Information Bulletin of the BRICS Trade Union Forum
Monitoring of the economic, social and labor situation in the BRICS countries
Monitoring of the economic, social and labor situation in the BRICS countries
Issue 28.2023
2023.07.10 — 2023.07.16
International relations
Foreign policy in the context of BRICS
How Can BRICS Take Africa Aboard? (Как БРИКС может привлечь Африку к себе?) / Russia, July, 2023
Keywords: brics+, expert_opinion
2023-07-13
2023-07-13
Russia
Source: russiancouncil.ru/
In recent months, at least six African states have declared their desire to join BRICS. Algeria, Egypt, Nigeria, Senegal and Sudan (before commencement of the civil conflict) explicitly indicated this, while Ethiopia was the last to declare its intention in late June 2023. In total, the number of candidates for accession has reached 20.
It is quite natural that the process of "enlarging BRICS" will not be able to satisfy all the aspirants or even most of the 20 potential candidates. The forum faces the dilemma of how to organize the process while not alienating those countries that will not be included for the time being. Much of this depends on the future goals of BRICS and the principles of enlargement that are currently under consideration.
BRICS is neither a military alliance, nor a trading bloc
An analysis of BRICS cannot dispense with mentioning that the forum consists of the world's largest economies. In 2021, the BRICS nations accounted for a quarter of global GDP—and this share is trending upward. Besides, the importance of Brazil, Russia, India, China and South Africa is even greater in certain sectors, such as agriculture, rare earth metals or rocket science. Yet, the main task of BRICS, according to the Economic Partnership Strategy 2025, is not leadership in terms of the global market share but the "strengthening of interconnectivity," that is, increasing mutual ties in all sectors, from economic cooperarion to humanitarian contacts.
In other words, the forum is constantly turning inward to its own needs and development priorities. This is the key difference between the BRICS and any military alliance: it is not threats that inform the behavior of the participating states, pushing them to join hands, but common goals. [1] Countries get united not against any power and not for ideological reasons but primarily for long-term and mutual benefit. To date, the BRICS format has been above the fray of the major great powers, assuming that its participants will develop and technologically improve while other powerhouses keep sorting things out in their quest for a "rules-based order" in the mazes of global affairs. Yet, the BRICS nations are certainly aware that the accumulated potential for cooperation may eventually be applied to threats as well.
In particular, the Beijing BRICS Declaration (2022) details the concerns of the participating states, mentioning the situation in Ukraine, the national dialogue in Afghanistan, and the denuclearization of the Korean peninsula, much as arms race in outer space, nonproliferation of chemical and bacteriological weapons, drug trafficking, and use of information and communication technologies for criminal purposes. Given that many of these problems can be classified as intractable, it is likely that their destabilizing effect will prove impossible to contain in the medium term. And this will require a turnaround of the BRICS potential for a stern response to emerging threats.
At the same time, the mutual benefits of cooperation between Brazil, Russia, India, China and South Africa are clearly sectoral in nature. "Strengthening interconnectivity" does not entail fencing off the rest of the world or abandoning profitable trade and investment projects with third parties. Specifically, for China, trade with the BRICS nations accounts for only 7.2% of its trade turnover, for India it is 19%, for Russia – 13.5%, for South Africa about 20% and for Brazil 24%. Trade flows between Russia, China, India and Brazil patently increased in 2022. For Brazil, the growth was due to Russia's fertilizer exports; for India – to new Russian energy export schemes; and for China – to an increase in industrial cooperation and commodity exports. [2] However, sectoral cooperation within the BRICS does not lead to intersectoral "spillover" or to the easing of all tariff and non-tariff barriers.
In other words, the economic interaction of the five nations is not aimed at pure economic benefits, but rather at benefits bound to the predictability of mutual relations as well as global political and economic processes. The focus of BRICS on long-term priorities and the rundown of contingencies distinguishes this format from classic free trade zones and regional integration groupings. Therefore, the enlargement process should take these realities into account.
Possible enlargement principles
The inclusion of African nations in BRICS makes sense, above all, in terms of the principle of geographic representation. Following the current logic, Brazil represents South America, South Africa represents Africa, India represents South Asia, China represents the Asia-Pacific, and Russia represents Eurasia. The Asian skew (with three BRICS member states partly or fully located in Asia) can be eliminated by adding African countries. However, to ensure a "fuller" representation, one should take into account related factors such as religious and linguistic affiliation, as well as the logistical position of potential members. From this perspective, it seems necessary to increase the presence of Muslim as well as Francophone and/or Arabic-speaking countries in BRICS.
The point is that in the absence of countries professing the world's second largest religion, and of the nations that officially use some of the most widely spoken languages, the organization can hardly claim to be truly geographically, religiously and linguistically representative. Thus, it would be rather reasonable to admit Senegal or Egypt, which are centers of Islam on the African continent and, what's more, they use French and/or Arabic as their official languages. Furthermore, these two states are well positioned and can be effectively included in the logistical network as sea gates to the west and north of Africa, respectively.
