Information Bulletin of the BRICS Trade Union Forum
Issue 53.2017
Issue 54.2018
2017.12.25— 2018.01.07
International relations
Foreign policy in the context of BRICS
Sachin Chaturvedi, Sabyasachi Saha / Competing imperatives of global governance and national interests within BRICS: An Indian perspective (Сачин Чатурведи, Сабясачи Саха / Конкурирующие требования глобального управления и национальные интересы в БРИКС: индийский взгляд) / India, January, 2018
Keywords: expert_opinion, global_governance

This paper revisits India's contribution to institution building efforts in BRICS to suggest India's keen interest in leveraging BRICS for fulfilling its national objectives on domestic economic growth and global governance. However, this paper notes, multiple competing imperatives of global governance and national interests within BRICS have led to asymmetric gains among members. BRICS suffers from weak cooperation in global trade, technology and environmental regimes. This paper explores positions of BRICS members on selected trade issues in the WTO in areas, such as agriculture and NAMA, to identify divergent national interests. It elaborates that the ITA, a plurilateral agreement under the WTO, is believed to have brought differential gains to India and China (with China gaining many times more than India in export performance). Faced with differential gains in sector-specific economic performance and intra-BRICS competition, BRICS seeks greater coordination in its economic policies and global governance approaches.


India, along with four large emerging economies — Brazil, Russia, China and South Africa — represent the shifting centre of gravity of the world economy (O'Neill 2001 and 2011; NDB, 2017); Baracuhy, 2012). At the turn of the century, these economies triggered awe for the rapid pace of expansion of their economies, especially China. The economic recession of the last years of the previous decade slowed global growth, but BRICS showed substantial resilience. India has become the fastest growing large economy globally. While growth in China seems to be stabilising, and Brazil, Russia and South Africa are facing contraction due to falling commodity prices globally, India is slated to maintain its average high economic growth rate.

In this decade, BRICS increasingly institutionalised its cooperation platforms at the level of ministers, officials (in the form of annual dialogue processes and committees) across a comprehensive array of issues, culminating into Annual Summits of BRICS Heads of Governments. BRICS has also encouraged deeper track two academic engagements and people to people linkages. BRICS institution building efforts and formalised mechanisms of cooperation have played important role in strengthening BRICS partnership so far. Apart from the creation of the New Development Bank (NDB) and the introduction of the Contingent Reserve Arrangement (CRA), BRICS has also adopted the Strategy for BRICS Economic Partnership. India has played an important role in proposing and in working with other members towards creating alternate institutions of global finance and for better coordination of macroeconomic management globally to prevent and respond to future crisis. BRICS has successfully launched the New Development Bank and has proposed creation of a BRICS Credit Rating Agency. To cater to future needs in development and sustainability, BRICS has established an Agriculture Research Platform. We observe that India offered ideas and support for the creation of such institutions in BRICS to fulfil the following objectives: 1) collectively influence global financial architecture; 2) create alternate financial institutions based on principles of greater equality; 3) create sector specific collaboration platforms on development and security; and 4) to use such platforms to leverage the BRICS advantage for domestic economic growth. In this regard, we would discuss three specific institution building efforts in BRICS.

However, unlike in the case of institution building and institutional approaches in sector specific cooperation, BRICS countries are confronting challenges in context of their approach to global governance, which has so far focused primarily on global financial architecture with much less coordination and coherence in approaches on global trade, technology and environmental regimes. [i] The Strategy for BRICS Economic Partnership statement pays less substantive attention to outstanding issues under multilateral trade negotiations or other specific themes of global economic governance that have multilateral significance. This, we presume, would result in partial gains for its members. We see BRICS as incomplete, or even faltering on issues that relate to wider and comprehensive dimensions of cooperation on global economic governance at a time when such a strategy is imminently required to fortify the space for economic growth in BRICS and in the South. Further, questions have been raised in academic forums on the willingness and maturity of BRICS to deliver on the foundational idea of multi-polarity and enhanced commitment for creating mutual space for leadership and role in the world order. The fact that BRICS could emerge is also attributed to gradual integration with the world economy, favourable structural transformation and productivity growth, and the ability to meaningfully leverage the opportunities of internationalisation keeping in mind issues of sectoral competitiveness. [ii] Over time, BRICS countries have demonstrated significant leadership on trade multilateralism, managing capital flows, etcetera, to the extent that these countries see opportunities in globalisation. Member countries in BRICS, nevertheless, have to create space for manoeuvrability to overcome situations when their economic interests are not aligned. For example, India faces the challenge of leading a coordinated approach on market access, excess capacity, technology transfer, industrial development and sector specific issues as actions by China are adversely affecting its own national policy making space.

Over time, BRICS countries have demonstrated significant leadership on trade multilateralism, managing capital flows, etcetera, to the extent that these countries see opportunities in globalisation.

BRICS experience with the WTO offers deep understanding of the diversity of national interests prevalent in BRICS. To begin with, we note, while IBSA (India, Brazil, South Africa) were original signatories of the GATT-WTO, both China and Russia are more recent entrants suggesting difference in timelines, readiness, perception and preference for globalisation in BRICS. At the same time, despite late entry, it is evident that China could leverage opportunities in external sector engagements much more than the other BRICS members because of reasons ranging from comparative advantages to domestic capacities. In this paper we elaborate issues of negotiations within WTO that capture convergence and divergence of economic interests in BRICS. In addition, we specifically highlight the Information Technology Agreement (1997), which is a plurilateral agreement under the WTO that has allegedly brought differential gains to India and China (with China gaining many times more than India in export performance). China, India and Russia are signatories to this agreement among BRICS members. Faced with differential gains in sector specific economic performance and intra-BRICS competition, BRICS seeks greater coordination in its economic policies and global governance approaches. It is in this light that we wish to present India's engagement with the BRICS and possible directions of future cooperation.

In this paper, we discuss issues pertaining to BRICS institution building efforts on finance and formal mechanisms of sectoral cooperation vis-a-vis its approach on global governance on international trade to suggest that the impact of, so far, impressive dialogue and cooperation process among the largest emerging economies can only be felt if these translate into deeper alliances on negotiating platforms that govern trade, technology and environment globally. This would positively influence economic growth in member states including that of India and would prevent weakening of the BRICS partnership. The priorities set by the dominant economies on several fronts do not overlap with those of fellow economies within BRICS. India is facing this challenge at this point, be that in the realm of excess capacity, non-tariff barriers or even in the sectoral agreements like the information technology agreement (ITA). While China has outperformed the developing world in manufacturing, other BRICS countries continue to remain selectively competitive across some sectors within the manufacturing industry. As high technology constitutes the major share of manufacturing exports, China based on its large ICT exports has generated maximum value added in manufacturing in BRICS.

While sectoral competitiveness in the high-technology industry in BRICS across fields remains intact or is improving, BRICS countries await more meaningful engagement and coordinated approach on multilateral agreements governing international trade with implication for industrial development, technology transfers and environmental sustainability. Forging BRICS alliance on these fronts would significantly shape an international environment that could facilitate economic growth in BRICS. It may be interesting to note that India, Brazil and South Africa have often aligned at the WTO as part of broader alliances to influence the ongoing Doha Round and there are opportunities of future cooperation. However, the fact that China followed by Russia are more recent players in the WTO, one may speculate on the strength and history of collaboration among BRICS as a group at the WTO.

BRICS countries await more meaningful engagement and coordinated approach on multilateral agreements governing international trade with implication for industrial development, technology transfers and environmental sustainability.

After the Introductory Section I, in Section II we present three BRICS institutional initiatives that reflect the multifaceted nature of the partnership and indicate the interests and contributions of India. In Section III we present BRICS approach on multilateralism and the possibilities of divergences based on national interests. We refer to the history of collaborations among BRICS countries at the WTO to draw necessary insights. In Section IV, we highlight the prevailing differences in the level of industrial development across BRICS, particularly in high value sectors like electronics that may be to a large extent, attributable to the information technology agreement (ITA) of the WTO. We discuss BRICS' response to the ITA to draw lessons on how global governance and national interests counteract, leading to weakening of BRICS partnership. In the Concluding Section V, we summarise on why collective partnerships in BRICS should deliver in confronting challenges of global governance as well as protect national interests of its members.

Institution building in BRICS and India's objectives

The New Development Bank as the flag-bearer of the BRICS promise

The first thoughts on the possibility of creation of an alternate multilateral financing institution in BRICS emerged at the 4th BRICS Summit in New Delhi in 2012. The idea was mooted by India to pursue a BRICS-led South-South Development Bank mainly funded and managed by BRICS countries to recycle surpluses into investment in developing countries for infrastructure and sustainable development projects (Agarwal, 2015). Following the report of the finance ministers, it was agreed to establish a New Development Bank by BRICS at the 5thSummit in Durban (South Africa) in 2013 and the institution was formally established at the 6th Summit in Fortaleza (Brazil) in 2014. This institution, beyond its objective and mandate, has become symbolic of the BRICS partnership itself. This institutionalises the first step towards the original BRICS ambition of alternate financial architecture and brilliantly reflects in its design a unique but operational model of multi-polarity, promoting meaningful multilateral cooperation. The institution, it is hoped, would follow alternate institutional framework and non-conditional financing norms in contrast to practices at Bretton Woods Institutions.

The Fortaleza declaration suggests the following: "the Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Centre shall be established in South Africa concurrently with the headquarters." The NDB has mainstreamed sustainability and infrastructure in its agenda, which reflects political commitment from BRICS on rigorously pursuing sustainable development globally. As some of the leading world powers have reversed their contributions on sustainability and the developed world as a group is increasingly noncommittal on sharing resources for global public goods (based on principles of common but differentiated responsibility), the utility of BRICS cooperation on sustainability and development is undeniable.

BRICS Credit Rating Agency and India's genuine interests

A prominent development on institution building in BRICS, following earlier successes like the creation of the NDB, and emanating from the Indian presidency of BRICS in 2016 (Goa Declaration), was the proposal to set up an independent BRICS Credit Rating Agency. India has been keen on making BRICS more receptive to alternative ideas in pursuit of evidence-based policy making. This initiative is probably unique in terms of its genesis compared to initiatives under several other regional groupings and global alliances. As explained, BRICS has a foremost ambition of creating alternate institutions that could restore balance in global governance. Global Credit Rating Agencies, a few in number and hugely influential, are West-dominated private organisations with clear methodological biases against emerging countries. [iii] Emerging macroeconomic strengths and longer term outlook of emerging nations are systematically discounted in such assessments. This has adversely affected resource flows to emerging countries including BRICS.

We note that the importance of Credit Rating Agencies is twofold: one, they assess the credit quality of individuals, companies and banks (to be considered by investors) and second, international accords emerging from the Basel process recognise and instruct banks to follow their assessments on credit risks. Lower credit ratings would therefore increase the cost of institutionalised borrowing. For BRICS in particular, many a time sovereign ratings have lacked consistency both in terms of the criteria and assessments. India's relative low score on such ratings despite political and economic stability and ever improving macroeconomic fundamentals have been a cause of concern. India's keen efforts to formalise a BRICS credit rating process, as we observe, is also possibly inspired by the fact that bond markets offer alternative sources of finance and have been an effective tool in some developing countries. The BRICS countries with mature capital markets have the potential to leverage local currency bond markets aided by informed, balanced and neutral credit ratings. [iv] The ability of the NDB to utilise bond markets in BRICS would be severely compromised with downgraded sovereign credit ratings of these countries. During its presidency, India hosted a meeting of BRICS officials to deliberate on strengthening bond markets in BRICS, wherein the possibility of a common BRICS bond market was also explored.

