 |
| BRICS Summit 2023 in South Africa, August 22. (Source: AFP) |
In a recent article on african.business , Dr. Hippolyte Fofack commented that when the BRICS countries held their 15th Summit in Johannesburg (South Africa) (August 22-24), the expansion of the bloc was at the top of the agenda. Will we see the geopolitical map being redrawn?
In 2001, Jim O'Neill, then an economist at credit rating agency Goldman Sachs, coined the acronym "BRIC" to refer to Brazil, Russia, India and China. These countries, he said, were populous, fast-growing emerging markets with the potential to shape the future of the global economy.
The four countries formed the group in 2010 and on Christmas Eve that year, South Africa was invited to join. Economist O'Neil once said that the country was too small an economy to stand alongside the four.
However, the geopolitical significance of the group's expansion into Africa is outlining the structure of a new world economic order. South Africa's entry added another letter to the acronym, establishing what the world now commonly calls BRICS (Britain of the World's Leading Emerging Economies).
BRICS has matured over the years, emerging as the leading economic rival to the Group of Seven (G7) with the potential to accelerate the transition to a multipolar world.
Economic growth
According to the author of the article, surpassing the G7 in terms of contribution to global GDP, the BRICS countries now account for nearly a third of the world's economic activity. This position is growing, and according to the most recent estimates of the International Monetary Fund (IMF), China and India together will generate about half of global growth by 2023.
With its economic size and influence in international trade, China, the largest economy of the BRICS, surpassed the United States in 2013 to become the world's largest trading nation. The Northeast Asian nation has become the top trading partner of more than 120 countries around the world, a position the United States had previously coveted for decades. Of the world's 10 largest economies, China is the top trading partner of eight and the largest trading partner of the European Union (EU).
There is a clear positive correlation between economic growth and trade, especially in the era of efficient and timely global value chains, so the rise of the BRICS means the G7 is growing more slowly.
The G7 countries still account for a significant share of global trade – thanks to their stable purchasing power – but this is on a downward trend, at around 30% in 2022 from over 45% in 1992. Over the same period, the BRICS share has increased from around 16% to almost 32%, with the biggest jump coming between 2002 and 2012.
These changes are evident in trade and economic spheres, but the significance of the BRICS’s maturation is much broader. In an era of great power competition and rising international tensions, the use of economic sanctions and the weaponization of the dollar have thrust the BRICS into the geopolitical arena.
While trade between Russia and the G7 has fallen by more than 36% since 2014 under the weight of sanctions, trade between the country and other BRICS countries has soared by more than 121% over the same period. China and India have become the largest importers of Russian oil following the EU-imposed ban.
China's trade with Russia hit a record $188.5 billion in 2022, up 97% from 2014 and about 30% higher than in 2021. The increase comes as Moscow more than doubled its liquefied natural gas exports to diversify its export markets.
Despite sanctions, the resilience of export growth is keeping Russia's economy expanding, with gross domestic product (GDP) expected to grow by 1.5% in 2023, according to the IMF's most recent forecast.
Finding a way to circumvent Western-imposed economic and financial sanctions, along with BRICS unity, is a balm for Russia. The bloc has introduced trade diversion measures for one of its founding members, while undermining the effectiveness of sanctions as a tool to advance its economic and geopolitical interests.
Multi-pole magnet
Bolstered by success on economic and geopolitical fronts, the BRICS group is increasingly seen by many countries in the Global South as an attractive agent of multilateralism.
 |
| China's trade with Russia hit a record $188.5 billion in 2022, up 97% from 2014 and about 30% higher than in 2021. (Source: RIA) |
The BRICS’s success and strong economic prospects, bolstered by the growing middle classes of its member states, have attracted support from other countries. As the trade-off between the risks and benefits of integration becomes increasingly compelling, the bloc’s expansion has now gained significant momentum.
Ahead of the 15th BRICS Summit in Johannesburg, South Africa, more than 40 countries, including Algeria, Egypt, Thailand and the United Arab Emirates (UAE), as well as key members of the Group of 20 (G20) such as Argentina, Indonesia, Mexico and Saudi Arabia, have officially expressed interest in joining the bloc.
In a zero-sum global trade environment, the bloc’s expansion also accelerates the diversification of demand away from the G7 and reduces its members’ future geopolitical exposure. The more members there are, the greater the network effects of BRICS expansion.
The talks at the Summit have the potential to shape the bloc's trajectory and enhance its role in addressing emerging challenges, while accelerating the transition to a multipolar world.
Speaking at the Summit in early August, Anil Sooklal, South Africa's Ambassador to BRICS, highlighted the bloc's transformative potential: “BRICS is a catalyst for the tectonic shift that you will see in the global geopolitical structure starting from the Summit.”
All eyes are on South Africa as BRICS leaders deliberate on a range of issues that go beyond the group’s original mandate to encourage trade, political and economic cooperation among its members. The focus is on bringing in new members, as well as facilitating trade and investment in a challenging global environment where escalating trade and technology tensions – along with the “connecting of friends” of supply chains – have raised the risk of slowing global growth and the possibility of a hard landing in China.
Key areas of disagreement with the G7 were also discussed, including sustainable development in the era of climate change, global governance reform (especially regarding the IMF) and orderly de-dollarization, with more emerging economies looking to conduct transactions in currencies other than the greenback following Western sanctions against Russia.
A growing number of experts, including senior US government officials, acknowledge that Washington's aggressive use of economic and financial sanctions to advance its foreign policy could threaten the US dollar's hegemony.
US Treasury Secretary Janet Yellen recently emphasized this point: “There is a risk that when we use financial sanctions that are linked to the role of the US dollar, over time it could weaken the dominance of this currency.”
(continued)
Source
Comment (0)