Another possible factor for a BRICS expansion could be the size of the economy and the associated "demographic dividend." [3] Many African nations are already showing high growth rates. This trend will be heading up as their population grows and, consequently, as the number of consumers and the capacity of the domestic market build up. From these perspectives, Nigeria and Egypt, the leaders among African nations in terms of GDP, also demonstrating relatively high economic growth rates, are clear standouts. In the meantime, given the demographic indicators, Ethiopia, the second most populous nation on the continent, whose economic growth rates suffered in recent years due to internal political instability, can also be included in the list of the most promising BRICS member states from the African continent.
Finally, the criterion for candidates to be part of a BRICS enlargement could be a member's potential for changing or preserving the format per se. At present, Russia and China support expanding the sphere of BRICS responsibility in one form or another as well as the forum's more active inclusion in global governance processes. Adding a nation with a similar foreign policy stance could help transform the five current members into a more traditional international coalition or a formalized political alliance. On the contrary, the accession of a state that is more likely to support a line of detachment from the confrontational centers of power will contribute to the freezing of BRICS' current institutional structure.
Among the six aspirant countries under review, the most politicized approach is the anti-colonial rhetoric characteristic of the Algerian government. Algeria, which has maintained close contacts with Russia for many years, including through the military-industrial complex, is undoubtedly interested not only in the economic prospects that will open up in case of its accession to BRICS, but also in fostering a common position on a number of issues on the global political agenda. With that in mind, Algeria's non-involvement in global and regional conflicts, except for the "traditional" confrontation with Morocco, would allow BRICS to avoid being dragging into solving acute military and political problems and, as a consequence, to preclude the possible polarization of the bloc. For their part, both Egypt and Ethiopia, which proceed from the principles of political and economic developmentalism, as well as more "pro-Western" Nigeria and Senegal, hardly share the Russian and Chinese approach to the forum's outlook. Given the acute crisis and the lack of any vision for future development at the moment, Sudan cannot be regarded as a force capable of participating in the directional transformation of BRICS.
Implications
Today, amid a deepening mutual cooperation and a high interest in the organization shown by different states from almost all parts of the world, BRICS is facing a dilemma of choosing a further expansion path and a direction for its development. On the one hand, a large number of candidates for accession augurs well for its successful development in the future. On the other hand, it becomes critically important to construct a common vision of the goals and mechanisms for an expansion of BRICS, including the parameters and criteria for the selection of new members. Reliance on three major pillars seems viable: 1) geographic as well as religious and linguistic representation; 2) economic potential, including the size and growth rates of the economy and the population numbers; 3) political and ideological affiliation, enabling to consider the preferred development direction for this or that candidate. Thus, while BRICS does not currently imply a formulation of a collective view on the entire range of contemporary challenges, rather focusing on the joint achievement of economic goals and the development of common approaches to understanding global trends and problems, the prospects for its enlargement and the accompanying reform of the forum re-emphasize the imperative of possible transformations within BRICS.
Surely, the original principle underlying the association does not suggest that BRICS may evolve into a full-fledged international union with clear commitments to act with respect to third countries under certain circumstances. But it would also be a mistake to treat BRICS as a coalition or an association pursuing short-term goals not distinguished by a higher longevity. In this regard, the expansion of BRICS into Africa is more likely to preserve this forum as a "soft" political and economic platform. This outcome will make it possible to maintain both the current level of commitments by its member states and to retain attractiveness for other states in a difficult international environment.
1. Wilkins T. S. 'Alignment', not 'alliance'–the shifting paradigm of international security cooperation: toward a conceptual taxonomy of alignment // Review of International Studies. 2012. Vol. 38. №. 1. pp. 53-76.
2. Kovaleva Е. I. at al. Evaluating Russia's Trade with BRICS Nations //Индустриальная экономика Industrial Economy. – 2023. – No. 2. – p. 14-19.
3. Abramova I. O. Demographic Dividend and the Future of Africa //Asia and Africa Today. – 2014. – №. 11. – p. 23-30.
Source: russiancouncil.ru/
In recent months, at least six African states have declared their desire to join BRICS. Algeria, Egypt, Nigeria, Senegal and Sudan (before commencement of the civil conflict) explicitly indicated this, while Ethiopia was the last to declare its intention in late June 2023. In total, the number of candidates for accession has reached 20.
It is quite natural that the process of "enlarging BRICS" will not be able to satisfy all the aspirants or even most of the 20 potential candidates. The forum faces the dilemma of how to organize the process while not alienating those countries that will not be included for the time being. Much of this depends on the future goals of BRICS and the principles of enlargement that are currently under consideration.
BRICS is neither a military alliance, nor a trading bloc
An analysis of BRICS cannot dispense with mentioning that the forum consists of the world's largest economies. In 2021, the BRICS nations accounted for a quarter of global GDP—and this share is trending upward. Besides, the importance of Brazil, Russia, India, China and South Africa is even greater in certain sectors, such as agriculture, rare earth metals or rocket science. Yet, the main task of BRICS, according to the Economic Partnership Strategy 2025, is not leadership in terms of the global market share but the "strengthening of interconnectivity," that is, increasing mutual ties in all sectors, from economic cooperarion to humanitarian contacts.