The importance of Credit Rating Agencies is twofold: one, they assess the credit quality of individuals, companies and banks (to be considered by investors) and second, international accords emerging from the Basel process recognise and instruct banks to follow their assessments on credit risks.

BRICS Agriculture Research Platform and India's credible leadership on development

While BRICS' efforts on cooperation in financial coordination is acknowledged, the group is often criticised for being selective on development challenges and having failed to exploit opportunities of cooperation across broad areas of sustainable development to meet future needs. India's own development challenges and experience, coupled with its consistent posture at various global fora on such issues, prompted it to mainstream development issues in BRICS and also offer futuristic ideas on cooperation. The Prime Minister of India, Mr Narendra Modi proposed the creation of a BRICS Agricultural Research Centre at the 7thBRICS Summit at Ufa, Russia in 2015. Acknowledging strengths with individual BRICS countries in the field of agriculture and agriculture research, he had put forward this vision of BRICS collaboration not only to support future needs in BRICS, but also in the developing world. This may also be seen in light of the fact that BRICS countries are leading producers, consumers and exporters of agricultural products including in horticulture, fisheries and other animal products. Accordingly, all BRICS countries at the 8th Summit in Goa, India agreed to the establishment of the BRICS Agricultural Research Platform. We note that the Goa declaration emphasised substantially on issues around agriculture, food security, and malnutrition; and has highlighted the importance of agricultural productivity, sustainable management and trade. However, BRICS' focus on cooperation in science, technology and innovation has been discernible all through. The establishment of BRICS Agriculture Research Platform falls at the intersection of BRICS approach on agriculture and its efforts to build collaborations in Science and Technology. Subsequently, the coordination centre of the BRICS Agricultural Research Platform has been located in New Delhi, India at the National Agricultural Science Complex. Through this, India is expected to make meaningful contribution to this initiative.

BRICS at the WTO possibilities beyond national interests?

At the WTO, free trade is primarily understood in terms of reduction in tariff barriers. Distortions and inefficiencies in world trade due to policy regimes in countries (in areas like subsidies and IPR) remained contentious, with developed countries seriously hurting interests of developing countries in areas of significant concern to them like agriculture exports, food security, livelihood and public health. Such divergences brought down confidence among members and the developing countries demanded a course correction. The developing countries faced dual challenges in the form of adverse posturing of the developed countries as well as biased technical specifications that went into determining the level of distortions. To address these issues, a new round of negotiations was launched in 2001 that came to be known as the Doha Development Round, which remains inconclusive till date.

However, what remained outside mainstream thinking, even for review, let alone renegotiations, is the impact of WTO on trade and production capabilities of developing countries for deepening industrialisation as the world transits from the so-called third to the fourth industrial revolution. The early industrialised countries adopted suitable strategies to aid their industrialisation process. Independent strategies on these counts are much less feasible under the WTO regime (Lall 2000; Rodrik, 2004; Chang, 2009; Singh, 2016). The narrow window of special and differential treatment, which is in any case challenged by developed countries in negotiations and the ad-hoc approach under non-agricultural market access (NAMA) negotiations, is clearly insufficient to serve the purpose. While industry led to value creation in the early industrialised economies, the negative influence of global trade regimes on industrial capabilities of some developing and emerging countries would seriously hamper their long term growth prospects. BRICS cannot be an exception.

The WTO regime remains complex. Attempts to widen the scope and coverage, without addressing the long term concerns of developing counties remain a challenge. The WTO has been successful to pull through negotiations on issues beyond the Doha Round in areas like Trade Facilitation, however, to the satisfaction of large segments of the developing world as they see new opportunities of integration. In the run-up to the 11th WTO Ministerial Conference in Buenos Aires in December 2017, BRICS members are split on some of the new issues, taking offensive or defensive postures depending on their national interest and sector specific competitiveness. India seeks greater cooperation in BRICS in influencing the outcomes. BRICS has time and again called for early completion of the Doha Round, but coordination has been waning. The challenges have multiplied with rising regionalism. BRICS countries competing in such arrangements has led to further weakening of BRICS cooperation in upholding multilateralism and taking common positions on trade issues that affect industrial development in their countries. As some major economies of the world recede to trade protectionism, beyond rhetoric, BRICS is well positioned to champion trade multilateralism on their own terms that would foster competitiveness across sectors including in agriculture and industry. However, this requires intent and credible action on part of the BRICS.

BRICS has time and again called for early completion of the Doha Round, but coordination has been waning. The challenges have multiplied with rising regionalism.

Individual members of BRICS have greatly influenced trade multilateralism in the WTO in the last decade, and there is a chance that these countries can start from where they left. Of course, in terms of export interests and domestic priorities, BRICS may substantially differ on some counts, but as already explained, opportunities of industrial development, value chains, innovations and wealth creation could be very similar. The axis of cooperation among BICS (Russia joined the WTO as recently as 2011) can be traced to the initial years of the Doha Round, with agriculture as the pivot on most instances.

At the WTO, Brazil, India, South Africa, and to some extent China, started working together as part of the broad G20 alliance to hammer out issues in agriculture. While the uncertainty continued through the Hong Kong Ministerial in 2005, in 2006 India and Brazil were exclusively selected to be part of G4 along with the US and the EU to renegotiate and salvage the Doha Round, before the talks failed in 2007 (Ray and Saha, 2009). The fact that Brazil and India were selected separately is attributable to the fact that India's and Brazil's interests in agriculture are divergent based on the fact that Brazil is an aggressive player as a major exporter in agriculture. This is also the reason that India has collaborated more closely with G33 group of developing countries in agriculture which included China, while Brazil with the Cairns group led by Australia. While some coordination among BRICS was visible, China's position on agriculture negotiations as part of recently acceded members (RAMs) group in seeking longer timelines of implementation and other flexibilities suggests its defensive posture not too different in spirit from that of India. In an encouraging development, in July 2017, India and China jointly submitted a proposal to the WTO calling for the elimination, by developed countries, of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support (AMS) or 'Amber Box' support as a prerequisite for consideration of other reforms in domestic support negotiations. [v]

On NAMA, the IBSA (India-Brazil-South Africa) partnership has remained strong with significant convergence with China on specific issues like non-tariff barriers (NTBs). It may be important to note that the NAMA 11 group for tariff negotiations in the Doha Round has been led by South Africa. China, driven by its manufacturing prowess and related competitiveness, has been offensive in its offers on tariff liberalisation. The advanced industrialised countries introduced what is known as the Swiss Formula that would set uniform rules on tariff reduction. Argentina, Brazil and India proposed an alternative formula, known as the Argentina–Brazil–India (ABI) Formula. The ABI formula adjusted for country specific average tariffs unlike fixed coefficients used in the case of the Swiss Formula in the spirit of less than full reciprocity. China, while agreeing to the ABI concept, proposed its own formula (Thorstensen and Oliveira, 2014). This leads us to believe that on industrial tariffs and market access the BICS posture at the WTO has never been aligned with that of the early industrialised countries led by the US, EU and Japan.

Ever increasing bilateralism/regionalism within the global trading order has made way for plurilateralism that have much wider scale and scope; and may be seen as efforts to expand buy-ins as in multilateral processes to bring on board tariff and non-tariff issues that are extremely difficult to negotiate under the framework of the WTO. [vi] The projects of Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Regional Comprehensive Economic Partnership (RCEP) are plurilateral or mega-regional trade negotiations that have confronted diverse fortunes in recent times. While TPP having failed in its previous form and TTIP held up, it is only RCEP that carries some promise of reaching the desired goal. However, given firm postures of the BRICS at the WTO, TPP led by the US and TTIP (between the EU and the US) were specifically designed to keep BRICS out of the purview of such trade deals. The RCEP, however, sees China and India fighting each other not only for influence but also for maximising gains. The structure and export competiveness of sectors including services varies greatly between the two countries and chances of cooperation are minimal.

Global trade architecture and unequal gains: India vis-à-vis China in the context of ITA

The Ministerial Declaration on Trade in Information Technology Products (ITA) was concluded by 29 participants at the Singapore Ministerial Conference of the WTO in December 1996 (the number of ratifying countries currently stands at 82 representing 97 percent of world trade in such products). In doing so, ITA proactively sought enhanced market accesses for information and communication technology (ICT) products by eliminating tariffs for such products (with commitments of MFN nature). The applied rates in most cases were much lower than the bound rates. ITA is credited for expanding trade in ICT products phenomenally. Exports in the products covered by the ITA tripled from US$ 549 billion in 1996 to approximately US$ 1.7 trillion in 2015 (WTO 2017). China remains the world's top exporter of all main categories of ICT goods. China is also the top importer of ICT goods, accounting for 18 percent of world imports and 34 percent of all electronic component imports, including re-imports from Hong Kong (China) (UNCTAD, 2014).

While, India joined ITA in 1997 itself, China did so in 2003 after its accession into the WTO in 2001. The other two prominent BRICS members, Brazil and South Africa, are yet to join ITA. Russia has recently joined ITA as part of its accession to the WTO. China's export of IT products was way behind countries like the US, the UK, Germany, Japan, and South Korea in 1996 (Table 1). However, China overtook the United States to become the world's leading exporter of ICT goods such as mobile phones, laptop computers and digital cameras. China's import of ICT products was very low when compared with US, UK, Germany, South Korea and Japan till 2005. China's import of ICT products have risen after 2005 and stands higher than that of US and other developed countries like Germany, Japan, and UK. Economies in East and South East Asia remain among the only net exporters of ICT goods. The growth of China's export of information technology goods was fastest during 2005-10. On the other hand, growth of US exports of ICT products has slowed down compared to 1996-2000. India's performance has somewhat picked up from very low levels. Also, export of ICT products has seen a relative decline in UK, Germany and Japan in recent years.

However, the US has been one of the biggest beneficiaries of the ITA. Not only did US exports in particular product categories like semiconductor increase (US presently holds 50 percent market share in semiconductors globally) after ITA was adopted by the signatories, ITA also provided a big push to the expansion of Global Production Networks (GPNs) of US ICT companies (Ernst, 2014). US multinational companies (MNCs) were increasingly investing in manufacturing in low cost countries like China. EU and Japan have been ahead in manufacturing and innovations of ICT products and are aggressive players in the ITA.

