Information Bulletin of the BRICS Trade Union Forum

Monitoring of the economic, social and labor situation in the BRICS countries
Issue 34.2022
2022.08.22 — 2022.08.28
International relations
Foreign policy in the context of BRICS
BRICS Plus hailed as key to prosperity (БРИКС Плюс признан ключом к процветанию) / China, August, 2022
Keywords: brics+

Rebalancing seen as helping to give developing countries a louder voice

The BRICS Plus framework would help contribute in reinforcing multilateralism, respect for international law and peaceful settlement of disputes, the Argentine embassy in South Africa says.

BRICS and BRICS Plus would help address common challenges and facilitate "dialogue based on shared interests", the embassy told China Daily.

"BRICS Plus offers a flexible international cooperation scheme between the BRICS and other emerging developing countries and allows a country like Argentina to move freely based on the principles that guide its foreign policy, namely: inclusive multilateralism, attachment to international law, peaceful settlement of disputes, special and differential treatment for developing countries, the search for a global balance with development and a greater participation of our countries."

The embassy said what BRICS stands for resonates with Argentina's foreign policy. BRICS Plus would help promote and balance redistribution of forces in the multilateral system in favor of developing countries, it said.

Argentina would be a useful member of BRICS Plus with its active membership of "different regional and interregional integration and coordination spaces".

Argentina is a member of the Community of Latin American and Caribbean States, G20, Organization of American States, the Southern Common Market, the G77 and the Alliance for Multilateralism. Argentina would be better placed to bring consensus to the world characterized by geopolitical tensions, the embassy said.

"Participation in BRICS Plus will make it possible to reinforce the role of our country as an actor that dialogues and cooperates with all the main powers, both from the developed and emerging worlds, and which has the possibility of contributing in all cases to promoting visions closer to the realities and needs of Latin America and the Caribbean," the Argentine embassy in South Africa said.

"We are fully convinced that only actions agreed upon by all the actors of the international community will allow us to return to a time of peaceful coexistence and will give greater stability to the economic cycle and will help us."

The embassy said Argentina would help to tackle energy and food challenges as a global food producer with one of the largest shale gas reserves. Advocating for greater liberalization of agricultural trade within the framework of BRICS and BRICS Plus would promote efficient use of natural resources.

Fulufhelo Netswera, a professor in management sciences at Durban University of Technology in South Africa, said BRICS Plus would add a voice to the growing call for the reformation of global multilateral institutions. All countries "deemed developing or third world" and that do not have veto powers or any influence in the UN Security Council are potential members of the BRICS family, Netswera said.

"The continuous expansion of BRICS membership balances global multilateral hegemonic powers, at both economic and political levels. BRICS Plus should continue lobbying for a just and stable world where all nations have a voice."

The Bretton Woods system was meant to guarantee world peace and stability but had withered, Netswera said, and "there is much stronger and dictatorial Western hegemony which is led by the US". BRICS Plus should join in lobbying for the UN Security Council, the World Bank and the International Monetary Fund to be reformed, he said.

"In the absence of much-needed reforms, BRICS Plus should find an alternative mechanism that guarantees the economic and political security and stability of the developing world."

The writer is a freelance writer for China Daily.

Investment and Finance
Investment and finance in BRICS
What would BRICS expansion mean for emerging markets? (Что будет означать расширение БРИКС для развивающихся рынков?) / United Kingdom, August, 2022
Keywords: economic_challenges, expert_opinion
United Kingdom

– BRICS is considering accepting several emerging markets into the grouping

– High energy prices and US interest rates are encouraging expansion

– Trade between Russia, China and India has grown notably since March

– Food and renewable energy offer significant potential for cooperation

As emerging markets recover from the Covid-19 pandemic and face financial headwinds due to interest rate hikes in the US, the BRICS group – Brazil, Russia, India, China and South Africa – is looking to expand its membership to tackle shared challenges.

At the 14th BRICS Summit held in July, China, Russia and India discussed the potential entry of Egypt, Saudi Arabia and Turkey, which are reportedly preparing applications.

This announcement came after the disclosure in June that Iran and Argentina had already applied with support from China. In addition, international media has reported that Algeria, Bangladesh, Indonesia, Mexico, Nigeria, Sudan, Syria, Pakistan and Venezuela have expressed interest in joining the organisation.

An online meeting hosted by China in May of potential BRICS+ applicants included the foreign ministers of Argentina, Egypt, Indonesia, Kazakhstan, Nigeria, the UAE, Saudi Arabia, Senegal and Thailand.

It is unclear who will join and when, as there is no formal process for welcoming new members, and any expansion would likely take place in piecemeal fashion. However, BRICS expansion could offer emerging markets the opportunity to build new economic synergies.

Coined in 2001 as a term to describe a group of high-potential emerging markets, BRICS have become central drivers of the world economy. As of December 2021, they accounted for 40% of the world's population, 25% of nominal GDP at $16trn, 30% of land mass and 18% of total trade flows, while holding a combined $4trn in foreign exchange.

Bilateral trade growth

Russia's invasion of Ukraine and Western sanctions are galvanising China and Russia to attempt to switch from the US dollar as a form of exchange and increase bilateral trade, especially in the all-important hydrocarbons sector.

Since March trade volume in the Chinese yuan and Russian ruble has grown. Yuan-ruble transactions in currency markets hit a daily record high in late July at $1.2bn, outpacing euro-ruble trading volumes, while Russia purchased $6.7bn in goods from China that month.

The surge in Russia buying yuan-denominated goods has also been driven by the continued strength of the ruble, buoyed by high prices for hydrocarbons.