In other words, the forum is constantly turning inward to its own needs and development priorities. This is the key difference between the BRICS and any military alliance: it is not threats that inform the behavior of the participating states, pushing them to join hands, but common goals. [1] Countries get united not against any power and not for ideological reasons but primarily for long-term and mutual benefit. To date, the BRICS format has been above the fray of the major great powers, assuming that its participants will develop and technologically improve while other powerhouses keep sorting things out in their quest for a "rules-based order" in the mazes of global affairs. Yet, the BRICS nations are certainly aware that the accumulated potential for cooperation may eventually be applied to threats as well.
In particular, the Beijing BRICS Declaration (2022) details the concerns of the participating states, mentioning the situation in Ukraine, the national dialogue in Afghanistan, and the denuclearization of the Korean peninsula, much as arms race in outer space, nonproliferation of chemical and bacteriological weapons, drug trafficking, and use of information and communication technologies for criminal purposes. Given that many of these problems can be classified as intractable, it is likely that their destabilizing effect will prove impossible to contain in the medium term. And this will require a turnaround of the BRICS potential for a stern response to emerging threats.
At the same time, the mutual benefits of cooperation between Brazil, Russia, India, China and South Africa are clearly sectoral in nature. "Strengthening interconnectivity" does not entail fencing off the rest of the world or abandoning profitable trade and investment projects with third parties. Specifically, for China, trade with the BRICS nations accounts for only 7.2% of its trade turnover, for India it is 19%, for Russia – 13.5%, for South Africa about 20% and for Brazil 24%. Trade flows between Russia, China, India and Brazil patently increased in 2022. For Brazil, the growth was due to Russia's fertilizer exports; for India – to new Russian energy export schemes; and for China – to an increase in industrial cooperation and commodity exports. [2] However, sectoral cooperation within the BRICS does not lead to intersectoral "spillover" or to the easing of all tariff and non-tariff barriers.
In other words, the economic interaction of the five nations is not aimed at pure economic benefits, but rather at benefits bound to the predictability of mutual relations as well as global political and economic processes. The focus of BRICS on long-term priorities and the rundown of contingencies distinguishes this format from classic free trade zones and regional integration groupings. Therefore, the enlargement process should take these realities into account.
Possible enlargement principles
The inclusion of African nations in BRICS makes sense, above all, in terms of the principle of geographic representation. Following the current logic, Brazil represents South America, South Africa represents Africa, India represents South Asia, China represents the Asia-Pacific, and Russia represents Eurasia. The Asian skew (with three BRICS member states partly or fully located in Asia) can be eliminated by adding African countries. However, to ensure a "fuller" representation, one should take into account related factors such as religious and linguistic affiliation, as well as the logistical position of potential members. From this perspective, it seems necessary to increase the presence of Muslim as well as Francophone and/or Arabic-speaking countries in BRICS.
The point is that in the absence of countries professing the world's second largest religion, and of the nations that officially use some of the most widely spoken languages, the organization can hardly claim to be truly geographically, religiously and linguistically representative. Thus, it would be rather reasonable to admit Senegal or Egypt, which are centers of Islam on the African continent and, what's more, they use French and/or Arabic as their official languages. Furthermore, these two states are well positioned and can be effectively included in the logistical network as sea gates to the west and north of Africa, respectively.
Another possible factor for a BRICS expansion could be the size of the economy and the associated "demographic dividend." [3] Many African nations are already showing high growth rates. This trend will be heading up as their population grows and, consequently, as the number of consumers and the capacity of the domestic market build up. From these perspectives, Nigeria and Egypt, the leaders among African nations in terms of GDP, also demonstrating relatively high economic growth rates, are clear standouts. In the meantime, given the demographic indicators, Ethiopia, the second most populous nation on the continent, whose economic growth rates suffered in recent years due to internal political instability, can also be included in the list of the most promising BRICS member states from the African continent.
Finally, the criterion for candidates to be part of a BRICS enlargement could be a member's potential for changing or preserving the format per se. At present, Russia and China support expanding the sphere of BRICS responsibility in one form or another as well as the forum's more active inclusion in global governance processes. Adding a nation with a similar foreign policy stance could help transform the five current members into a more traditional international coalition or a formalized political alliance. On the contrary, the accession of a state that is more likely to support a line of detachment from the confrontational centers of power will contribute to the freezing of BRICS' current institutional structure.
Among the six aspirant countries under review, the most politicized approach is the anti-colonial rhetoric characteristic of the Algerian government. Algeria, which has maintained close contacts with Russia for many years, including through the military-industrial complex, is undoubtedly interested not only in the economic prospects that will open up in case of its accession to BRICS, but also in fostering a common position on a number of issues on the global political agenda. With that in mind, Algeria's non-involvement in global and regional conflicts, except for the "traditional" confrontation with Morocco, would allow BRICS to avoid being dragging into solving acute military and political problems and, as a consequence, to preclude the possible polarization of the bloc. For their part, both Egypt and Ethiopia, which proceed from the principles of political and economic developmentalism, as well as more "pro-Western" Nigeria and Senegal, hardly share the Russian and Chinese approach to the forum's outlook. Given the acute crisis and the lack of any vision for future development at the moment, Sudan cannot be regarded as a force capable of participating in the directional transformation of BRICS.