Portugal-Perez et al. (2009) suggests discussions on extension of the ITA, which includes coverage of more electronic products, to non-tariff measures — including standards, began shortly after the ITA was signed in 1996. In 2000, the Committee of Participants on the Expansion of Trade in Information Technology Products (ITA Committee) agreed on its "Non-Tariff Measures Work Programme". In September 2008 the EU submitted a proposal to review and initiate negotiations to update the ITA. On non-tariff barriers it proposed, "... agreement on substantive provisions concerning the recognition of internationally agreed standards and of methods of conformity assessment, in order to avoid multiple testing and enable greater economies of scale without compromising on product safety". Deliberations and workshops on NTMs were conducted on a regular basis. The negotiation was strongly focused on "for each area of certification: one global product, one global standard, one global test and one global certificate." [vii]

In June 2012, six ITA participants (United States, European Union, Japan, the Republic of Korea, Chinese Taipei and Costa Rica) initiated an informal process towards launching negotiations for the expansion of the product coverage of the ITA. This process led to the establishment of a technical working group, which has been meeting informally in Geneva, outside of the formal framework of the WTO ITA Committee. [viii] The US stressed that ITA 2 is a top priority and EU announced consensus on product coverage. Japan has been keen on extending such provisions to regional trade deals. Norway, Switzerland, Canada, Chinese Taipei, Montenegro, Singapore, Colombia, Australia and Hong Kong, China also supported the early conclusion of ITA 2. While Korea was close to ratifying such changes, China was firm on its stand of protecting domestic interests even as it saw merit in ITA 2. ITA 2 has been much less appealing to BRICS other than China leading to their non-participation in ITA 2. This clearly flows from the fact that for these four countries exports of ITA expansion products as a share of global exports in this category is negligible (0.1-0.4 percent). While these countries have increasing import bills on ITA products, India tops the list. Among the ITA members who are not party to ITA expansion India ranks second after Jordan in having a relatively high MFN applied tariff on ITA expansion products. Brazil and South Africa, on average maintains less than 10 percent MFN applied tariff on original ITA products (which is much lower for South Africa).[ix]

At the WTO's Tenth Ministerial Conference, in Nairobi (16 December 2015), 53 members representing major exporters of information technology products, endorsed the timetable for implementing the landmark deal to eliminate tariffs on the 201 IT products. The declaration established that the first set of tariff cuts (65 percent of tariff lines) were to be implemented on 1 July 2016 and the second set no later than 1 July 2017, with successive reductions taking place on 1 July 2018 and effective elimination no later than 1 July 2019. [x]On 1 November 2016, WTO's ITA Committee announced majority of participants (18 of the 24, who originally represented the 53 countries under ITA 2) have implemented their tariff commitments, and others were on track to do so.

We have already highlighted, of the BRICS only China, India and the Russian Federation are party to ITA, specifically ITA 1. The fact that Brazil and South Africa have not been participating in such negotiations suggests conflict between domestic priorities and external sector gains. Such considerations have to be noted in order to understand convergences and divergences in BRICS in the context of industrial strategy as well as the broader developmental context that links industrial development not only with value addition, but also with economic opportunities of the domestic industry (and individuals in terms jobs etc.). In BRICS, China has outperformed the rest in ICT trade. Policymakers in countries that are part of ITA yet with a limited manufacturing base in electronics and equipments blame it on the ITA. Cheaper imports have contributed to the decline of the domestic electronics and equipments industry. This has been the case with India (Joseph 2013; Ernst 2014). The experience with regard to ITA 1, definitely has led India to take very cautious stance on ITA 2, despite being one of the first participants in ITA 1. Strategy to promote domestic manufacturing in this segment is being sought in countries like India and Brazil, however with perceptible differences in approach.

Of the BRICS, only China, India and the Russian Federation are party to ITA, specifically ITA 1. The fact that Brazil and South Africa have not been participating in such negotiations suggests conflict between domestic priorities and external sector gains.

The ITA 2 negotiations suggest adjustments on ITA 1 product list specifically to address issues of multiple uses on one hand and technology convergence on the other. While new classification has been adopted, obsolete products have been dropped. China, has thus far been able to integrate with the value chain of global production of ICT goods and gain in terms of value of manufacturing and exports. However, often the Chinese value addition is such products have been low due to overspecialisation in downstream activities and highly fragmented production networks. One possible indication has been China's lagging performance in technologically-advanced subcategory like semiconductors. China has adopted sectoral strategies to develop its semiconductor manufacturing sector. ITA 2 was hence viewed with suspicion in terms of its product coverage and there were demands of sensitive lists. While the work on non-tariff measures (NTMs) is ongoing at the WTO with regard to issues like regulation, standards, conformity, e-labelling, and transparency, country positions are not in the public domain. The Geneva based international think-tank the South Centre in one of the publications in 2013 highlighted that NTBs – in the form of national standards and regulations or international standards – have been the most significant barriers that developing country products face in accessing the ITA markets, whether or not these countries are part of the ITA. Consensus building in BRICS on such intricate issues on industrial strategy concerning policy space and market access is far from reality.[xi]


India has played an increasingly important role in contributing to a new narrative led by the BRICS in creating new institutional mechanisms that reflect the 21st century reality of emergence of the South. BRICS has strengthened avenues and governance architecture on global finance, capital and investment. Moreover, while promoting collective economic interests, BRICS has gone beyond the narrow focus of intra-BRICS trade. In doing so it has also avoided rhetorically supporting multilateralism and has not gone into the specifics in terms of forming coalitions on negotiations. However, with collective partnerships, BRICS may clearly be delivering in terms of consensus on economic, trade and investment issues that may foster growth across economies.

The new institutional mechanisms that India actively sought viz. New Development Bank, BRICS Rating Agency and BRICS Agriculture Research platform are some efforts that bring forward an extremely important message. The message is of BRICS' contribution to a new responsible and responsive global order with due prominence to inclusive multilateralism. It would be important to see how far the current disposition should be viewed as a building block for wider global governance. Till the time, when multilateralism remained pivot to global trade, there was still scope for multifaceted partnerships and coalitions and we have elaborated how BICS often collaborated on issues of mutual interest and in reigning skewed gains in favour of other dominant economies.

However, under present realities, possibilities about fading away of such partnerships have multiplied significantly. We see divergent interests in terms of countries forming regional agreements and with some countries collaborating on mega-regional trade arrangements driving a wedge into the consensus arrived under the multilateral fora. Efforts to take advantage of the legal options to push for numerous sectoral trade and other agreements and seal deals on non-trade issues impacting trade are on. Needless to mention, such agreements are meant to favour the dominant economies in the balance. It would be a testing time for BRICS to demonstrate willingness to work on such issues in the spirit of cooperation and consensus. Whether BRICS members would be able to overcome their narrow national interests and continue to contribute through alternative institutions, is an issue that would determine wider relevance of BRICS in the days to come. The experience of working together and striking coalitions on specific issues at the WTO provides important lessons and a ready reference to each other's domestic interests and external outlook.

Moving forward would not be easy. Capabilities and institutions are often highlighted as major strengths of BRICS countries. However, domestic capabilities are rendered inadequate in the face of major discriminations and overriding harmonisations in the world economy. While intra-BRICS trade is dominated by trade flows from China (we have shown the case of ICT goods), and is often perceived to be a challenge by other members, market access in third country remains an important consideration. It remains a difficult question how BRICS can address such issues and work towards meaningful partnerships and coalitions. As pointed out in the beginning, in the absence of concrete actions in this direction, BRICS as a group might seriously fall short of fulfilling its own expectations. It would also be a disappointment for countries like India, whose own national interests would also be adversely affected if BRICS as a group does not respond to wider global governance expectations.

Table 1: Exports of Information Technology Products of Selected Countries (USD Billion)
Source: Authors' calculations based on ITA Product List (Attachment A, Sections 1 and 2) in HS 1996 from WITS Online

Foreign Minister Sergey Lavrov's interview with Interfax news agency, December 28, 2017 (Интервью Министра иностранных дел России С.В.Лаврова информационному агентству «Интерфакс», 28 декабря 2017 года) / Russia, December, 2017
Keywords: sergey_lavrov, quotation, interview

Question: Mr Lavrov, what was the main factor influencing Russian diplomacy in the last year? What foreign policy challenges will we face in 2018? Will peace be restored in Syria?

Sergey Lavrov: 2017 was a difficult year. The international situation has not improved. The main task for Russian diplomacy was to protect national interests, security and sovereignty, neutralise threats and provide an appropriate response to external challenges in the interests of consistent internal development. There were quite a few such challenges, from the fratricidal conflict in neighbouring Ukraine, which has an internal Russian dimension due to the special national-historic ties between our countries, to an alarming growth of tension in the Russian Far East, which borders the Korean Peninsula. Some irresponsible forces in the West are fueling conflict in a bid to contain Russia and other independent centres of global influence. The increasingly radical policies of some Western countries and their lack of any pragmatic basis in reality are seriously increasing pressure on international law and threatening to bring chaos to interstate relations.

The Russian Foreign Ministry continued to work efficiently in this difficult situation. Our diplomats are used to seeing problems as an impetus for creativity. Of course, we are glad that we can rely in our work on the unanimous public support for our President's principled, honest and independent foreign policy. We are advocating a positive, balanced and future-oriented international agenda, including as a permanent UN Security Council member, aimed at finding effective solutions to global problems.

One of our key priorities was the promotion of a peaceful settlement in the long-standing internal Syrian conflict. We joined hands with Iran and Turkey to initiate the Astana format, which has proved effective: we have introduced and promoted a ceasefire between the government forces and the armed opposition, which allowed us to focus on defeating ISIS. Four de-escalation zones are operating effectively in Syria. Refugees are returning to their country, which is rebuilding its infrastructure. Therefore, the necessary conditions for a political settlement, based on UN Security Council Resolution 2254, have been created largely thanks to Russia's efforts.

We closely monitored the development of integration within the EAEU and the strengthening of cooperation within the CSTO and the CIS, where Russia held the rotating chairmanship. We continued to work on the implementation of Vladimir Putin's initiative on the creation of a Greater Eurasian Partnership, including through the alignment of Eurasian integration and China's Belt and Road initiative.

All-out partnership and strategic cooperation with our great neighbour China has made considerable headway and has been enriched with new content. Other high-priority areas included the development of an especially privileged strategic partnership with India. Relations with Turkey have been normalised. The quality of ties with an overwhelming majority of Asia Pacific, Latin American and African states continued to improve steadily. We actively cooperated with our partners at such new multilateral associations as the G20, the Shanghai Cooperation Organisation and BRICS where there are no "teachers" and "pupils," and where equitable dialogue is conducted.

In 2018, we will continue to focus on the uncompromising fight against international terrorism in line with Vladimir Putin's well-known initiative to establish a broad anti-terrorist coalition under UN auspices. We intend to continue to help scale down tensions around the Korean Peninsula in every possible way and to prevent an armed confrontation there.

We will do everything we can to restore peace and stability in Syria as soon as possible. At the same time, it is obvious that progress in achieving a political settlement in the Syrian Arab Republic primarily depends on the people of Syria themselves. The efforts of outside players should be aimed at helping the Syrian parties to reach agreement. In this connection, we want to continue working energetically with the government and the opposition and to urge them to reach a consensus and to stop confrontation. Currently, we are focused on practical issues of convening the Syrian National Dialogue Congress in Sochi in close contact with our partners from the Astana format. This Congress is called upon to facilitate UN-mediated intra-Syrian talks in Geneva.

