SVETLANA IVANOVA, Doctor of Economic Sciences, Professor of the Plekhanov Russian University of Economics, especially for the ‘Eurasian Dialogue’ magazine
The BRICS phenomenon is largely conditioned by the genesis of this intercountry association. The acronym was coined by the Goldman Sachs U.S. investment bank in 2001. Initially, the BRIC group (Brazil, Russia, India, China, group of four) was created according to the following characteristics: a large, unsaturated, growing market (parameters of the state’s gross domestic product), a growing share in world trade and foreign direct investment flows.
In the wake of the implementation of the concept of ‘globalization’, the bank, international in scope of its activities, was looking for countries with the most profitable, risk-free investment of large capitals for its clients. Jim O’Neill assumed that by 2035 the combined GDP of these states would exceed the total GDP of the G-7 group. At the same time, Brazil and Russia will increase their GDP through the use of natural resources, especially energy resources.
An increase in demand for the latter from China and India will contribute to an increase in world prices for these resources, and therefore stimulate GDP growth in Brazil and Russia. According to the Goldman Sachs, the main advantages of India and China are huge workforce potential, leadership in the global outsourcing market and consistently high GDP growth rates.
In the wake of the implementation of the concept of ‘globalization’, the bank, international in scope of its activities, was looking for countries with the most profitable, risk-free investment of large capitals for its clients. Jim O’Neill assumed that by 2035 the combined GDP of these states would exceed the total GDP of the G-7 group. At the same time, Brazil and Russia will increase their GDP through the use of natural resources, especially energy resources.
An increase in demand for the latter from China and India will contribute to an increase in world prices for these resources, and therefore stimulate GDP growth in Brazil and Russia. According to the Goldman Sachs, the main advantages of India and China are huge workforce potential, leadership in the global outsourcing market and consistently high GDP growth rates.
HISTORY
In 2011, following the results of the third BRIC summit, the Republic of South Africa (South Africa) joined the group. The BRIC group was transformed into the BRICS group. The accession of South Africa (a former British colony) was initiated by China, which has significant economic interests in this state and is also interested in expanding cooperation with the states where the U.S. influence is limited.
It is also significant that the Johannesburg Stock Exchange trades securities throughout the African continent.
The accession of South Africa was carried out in violation of the initial criteria promulgated by the bank: high GDP growth rates (at least 10% per year), GDP volume (at least $1 trillion), a growing share in world trade and significant volumes of attracted foreign capital. The South Africa’s PPP GDP ($555.3 billion in 2011) is significantly lower than Mexico’s
or South Korea’s. Overall, South Africa is the least developed state among the BRICS members.
The main issues of its development are the shortage of electricity, the low educational level of the workforce, a weak port infrastructure, and an extremely heterogeneous society. However, in the context of the idea of multipolarity, the role of BRICS is highly assessed. The South African leadership also attaches great importance to joining the BRIC states.
‘The original concept of BRIC has evolved into a multi-sectoral diplomatic force bringing about quantitative and qualitative changes in global governance’, President Zuma emphasized at the Sanya Summit in April 2011, where South Africa gained full BRICS membership.
The President also reiterated that South Africa uses membership as a strategic opportunity to advance African interests on global issues such as global governance reform, the work of the G-20, international trade, energy and climate change. Three out of five states are nuclear powers, and Russia and China are also permanent members of the UN Security Council.
The turning point in reformatting the original idea of creating a group of four was 2006-2009. Russia was the initiator of filling the BRIC format with new meanings.
In September 2006, on the initiative of President Vladimir Putin, the first meeting of the heads of foreign affairs departments took place at the UN General Assembly session in New York, which, in fact, approved and clarified the proposal for the development of multifaceted mutually beneficial quadrilateral cooperation in the interests of the participating states.
In total, 15 annual BRICS summits were held, which are a platform for developing basic formats of cooperation. The first BRIC summit took place on June 16, 2009 in Yekaterinburg. The summit meeting was attended by Russian President Dmitry Medvedev, Brazilian President Luiz Lula da Silva, Indian Prime Minister Manmohan Singh, and President of the People’s Republic of China Hu Jintao. Following the summit, the heads of state of the BRIC group adopted a joint statement, as well as a separate document on global food security.
In the final documents of the summit, the parties expressed interest in further coordination of interaction in the process of forming a multipolar world, supporting ideas and initiatives regarding a new system of sustainable growth, strengthening and greater coordination of cooperation in the energy sector with the participation of producers, consumers and energy exporting states. The dialogue between the four states on international security and finance also received support.
