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BRICS a new rival for the G7 – Can Pakistan be a member?

Byadmin

Aug 26, 2023

The writer is an

economist, anchor,

analyst and the

President of All

 Pakistan Private

Schools’ Federation

president@Pakistan

privateschools.com

At the BRICS Summit, the group has agreed to admit six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE; and to consider other prospective countries. Strongly supported by China and Russia, the inclusion of Iran has strengthened the anti-US bloc in the BRICS—probably making it more antagonistic and more challenging for the United States and the West to deal with it as an organization that contains two internationally sanctioned members.The announced expansion of the five-nation Brics Club of emerging economies was described as “historic” by Chinese President Xi Jinping. The BRICS also agreed at the summit to accelerate the use of their local currencies to settle trade and investment transactions among themselves—continuing to reduce their reliance on the US dollar-based global payment and financial system. A formidable rival to the Group of Seven (G7) democratic powers could reshape geoeconomics and geopolitics across a range of issues, from Russia’s war in Ukraine to the status of the US dollar as the world’s reserve currency. The high-level attendance, from Xi to Modi, reveals a lot of the bloc’s big ambitions to build an alternative multilateralism, starting with challenging the dollar and strengthening the New Development Bank without conditionality. The US is monitoring the situation closely, the Biden administration announced its willingness to strengthen the financing capacities of the International Monetary Fund and the World Bank on the occasion of the next G20 summit in India in September. Saudi Arabia and the UAE would add important economic heft to the group, which now includes several important Organisation of Petroleum Exporting Countries members as well as Russia—giving it a relevancy in the geopolitics of the global oil market. Saudi Arabia and Argentina, both members of the Group of Twenty (G20), could enable the BRICS to help coordinate the views of most of the emerging market G20 members. In this sense, the group could serve as an informal counterpart to the G7, which coordinates developed countries’ positions in advance of G20 meetings. However, with a strong China-Russia-Iran bloc, making compromises in the G20 more difficult to reach. The fact that Saudi Arabia, Iran, and the UAE will be members would have been unthinkable until recently and shows another facet of the diplomatic reconciliation among the three countries—with intermediation by China. The BRICS also agreed at the summit to accelerate the use of their local currencies to settle trade and investment transactions among themselves—continuing to reduce their reliance on the US dollar-based global payment and financial system. The decision by the BRICS nations to invite four Middle Eastern countries to join their ranks—Saudi Arabia, the UAE, Egypt, and Iran—highlights shifting geopolitical winds as much as it reflects an opportunity for closer economic integration with those states. For Saudi Arabia and the UAE, inclusion in the group is potentially symbiotic, as both are looking to engage and deepen cooperation with non-Western countries and diversify their economic partnerships as an additional hedge against the United States, and to be viewed as not just important regional leaders, but global ones. For the BRICS states, the inclusion of Saudi Arabia and the UAE would bring new investment and trade opportunities as the former seeks to quickly diversify and scale up its economy across a range of new, non-fossil fuel industries and the latter is home to the region’s leading financial hub in Dubai. Egypt, which currently faces a massive financial and economic crisis, would not appear to be a prime candidate for inclusion on paper, but Russia and China probably view inviting Egypt as akin to taking a flier—enhancing relations now in hopes of being able to strategically leverage Egyptian assets in the coming decades. Cairo’s key strategic location, control of the Suez Canal, and newly discovered gas fields are all probably viewed by the BRICS group as potentially lucrative, both economically and politically, over the coming decades. The decision to include Iran was almost certainly driven by Russia and China, as the country’s massive gas and oil reserves were likely a selling point for Beijing in convincing Brasilia, Pretoria, and New Delhi to go along with the invitation, knowing it would further fuel tensions with Washington. Inclusion in the BRICS won’t transform Iran’s economy overnight. Iran views relations with China as providing an economic lifeline, given the poor state of the economy, which continues to reel from a bevy of US sanctions. But over time, groupings such as the BRICS have the potential to undermine Washington’s power when it comes to punishing or isolating countries pursuing policies that contradict US interests, especially if they seek alternative systems and methods for trade and payment over which Washington lacks the same leverage that it has today over SWIFT. In the view of the BRICS states, including the newly invited members, reducing global US economic and financial leverage would create a more level playing field, while countries such as Iran would view it as a way to further reduce the impact of sanctions. For the US, it should be a warning: the need to strengthen and renew relationships with allies has never been more important. The emerging world might be multipolar, but some poles will be closer than others.