We continue to make our contribution to finding political and diplomatic solutions to other crises and conflicts, with which the world is, unfortunately, oversaturated. We will promote the universal values of justice, honesty, wide-ranging and equitable partnership and conflict-free constructive development. We will help strengthen multilateral aspects in international affairs for maintaining a more equitable and democratic world order, based on the UN Charter, reflecting and respecting the cultural-civilisational diversity of nations.

Our responsible and well-thought-out approaches meet with the broadest possible support. Therefore one can safely say that Russia has reinstated its historically essential role as the guarantor of global stability.

Question: Washington has said that it is not going to pull out of Syria. Is Russia ready to work together with its American partners in Syria in order to rout terrorism and maintain peace and security there in the post-conflict period?

Sergey Lavrov: We have said many times, at various levels, that if the Americans' goal in Syria is indeed to fight terrorism, as they say, there are objective opportunities for cooperating with them in this sphere.

The joint statement, which President Vladimir Putin and President Donald Trump adopted on the sidelines of the APEC Economic Leaders' Meeting in Danang on November 11, seals their resolve to continue to work together in Syria. In addition, on November 8, Russia, the United States and Jordan signed a trilateral memorandum on de-escalation principles in southern Syria, which is designed to reinforce the ceasefire initiative in this region. The de-escalation zone, which has been functioning there since last summer, has proved effective.

We believe that Americans should pull out of Syria as soon as terrorist activity is totally eradicated there, which will happen very soon. I would like to point out that the United States and the US-led coalition do not have the UN Security Council's mandate for their operations in Syria. The legitimate Syrian Government has not invited them either.

We are surprised, therefore, at the statement made by US Defence Secretary James Mattis, who has said that US forces will remain in Syria until progress in a political settlement is reached there. Washington is acting as if it has the right to judge progress towards a political settlement and wants to control a part of Syrian territory until it achieves the result it wants. This is not how it is done. Under UN Security Council Resolution 2254, the adoption of which the United States advocated, the Syrians themselves must decide the future of their country. We will be guided by this understanding in our relations with our American partners.

Question: Did President Trump live up to our expectations in terms of bilateral relations? Or are you disappointed? How will Russia-US relations be affected by the coming into force of new US sanctions on the Russian energy sector and defence industry, and the planned publication of lists of the Russian elite early next year?

Sergey Lavrov: Disappointment comes from inflated expectations, which we didn't have with regard to Russia-US relations.

In our efforts to build a dialogue with Washington – no matter who is sitting in the White House – we rely on pragmatic approaches and realistic assessments. We do not entertain any illusions. From the outset, we realised that overcoming the burdensome legacy of the Obama administration in the sphere of bilateral relations would be an extremely difficult process.

We are still willing to do our part in order to get them back on track. We regularly remind our US colleagues that building a normal dialogue between our countries and establishing productive cooperation in international affairs is only possible if the national interests of both countries are taken in account and respected.

So far, we have been unable to achieve any changes for the better because of the Russophobic hysteria that has swept the political circles in Washington and has taken on, without exaggeration, a paranoid character. This is what prevents us from moving forward in areas that are important for both our states, and provokes additional tensions in the international arena. The United States is taking unfriendly actions with regard to our country. The implementation of Countering America's Adversaries Through Sanctions Act will inevitably affect our relationship. That said, Washington is clearly off the mark – the Russian economy has not only adapted [to sanctions], but has regained an economic growth trajectory, and is about to break new ground.

We will respond to any hostile actions against Russia and our citizens in the way that is best for us. However, we expect that Washington will at some point realise the futility of exerting pressure on our country. In fact, the sooner certain American politicians get rid of the illusions that Russia can be cowed by restrictive measures or a show of force, the better it will be for everyone, including themselves. This will not only improve the atmosphere of Russian-American relations, but will also allow us to more effectively address pressing global and regional problems plaguing the entire international community.

Foreign Minister Sergey Lavrov's interview with RT, Moscow, December 25, 2017 (Интервью Министра иностранных дел России С.В.Лаврова телеканалу «Раша Тудей», Москва, 25 декабря 2017 года) / Russia, December, 2017
Keywords: sergey_lavrov, quotation, interview

Question: Let us begin with global matters. The first question will be about the multipolar world Russia has been talking about for more than ten years. Even as this multipolar world order is taking shape, there are no international rules to regulate this chaotic structure. In this connection the question will be two-sided. Is there a chance for these rules to be developed in the near future, and what is your view of Russia's role in this new world? Should Russia proactively contribute to resolving issues beyond its borders?

Sergey Lavrov: I think that the concept of a multipolar world came into being not ten, but rather some 20 years ago. It was put forward by Yevgeny Primakov when he served as Russia's Foreign Minister, in 1996−1998. He was also behind the initiative to set up the Russia-India-China (RIC) three-sided cooperation framework, which operates to this day. Meetings in this format have been quite useful, including at the level of foreign ministers, as well as for experts in agriculture, industry, finance, youth and humanitarian cooperation, and many other matters. The RIC framework paved the way to what we now call BRICS, when Brazil and later South Africa joined the Russia-India-China trio.

I believe that this is indicative of the trend towards the emergence of what we call a polycentric world order, since these five countries came together at a time when their economies experienced rapid growth, and were probably world leaders in terms of economic growth rates. The situation has changed since then. Economic growth in Russia, Brazil and South Africa decelerated, while India and China remain among the fastest growing economies.

Jointly, the BRICS countries have 14.7% of the IMF vote, which is just 0.15% less than the blocking stake. We are not seeking to have this blocking stake as an end in itself, but, given the multi-faceted nature of monetary and financial problems, the current status of the dollar as well as the strengthening of many other currencies, we are confident that changes within the IMF are long overdue, which will guarantee a more democratic mode of governance of this highly important institution.

One step in that direction was made 7 or 8 years ago, when G20 was established and held its first summit. It existed even before that time but few people knew about it. G20 had never assembled at a more or less serious political level, but all of a sudden it convened a summit, which reflected the fact that the leading Western countries had come to realise the impossibility of doing business without reaching agreements with the new centres of economic growth, financial might, and political influence.

Incidentally, BRICS is not alone within G20 that also symbolises the movement towards a multipolar world. BRICS has allies, including such countries as Saudi Arabia, Argentina, Mexico, and Indonesia. Therefore, I think that approximately half the G20 members are interested in not conserving the situation, where non-Western countries would, in fact, be barred from the process of decision-making.

This is a healthy process based on the principle of consensus which exists within G20. I think that our Western G20 partners are becoming increasingly aware of the need to reach agreements.

This said, I would like to answer the part of your question about developing rules for shaping a multipolar world. This does not seem to me to be necessary. I gave you the examples of how a group of the three countries, Russia, India and China, as well as BRICS have been established as well as how G20 was given a new lease of life and started to move very fast. All these are natural processes and nobody predetermines the course they will take. I would also like to mention something else that also reflects the aspiration of countries to incorporate the objective trends towards a multipolar world [into their policy] – I mean our approach to developing cooperation on the Eurasian continent. The Greater Eurasia Project, the idea for which was suggested by Russian President Vladimir Putin, does not specify any indicators that must be achieved no matter what, nor does it put forward any preconditions. The Trans-Pacific Project (TPP), which Barak Obama was pushing forward, was from the very beginning designated to involve a group of 12 countries, who would develop the rules of the game while the rest would be able to join in if they were able to meet certain conditions formulated by these dozen countries. The project provided for specific targets that the countries had to meet.

We know what has become of this project at the current stage. The Trump administration decided to pull out of it, while the remaining 11 countries are contemplating two options: whether to continue without the United States or think up something else. It seems to me that having the project geared to achieving a specific result prior to evaluating the balance of interests of all who were invited, and not only them, has affected the fate of the project.

Our approach is much more democratic. We are against any restrictions on cooperation in Eurasia. President Putin has formulated an initiative that underlies our position of being in favour of relations between the Eurasian Economic Union, the Shanghai Cooperation Organisation and ASEAN which start to be developed as soon as participants in these organisations grow aware of their mutual interest in cooperating in a specific area, be it logistics, infrastructure, energy or something else. We say in much the same manner that when the ideological considerations of our partners in the European Union have moved to the background, we will welcome their participation – we have already sent them invitations – in this pan-continental Greater Eurasia Project, which even extends beyond the land as far as South-East Asia, including the island-states.

I will cite a good example from everyday life. If I remember rightly , before creating a path across a lawn, people in Britain are allowed to walk on it, so it is clear which way would be most suitable for those that walk through this park every day. We are, perhaps, acting in the same way – we are not artificially creating a road that will be inconvenient to walk along.

Question: The outgoing year was fairly complex with regard to Russia-US relations, despite last year's hopes for the better. Russia is compelled to respond to hostile US actions, including in the sphere of sanctions and diplomacy. The latest example is the attacks on the Russian media, in particular, the withdrawal of our channel's accreditation with the US Senate. Do you believe the method of mirror responses is effective? Where can such an escalation of relations between Russia and the West, Russia and the United States take us?

Sergey Lavrov: You said your channel is one of the most hardest hit by this US policy, which is completely at odds with the norms and principles of journalism, freedom of speech, or freedom of opinion. By the way, as a leader of a group of Western countries in the OSCE, the United States has been pushing for the adoption of separate resolutions for several years now, which would highlight the need to protect journalists and ensure their rights. Russia is entirely for this. The only thing we are against is singling out a single social or professional group in the context of the need to ensure non-discrimination, respect for human rights, including, of course, professional rights. We are for respecting the rights of everyone in any line of work, if what they do it based on the law and international principles that provide the guidelines for everyone.

By the way, the United States is not the only country or government that discriminates against your channel. In France, problems remain, despite the opening of Russia Today France. As I understand it, you were "excommunicated" from the presidential pool alongside Sputnik. We cannot understand this. We keep reminding our French colleagues of this rather unseemly situation, but to no avail so far.

In Britain, politicians who speak on your station are accused of betraying the interests of the United Kingdom. I hope that I will not be included on some sanctions list for speaking with you now, and with your colleagues on other occasions.

I understand that reciprocity is one of the basic principles in diplomacy, and in life in general. If you want to be treated well, treat others well. When you are doing something with regard to your colleague or partner, always check if you would like them to do to you what you are about to do to them. That said, I will note that you are all aware of the law adopted by the State Duma, which does not name anyone as a taboo entity, but contains principles which make it possible to identify a particular media as a foreign agent. This does not mean that their accreditation will be revoked. Accreditation with the Foreign Ministry remains in full, and the reporters can attend all our events without any exception. With regard to the Federal Assembly, our colleagues who are parliamentarians will determine themselves if it's appropriate to provide such access to the state media from the countries where our media receiving subsidies from the state cannot do so.

However, I would suggest that, while sticking to the principle of reciprocity, we should not be reckless and start mutual recriminations and punishments. No one will gain from this. I believe the right thing to do here would be to simply show the world how outdated as well as stupid this policy is which bans, in Ukraine for instance, all Russian media, including animation channels (if memory serves me correctly), and how important it is to oppose such developments. I would suggest not to tighten the screws any further, but rather go back a little and release existing tension through encouraging international discussions.