China's imports of Russian crude oil reached a record high in May, up 55% year-on-year (y-o-y). However, the spot price of Russian oil was roughly 29% lower than before Russia's invasion of Ukraine, according to estimates by Reuters. Moreover, Russia has had to offer a $10-per-barrel discount compared to Middle East suppliers such as Saudi Arabia to attract customers.

Russia is also reportedly looking to buy the yuan, India's rupee and Turkey's lira as reserves for its sovereign wealth fund, as these currencies have weakened, and Russia's energy sales have surged.

India's trade with Russia has also grown, punctuated by rising imports of oil. In April India imported 25,000 barrels per day (bpd), but this figure increased to 600,000 bpd in both May and June.

In July India's central bank announced a plan that it would allow domestic importers to buy goods in rupees, which will then be credited to an account held by the exporting country, most ostensibly to enable smoother transactions with Russia.

More recently, in early August Reuters reported that Turkey also agreed to bolster cooperation with Russia by purchasing its gas imports in rubles.

China and India now account for over 40% of Russia's total crude oil exports, whereas last July this figure was roughly 21.7%. While noteworthy, Russian dependence on the two countries could create new challenges, and there are already signs that this cooperation has reached its limit as imports declined in June and July.

The recent upswing in trade between the ruble, yuan and other emerging market currencies ultimately may signify a long-term trend, but a shift away from the US dollar is not imminent.

The US dollar accounted for 58.8% of global government currency reserves at the end of June 2022, down from 59.4% y-o-y, according to the IMF. More tellingly, 88% of currency trades in 2019 involved the US dollar, according to a Triennial Central Bank Survey conducted in December 2019.

Emerging market cooperation

Reflective of the potential that enhanced unity and trade among emerging markets can facilitate economic growth, calls for the expansion of the BRICS began in 2013 and received renewed impetus when China was president of the grouping in 2017. However, these initiatives have failed to gain traction.

Critics argue that this current push for BRICS expansion is driven by China's intent to gain a larger footprint in the global economy, as it is once again president of the grouping. Whereas Russia and South Africa support expansion, Brazil and India have shown little enthusiasm.

Nevertheless, the urgency of solving global challenges of food security and climate change may outweigh such concerns and encourage cohesion among prospective BRICS members.

Concerns about global food security could prompt existing and new BRICS members to create a food exchange including members' major exports such as Argentine corn, Indian rice and wheat, Russian barley and sunflower oil, Chinese grain and cotton, and Brazilian soybeans. Such an exchange could later include other emerging markets' agriculture products.

Food importers such as Saudi Arabia could then gain greater food security, while opening the door to higher volumes of energy sales. In March the Saudi Agricultural and Livestock Investment Company, a wholly owned subsidiary of the Kingdom's Public Investment Fund, acquired a 35% share in Olam Agri, a leading global supplier of grains, oilseeds, rice and animal feed.

An increase in cooperation in green energy could also have significant effects on the global fight against climate change. The percentage of electricity produced from renewable sources in BRICS countries rose from 19% in 2010 to 37% in 2020.

As countries transition away from fossil fuels to cleaner sources of energy, there are numerous opportunities for BRICS countries to increase cross-border trade in electricity and seaborne trade in hydrogen.

The New Development Bank, created by the BRICS in 2014, began prioritising investment in renewable energy projects – including $811m in 2016 – but has suffered from a lack of transparency in recent years. Still, the establishment of the BRICS Energy Research Platform in 2018 and the publication of a roadmap for energy cooperation in 2020 demonstrate that the grouping has the institutional capacity for an expansion in this domain.

Russia is building up economic ties with non-Western countries (Россия наращивает экономические связи с незападными странами) / Russia, August, 2022
Keywords: expert_opinion, economic_challenges

Russia continues to build up cooperation with Asian countries, turning its back on Europe, the United States and other unfriendly states that have piled their sanctions on Moscow. But the world is huge, and it consists not only of the countries of the West hostile to Russia.

"China boosts spending on Russian energy to $35 Billion… Russia supplants Indonesia as the biggest supplier of coal… Cards based on Russia's Mir payment system may soon be in India". These are the headlines of the Western press, which never ceases to amaze.

China continues to expand its reliance on Russian energy, with purchases of crude oil products, gas and coal rising to $35 billion since the war in Ukraine began, from about $20 billion a year earlier, informs Bloomberg.

Russia is now supplanting Indonesia after the Southeast Asian nation deterred buyers by raising prices.

Cards based on Russia's Mir payment system may soon be accepted at ATMs and the Point of Sale terminals in India as the two nations continue discussion to build a financial system which would not be affected by Western sanctions on Russia.

Russia established its National Payment Card System in July 2014 after the US imposed sanctions on it … The Mir card was launched in December 2015. Its use witnessed a sharp increase this year as the US and other western nations imposed tougher sanctions on Russia.

A source in New Delhi told "Deccan Herald" (India) that the mutual acceptance of Mir and RuPay cards for hassle-free use of the cards by Russian and Indian visitors in each other's countries was among the issues discussed during recent engagements between the two nations.

Turkey has already begun accepting Russia's Mir cards.

Mir cards can also be used in 10 other nations, including Armenia, Belarus, Vietnam, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Venezuela.

Russia is in talks with China, Egypt, Myanmar, Thailand, Bahrain, Azerbaijan and Cuba for acceptance of Mir cards.

India and Russia, according to sources, are discussing expanding use of national currencies for bilateral trade. India is purportedly paying for its imports from Russia in Indian Rupee, UAE's Dirham and Chinese Yuan in order to bypass US sanctions.

They are also discussing within the BRICS – a bloc comprising Brazil, Russia, India, China and South Africa – the possibility of creating an international reserve currency based on the currencies of the five nations.

Made on