The BRICS group – Brazil, Russia, India, the People’s Republic of China (PRC) and South Africa – beyond containing fast-growing economies, can today be considered a geopolitical group posing a challenge to the open international order and United States (US)-led international financial system. The extent and nature of this challenge is up for debate, but what is certain is that BRICS’ ambitions are growing.
In the last year, Algeria, Argentina, Bangladesh, Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates all formally applied for BRICS membership, with South Africa, the host of the ongoing summit, recently announcing that over 40 countries have expressed interest in joining. BRICS proclamations about a ‘new global age’ have stirred diverse reactions, ranging from those viewing such claims as baseless and wishful thinking versus those concerned about an influential PRC- and Russia-led group emerging. But what are the challenges BRICS presents?
The financial challenge
Given BRIC (South Africa was invited as the fifth member in 2010) was first formulated as a grouping of diverse countries sharing similar economic characteristics, it should be no surprise the group is now positioning itself as a challenge to the established financial order led by the US. Perspectives of the US dollar as a near-universal reserve currency and major tool of international trade and development, commonplace among many central bankers and financial institutions, are now challenged by those viewing it as merely a soft power tool allowing the US to maintain its hegemony over the global financial system.
The de-dollarisation of the global economy has been a constant talking point for BRICS spokespeople. And there have even been proposals for an artificial BRICS currency. Although discussions of this shared currency are no longer on the docket for the ongoing summit, the general push away from the US dollar remains a significant part of the financial outlook of the group, which wants to expand the use of each member’s local currency. Earlier this year, Luiz Incacio Lula da Silva, Brazil’s President, urged developing countries to move away from trading in the US dollar, and to instead use either their own domestic currency or a potential BRICS currency.
However, despite all the talk, the US dollar cannot be replaced easily as the world’s preeminent reserve currency. The uniqueness of the US dollar – a fiat currency which has become the singular benchmark upon which the entire global financial system rests – is unmatched in history. The normative and systemic power of the US dollar, as well as its essential role in facilitating international trade and global commerce, is not something which can be overturned overnight; a significant counteroffer will need to be developed to convince international financial institutions and central banks to dump the US dollar. A shared BRICS currency is certainly not going to do this for one simple reason: it is a geopolitical project, not a monetary one.
The disparate economies, geographies, and demographics of BRICS members are much too diverse and unbalanced to equate to an optimum currency area. The goal of a shared currency is to increase the economic efficiency of all countries using it, not to be used as a tool for geopolitical competition. The creation of the euro, the most influential shared currency in the world, was a difficult enough project which is still ongoing, and was developed generally by likeminded, culturally similar neighbouring countries on the same continent. Producing a similar project amongst diverse countries located on four different continents seems unlikely to succeed. Thus, the challenge BRICS poses to the role of the US dollar seems, for the foreseeable future, to be minimal.
The political and normative challenge
Perhaps the greatest challenge posed by BRICS is its potential to act as a conduit for an alternative or reformed international order which aligns better with its members’ interests. As the PRC has grown in power both inside BRICS and globally, it has become more confident in positioning itself as the trailblazer for a reformed international system. Russia presents an anti-systemic challenge: Moscow wants to see the open international order torn down, something which its renewed aggression against Ukraine demonstrates. The transformation of BRICS into a full-blown international group of diverse members is within Moscow and Beijing’s interests.
Even though some of its members state the contrary, BRICS presents a challenge to the G7. Whereas the G7 is made of the world’s preeminent liberal democracies, BRICS members are increasingly becoming the centre of the global economy. It was reported in April this year that BRICS surpassed the G7 in terms of total gross domestic product measured by purchasing power. In the minds of its supporters, this achievement, though largely symbolic, gives BRICS a legitimate mandate to challenge the G7.
What is troubling for free and open countries is that BRICS’ hostility toward the prevailing international order and desire to see it altered is shared by many of the countries interested in joining BRICS. This could lead to a significant deterioration in the diplomatic influence of liberal democracies such as the United Kingdom (UK) and the US when they engage the developing world. The recent crisis in Niger, and the wider string of coups and political unrest within the Sahel, provide examples. Mohamed Bazoum, the ousted President of Niger, was known domestically and internationally for his strong cooperation with France in the fight against Islamist terrorism in the region. These deep security and economic relations with Paris were viewed by many Nigeriens as a form of neo-colonialism, and when Bazoum was ousted (with help from the Wagner Group), supporters of the coup celebrated with signs reading ‘down with France, long live Russia’.
The potential for the PRC and Russia to utilise the grievances of post-colonial nations in the developing world to exercise and grow their own geopolitical influence should concern free and open nations, despite Beijing’s own use of colonial-esque ‘debt dependency’ as a tool to spread its reach in the so-called ‘Middle Ground’.
However, despite the increasing interest in BRICS membership among many developing countries, one key factor which may stop the group from becoming a powerful international group is simmering geopolitical tensions between the PRC and India. The PRC and India are the largest and fastest-growing economies in the BRICS group, but recently their relationship has deteriorated rapidly, mainly due to conflict erupting in 2020 along the hotly-contested Sino-Indian border. This violence led to significant crackdowns in India towards Chinese companies and apps, as well as a decline in Indian views towards the PRC.
Furthermore, recent visits of Narendra Modi, India’s Prime Minister, to the US and France, as well as India’s participation in initiatives supportive of an open international order such as the Quadrilateral Security Dialogue, cast doubts on New Delhi’s determination to transform BRICS into a group which challenges the status quo. India’s view of the BRICS – which diverges greatly from the PRC’s – is one in which the organisation can transform itself into a tool to increase dialogue and engagement with the G7, support ‘South-South’ cooperation, and reform the international financial system to better benefit the developing world. India’s tensions with the PRC ultimately leave New Delhi suspicious of Beijing’s increasing clout within BRICS and the PRC’s potential to transform the group into a vessel for the advancement of Chinese or Russian interests. In fact, there was even doubt Modi would participate in the ongoing summit, although he accepted eventually.
The idea of BRICS being a group open to nations dissatisfied with the prevailing international order is more than a clever marketing ploy; dissatisfaction amongst developing countries should be addressed, or the diplomatic influence of free and open countries may wane. Similarly, although economically dubious, the replacement of the de-dollarisation of the financial system should not be cast aside as a pipe dream.
For countries such as the UK, opening more channels of dialogue with developing countries will be an absolute necessity in the future. The speech made by James Cleverly, the Foreign Secretary, earlier this month in Nigeria detailing the UK’s vision for future relations with the African continent is a step in the right direction, as is the recent announcement of increased British investment into Southeast Asia. However, such sentiment and efforts must be built upon by Britain and indeed replicated by others not willing to cede territory in international diplomacy and finance.
Jason Beck was Charles Pasley Intern at the Council on Geostrategy.
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