Question: I would like to ask you about one of the greatest challenges in this year's political world, North Korea. It has been discussed at length. How likely, do you think, is the conflict on the Korean Peninsula? What do you think the United States is trying to achieve with its aggressive rhetoric on this subject? Many analysts are saying its goal is to raise the bets to the point where the capitulation will take place on the US terms. Do you agree with such an analysis?

Sergey Lavrov: First, I don't think anyone in their right mind would want a war on the Korean Peninsula. The consequences, including the colossal losses for the world, were laid out not only by us, but by US experts and officials as well. I don't think anyone is consciously trying to take the matter to such an outcome. At least, I hope this is not true, although we can hear allusions to that. However, even if nobody wants a war, every time both sides of the confrontation start stocking up on advanced, high-tech, and destructive weapons, there's a risk of human error or a technical failure. I hope those who constantly conduct provocative military exercises are aware of the fact that this must be kept in mind.

Second, having said that I do not believe, or at least hope that the United States does not plan a military solution, I cannot fail to note the pattern that has developed over the past several months. The situation has come to a point where it is necessary to lift the veil on how the United States approaches this matter. I will not go into details, but in September we received a signal from the Americans that they want to start a dialogue. They said no exercises were planned until the spring, so the North Korean government can feel at ease. They also said that this natural break can be used to open some kind of a dialogue in the run-up for the planned exercises next spring. We passed this signal along, and it was not rejected. However, with all the preparations underway, the Americans announced that they now have unscheduled exercises on their hands which would take place in October. So, in September we got a signal that we can have talks until spring, and in October things turned around and talk was already about unscheduled exercises, major ones at that. Surprisingly, Pyongyang took it in its stride. Then, as if they wanted to draw out a particular reaction from it, the unprecedented US-Japanese air force exercises were announced in late November. After that, Pyongyang did react.

This does not mean, though, that we justify what Kim Jong-un did having launched the missile on the most recent occasion, which appears to be intercontinental. However, this goes to show the sequence of steps that cannot be ignored, and the train of thought of the Americans. Our joint proposal with China about a double freeze suggested that Pyongyang does not launch or test anything, while the Americans, South Koreans and other allies at least dramatically scale down their exercises. The American line of thinking was that no one ever said that these exercises were illegal. They are absolutely legitimate in terms of international law. However, Pyongyang cannot launch missiles or test nuclear devices based on the UN Security Council resolution. That is true. This is the difference in the legal status between these two actions. However, in politics, you can, of course, pull the legalist strings and build your practical actions based on that, but in a situation where things have already reached a point where they can go into a nosedive, perhaps the stronger and the smarter one should step aside.

We hope there are people in the United States who understand the need to defuse this very tense situation and start looking for a political and diplomatic solution. China and us propose to freeze all actions that are mutually provocative, and to start a dialogue without any commitments. This has to happen in order for the United States and the DPRK, either one-on-one or in the presence of other states which both countries feel comfortable with, to sit down and exchange their concrete assessments of how this crisis can be overcome.

We are all aware of such a format as the six-party talks. Our Chinese colleagues and us see the third stage as a multilateral process to harmonise the principles of peace and security on the Korean Peninsula in general. Speaking of this, we cannot ignore the harmful signals that were sent by Pyongyang in the wake of Washington's throes over the Iranian nuclear programme (INP) with regard to the agreement reached as part of the Joint Comprehensive Plan of Action (JCPOA). To question this fact only means that the agreement which led to the full closure of Iran's military nuclear programme is being questioned. Even though the United States has not yet withdrawn from it, the noise has already been pretty loud. Everyone, including those who participated in these talks alongside the United States, are becoming nervous.

The signal sent to Kim Jong-un is pretty straightforward. Yes, we urge you to abandon the nuclear military programme, and we will lift sanctions if you comply, but who knows what will come to our minds when the next administration moves into the White House.

I discussed this topic longer than I should have, but I think it's an important aspect. One should realise that one can't endlessly strangle the economy and the social sphere or try to impose a total blockade. Only recently, a new resolution was adopted, from which we managed to remove absolutely unacceptable things. Economic and logistical projects that are of direct interest to Russia were left in place, but again we hear from Washington that we need right now, almost before the New Year, or immediately afterwards, to sit down and think about how to strangle North Korea even more. This is a bad position.

If this is what was meant when McMaster stated that American diplomacy will rely exclusively on the world's most powerful military force, then it's bad, and we are all facing serious trials. We will do everything, as President Putin said, to prevent this from happening and to promote unifying rather than divisive approaches to various international matters, so as not to isolate anyone, but to seek inclusiveness in each specific situation instead.

Question: The planned date for the Syrian National Dialogue Congress in Sochi – January 29 and 30 – was recently made public at the eighth round of talks in Astana. Do you think we have come closer to a political settlement of the Syrian conflict? Have your talks with the representatives of the regional powers and international players shown that the international community is ready to end this war?

Sergey Lavrov: The main thing is that the overwhelming majority of those who were fighting on the ground, and some of those who continue fighting, are ready for this. The creation of four de-escalation zones has demonstrated the willingness of the opposition forces that controlled the situation in each of these zones to launch dialogue with the Syrian Government, to end the bloodshed and to resume peaceful life. This peaceful life is already returning to these regions. The local government agencies, which have survived the hostilities, have resumed operation. These are the officials who should be trusted by the local residents. They have been encouraged to launch reconciliation dialogue with the authorities of each of the four de-escalation zones, starting with simple steps such as meeting people's needs, ensuring the delivery of humanitarian aid and allowing people to cross the boundaries of de-escalation zones via observation points and checkpoints maintained by the guarantor countries, as well as by Russia, the United States and Jordan in the case of the southern zone. In other words, these are people who have opted for peace. In addition to the remaining terrorist groups, there are also the Jabhat al-Nusra units, against which our Western partners and members of the US-led coalition refuse to take resolute action despite our repeated urging, although al-Nusra is on the UN Security Council's list of terrorist organisations. This means that there are plans to preserve al-Nusra for the eventuality that it will have to be used (some forces clearly want this) to attempt a regime change again.

The UN Security Council recently discussed a resolution on foreign terrorist fighters and measures to counter threats posed by returning FTFs, as well as several other aspects on the counterterrorism agenda. These resolutions have been adopted and will be used, although we wanted them to stipulate more resolute measures. However, the position of our American colleagues and some of their allies indicated their dual attitude to Jabhat al-Nusra. They said that this organisation need not be mentioned because it is already on the UNSC terrorist lists. Next they said that the "extradite or prosecute" principle should not be applied unconditionally, although this is a globally recognised principle for dealing with criminals. They argued that a jihadist who is apprehended before committing a terrorist attack or doing anything harmful could be regarded as other than a terrorist. They provided very interesting arguments, all of which were connected one way or another to the concept that was advanced by President Barack Obama. The current US administration, which usually does not like Obama's initiatives, has taken this concept up and is promoting it, at least at the expert level. I do not know what President Donald Trump and his closest aides think about this, but US experts are advocating the Concept of Countering Violent Extremism, according to which violent extremism is caused by authoritarian governments that keep their people cold and hungry, restrict democracy, oppress their citizens and violate human rights. Therefore, the international community should go over the authoritarian government's head to tell the people how they should spread democracy to improve their lives, which would supposedly help eradicate the causes of extremist sentiments.

Do you see what they are trying to achieve? I do not think I need to explain their motives. Therefore, we are seriously concerned about the attempts to speculate on counterterrorism goals, which should be common to all countries and without any double standards. These tasks and goals must not be used to promote self-seeking agendas, in particular, for replacing undesirable regimes.

To come back to the issue of Syria, I have mentioned the readiness of those who fought each other on the ground to return to peaceful life in de-escalation zones. As for the external players' readiness, I can only speak for those with whom we are working directly. I think that Iran and Turkey are ready for this, although they have some concerns that do not necessarily coincide with our approach. These concerns include the Kurds for Turkey and the rights of the Shia brethren for Iran. In principle, these concerns are understandable, but it would be nevertheless better if these problems were settled through the reconciliation of Shias and Sunnis within the framework of common Islamic solidarity.

We have long been promoting the idea of a new Amman conference and a declaration that would declare the unity of all Muslims. This would benefit everyone and would also help build bridges between the main protagonists in the region. We believe that it is necessary to help Saudi Arabia and Iran launch dialogue. They should stop blaming each other and should sit down for talks to discuss concrete issues of their concern. As large regional powers, they are bound to have interests in adjacent regions. And they need to develop some common rules. We are ready to help them do this. We have long ago proposed a security concept for the Persian Gulf, and it is still on the table.

I am ambivalent about our Western partners' attitude to the Syrian settlement. Our not always obvious or public dialogue with our American partners on de-escalation and some other military aspects in the areas where the US-led coalition comes into contact with the Syrian army, which we are helping, has shown that they are willing to act pragmatically and have confirmed that Syria should remain a united, multi-confessional and multi-ethnic country. At the same time, their initial assurances, about which US Secretary of State Rex Tillerson told me personally, that their only goal in Syria is to rout ISIS, have become rather vague. They say now that the defeat of ISIS will only be complete when an irreversible political process in launched in Syria, and some people add that this process should result in the removal of Bashar al-Assad. In other words, the agreements we have reached are being interpreted rather unscrupulously. It is just another example of lip service, the same as their promise not to expand NATO. The US archive materials, which have been made public recently, concern similar situations in terms of behaviour and diplomatic proprieties. I am not sure that the other Western countries would accept any settlement scenario or that they do not care about who will play the leading role in this process. Some of our West European colleagues clearly want to turn the tables, to assume leadership and to show that the issue cannot be settled without them.

We are not driven by such selfish considerations. We have advanced the Astana initiative, which has helped reach a settlement on the ground, separate the ordinary armed opposition from the bulk of terrorists and deliver a crushing blow at ISIS in Syria. By the way, the terrorists are trying to escape from Syria to other countries, but this is a separate issue.

We have now advanced the idea of a Syrian National Dialogue Congress. I would like to remind you that the Astana process was launched a year ago following a 10-month pause at the Geneva talks. As soon as the first Astana meeting was announced, UN officials said they would resume the Geneva process. We are glad if our practical example has encouraged this decision. However, nothing was done at the Geneva platform for a long time this year. Saudi Arabia was trying to unite the opposition, and we did our best to help it. But the process in Geneva came to a standstill again. When Saudi Arabia created a delegation comprising representatives from three groups – the Riyadh, Cairo and Moscow groups – we saw this as a big step forward, even though the individuals who were chosen to lead the joint delegation advanced unacceptable ultimatums in a bid to discredit our Saudi colleagues, who had assured us, just as UN Secretary-General's Envoy for Syria Staffan de Mistura, that the delegation would come to Geneva without any preconditions to hold direct talks with the Syrian Government. These opposition leaders deceived Staffan de Mistura and, regrettably, also our Saudi partners. I hope efforts will be taken now to change this situation.