Implications
Today, amid a deepening mutual cooperation and a high interest in the organization shown by different states from almost all parts of the world, BRICS is facing a dilemma of choosing a further expansion path and a direction for its development. On the one hand, a large number of candidates for accession augurs well for its successful development in the future. On the other hand, it becomes critically important to construct a common vision of the goals and mechanisms for an expansion of BRICS, including the parameters and criteria for the selection of new members. Reliance on three major pillars seems viable: 1) geographic as well as religious and linguistic representation; 2) economic potential, including the size and growth rates of the economy and the population numbers; 3) political and ideological affiliation, enabling to consider the preferred development direction for this or that candidate. Thus, while BRICS does not currently imply a formulation of a collective view on the entire range of contemporary challenges, rather focusing on the joint achievement of economic goals and the development of common approaches to understanding global trends and problems, the prospects for its enlargement and the accompanying reform of the forum re-emphasize the imperative of possible transformations within BRICS.
Surely, the original principle underlying the association does not suggest that BRICS may evolve into a full-fledged international union with clear commitments to act with respect to third countries under certain circumstances. But it would also be a mistake to treat BRICS as a coalition or an association pursuing short-term goals not distinguished by a higher longevity. In this regard, the expansion of BRICS into Africa is more likely to preserve this forum as a "soft" political and economic platform. This outcome will make it possible to maintain both the current level of commitments by its member states and to retain attractiveness for other states in a difficult international environment.
1. Wilkins T. S. 'Alignment', not 'alliance'–the shifting paradigm of international security cooperation: toward a conceptual taxonomy of alignment // Review of International Studies. 2012. Vol. 38. №. 1. pp. 53-76.
2. Kovaleva Е. I. at al. Evaluating Russia's Trade with BRICS Nations //Индустриальная экономика Industrial Economy. – 2023. – No. 2. – p. 14-19.
3. Abramova I. O. Demographic Dividend and the Future of Africa //Asia and Africa Today. – 2014. – №. 11. – p. 23-30.
Putin's format of participation in BRICS summit in South Africa still undecided — Kremlin (Формат участия Путина в саммите БРИКС в ЮАР пока не определен, — Кремль) / Russia, July, 2023
Keywords: summit, vladimir_putin
2023-07-11
2023-07-11
Russia
Source: tass.com
Putin's format of participation in BRICS summit in South Africa still undecided — Kremlin
The BRICS summit will take place in the South African city of Johannesburg on August 22-24
MOSCOW, July 11. /TASS/. The Kremlin has not yet decided whether Russian President Vladimir Putin will personally attend the BRICS (an association of Brazil, Russia, India, China, and South Africa) summit next month in South Africa or whether he will take part in it in another format, Russian Presidential Spokesman Dmitry Peskov said on Tuesday.
"We're still considering various options. We will inform you as soon as the president makes a decision," Peskov told a news briefing.
The BRICS summit will take place in the South African city of Johannesburg on August 22-24. South African Presidential Spokesperson Vincent Magwenya said earlier in the year that the country's president, Cyril Ramaphosa, would soon complete consultations with other BRICS leaders on the summit details.
Source: tass.com
Putin's format of participation in BRICS summit in South Africa still undecided — Kremlin
The BRICS summit will take place in the South African city of Johannesburg on August 22-24
MOSCOW, July 11. /TASS/. The Kremlin has not yet decided whether Russian President Vladimir Putin will personally attend the BRICS (an association of Brazil, Russia, India, China, and South Africa) summit next month in South Africa or whether he will take part in it in another format, Russian Presidential Spokesman Dmitry Peskov said on Tuesday.
"We're still considering various options. We will inform you as soon as the president makes a decision," Peskov told a news briefing.
The BRICS summit will take place in the South African city of Johannesburg on August 22-24. South African Presidential Spokesperson Vincent Magwenya said earlier in the year that the country's president, Cyril Ramaphosa, would soon complete consultations with other BRICS leaders on the summit details.
Indian role in SCO/ BRICS and the Region (Роль Индии в ШОС/БРИКС и в регионе) / Greece, July, 2023
Keywords: expert_opinion
2023-07-14
2023-07-14
Greece
Source: moderndiplomacy.eu
The 23rd Summit of the Shanghai Cooperation Organization (SCO) was recently convened under the chairmanship of India, albeit in a virtual format. The decision to opt for a virtual summit, despite the easing of pandemic-related restrictions, has sparked curiosity. India, known for its active participation in international events, including Prime Minister Modi's recent visit to the United States and the successful hosting of the G20 meeting, prompts us to question the rationale behind the virtual SCO summit. This article delves into the aims, objectives, and agenda of the SCO to shed light on these concerns.