The current five-member BRICS group represents a quarter of the world’s wealth and brings together 47 percent of the world’s population and $27.7 trillion of the global economy, which is 36 percent of global GDP. More than 40 countries had expressed interest in joining BRICS, and 23 formally applied to join the club, which already represented a quarter of the global economy and 40 percent of the world’s population. However, with the concentration of economic power in Western-led institutions since World War II, the Global South felt largely overlooked. Indian leaders believe that the BRICS Summit could be the platform that can bring a new and more equitable perspective to global cooperation and problem-solving. Thus, the BRICS Summit raised the de facto voice of the Global South. But now, the BRICS will face new challenges. The group is very diverse, with unequal growth and rivaling interests. The importance of China, which represents 70 percent of the group’s gross domestic product, is a problem for India. Some of the BRICS countries, including South Africa, want to save their trade relations with the United States and don’t want to be dragged into the Cold War strategy pursued by Russia. With the new membership of Iran, the question arises: Do Africans really need the Middle East’s problems brought into this group? The expanded BRICS group will make it harder to operationalize its mission of advancing Global South interests. The BRICS has not coordinated with the New Development Bank, which has not notably shifted the global governance landscape in the ways the group hoped, to make progress, such as reducing the use of local currencies in trade and expanding their correspondent banking ties.




The BRICS is trying to cement its position as a platform for and champion of the Global South. This aligns particularly closely with Beijing’s vision for the grouping, and the six new members—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE—probably also accommodate Chinese preferences. Representation from the economic heavyweight region of Southeast Asia is notably missing, potentially reflecting Beijing’s strained ties in the region. Indonesia would have been a logical choice, having attended the Friends of BRICS event in June. Instead, four of the six new members hail from the Middle East, a region into which Beijing has steadily expanded its economic, military, and political ties in the past few years. Nonetheless, the group is clearly gaining traction across the Global South, with more than forty countries interested in joining the BRICS, according to this year’s chair, South Africa, and with BRICS leaders leaving open the possibility for further expansion appealing to and garnering support from the Global South. Over the longer term, BRICS leaders have pledged to sort out intra-African trade. Trade among African countries makes up only 14.4 percent of African exports, and there’s a push to get that to increase by facilitating trade between countries in their own respective currencies. BRICS can sort that out in a continent that uses more than forty different currencies, it will be a major achievement. The G7, G20, and Asia-Pacific Economic Cooperation degenerating into boxing rings for tantrum diplomacy, where final communiques either get watered down or not issued at all, perhaps it is worth giving BRICS a chance to reinvent multilateral cooperation. This reinvention cannot come soon enough—especially for poorer countries who need help the most. In the run-up to the BRICS leaders have shown the intentions for the platform, including issues like the response to the COVID-19 pandemic, the supply chain and energy crisis, the impact of the invasion of Ukraine, and the inability of Western-led multilateral platforms to manage global crises. The BRICS diverged to different degrees in their long-term strategic and economic interests. The expansion of BRICS from five countries to eleven may result in gaining leverage, as the expanded bloc includes a greater concentration of energy-producing countries, as well as potential collaboration on shifting trade transactions away from the dollar. The members will try to use the expansion to push for changes at the United Nations and other global institutions. However, for the BRICS to be effective over the long term, its member states will need to resolve their border challenges and collaborate on tough global issues as well as the deployment of capital for developing economies. Expansion will alter the fabric of the BRICS institution in two major ways. First, it could change the structure of negotiations internally. The new members vary tremendously in economic size, macroeconomic context, and their ties with non-BRICS economies. BRICS makes decisions through consensus, and achieving consensus among eleven countries with diverse economies, geographies, and interests is a bit more difficult than achieving it among five. The members may all agree on principles, such as increasing trade in non-dollar currencies. But the addition of new members will significantly slow down some of their more ambitious aspirations once they begin negotiating the nitty-gritty of those projects, for instance, that of a shared currency. To ensure the utility and coherence of the institution over the longer term, BRICS may instead choose to stick with low-hanging fruit. Second, the addition of new members could move the institution away from its geoeconomic origins of five countries on similar growth trajectories to a more geopolitically charged organization made up of different kinds of economies. Russia and China led the calls for accelerated expansion and attempts to position BRICS as a counterweight to the G7 will make countries such as India and Brazil, which are already walking a delicate balance with the West, uncomfortable. The addition of six new full members will nevertheless make BRICS the premier convening for emerging markets, at least in the short term, when the disadvantages of scale will not yet be apparent. More than twenty countries had already formally applied to join BRICS prior to this year’s summit, and more will likely be interested for fear of missing out.