UN Secretary-General's Envoy for Syria Staffan de Mistura visited Russia. Together with Defence Minister Sergey Shoigu, we tried to explain to him that this kind of behaviour by their protégés is unacceptable. I hope proper conclusions will be made from this. At the same time, we are working with the Syrian Government to encourage it to act constructively. I do not think it is right to blame the Syrian Government for refusing to talk with those who demanded government change, contrary to their obligations. What we need is to give a push to the opposition delegation. Several radicals were removed when the delegation was formed, but it appears that the format of the delegation should be revised to weed out any remaining radicals.

We advanced the idea of a Syrian National Dialogue Congress with due regard for the need to implement UN Security Council Resolution 2254. It stipulates direct broad-based talks between the representatives of the Syrian Government and all opposition groups, during which the Syrian people will decide the future of Syria. It is obvious that not all opposition groups are represented at the Geneva talks in the delegation of the Riyadh, Moscow and Cairo opposition groups. The overwhelming majority of these people are émigrés who do not live in Syria but in various European capitals. Seeking to implement the provision of UNSC Resolution 2254 on holding inclusive talks where the entire range of opposition groups are represented, we appealed to the opposition through our military personnel at the Hmeymim airbase and using the contacts they developed while ensuring the operation of the de-escalation zones and normalising life in Aleppo and other liberated towns. I believe these efforts to promote the political process involved over 1,700 Syrians, including sheikhs and tribal leaders, who probably did not take part in the hostilities but they live "on the ground" and so they are not indifferent to what kind of a constitution new Syria would have. They are not represented in the delegation that went to Geneva. We have compiled a long list, which we are coordinating with our partners, Turkey and Iran, which are the other guarantors of the Astana process.

A trilateral summit was held in Sochi on November 22, where the initiative was supported. We told Staffan de Mistura that we are not trying to snatch the palm from Geneva. Our goal is to help launch a constitutional process not in a restricted format, when mostly those who live beyond Syria would be represented, but in as large a format as possible in order to form a Syrian commission that will draft a new constitution. The establishment of this commission will give a new lease of life to the Geneva process. We will give our full support to drafting a new Syrian constitution in a UN-led process under the guidance of UN Secretary-General's Envoy for Syria Staffan de Mistura.

Question: I would like to clarify something. Do you think the US presence in northern Syria, with its 10 bases or so, is helping to organise the Syrian National Dialogue Congress, or is it hampering the political process?

Sergey Lavrov: I think this has little to do with the Congress. It is relatively clear how this process will develop. We see the support for the Congress initiative by the overwhelming majority of Syrians "on the ground." We are certainly concerned about the American military bases in Syria and especially about the information that some of these bases are beginning to be used to train militants, including former members of terrorist groups. We spoke about this publicly more than once. This is a direct violation of the sovereignty and territorial integrity of Syria. The Syrian Government has been pragmatic in dealing with the Russian Aerospace Forces, which were invited to fight the terrorists absolutely legitimately. This was a pragmatic decision that reflected the priority of destroying the terrorists. We understood that the American coalition (especially if slightly prodded, because at first it was very passive) could help to eliminate terrorist seats. This happened. Although it was clear that the Americans were working half-heartedly there until the Russian Aerospace Forces joined them. Their policy was questionable, especially because they spared not only the Jabhat al-Nusra, but very often failed to strike ISIS units when it was necessary. But this is another question.

We are cooperating with the Americans for equally pragmatic reasons, as we also do with the Jordanians in the southern de-escalation zone. A joint tripartite monitoring centre was established in Amman. This is a beneficial initiative, given the proximity of the Golan Heights and Israel's concerns. Many factors have to be taken into account. This is such a holy mess, influenced by much of what is happening "on the ground", as well as by external players, some promoting their own interests, or those of their fellow tribesmen, clansmen, fellow believers, and others, on the contrary, wishing to prevent adversaries from strengthening their positions in Syria. Without a broad-based and inclusive intra-Syrian dialogue, which we want to start, without a dialogue with everyone represented and everyone guaranteed that their interests will be taken into account in the final state structure of Syria, the Geneva process is unlikely to succeed. I hope that the convocation of the Syrian National Dialogue Congress at the end of January will give a practical impetus to the Geneva talks, since a much wider range of Syrian parties need to be involved in the constitutional process than those represented in Geneva.

Question: Now about Russian-Egyptian relations. Our countries have recently signed an agreement on aviation cooperation, using the aviation infrastructure. Will part of the Russian air force be redeployed from Hmeymim to Egypt? Are you discussing any counter-terrorism cooperation in Libya?

Sergey Lavrov: We have been cooperating with our Egyptian colleagues very closely for a long time. We continue to expand our strategic partnership in all areas, including the economy, trade, and the investment sector. We have also drafted a nuclear power station construction project, a project for establishing a Russian industrial zone in Egypt, and there are many other projects, including, of course, those involving cultural and humanitarian ties. Military and military-technical ties occupy a very important place, first of all, in the context of the threat posed by terrorists in this entire region and being seriously felt, including in Egypt.

We unequivocally support the Egyptian leadership's determination to irreconcilably combat terrorism. Our military-technical cooperation stipulating deliveries of the required equipment and weapons for counter-terrorism operations continues to develop very actively. Our military maintain very close contacts. We hold joint military exercises. This helps exchange experience, including our counter-terrorism experience obtained in Syria.

There are no plans to permanently redeploy Russian military units from Hmeymim to Egypt.

The Government of the Russian Federation and the Government of the Arab Republic of Egypt have recently signed a technical cooperation protocol to maintain civil aviation safety. This document reflects the partner-like nature of our relations and envisions specific things, including the free submission of requests to use the air space of each other state, the provision of military navigation services and efforts to guard parking areas. These mutual military measures are in line with the most-favoured nation status.

Question: Former President of Yemen Ali Abdullah Saleh has been recently assassinated. It is hard to understand the current situation in that country. What does Russia think about developments in Yemen? The Russian Embassy has been relocated from Yemen to Saudi Arabia. How, in your opinion, can the political process be advanced in the context of disagreements between Persian Gulf countries?

Sergey Lavrov: The assassination of the former President of Yemen Saleh has seriously aggravated the situation and allowed the Houthi movement to become more radical. They maintained an alliance with the General People's Congress headed by Saleh, and internal disagreements later flared up between them. We persuaded the warring parties to join the all-out intra-Yemen dialogue. Although we met with understanding, something backfired. Quite possibly, there are some subjective factors involved there that should be taken into account. It goes without saying that, regardless of local developments (the Yemeni situation has become seriously aggravated, and the country faces the prospect of an all-out blockade) there is no alternative to peace talks. We are involved in the work of the support group whose members meet to assist the UN Secretary-General's Special Envoy for Yemen. I hope that he will promote unbiased reunification initiatives, without supporting any side; this is very important for a mediator.

Of course, we are also holding talks with our Saudi colleagues, the United States, the United Kingdom and Iran. While replying to another question, I have just noted that, of course, it would be much easier to resolve many matters, if members of the Cooperation Council for the Arab States of the Gulf and the Islamic Republic of Iran reached an agreement. Permanent mutual suspicions and a refusal to maintain contacts only make the situation worse. It is important to speak and look someone in the eyes, to listen to one another's concerns and to find some ways of taking them into account on a reciprocal basis. I hope that we will eventually come to it.

Question: Several Latin American countries will hold elections in the coming year. Of particular interest are Mexico, Venezuela and Cuba. President of Cuba Raul Castro said he plans to leave his post in April. Should we expect a change in Mexico's political course, or any improvements in Venezuela, especially when it comes to the tension between the government and the opposition, or any drastic changes in Cuba?

Sergey Lavrov: We have very good relations with Latin America. We can see the wave-like political process. Some time ago, leftist governments took office in most countries; now right-wing governments prevail. I can tell you, as I see it, we do not feel any drastic changes in the Latin American governments' approaches to relations with the Russian Federation. They do have disagreements between local parties about domestic policies, as so often the case. Yet, we certainly cannot fail to notice some of our Western partners' attempts to influence the course of the elections, as it was in Venezuela, for example.

Very positive changes have been achieved in that country, some of them during the recent gubernatorial and municipal elections, which were absolutely peaceful and their results were approved, much to the surprise of those who craved scandal. In Venezuela, the negotiation process is underway between the Government and the opposition. I am confident that if no one interferes, they will reach some agreement. These signs have been observed before; however, unfortunately, once there is some progress, immediately there appear those who whisper to the oppositionists, advising them to toughen their position. We urge them to stop doing this. This is not in the interest of either Venezuela or the whole of Latin America.

As for Mexico, we have not seen any "Russian factors" in that country's election campaign. Nobody accuses us, thank God, of interfering in elections in that country. But I would like to note that we still have not received a single fact from any government that accuses us of interfering in their internal affairs. Not a single fact has been presented. So they probably do not have any facts.

Mexico and Russia have very good plans for developing cooperation – in investment, trade, civil aviation, and a number of other high-tech areas. We cooperate closely in the UN, G20, and CELAC.

As for Cuba, it is our long-time friend, and a time-tested partner. This is a country that has become a legend in its hemisphere, and indeed in the world. A country that, I believe, is very dignified, and holding itself proudly despite the hardest trials it has gone through. We are in constant contact with the current leadership of Cuba, as well as with all its representatives. We see no reason for our relations to change now that a new parliament is going to be convened in April, as far as I know, which will elect a new leader. I am looking to the future with optimism.

Question: Donald Trump's migration policy continues to provoke indignation in Latin America. Nevertheless, the list of those criticising Washington is not growing. On the contrary, the region continues its turn "to the right." Against this background, China's influence is growing stronger in certain countries. How will Russia behave towards its partners in Latin America under these circumstances? Will it go on cooperating with its long-standing partners? Will pragmatic relations be promoted with other countries in the region?

Sergey Lavrov: As for migration, it does not concern us directly where Latin, South and North Americas, as well as the Caribbean are involved. We can only comment on this proceeding from the universal problems put forward by the current stage of migration not only in your region but also in North Africa, the Middle East, Northern Europe, as well as other parts of the world.

In New York, approximately a year ago, it was decided to start talks on drafting a treaty with regard to a streamlined, legal migration and the talks got under way in early December in Mexico. Regrettably, the US delegation failed to turn up and the United States declared that it was withdrawing from the process, although it had supported last year's decision on starting the talks. The new US administration is unwilling, in this particular case, to follow in the wake of the steps taken by the Obama administration (we are witnessing this in other situations, too). But the problem will not disappear by itself: we should address it and come to terms on migration.

In Europe, we are in favour of the migration flows becoming subject to agreements, with account taken of the reasons that have accelerated these flows to an unimaginable degree. The reasons are clear: the Arab Spring and outside interference therein, as well as the bombing of Libya, which immediately turned into a "grey zone," a corridor for all illegal arms deliveries and human flows, with militants heading south, migrants north, etc.

In Latin America, thank God, there were no disasters comparable to those that were and still are underway in the Middle East and North Africa, but anyway it is necessary to come to an agreement. As I understand, the majority of the migrants that are causing problems for Washington are economic migrants who are simply seeking a better life. It is not up to me but those living in the region to decide. I am just proceeding from the assumption that it is always better to come to an agreement than to isolate someone; it is better to build bridges than walls. I hope that eventually it will be this way.