The Significance of the SCO:
The SCO is a permanent inter-governmental international organization that seeks to strengthen confidence and foster good-neighborly relations among member countries. It aims to facilitate effective cooperation across various domains such as politics, trade and economy, science and technology, culture, education, energy, transportation, tourism, and environmental protection. Additionally, the SCO endeavors to maintain peace, security, and stability in the region while aspiring to establish a new, democratic, just, and rational global political and economic order. Rooted in the Spirit of Shanghai, the SCO's internal policy is guided by principles of mutual trust, mutual benefit, equal rights, consultations, respect for cultural diversity, and a shared vision of common development. In its external affairs, the SCO upholds principles of non-alignment, non-targeting, and openness.
Membership and India's Presidency:
The SCO was established on June 15, 2001, in Shanghai, China, by the Republic of Kazakhstan, the People's Republic of China, the Kyrgyz Republic, the Russian Federation, the Republic of Tajikistan, and the Republic of Uzbekistan. Currently, eight countries enjoy full membership in the SCO: India, Kazakhstan, China, Kyrgyzstan, Russia, Pakistan, Tajikistan, and Uzbekistan. Additionally, Afghanistan, Belarus, Iran, and Mongolia hold observer status, while Azerbaijan, Armenia, Cambodia, Nepal, Turkey, and Sri Lanka have a dialogue partner status. During the 23rd Summit, Iran joined as the ninth member country. India's SCO presidency was guided by the theme "SECURE," emphasizing Security, Economic development, Connectivity, Unity, Respect for sovereignty and territorial integrity, and Environmental protection. The summit aimed to address regional security concerns and explore avenues for enhancing connectivity and trade. Notably, this marked President Putin's first participation in a multilateral summit since the Russia-Ukraine crisis.
India's Approach and Concerns:
According to Parveen Sawhney, India, as the host of the event, diverged from other SCO members in two key aspects: Firstly, India chose not to sign the Economic Development Strategy 2030, and secondly, India refrained from endorsing the Belt and Road Initiative (BRI), citing concerns over its potential to lead to a debt trap. It is important to note that the BRI has garnered support from 149 nations, including 49 out of 54 African countries. China's BRI seeks common prosperity and cooperative security, challenging the notion of a zero-sum game. Through infrastructure projects, cyberspace connectivity, and revolutionary developments, China aims to connect the region via land, sea, and space routes. The United Nations has endorsed the BRI for its potential to meet sustainable goals and objectives. President Xi introduced the Global Development Initiative in 2021, which closely aligns with the BRI, incorporating the UN Sustainable Development Goals. In 2022, President Xi unveiled the Global Security Initiative, operating within the UN framework. The SCO plays a crucial role in advancing these shared objectives.
Prime Minister Modi's Remarks:
During the SCO Summit, Prime Minister Modi emphasized that "today's era is not an era of war." This statement raises questions about India's stance and diplomatic language. Additionally, Modi underscored the significance of the Chabahar Port and the International North-South Transport Corridor, which bypass China and Pakistan. This prompts us to consider Iran's position, as it aligns itself with India while potentially opposing SCO countries, particularly China and Russia. Furthermore, Modi addressed the issue of terrorism emanating from Pakistan. It is noteworthy to evaluate if these remarks emerged in the aftermath of Modi's visit to the United States, where counterterrorism and eradicating violent extremism were central themes, especially concerning Pakistan. Besides these statements, the SCO Summit received limited media coverage, necessitating in-depth research to uncover updates. India's simultaneous chairmanship of both the SCO and G20 this year has been approached differently. While India projected the G20 meeting with great fanfare, the SCO Summit was comparatively low profile and held virtually.
China's Perspective and India's Role:
From China's perspective, the SCO Summit's virtual nature represents a setback. China, alongside Russia, serves as a driving force behind the SCO, making statements of utmost importance. Did Prime Minister Modi's visit to the United States aim to undermine the SCO Summit, cast doubt on Pakistan, weaken the BRI and its flagship project, the China-Pakistan Economic Corridor (CPEC), or issue a warning to BRICS members regarding India's presence? BRICS, composed of emerging economies supported by institutions such as the BRICS Bank (New Development Bank) and the Asian Infrastructure Investment Bank, seeks to establish parallel structures to existing global financial institutions like the World Bank and IMF. Considering the gravity of the SCO, India's choice to hold a virtual summit raises significant questions. India perceives itself as a rival to China in the emerging global order and champions the voice of the Global South, enjoying support from G20 nations. Consequently, India hesitates to endorse any strategy involving China, despite its participation in the SCO and BRICS.
Trust and India's Role in the Region:
These circumstances raise concerns about India's credibility and trustworthiness as a member of both the SCO and BRICS. How can other member states place their trust in India's commitments? India's actions at the SCO Summit, coupled with the upcoming BRICS Summit scheduled for August in Johannesburg, South Africa, warrant serious consideration among BRICS countries. It is essential to evaluate whether India's inclusion in BRICS, which is set to expand with the addition of countries like Saudi Arabia, the United Arab Emirates, Egypt, Algeria, Argentina, Mexico, and Nigeria, serves the best interests of the group. India's economic contribution to BRICS stands at a modest 13% compared to China's 70%. Therefore, it is imperative to position India appropriately within BRICS to avoid disruptive tendencies in the region and beyond.