Each meeting meant a new step towards bringing positions closer together and developing specific solutions cooperation. However, some summits are worth noting separately. Thus, the Sixth BRICS Summit (July 15-16, 2014, Fortaleza and Brasilia (Brazil) ended with the signing of the Agreement on the establishment of the New Development Bank and the Agreement on the creation of a Pool of Conditional Foreign Exchange Reserves of the BRICS member states.
According to the signed documents, the Pool of Conditional Currencies being created (the BRICS Reserve Fund) will have functions similar to the IMF: if necessary, the fund will provide financial assistance to those BRICS states that are experiencing problems with their balance of payments.
The fund’s capital will be $ 100 billion. The size of each state’s contribution corresponds to the size of its economy, at the same time, the central banks of the BRICS countries retain their shares in the composition of gold and foreign exchange reserves, and the allocation of financial assistance to a BRICS member in need is tied to the corresponding IMF program.
The Fifteenth BRICS Summit took place in Johannesburg, South Africa from August 22-24, 2023. During this historic event, a decision was made to expand the group of five. From January 1, 2024, the association included Egypt, Ethiopia, Saudi Arabia, Iran, the United Arab Emirates. The new President of Argentina (from December 10, 2023) – Javier Miley, refused the previously submitted application.
There are 14 more states in line for accession, including Belarus and Kazakhstan (members of the EAEU), and some APEC and RCEP states. It is assumed that this will strengthen the international position of developing states, especially energy exporting states. However, vague admission criteria may create certain issues.
Currently, the BRICS group has the status of an informal interstate (transregional) association, but is not an integration grouping (like the European Union or the Eurasian Economic Union). However, the process of institutionalization of the five states that emerged after 2014 allows us to talk about the expansion of the functions of the BRICS.
In addition to coordinating and harmonizing the interests of the five states at the intergovernmental level (similar to the G20), the BRICS have the opportunity to pursue a solidary policy in the IMF, where the total number of votes of the BRICS countries is 15%.
There is a possibility that BRICS could transform from an informal international forum into a block of countries seeking closer economic, financial and political integration. These states have long-term bilateral relations and are strategic partners, which facilitates their cooperation.
But the main thing is the convergence of positions on issues of compliance with international law, commitment to the collective solution of global issues through the UN mechanism and recognition of the values of a multipolar world, multiple models of socio-economic development (Beijing Consensus, Delhi Consensus). Thus, cooperation within the BRICS framework goes beyond economics and becomes an alternative to the project of a unipolar world centered in the United States (Pax Americana).
We are talking about a transcontinental coalition, bound by close geopolitical interests and interested in changing the previously established hierarchy of global governance.
In 2011, following the results of the third BRIC summit, the Republic of South Africa (South Africa) joined the group. The BRIC group was transformed into the BRICS group. The accession of South Africa (a former British colony) was initiated by China, which has significant economic interests in this state and is also interested in expanding cooperation with the states where the U.S. influence is limited.
It is also significant that the Johannesburg Stock Exchange trades securities throughout the African continent.
The accession of South Africa was carried out in violation of the initial criteria promulgated by the bank: high GDP growth rates (at least 10% per year), GDP volume (at least $1 trillion), a growing share in world trade and significant volumes of attracted foreign capital. The South Africa’s PPP GDP ($555.3 billion in 2011) is significantly lower than Mexico’s
or South Korea’s. Overall, South Africa is the least developed state among the BRICS members.
The main issues of its development are the shortage of electricity, the low educational level of the workforce, a weak port infrastructure, and an extremely heterogeneous society. However, in the context of the idea of multipolarity, the role of BRICS is highly assessed. The South African leadership also attaches great importance to joining the BRIC states.
‘The original concept of BRIC has evolved into a multi-sectoral diplomatic force bringing about quantitative and qualitative changes in global governance’, President Zuma emphasized at the Sanya Summit in April 2011, where South Africa gained full BRICS membership.
The President also reiterated that South Africa uses membership as a strategic opportunity to advance African interests on global issues such as global governance reform, the work of the G-20, international trade, energy and climate change. Three out of five states are nuclear powers, and Russia and China are also permanent members of the UN Security Council.
The turning point in reformatting the original idea of creating a group of four was 2006-2009. Russia was the initiator of filling the BRIC format with new meanings.