As for China's focus on this region, it is also absolutely natural. China is the second (and will soon be the first) economic power in the world today. China has interests and financial resources that it wants to invest for the benefit of its economy and the country, which is rather short of its own mineral resources. Of course, Latin America is a very promising region for Russian companies as well. As far as our economic operators' capabilities allow, we are also active in Latin America.

I don't rule out and, moreover, think that it would be right for Russian and Chinese entrepreneurs to consider situations where they will be able to pool their efforts (the first such contacts are already in progress). There are quite a few projects of this kind. I am confident that as Russian and Chinese businesses go deeper into Latin America and gain a better understanding of what and how things are going there, such projects will materialise not only as Russian-Chinese but also as BRICS undertakings supported by the New Development Bank that was created by BRICS and originally conceived as an institution for financing projects in BRICS member-countries. But its Charter does not exclude projects in other regions either (a BRICS office is being launched in South Africa). I think this is also a promising form of cooperation, albeit realisable not today, and not tomorrow.

Question: It appears that US-Cuba relations are worse under the current US administration than they were under the Obama administration. The situation further deteriorated when the Trump administration accused the Cuban authorities of acoustic attacks on US diplomats in Cuba. What can we expect from US-Cuba relations in this situation?

Sergey Lavrov: We are not happy about this. We supported the policy of normalising relations with Cuba under the previous US administration, when President Barack Obama visited Cuba and the US embassy reopened there. It should be said for the sake of justice, though, that the US Interests Section [of the Swiss Embassy in Havana] operated as a full-scale embassy and was several times larger than any other diplomatic agency on the island. However, diplomatic symbols are very important for political relations. The reopening of the US Embassy in Havana and the Cuban Embassy in Washington was a very positive sign.

Practical steps have been taken to normalise bilateral trade and economic relations despite the biggest obstacles still in the way such as the trade and economic blockade, which was introduced 55 years ago and is condemned every year in a UN General Assembly resolution, against which the United States and one or two of its close or not very close allies routinely vote. The EU, just as all the other countries, votes for lifting the economic blockade. There is also the problem of the Guantanamo base and the illegal military prison located there. All these issues are to be coordinated in bilateral agreements, though. For our part, we will support the sovereign positions of the Cuban authorities.

Regarding the blockade and the embargo, Cuba has shown convincingly, if anyone needed convincing, that the use of such enforcement methods for political purposes is pointless. Regrettably, this lesson has been wasted: the Americans, starting with Barack Obama, reach for the sanctions stick whenever they fail to attain their goals diplomatically. A case in point is North Korea, which we have discussed a while ago. We have the physical strength [to deal with this problem]. But, to paraphrase a well-known saying, all brawn and no diplomacy [does not help in such cases].

We would like the United States to normalise its relations with Cuba. Instead we see news about mysterious acoustic attacks targeting US diplomats. I know that Cubans and the FBI worked together on this case, and that FBI agents even travelled to Havana to investigate it and have found nothing to confirm the sonic weapons version. The FBI agents, being honest people, have reported their findings to politicians, who presumably decided against making their conclusions public. I have heard about this. I cannot vouch for this, but the United States would have taken practical or legal measures if this were not so. In addition, nobody has explained what acoustic attacks are.
South Africa picks up the baton of BRICS Chairmanship (ЮАР подхватила эстафету председательства БРИКС) / Russia, January, 2018
Keywords: SA_chairmanship, economic_challenges, global_governance, social_issues

BRICS is an informal inter-state association whose objective is to develop a consistent, active, pragmatic, open and transparent dialogue and cooperation between countries

MOSCOW/PRETORIA, January 1. /TASS/. South Africa is taking over the BRICS (Brazil, Russia, India, China, South Africa) Chairmanship on January 1. The decision to this effect was made at the most recent summit of this informal association in Xiamen, China, in September 2017.

South Africa: No chairmanship agenda yet

Vice President of the BRICS New Development Bank, Leslie Maasdorp, told TASS that the South African government has not yet hammered out the objectives and agenda of its chairmanship in this integration association.

Nevertheless, one can judge the priorities of South Africa's policy in relations with its club partners, which are to determine its agenda at the joint events in 2018, based on President Jacob Zuma's speech at a special session of the BRICS Business Council held in September 2017 during the 9th summit in Xiamen.

Efforts to promote economic development and growth, increase trade volumes and attract investment to the industrial sector of South Africa's economy were identified as the key objectives for the country's participation in this format at that time. Special hopes have been pinned on investment in industry, because, according to government's plans, they should assist the authorities in accomplishing their key declared aims, namely, creating new jobs, and reducing poverty and social inequality.

Resolving conflicts in Africa

Cyril Prinsloo, a researcher at the South African Institute of International Affairs, has singled out the development of a common approach to the problem of maintaining peace and security in the countries of the African region, which traditionally remains a major source of instability. These are just some of the political issues Pretoria will tackle during its chairmanship in the group of five nations. Currently, more than 1,000 South African peacekeepers are involved in the United Nations Organization Stabilization Mission in the Democratic Republic of the Congo.

Internal political difficulties in BRICS countries

According to Vyacheslav Kholodkov, Head of the International Economic Organizations Sector at the Russian Institute for Strategic Studies (RISS), the meeting of the BRICS leaders will not be easy due to the current internal political difficulties in the association's member-states.

"Since South Africa will hold the BRICS chairmanship in 2018, the summit will be held in that African country. The summit will be not an easy one from a domestic policy point of view," Kholodkov told TASS, referring to the upcoming 2018 presidential elections in Russia and Brazil as the factors that could make the meeting more difficult. In his view, the situation in Brazil will be the most difficult. "The situation there is very tense due to the fact that there are many flaws in the policy pursued by incumbent head of state Michel Temer, and he is under fire for that. Therefore, the (presidential) election can trigger an internal political standoff and exacerbate the situation in the country, which could turn ugly."

The expert also pointed to the loss of influence by South African leader Jacob Zuma. "The situation of South African President Jacob Zuma has also been volatile recently. The African National Congress (the oldest political organization of South Africa's African population and the ruling party – TASS) raised the issue of his voluntary resignation over a number of scandals, due to which a change in that country's political leadership is possible."

"In such a difficult internal political situation in South Africa, Brazil and, to some extent, in Russia, the summit and preparations for it will be much more complicated," Kholodkov emphasized. "These countries' top officials will have to pay much more attention to work to tackle internal issues, which means that less time and energy will be dedicated to preparations for the landmark summit. Therefore, I expect no breakthrough decisions at this summit."

AIDS can be major issue during South Africa's chairmanship

According to Kholodkov, the development of joint mechanisms to fight and prevent the HIV infection could be one of the most pressing and key issues for both South Africa as the BRICS chair and the association's summit. "One of the central problems that could be discussed at the BRICS summit in South Africa and for which we could find some mutually acceptable solutions is the spread of the HIV infection," he said. "The fact is that the situation in both Russia and South Africa in this regard is very difficult."

The expert noted that Russia and South Africa could adopt China's productive experience from its efforts to fight and prevent this disease. "China has a very positive experience. The number of new HIV-infected people has decreased dramatically there," he said. "We need to use China's experience and hammer out a common program."

"Developing a broad strategy to fight the HIV infection is a major task facing both our country and other BRICS member-states," the expert concluded.

Informal association of BRICS states

BRICS (Brazil, Russia, India, China and South Africa) is an informal inter-state association whose objective is to develop a consistent, active, pragmatic, open and transparent dialogue and cooperation between countries. The association's member-states also share such principles as a non-aligned status and activities that are not aimed against any third parties. Russia initiated the creation of the association. Annual BRICS summits have been held since 2009 in its member-countries alternately. The host country is the association's chair and ensures coordination of all current activities. The 2018 summit is set to be held in Johannesburg, South Africa.
Investment and Finance
Investment and finance in BRICS
Joint research paper «Use of national currencies in international settlements. Experience of the BRICS countries» (Совместная исследовательская работа «Использование национальных валют в международных расчетах. Опыт стран БРИКС») / Russia, December, 2017
Keywords: economic_challenges, emerging_market, research, trade_relations

We are glad to present you a joint research paper «Use of national currencies in international settlements. Experience of the BRICS countries».

Authors: Uallace Moreira Lima, Marcelo Xavier do Nascimento, Sergey Karataev, Nikolay Troshin, Pavel Zakharov, Natalya Gribova, Ivan Bazhenov, Shekhar Hari Kumar, Ila Patnaik, Liu Dongmin, Xiao Lisheng, Lu Ting, Xiong Aizong, Zhang Chi, Ronney Ncwadi, Jaya Josie
Publishing house: ………………………………. RISS
Pages: ……………………………………….. 114

Financial crises of the past decades revealed the instability of the modern international monetary system based on a single dominant currency. Increasing the role and turnover of national currencies in international economic transactions and payments would contribute to redressing the existing imbalance. BRICS countries' experience indicates that effi cient currency internationalization can be reached by both forming a number of prerequisites and fi nancial and economic policies pursued by the authorities. Strengthening the BRICS countries' collaboration and implementation of joint initiatives should help create favorable conditions for promoting a wider use of their currencies in international settlements.
Monetary Policy and Industrial Output in the BRICS Countries: a Markov-Switching Model (Денежно-кредитная политика и промышленный выпуск в странах БРИКС: модель с марковскими переключениями) / Germany, January, 2018
Keywords: economic_challenges, research

This paper examines whether the five BRICS countries share similar business cycles and determines the probability of any of the countries moving from a contractionary regime to an expansionary regime. The study further examines the extent to which changes in monetary policy affect industrial output in expansions relative to contractions. Employing the Peersman and Smets (2001) Markov-Switching Model (MSM) and monthly data from 1994.01–2013.12, the study reveals that the five BRICS countries have similar business cycles. The results further demonstrate that the BRICS countries' business cycles are characterized by two distinct growth rate phases: a contractionary regime and an expansionary regime. It can also be observed that the area-wide monetary policy has significantly large effects on industrial output in recessions as well as in booms. It has also been established that there is a high probability of moving from state one (recession) to state two (expansion) and that on average, the probabilities of staying in state 2 (expansion) are high for each of the five countries. It is, therefore, recommended that the BRICS countries should sustain uniform policy consistency (monetary policy), especially as they formulate and implement economic policies to stimulate industrial output.
BRICS the Rise & Fall (Взлеты и падения БРИКС) / USA, December, 2017
Keywords: economic_challenges, expert_opinion, digital
Author: Martin Armstrong

The first thing to go when a country is moving into economic crisis is the arts. This is intermixed with various social programs. As the economic crisis broadens, demand for taxing the rich rise. However, all this accomplishes is to cause capital to hide and hoard even more refusing to invest or spend and this then adds to the economic decline.

The BRICS were touted as the new rage in the world economy. The BRICS were even holding their own summits and they were supposed to surpass the G7, were all the forecasts. Brazil, Russia, India, China and South Africa became known as the "BRIC" nations back in 2001 which was a term coined by of course Goldman Sachs.

This curiosity about how the BRICS would displace the G7 as the world leading economic power was up there with the DOT.COM bubble and more recently the BitCoin Bubble. This five-country association of emerging economies has demonstrated that such hype of counting on such fades to alter the future have always ended in disappointment.