China wanted Pakistan into the BRICS alliance, this development arises as China argues that the BRICS coalition should expand its membership to include more developing nations, using this rationale to advocate for Pakistan’s inclusion. This proposition, however, has encountered resistance from India, who consistently opposed expansions even when Belarus formally sought entry into the BRICS group. Earlier in 2023, Pakistan, along with other countries like Argentina, Turkey, and Saudi Arabia, expressed their interest in joining BRICS. The motivations behind this inclination toward BRICS are rooted in developing nations’ dissatisfaction with the stringent conditions imposed by Western-dominated institutions. Additionally, there is skepticism among these countries about Western values, viewing them as a façade to advance self-serving agendas. The expansion is a new starting point for BRICS cooperation. It will bring new vigor to the BRICS cooperation mechanism and further strengthen the force for world peace and development. China was the state pushing hardest for group expansion as a way to counter Western dominance. Although the BRICS members do not have much in common on the surface, President Xi was trying to show his fellow bloc members that they all want a similar future, none of them want to live in a Western-dominated world. What the Chinese are offering is an alternative world order for which autocrats can feel safe and secure in their own countries. They can find an alternative direction of development without having to accept the conditionalities imposed by the democratic Americans and European powers. Neo-liberalism posed a threat to both traditional values in developing countries and to the emergence of a multi-polar world where no one country or bloc dominated. The message was that this is a diverse set of countries, none of them are close US allies or formal allies, and two or three of them will be US opponents. But more broadly, this is not a group of anti-American states. Nevertheless, the Brics expansion does represent a shift. The expansion of the group is part of its plan to build dominance and reshape global governance into a multipolar world order that puts the voices of the Global South at the center of the world agenda. The inclusion of Saudi Arabia, the UAE, Iran, and Egypt marks the first MENA representation in the group, and the inclusion of Argentina was championed by member Brazil. Expansion was pushed heavily by Russia and China, as they are facing pushback from Western nations in the form of sanctions. The Brics enlargement represents a symbolic boost for Putin, as he fights a US-led effort to isolate his regime to force a withdrawal and an end to the war. The decision to admit Iran, also looking for a way to sidestep sanctions, represented a win for Putin and Xi, helping give the group a more anti-western, non-democratic tinge. With these new members – especially the major oil-producing ones – on board, the Brics configuration represents a much more significant share of the global economy and global population. As an important platform for cooperation among emerging markets and developing countries, BRICS is an open and inclusive mechanism. The criteria for this should also be confirmed. After joining BRICS, South Africa’s trade with other BRICS countries has increased significantly, especially with China, with which it has grown exponentially. China was one of South Africa’s trading partners before 2009, but not the largest. After South Africa joined BRICS, China became South Africa’s largest trading partner for years. Now, it is a big market in the world and emerging economies and they have improved their country, their economic conditions, manufacturing, and found markets for themselves by joining the bloc. So in any case, being a BRICS member would be very fortunate for Pakistan. BRICS economies are all quite stable. Until Pakistan improves its economic conditions, BRICS membership may be difficult. There are opportunities attached to BRICS expansion as its members can tap into a huge market. As Pakistan has easy access to China, India, and Russia by road and by sea, it has advantages to join the group and build more connections with the members. The BRICS countries are often seen as a counterweight to the Western-led world. The growth of Brics will further strengthen the force for world peace and development.

Being a BRICS member would be very fortunate for Pakistan. BRICS economies are all quite stable. Until Pakistan improves its economic conditions, BRICS membership may be difficult. There are opportunities attached to BRICS expansion as its members can tap a huge market. As Pakistan has easy access to China, India and Russia by road and by sea.

By admin

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