Source: moderndiplomacy.eu
The 23rd Summit of the Shanghai Cooperation Organization (SCO) was recently convened under the chairmanship of India, albeit in a virtual format. The decision to opt for a virtual summit, despite the easing of pandemic-related restrictions, has sparked curiosity. India, known for its active participation in international events, including Prime Minister Modi's recent visit to the United States and the successful hosting of the G20 meeting, prompts us to question the rationale behind the virtual SCO summit. This article delves into the aims, objectives, and agenda of the SCO to shed light on these concerns.
The Significance of the SCO:
The SCO is a permanent inter-governmental international organization that seeks to strengthen confidence and foster good-neighborly relations among member countries. It aims to facilitate effective cooperation across various domains such as politics, trade and economy, science and technology, culture, education, energy, transportation, tourism, and environmental protection. Additionally, the SCO endeavors to maintain peace, security, and stability in the region while aspiring to establish a new, democratic, just, and rational global political and economic order. Rooted in the Spirit of Shanghai, the SCO's internal policy is guided by principles of mutual trust, mutual benefit, equal rights, consultations, respect for cultural diversity, and a shared vision of common development. In its external affairs, the SCO upholds principles of non-alignment, non-targeting, and openness.
Membership and India's Presidency:
The SCO was established on June 15, 2001, in Shanghai, China, by the Republic of Kazakhstan, the People's Republic of China, the Kyrgyz Republic, the Russian Federation, the Republic of Tajikistan, and the Republic of Uzbekistan. Currently, eight countries enjoy full membership in the SCO: India, Kazakhstan, China, Kyrgyzstan, Russia, Pakistan, Tajikistan, and Uzbekistan. Additionally, Afghanistan, Belarus, Iran, and Mongolia hold observer status, while Azerbaijan, Armenia, Cambodia, Nepal, Turkey, and Sri Lanka have a dialogue partner status. During the 23rd Summit, Iran joined as the ninth member country. India's SCO presidency was guided by the theme "SECURE," emphasizing Security, Economic development, Connectivity, Unity, Respect for sovereignty and territorial integrity, and Environmental protection. The summit aimed to address regional security concerns and explore avenues for enhancing connectivity and trade. Notably, this marked President Putin's first participation in a multilateral summit since the Russia-Ukraine crisis.
India's Approach and Concerns:
According to Parveen Sawhney, India, as the host of the event, diverged from other SCO members in two key aspects: Firstly, India chose not to sign the Economic Development Strategy 2030, and secondly, India refrained from endorsing the Belt and Road Initiative (BRI), citing concerns over its potential to lead to a debt trap. It is important to note that the BRI has garnered support from 149 nations, including 49 out of 54 African countries. China's BRI seeks common prosperity and cooperative security, challenging the notion of a zero-sum game. Through infrastructure projects, cyberspace connectivity, and revolutionary developments, China aims to connect the region via land, sea, and space routes. The United Nations has endorsed the BRI for its potential to meet sustainable goals and objectives. President Xi introduced the Global Development Initiative in 2021, which closely aligns with the BRI, incorporating the UN Sustainable Development Goals. In 2022, President Xi unveiled the Global Security Initiative, operating within the UN framework. The SCO plays a crucial role in advancing these shared objectives.
Prime Minister Modi's Remarks:
During the SCO Summit, Prime Minister Modi emphasized that "today's era is not an era of war." This statement raises questions about India's stance and diplomatic language. Additionally, Modi underscored the significance of the Chabahar Port and the International North-South Transport Corridor, which bypass China and Pakistan. This prompts us to consider Iran's position, as it aligns itself with India while potentially opposing SCO countries, particularly China and Russia. Furthermore, Modi addressed the issue of terrorism emanating from Pakistan. It is noteworthy to evaluate if these remarks emerged in the aftermath of Modi's visit to the United States, where counterterrorism and eradicating violent extremism were central themes, especially concerning Pakistan. Besides these statements, the SCO Summit received limited media coverage, necessitating in-depth research to uncover updates. India's simultaneous chairmanship of both the SCO and G20 this year has been approached differently. While India projected the G20 meeting with great fanfare, the SCO Summit was comparatively low profile and held virtually.
China's Perspective and India's Role:
From China's perspective, the SCO Summit's virtual nature represents a setback. China, alongside Russia, serves as a driving force behind the SCO, making statements of utmost importance. Did Prime Minister Modi's visit to the United States aim to undermine the SCO Summit, cast doubt on Pakistan, weaken the BRI and its flagship project, the China-Pakistan Economic Corridor (CPEC), or issue a warning to BRICS members regarding India's presence? BRICS, composed of emerging economies supported by institutions such as the BRICS Bank (New Development Bank) and the Asian Infrastructure Investment Bank, seeks to establish parallel structures to existing global financial institutions like the World Bank and IMF. Considering the gravity of the SCO, India's choice to hold a virtual summit raises significant questions. India perceives itself as a rival to China in the emerging global order and champions the voice of the Global South, enjoying support from G20 nations. Consequently, India hesitates to endorse any strategy involving China, despite its participation in the SCO and BRICS.