Russia ran into an economic headwind and sanctions, China has slowed remarkably and has now shifted its focus to try to build its internal economy as we see in Suadi Arabia and the UAE in the Middle East. India committed suicide trying to force its economy out of a cash-based economy with his leftist Prime Minister who has done far more harm to India than good.

South Africa has seen political change sweeping the nation because of the failure of this BRIC dream. The new ANC government of South Africa wants to nationalize the central bank and expropriate the white minority. They want to now take control of the central bank 100% and you know what that means – total economic disaster. The bank will now become the political tool of government divorcing any economic management whatsoever.

Then there is Brazil, burdened with corruption and everything within the social structure is collapsing. The symbol of this economic failure is the effective closure of its Rio de Janeiro's splendid Municipal Theatre which has gone dark as months of unpaid wages forced ballerinas and opera singers into poverty.

Russia's Central Bank Considering Cryptocurrency Within EEU, BRICS (Центробанк обсудит введение цифровой валюты в рамках БРИКС и ЕАЭС) / Czech Republic, December, 2017
Keywords: digital, economic_challenges
Czech Republic

Russia's central bank says it is considering the possibility of introducing a digital currency within the Russian-led Eurasian Economic Union (EEU) and the so-called BRICS countries (Brazil, Russia, India, China, and South Africa).

Bank of Russia First Deputy Chairwoman Olga Skorobogatova told reporters in Moscow on December 28 that the issue will most likely be studied during 2018, including consultations within Russian's partners in the EEU and BRICS.

"There are a lot of technological and macroeconomic aspects, so I think next year will be devoted to working out approaches to the possibility of issuing such a supranational cryptocurrency," Skorobogatova said.

Earlier on December 28, during a Finance Ministry meeting where a draft law regulating cryptocurrency operations was discussed, Skorobogatova said Russia's central bank will not consider cryptocurrencies as means of payment.

Deputy Finance Minister Aleksei Moiseyev said his ministry may approve the use of cryptocurrencies for initial coin offering (ICO) investments.

Moiseyev said digital money would be assessed not as currency for payment but rather as property. He also suggested that cryptocurrency mining activities should be taxed.

On December 22, Belarusian President Alyaksandr Lukashenka signed a decree that legalizes transactions in cryptocurrencies such as Bitcoin.

Lukashenka said the move is aimed at attracting foreign investors and transform Belarus into a regional center for block chain technology, which makes online transactions faster, anonymous and more secure.
World of work
Social policy, trade unions, actions
ICT Services Trade in the BRICS Countries: Special and Common Features (Торговля услугами ИКТ в странах БРИКС: специальные и общие функции) / Russia, January, 2018
Keywords: research, trade_relations, economic_challenges, digital

Involvement in the global innovation system and the level of ICT influence the technological state of the Brazil, Russia, India, China and South Africa (BRICS) countries and their position in the world economy. Many studies were inspired that examined these economies from various prospective. However, only a few have specially focused on information and communication technologies (ICT), and particularly in services sectors. This paper aims to contribute to the analysis of the evolution of services ICT systems in BRICS. The main hypothesis of the article is that BRICS has made significant progress in economic cooperation, at the same time, the group has not been equally successful in designing and implementing their own agenda in the technology field. The BRICS are not released at a sufficient level of interaction and advocacy in ICT services, which would increase their role in international trade. The authors observe the retrospective of the process of formation of national innovation systems of the country participants of BRICS, consider current trends and challenges in the development of national markets for these services in each member country, and highlight future directions for the development. Then they provide an analysis of BRICS countries' participation in the international ICT services trade. An estimation of revealed comparative advantage indicators allowed determining the dynamics in comparative advantage for ICT service trade in BRICS. Despite the increase in the volume of export operations in the trade in ICT services, their level of competitiveness is declining. The most vulnerable to the reduction of revealed comparative advantage was India, at the same time Brazil and South Africa showed the least volatile dynamics. It is argued that the policies aimed at promoting investment and enhancing conditions for trade in ICT services contributed significantly to services exports expansion in BRICS. Based on the analysis, a conclusion is made about the current problems and insufficient level of technical cooperation within the group.
Regional Aviation Working Group established (Создана Региональная авиационная рабочая группа) / South Africa, December, 2017
Keywords: Business_Council
South Africa
Author: Carin Smith

Cape Town - The current aviation environment in South Africa and the rest of Africa is more challenging and competitive than ever, according to Javed Malik co-founder of PAK Africa Aviation, which owns Johannesburg-based low-cost aviation company Skywise Airlines.

Airports Company SA (Acsa) suspended Skywise's flights on December 2 2015 due to unpaid airport charges for landing, take off, parking of aircraft and related service charges. Acsa has maintained all along that its decisions regarding Skywise were taken in its own best commercial interests, and to ensure the sustainability of the aviation industry.

In Malik's view, if ever there was a time for Africa to redefine the aviation sector as a powerful tool for socio-economic development – it is now. He was recently appointed to be the inaugural co-chair of the newly formed Regional Aviation Working Group of the South African Chapter of the BRICS Business Council (SA-BBC).

Fin24 asked Malik to explain more about this council and its activities.

What is the BRICS Business Council? Who started it and who are some of its members? Where is it based?

The BRICS Business Council is a coalition of private sector organisations, captains of business and conglomerates who form a sub-structure of the BRICS alliance of nations.

BRICS countries have two billion people and occupy 40% of the planet's land area. We produce a third of the world's industrial products and one half of agricultural goods.

The BRICS Business Council was formed in March 2013 during the Fifth BRICS Summit in Durban. Each country has its own chapter of a Business Council and in the case of South Africa, the unit is called the South African Chapter of the BRICS Business Council (SAC-BBC).

It is chaired by Dr Iqbal Survé, a leading businessman, philanthropist, human and social rights activist, and founder and chair of the Sekunjalo Group. SAC-BBC is headquartered in Cape Town.

The overriding objective for all the Business Councils is to promote and strengthen business, trade and investment ties among the business communities of the five BRICS countries.

Seven working groups in the areas of infrastructure, manufacturing, financial services, energy and green economy, skills development, agribusiness and deregulation have been formed to facilitate implementation of the principal objectives of the BRICS Business Council.

While all seven are of utmost importance, deregulation, skills development and building infrastructure are high on the list of priorities for the SA-BBC, based on the immediate needs of South Africa and the greater continent.

What have been some of the activities of the Council – for instance has it met with delegations of other BRICS countries and if so, what were some of the outcomes – for instance business deals?

So much has been achieved by the SA-BBC in enhancing cooperation and ensuring that South Africa is able to channel foreign direct investment into the economy, create jobs and enhance skills development by leveraging on the BRICS dividend.

Through BRICS, South African companies have access to the global market, and access to capital.

The SA-BBC has been instrumental in ensuring major achievements within BRICS such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), both of which have led to tangible benefits to and created considerable opportunities for businesses.

The NDB invests in crucial sectors of BRICS and emerging nation's economies, such as infrastructure and sustainable development projects. The CRA provides an additional safety net.

The first regional office of the NDB is the Africa Regional Centre (ARC), located in Johannesburg.

Let me point out at this juncture that I totally agree with Dr Survé who has repeatedly insisted that our partnership with BRICS is not meant to be at the exclusion of other investment partners, such as the EU and North America. It is intended to augment these partnerships and draw increased investment.

Why was the aviation sector part of the BRICS focus?

The aviation and aeronautics sector are a catalyst for growth and is a powerful tool for economic development, intra-continental trade, and poverty alleviation through job creation.

BRICS governments and the private-sector within the five countries, and emerging economies understand that they must claim their stake and lead progress in this powerful sector.

According to the Fourth Annual Report of the BRICS Business Council, globally, airline traffic is forecast to grow over 4.5% each year for the next 20 years, which will drive the need for thousands of new aircraft.

The current worldwide fleet of 25 000 aircraft will grow to approximately 45 000 between 2016 and 2036 and the passenger numbers will reach 7.2 billion by 2035. The demand for air travel will continue to put pressure on the aviation sector.

It is important for BRICS countries to have a highly efficient and effective aviation industry supported by government policies and regulation particularly on the regional aviation sector. Enhanced BRICS government and private sector cooperation will help in fostering new opportunities for investment in the sustainable and intelligent aviation infrastructure of the future.

Hence the establishment of the Regional Aviation Working Group for which I was recently appointed co-chair.

What are the plans of the of the Regional Aviation Working Group?

The South African aviation industry contributes over R74bn to the economy and supports 350 000 jobs within the airlines, airports, grounds and auxiliary levels South Africa, and greater Africa's aviation industry holds great promise for expansion.

We need to exploit this opportunity and encourage the private sector to be fully involved and address the issue of connectivity on the continent.
Before I go deeper into our vision, I would like to thank Dr Survé and his team for the confidence shown on us. With team work and by applying my experience, education and networks will ensure the industry keeps pace with the continental and global markets.

Please give details of the kind of cooperation your working group with have with the other BRICS countries?

Our collective profiles within the BRICS association of nations is very impressive and working together we will implement a winning strategy. Fellow BRICS nations have made remarkable progress in terms of infrastructure and operations models.

Let me give you the breakdown of success angles and areas with great potential as follows:


Embraer began with regional aircraft and military COIN aircraft, and has advanced into the business jet market to the extent of opening a factory in Florida.

It will follow Airbus and Boeing in launching a re-engined version of its E-Jet airliner family. It has big ambitions, too, in military aerospace. Its Super Tucano light attack aircraft was selected by the US for supply to the Afghan Air Force.


The country is historically an aerospace technology leader. The Soyuz rocket remains the only way the astronauts of any nation can get to the International Space Station. The country has recorded a degree of commercial aviation success too and has the MC-21.


The country has a joint project with Russia to build stealth fighters and is also planning to develop its own unmanned drone.


The country will need 5 000 pilots annually over the next 20 years.

South Africa

Our aerospace industry is known for its innovative solutions. The country has two original equipment manufacturers: Denel Dynamics and Advanced Technologies which produce unmanned air vehicles and missiles.

We also have aero-structures and aircraft component manufacturers (Saab Aero-structures and Aero-sud) and some small manufacturers of sports aircraft and gliders. There are also companies manufacturing avionics and sensors.

Any other comment?

Our primary focus will be to bring together leading representatives of the aviation sectors representing government authorities, airlines, aerospace industries and service providers.

We want strategic dialogue on the prospective aviation matters among the BRICS countries. Our goal is to develop a strong sector in both passenger and cargo transport among Brics countries.

We will promote joint ventures on establishing maintenance, repair and operating facilities. We will also promote secondary airports and the balance of traffic rights agreed in the underlying bilateral agreements amongst BRICS member states.

Safety and security matters within the aviation space of BRICS are of paramount importance.

We have also agreed with Dr Survé that meaningful transformation that encompasses youth and women empowerment will be a top priority in all our operations.

The BRICS Aviation Group could not come at a better time due to the fact that South Africa will be hosting and Chairing the 2018 BRICS Conference under the leadership of Dr Survé as chair. At this conference it will be our window of opportunity to bring together trade, tourism and transport in the industry.

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