In September 2006, on the initiative of President Vladimir Putin, the first meeting of the heads of foreign affairs departments took place at the UN General Assembly session in New York, which, in fact, approved and clarified the proposal for the development of multifaceted mutually beneficial quadrilateral cooperation in the interests of the participating states.
In total, 15 annual BRICS summits were held, which are a platform for developing basic formats of cooperation. The first BRIC summit took place on June 16, 2009 in Yekaterinburg. The summit meeting was attended by Russian President Dmitry Medvedev, Brazilian President Luiz Lula da Silva, Indian Prime Minister Manmohan Singh, and President of the People’s Republic of China Hu Jintao. Following the summit, the heads of state of the BRIC group adopted a joint statement, as well as a separate document on global food security.
In the final documents of the summit, the parties expressed interest in further coordination of interaction in the process of forming a multipolar world, supporting ideas and initiatives regarding a new system of sustainable growth, strengthening and greater coordination of cooperation in the energy sector with the participation of producers, consumers and energy exporting states. The dialogue between the four states on international security and finance also received support.
Each meeting meant a new step towards bringing positions closer together and developing specific solutions cooperation. However, some summits are worth noting separately. Thus, the Sixth BRICS Summit (July 15-16, 2014, Fortaleza and Brasilia (Brazil) ended with the signing of the Agreement on the establishment of the New Development Bank and the Agreement on the creation of a Pool of Conditional Foreign Exchange Reserves of the BRICS member states.
According to the signed documents, the Pool of Conditional Currencies being created (the BRICS Reserve Fund) will have functions similar to the IMF: if necessary, the fund will provide financial assistance to those BRICS states that are experiencing problems with their balance of payments.
The fund’s capital will be $ 100 billion. The size of each state’s contribution corresponds to the size of its economy, at the same time, the central banks of the BRICS countries retain their shares in the composition of gold and foreign exchange reserves, and the allocation of financial assistance to a BRICS member in need is tied to the corresponding IMF program.
The Fifteenth BRICS Summit took place in Johannesburg, South Africa from August 22-24, 2023. During this historic event, a decision was made to expand the group of five. From January 1, 2024, the association included Egypt, Ethiopia, Saudi Arabia, Iran, the United Arab Emirates. The new President of Argentina (from December 10, 2023) – Javier Miley, refused the previously submitted application.
There are 14 more states in line for accession, including Belarus and Kazakhstan (members of the EAEU), and some APEC and RCEP states. It is assumed that this will strengthen the international position of developing states, especially energy exporting states. However, vague admission criteria may create certain issues.
Currently, the BRICS group has the status of an informal interstate (transregional) association, but is not an integration grouping (like the European Union or the Eurasian Economic Union). However, the process of institutionalization of the five states that emerged after 2014 allows us to talk about the expansion of the functions of the BRICS.
In addition to coordinating and harmonizing the interests of the five states at the intergovernmental level (similar to the G20), the BRICS have the opportunity to pursue a solidary policy in the IMF, where the total number of votes of the BRICS countries is 15%.
There is a possibility that BRICS could transform from an informal international forum into a block of countries seeking closer economic, financial and political integration. These states have long-term bilateral relations and are strategic partners, which facilitates their cooperation.
But the main thing is the convergence of positions on issues of compliance with international law, commitment to the collective solution of global issues through the UN mechanism and recognition of the values of a multipolar world, multiple models of socio-economic development (Beijing Consensus, Delhi Consensus). Thus, cooperation within the BRICS framework goes beyond economics and becomes an alternative to the project of a unipolar world centered in the United States (Pax Americana).
We are talking about a transcontinental coalition, bound by close geopolitical interests and interested in changing the previously established hierarchy of global governance.
OPPORTUNITIES
In general, it should be taken into account that in the 21st century internally ‘asymmetrical’ associations of states with completely different levels of development, different geopolitical weight, different cultures and religious preferences are emerging, operating on the principles of ‘open regionalism’. Despite all the socioeconomic and mental differences of the participating states (and these are five different civilizational centers of the world) the BRICS states belong to the group of emerging market countries.
In the recent past, all of them, to one degree or another, were related to or were influenced by the implementation of the ‘red communist project’.
The cooperation within the BRICS is associated with the intersection of interests of those integration associations, the core of which are the BRICS states: the Shanghai Cooperation Organization – SCO (includes Russia and China), the Association of Southeast Asian Nations – ASEAN + 3 + 1 (China, India), the Asian – Pacific Economic Cooperation – APEC (Russia, China), South American Common Market – MERCOSUR (Brazil), South Asian - Association for Regional Cooperation – SAARC (India), Southern African Development Community – SADC (South Africa).