Trust and India's Role in the Region:
These circumstances raise concerns about India's credibility and trustworthiness as a member of both the SCO and BRICS. How can other member states place their trust in India's commitments? India's actions at the SCO Summit, coupled with the upcoming BRICS Summit scheduled for August in Johannesburg, South Africa, warrant serious consideration among BRICS countries. It is essential to evaluate whether India's inclusion in BRICS, which is set to expand with the addition of countries like Saudi Arabia, the United Arab Emirates, Egypt, Algeria, Argentina, Mexico, and Nigeria, serves the best interests of the group. India's economic contribution to BRICS stands at a modest 13% compared to China's 70%. Therefore, it is imperative to position India appropriately within BRICS to avoid disruptive tendencies in the region and beyond.
Russian, Indian foreign ministers discuss ties, interaction in SCO, BRICS (Главы МИД России и Индии обсудили связи и взаимодействие в ШОС и БРИКС) / Russia, July, 2023
Keywords: foreign_ministers_meeting
2023-07-13
2023-07-13
Russia
Source: tass.com
It is reported that the sides discussed a number of pertinent issues of bilateral ties and cooperation in various areas
MOSCOW, July 13. /TASS/. Russian Foreign Minister Sergey Lavrov and his Indian counterpart Subrahmanyam Jaishankar discussed bilateral relations and interaction within the Shanghai Cooperation Organization (SCO) and BRICS (Brazil, Russia, India, China, South Africa) on Thursday.
The two top diplomats met on the sidelines of ministerial events within the framework of the Association of Southeast Asian Nations (ASEAN) in Jakarta.
"During the conversation, the sides discussed a number of pertinent issues of bilateral ties and cooperation in various areas. They exchanged opinions on the key issues of the regional and international agenda, including interaction at SCO and BRICS venues," a statement by the Russian Foreign Ministry said.
Earlier on Twitter, the Indian top diplomat said that he had discussed bilateral economic issues and the situation in Ukraine with his Russian colleague during the Jakarta meeting.
On Wednesday, Lavrov arrived in Jakarta to participate in ASEAN events. His visit to Indonesia will run until July 14. On Tuesday, the Russian Foreign Ministry said that on July 13, the Russian foreign minister would participate in the meetings of top diplomats in the Russia-ASEAN format and on July 14, he would attend the foreign ministers' meetings of the East Asia Summit (EAS) and the ASEAN Regional Forum (ARF) on security.
Source: tass.com
It is reported that the sides discussed a number of pertinent issues of bilateral ties and cooperation in various areas
MOSCOW, July 13. /TASS/. Russian Foreign Minister Sergey Lavrov and his Indian counterpart Subrahmanyam Jaishankar discussed bilateral relations and interaction within the Shanghai Cooperation Organization (SCO) and BRICS (Brazil, Russia, India, China, South Africa) on Thursday.
The two top diplomats met on the sidelines of ministerial events within the framework of the Association of Southeast Asian Nations (ASEAN) in Jakarta.
"During the conversation, the sides discussed a number of pertinent issues of bilateral ties and cooperation in various areas. They exchanged opinions on the key issues of the regional and international agenda, including interaction at SCO and BRICS venues," a statement by the Russian Foreign Ministry said.
Earlier on Twitter, the Indian top diplomat said that he had discussed bilateral economic issues and the situation in Ukraine with his Russian colleague during the Jakarta meeting.
On Wednesday, Lavrov arrived in Jakarta to participate in ASEAN events. His visit to Indonesia will run until July 14. On Tuesday, the Russian Foreign Ministry said that on July 13, the Russian foreign minister would participate in the meetings of top diplomats in the Russia-ASEAN format and on July 14, he would attend the foreign ministers' meetings of the East Asia Summit (EAS) and the ASEAN Regional Forum (ARF) on security.
Incredulous observers: why have they missed the "BRICS+ moment"? (Недоверчивые наблюдатели: почему они упустили «момент БРИКС+»?) / Russia, July, 2023
Keywords: brics+, expert_opinion
2023-07-10
2023-07-10
Russia
Source: brics-plus-analytics.org
Incredulous observers: why have they missed the "BRICS+ moment"?
As the August 2023 BRICS summit draws near, there are more and more alarm bells ringing from various parts of the academic community regarding the "excessive ambition" coming from BRICS attempts to change global governance. One of such recent pronouncements came from no other than "Dr. Doom" himself, Nouriel Roubini, who argued that: "The idea that the BRICS are going to take over the world turned out not to be right… [as] this BRICS is a bit of a mishmash that, by itself, has very different countries: economically, socially, politically, and geopolitically". In reality, critical changes have already taken place and the advanced world has missed the "BRICS+ moment", i.e. the "big bang" expansion in the block in a matter of months. There may be more substantial changes that could take the incredulous observers by surprise in the coming years, most notably the creation of a new BRICS currency. The question that many will be asking themselves in the months to come is why did the world miss this momentous transformation in global governance?
