Iran and Saudi Arabia were among six countries invited on Thursday to join the BRICS bloc of developing economies in a move that showed signs of strengthening a China-Russia coalition as tensions with the West spiral higher. The United Arab Emirates, Argentina, Egypt, and Ethiopia were also set to enter BRICS from Jan. 1, 2024, joining current members Brazil, Russia, India, China, and South Africa to make an 11-nation bloc. Will their increased power allow them to change the world as we know it?
The addition of these six oil-producing countries to the BRICS is significant because it gives the bloc a major voice in global energy markets. The BRICS countries account for over 40% of the world’s oil production and over 30% of the world’s oil consumption. This gives them a significant amount of power to influence the price of oil and the global economy.
The announcement came after two days of talks Aug. 22-24 at a summit in Johannesburg involving Brazilian President Luiz Inácio Lula da Silva, Indian Prime Minister Narendra Modi, Chinese President Xi Jinping, and South African President Cyril Ramaphosa. Russian President Vladimir Putin participated in the discussions virtually.
Brazil’s President, Luiz Inacio Lula Da Silva, confirmed the development at this week’s BRICS Summit. Additionally, the bloc announced its agreement to expand. Changing the geopolitical landscape, the alliance is set to welcome the six additional countries by 2024.
The acronym BRIC, was coined in 2001 by then Goldman Sachs chief economist Jim O’Neill in a research paper that underlined the growth potential of Brazil, Russia, India, and China. The bloc was founded as an informal club in 2009 to provide a platform for its members to challenge a world order dominated by the United States and its Western allies. Its creation was initiated by Russia.
The heads of state and government of the member nations convene annually with each nation taking up a one-year rotating chairmanship of the group.
Brazil, Russia, India, and China are the founding members. South Africa, the smallest member in terms of economic clout and population, was the first beneficiary of an expansion of the bloc in 2010 when the grouping became known as BRICS.
Over 40 countries including Iran, Saudi Arabia, United Arab Emirates, Argentina, Algeria, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan had expressed interest in joining the forum, according to 2023 summit chair South Africa. Together the countries account for more than 40% of the world population and a quarter of the global economy.
Of them, nearly two dozen have formally asked to be admitted.”The objective necessity for a grouping like BRICS has never been larger,” said Rob Davies, South Africa’s former trade minister, who helped usher his country into the bloc in 2010. (source).
They view BRICS as an alternative to global bodies viewed as dominated by the traditional Western powers and hope membership will unlock benefits including development finance, and increased trade and investment. Dissatisfaction with the global order among developing nations has exacerbated over the last few years (source).
“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar” – Janet Yellen, US Treasury Secretary Janet Yellen.
The Russian president took the opportunity to slam “illegitimate sanctions” — laid down by the U.S. and other Western economic powers in response to the Ukraine situation. The “unlawful freezing of sovereign states’ assets,” he said, “seriously weighs on the international economic situation.”
Numerous countries within BRICS have openly voiced their concerns about the dollar’s weaponization and many are now opting to use local currencies for trade as a countermeasure. According to Brazil’s president, the BRICS economic alliance is officially set to abandon the US dollar for trade settlements. Moreover, the development aligns with recent de-dollarization efforts embraced by the bloc. (source).
BRICS kick-started the de-dollarisation efforts by settling oil and gas trade with local currencies and not the U.S. dollar. With six of the world’s nine biggest oil producers the BRICS members as of the the 1st of January, 2024, the demand for dollars will massively decline as BRICS will no longer require dollars to settle trade in oil.
The U.S. dollar has reigned supreme over the global economy for close to a century, but efforts to dethrone it are “gaining momentum,” says Russian president Vladimir Putin, and called the dollar’s drop in dominance “objective and irreversible,” in an address at the 15th BRICS Summit on Tuesday.
He also said the five BRICS members — Russia, China, India, Brazil and South Africa — which are home to more than 40% of the world’s population, are growing into global economic superpowers that could rival (and maybe even overtake) the G-7.According to the World Bank,
BRICS members’ share of global GDP grew from 18% in 2010 to 26% in 2021, with increases in all years during that period. China is leading the way, with over 70% of BRICS GDP in 2021.
Putin claims that over the past decade, mutual investments and transactions between BRICS countries have increased sixfold — thanks partly to BRICS members’ mutual respect for each other’s interests.
The United Nations BRICS Investment Report 2023 states that BRICS economies represent 18% of global exports, with their share continuing to increase, while the growth rate of intra-BRICS exports also exceeds the global average.
When addressing bloc leaders in South Africa, Putin asked for continued collaboration between BRICS members: “During this summit, we shall discuss in detail the entire range of issues related to the transition to national currencies in all areas of economic co-operation between our five nations.”
Trades in local currencies
In an effort to reduce transaction costs, limit their exposure to global volatility and geopolitical risks, and boost their local economies, members of BRICS and their allies have begun settling trades in their local currencies instead of the U.S. dollar.
Just last week, India announced that its leading petroleum refiner, Indian Oil Corp., used the local rupee to buy one million barrels of oil from the Abu Dhabi National Oil Company — as part of a bilateral trading agreement between the two countries.
Despite more of these no-dollar transactions taking place with the assistance of the BRICS New Development Bank, U.S. Treasury Secretary Janet Yellen still believes that no currency currently exists that could displace the greenback.
The dollar’s dominance in global trade and capital flows dates back at least 80 years — not just because the U.S. is the world’s largest economy, but also because oil and other essential commodities are priced in the dollar.
“We should expect over time a gradually increased share of other assets in reserve holdings of countries — a natural desire to diversify,” said Yellen. “But the dollar is far and away the dominant reserve asset.” (source)
Change For The Better
The news of the BRICS expansion has pleased many people and are happy that the U.S. hegemonic position may soon be over. The U.S. has enjoyed a “hegemonic “currency privilege” that they have used to exploit the world through financial schemes, resulting in “poverty, war, and large-scale underdevelopment.” It is hoped that when BRICS nations are in control over the most essential resources this would be “broadly done” and will respect the sovereignty of the countries involved.
Additionally it is thought that as the BRICS membership has nearly 4 billion people, they will be in a position to be the “number one peace organization on the entire planet,” according to researcher Rev Laskaris, who continues, “The BRICS alliance is getting bigger and bigger because it does not demand or pressure countries to stay underdeveloped or surrender resources over to any country for the sole purpose of financial gain. Rather, BRICS instead calls for fair win-win negotiation and deals to mutually develop in unison.”
“In terms of resources, the reality is much more obvious… 6 of the 10 largest oil producers in the world have already joined BRICS, and many more in the top 25 have shown great interest in joining in the future.”
“When it comes to steel production, 5/10 largest producers of steel in the world are members of BRICS, including both 1 and 2 (China and India). Even when it comes to Phosphate, which is one of the most essential resources on Earth, primarily because of its role in agriculture, is produced the most by 5/10 countries who are members of BRICS, including number 1 (China).”
Will BRICS Change the World?
Here Nury Vittachi explains why he thinks BRICS will change the world.
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