washington [PPIO]

This in part explains why this Summit is especially important to Russia.

The Summit will demonstrate that US claims of an isolated Russia in the wake of the Ukraine crisis are far from reality.

Russian mass media has already stated that Putin’s trip to Latin America (he signed 10 fresh agreements with Cuba on June 11), which the US still sees as its backyard, is a snub to Washington.

Russia’s long-term foreign policy has incorporated BRICS as a new strategic dimension, particularly given the realization among the Russian political class and public alike that the US still acts and will act toward Russia as an enemy.

Russia sees BRICS as a 21st Century geopolitical alternative – one that affords Moscow the capability to increase its role in global affairs (to reverse the downward tendency of the last 30 years) and become a core member of the group of nations in determining the world order.

It was not by its choice that Russia was denied that role by the West, which perceived the former Soviets as the “losers” in the Cold War.

It should also be noted that BRICS leaders have repeatedly emphasized that the bloc is not an anti-Western conspiracy; Russia would most welcome negotiations with the West to collaborate on creating a more predictable, equal and just world.

The current Summit might be a step in that direction.

BRICS leaders will probably confirm their commitment to international law and to multilateralism, with the United Nations at its center.

But the issue of Crimea – the reunification with Russia is not something clearly defined as a legitimate action in international law – is unlikely to be discussed in detail.

Malfunctioning economic models

The theme chosen for this year’s Summit in Fortaleza is Inclusive Growth: Sustainable Solutions.

It reflects the dissatisfaction of the biggest emerging economies with the current social-economic development model, and highlights the fact that the existing global economic growth model is malfunctioning.

Seen from that point of view, the Contingent Reserve Arrangement (CRA) and the establishment of the BRICS New Development Bank takes on symbolic more than practical dimensions.

In June 2012, BRICS leaders realized the importance of establishing financial structures independent from the West-dominated mechanisms and proceeded to task their respective finance ministers and central bank chiefs to set up a CRA to be shared by all five member states.

During the 2013 Durban Summit, they issued a statement, which said:

“They [finance ministers] have concluded that the establishment of a self-managed contingent reserve arrangement would have a positive precautionary effect, help BRICS countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability.”

Some commentators have held the CRA and the BRICS Bank as alternatives both to the IMF and the World Bank, but this is clearly an overstatement.

On the other hand, some Chinese scholars envision that the CRA and BRICS Bank would instead function as beneficial supplements to the World Bank and IMF system.

I believe this is how the CRA and BRICS Bank should be viewed.

However, given the current volatile financial situation around the world, it remains important for the big emerging economies to retain the capability to turn to an independent organization which can provide liquidity in case of capital outflow.

And, as Russian Finance Minister Anton Siluanov mentioned, provided that liquidity “in US dollars, as a ‘mini-IMF”.

The BRICS New Development Bank is a promising and strategically significant undertaking.

In the first few years, the Bank’s paid-in capital will not exceed $10 billion, with members’ quotas being equal.

This means that each of the five BRICS nations will contribute $10 billion for a total initial sum of $50 billion.

Although there was a proposal to have the quotas proportional to GDP, the equality mechanism symbolizes a preference over possible scope of the investment.

Russian officials stress that the Bank can be an alternative source of investment for infrastructure projects required in development countries – projects which the West-dominated financial institutions have traditionally been reluctant to support.

However, I believe the bank has a more important long-term mission: It is the first intra-BRICS multilateral institution that could gather and analyze economic information, judge economic policy and prospects of developing countries and, moreover, be the nucleus of a coordination mechanism for their economic development strategies.

This is an important contribution to the eventual institutionalization of BRICS, which I think is imminent if BRICS is to fulfill its geopolitical and geo-economic responsibility.

The views expressed in this article are the author's own and do not necessarily reflect the publisher's editorial policy.