The enormous resources are concentrated in the BRICS states. Thus, these states have 26% of the Earth’s land area at their disposal. About 42% of the world’s population lives here. In 2000, the share of the BRICS states in the gross world product (GWP), taking into account the purchasing power parity of currencies (PPP), was about 18%, the G7 group – 43%, and in 2023, respectively – 32% and 30%.
Currently, the trade turnover of the BRICS states exceeds 20% of world trade turnover. All participating states are export-oriented, and their economies are complementary.
Thus, the BRICS states account for about a third of Brazil’s total foreign trade turnover, 10% of all exports and 20% of all imports of India, 10% of all trade turnover of China, 15% of all exports and about 30% of all imports of South Africa, almost 20% of all exports and a third of all imports from Russia. The mutual trade between the five states tends to grow. In particular, Russia will reorient its foreign trade towards friendly states, especially China.
Russia, China and India are implementing large joint projects in the field of industry and energy. For example, Power of Siberia-2 (Russia-China), Amur Gas Chemical Complex (Russia-China), Kudankulam NPP (Russia-India)...
Over the past 10 years, mutual investments have grown 6 times, and in general in the world economy – 2 times. Russia will reorient logistics to friendly states, including the construction of the Northern Sea Route (Russia-China), the Trans-Caspian route (Russia-India).
The most important area of interaction is the abandonment of the U.S. dollar in bilateral settlements. Currently, the development of the multilateral settlement and payment digital platform BRICS Bridge is underway. Apparently the topic of digital currency will be developed taking into account Russia’s chairmanship of BRICS in 2024.
In general, the interaction between the states is developing in accordance with the BRICS Economic Partnership Strategy until 2025, including sustainable development items (climate change, energy, infrastructure development, food security, human capital).
The broader programs of humanitarian cooperation are also being implemented. In particular, in the field of education, the BRICS University was created in Russia. Russia and China are expanding their activities in the SCO and BRICS network universities, including mutual adaptation of curricula.
In general, it should be taken into account that in the 21st century internally ‘asymmetrical’ associations of states with completely different levels of development, different geopolitical weight, different cultures and religious preferences are emerging, operating on the principles of ‘open regionalism’. Despite all the socioeconomic and mental differences of the participating states (and these are five different civilizational centers of the world) the BRICS states belong to the group of emerging market countries.
In the recent past, all of them, to one degree or another, were related to or were influenced by the implementation of the ‘red communist project’.
The cooperation within the BRICS is associated with the intersection of interests of those integration associations, the core of which are the BRICS states: the Shanghai Cooperation Organization – SCO (includes Russia and China), the Association of Southeast Asian Nations – ASEAN + 3 + 1 (China, India), the Asian – Pacific Economic Cooperation – APEC (Russia, China), South American Common Market – MERCOSUR (Brazil), South Asian - Association for Regional Cooperation – SAARC (India), Southern African Development Community – SADC (South Africa).
The enormous resources are concentrated in the BRICS states. Thus, these states have 26% of the Earth’s land area at their disposal. About 42% of the world’s population lives here. In 2000, the share of the BRICS states in the gross world product (GWP), taking into account the purchasing power parity of currencies (PPP), was about 18%, the G7 group – 43%, and in 2023, respectively – 32% and 30%.
Currently, the trade turnover of the BRICS states exceeds 20% of world trade turnover. All participating states are export-oriented, and their economies are complementary.
Thus, the BRICS states account for about a third of Brazil’s total foreign trade turnover, 10% of all exports and 20% of all imports of India, 10% of all trade turnover of China, 15% of all exports and about 30% of all imports of South Africa, almost 20% of all exports and a third of all imports from Russia. The mutual trade between the five states tends to grow. In particular, Russia will reorient its foreign trade towards friendly states, especially China.
Russia, China and India are implementing large joint projects in the field of industry and energy. For example, Power of Siberia-2 (Russia-China), Amur Gas Chemical Complex (Russia-China), Kudankulam NPP (Russia-India)...
Over the past 10 years, mutual investments have grown 6 times, and in general in the world economy – 2 times. Russia will reorient logistics to friendly states, including the construction of the Northern Sea Route (Russia-China), the Trans-Caspian route (Russia-India).
The most important area of interaction is the abandonment of the U.S. dollar in bilateral settlements. Currently, the development of the multilateral settlement and payment digital platform BRICS Bridge is underway. Apparently the topic of digital currency will be developed taking into account Russia’s chairmanship of BRICS in 2024.
In general, the interaction between the states is developing in accordance with the BRICS Economic Partnership Strategy until 2025, including sustainable development items (climate change, energy, infrastructure development, food security, human capital).
The broader programs of humanitarian cooperation are also being implemented. In particular, in the field of education, the BRICS University was created in Russia. Russia and China are expanding their activities in the SCO and BRICS network universities, including mutual adaptation of curricula.
LIMITATIONS
In general, the positive dynamics of cooperation in the BRICS format should not give rise to illusions. The group unites developing states whose economies: a) are significantly different in terms of the level of technological and social structure, b) have intranational imbalances and c) are significantly dependent on the global financial and economic system built by developed countries and in the interests of developed states.
The above mentioned mutual trade and investment orientation is not yet a priority for the BRICS states. In addition, there are areas with conflicts of interest and competition between the BRICS states.
Taken together, these reasons call into question the creation of a single BRICS currency. Brazil, Russia, and South Africa remain the exporters of raw materials, with a negligible share of high-tech products. This means that states are highly dependent on the situation on world commodity markets, which is characterized by high volatility and specific pricing.
There is a high dependence on external loans and investments. Under global monetary capitalism, national financial systems are embedded in global hierarchies and pay dollar rent.
Meanwhile, the transition to an innovative, digital, green economy requires enormous investments and energy resources. The ‘data economy’ is impossible without ensuring information and IT security and alternative national NBIC systems.
In the context of global crises, a slowdown in the growth rate of the world economy as a whole, and its individual states, periods of stagnation are observed in the mutual trade of the five states. The slowdown in China’s economic growth is of key importance for BRICS. The same can be said about China’s total debt, which, according to experts, amounts to more than 200% of China’s GDP.
The growing stratification of the population in the BRICS states, excessive commercialization of public goods gives rise to social discontent and political instability within states, which reduces public enthusiasm and the efficiency of labour.
In general, the positive dynamics of cooperation in the BRICS format should not give rise to illusions. The group unites developing states whose economies: a) are significantly different in terms of the level of technological and social structure, b) have intranational imbalances and c) are significantly dependent on the global financial and economic system built by developed countries and in the interests of developed states.
The above mentioned mutual trade and investment orientation is not yet a priority for the BRICS states. In addition, there are areas with conflicts of interest and competition between the BRICS states.
Taken together, these reasons call into question the creation of a single BRICS currency. Brazil, Russia, and South Africa remain the exporters of raw materials, with a negligible share of high-tech products. This means that states are highly dependent on the situation on world commodity markets, which is characterized by high volatility and specific pricing.
There is a high dependence on external loans and investments. Under global monetary capitalism, national financial systems are embedded in global hierarchies and pay dollar rent.
Meanwhile, the transition to an innovative, digital, green economy requires enormous investments and energy resources. The ‘data economy’ is impossible without ensuring information and IT security and alternative national NBIC systems.
In the context of global crises, a slowdown in the growth rate of the world economy as a whole, and its individual states, periods of stagnation are observed in the mutual trade of the five states. The slowdown in China’s economic growth is of key importance for BRICS. The same can be said about China’s total debt, which, according to experts, amounts to more than 200% of China’s GDP.
The growing stratification of the population in the BRICS states, excessive commercialization of public goods gives rise to social discontent and political instability within states, which reduces public enthusiasm and the efficiency of labour.
SUMMARY
In the context of the crisis of the doctrine of neoliberal globalization (Washington Consensus), the trend towards fragmentation of the world economy, the unprecedented (after World War II) geopolitical confrontation, doubling the number of BRICS states is an absolute imperative for the survival of the participating states.
And there are no simple solutions here, but there are real prospects for development, including the possibilities of the SCO and the Comprehensive Regional Economic Partnership.
In the context of the crisis of the doctrine of neoliberal globalization (Washington Consensus), the trend towards fragmentation of the world economy, the unprecedented (after World War II) geopolitical confrontation, doubling the number of BRICS states is an absolute imperative for the survival of the participating states.
And there are no simple solutions here, but there are real prospects for development, including the possibilities of the SCO and the Comprehensive Regional Economic Partnership.