The simple explanation may be the fast pace of the block's enlargement. This is due in part to the fact that BRICS and BRICS+ increasingly operate as an aggregation platform that brings together countries and regional blocks with ambitions to play a global role in building a new construct of "global governance". Platforms can operate quickly – much as the social platforms that were used within countries to mobilize financing, activism/opposition, so too cross-country/international platforms with a powerful purpose can achieve a high degree of participation in a short period of time. In the case of the flurry of applications to join the BRICS block the speed and the scale of this process may well feature in the "Guinness book of records" as dozens of influential developing economies (many of them among the leaders in their respective regions) have sided with the BRICS block in a matter of months. And once a critical mass of countries joins the block, then the "domino effect" kicks in as was the case with the expansion in the EU membership.
The key point is that even without a formal decision on the expansion of the BRICS core to include all candidates, the very fact that dozens of leading economies from the Global South applied for membership is a manifestation of the growing support exercised by BRICS in the developing world. This expansion in the pool of candidates may be in itself indicative of the changes in the global balance of power and governance that are under way. And apart from the sheer speed and number of countries applying to join the BRICS block, the expansion process has already exceeded some important threshold levels. At this stage, nearly all of the developing economies that are members of the G20 (apart from Mexico) have applied for BRICS membership. The combined GDP of the economies that applied for membership or featured in BRICS+ dialogues exceeds that of the rest of the Global South (outside of BRICS). With the upcoming expansion, the BRICS core is set to strengthen its presence in all the main regions of the Global South and widen its scope to include the GCC region (with Saudi Arabia) and ASEAN (with Indonesia). In other words, the BRICS+ is becoming more of a global majority and not just on the back of the presence of giants such as China or India, but increasingly via representing all of the main regions of the developing world.
Maybe another reason why many observers missed the "BRICS+ moment" is that some of the leading scholars from both the West and the developing world ignored the "BRICS+" theme for years, much as the mainstream media largely turned a blind eye on BRICS in the past decade – in the expectation perhaps that the whole openness of BRICS and the BRICS+ paradigm would fizzle away and be reduced again to the emphasis on "intra-BRICS" cooperation. Indeed, it is astounding how few academic publications have been devoted to issues of BRICS enlargement and BRICS+ in the past 5-6 years. Even still in some of the BRICS countries prominent scholars display aversion to any significant change in global governance that may be brought about by BRICS/BRICS+. But if there is nothing significant coming from BRICS, what is the purpose of that block anyway? Was change not the rationale for the creation of BRICS in the first place? And if in line with these experts' prescriptions the BRICS shifts back into "introvert mode" then we will yet again hear the usual pronouncements "we told you so" from these very same scholars about the "ineffectiveness" of BRICS and lack of results.
On that latter note, amid the elation surrounding the expansion of BRICS, several sobering observations are in order at this critical juncture for the Global South. Firstly, the BRICS expansion while an achievement of sorts, is not an innovation or a qualitative transformation of the global economic system just yet. So far this is more about the quantity of allies rather than the quality and the depth of the transformation of the global economic system. The creation of a new global reserve currency would be one such qualitative step that would elevate the stature of BRICS on the international arena. An expanded BRICS core together with BRICS+ provide a stronger foundation for launching projects such as a common currency alongside greater trade and investment openness.
Another sobering observation is that there remain important countries from the Global South that are yet to be brought closer into the BRICS+ framework of economic cooperation. My assessment of the scope of these countries is the following: Thailand, Colombia, Vietnam, Singapore, Mexico, Malaysia, Philippines, Chile, Nigeria and Morocco. Some of these economies have already participated in BRICS+ activities – most notably Thailand and Mexico. Overall, however, greater cooperation with these economies would solidify the presence of BRICS+ in the key regions of the Global South. Half of these economies are from ASEAN and building closer cooperation with these countries via a BRICS+ platform for regional integration arrangements may be one of the more promising solutions in the future.
In the end, the truth of the matter is that Dr. Doom is wrong on two counts. Firstly, the fact that BRICS countries are "a mishmash" is not a weakness, but a strength – it is the diversity across the BRICS+ platform that will endow it with greater vitality and complementarities in development. Secondly, sizeable BRICS-induced changes in global governance have already transpired and are ongoing. Rather than dismissing or ignoring these important global shifts, the advanced economies could focus on exploring the opportunities that are opened in the changing global setting. Discussing cooperative frameworks along the lines of "BRICS++", a framework that would bring together the development institutions of the Global South and advanced economies may be one such promising venue. The world is changing fast and as Earvin "Magic" Johnson once presciently observed: "If you reach down for the popcorn, you might miss something".
Image of Gerd Altmann by Pixabay
Source: brics-plus-analytics.org
Incredulous observers: why have they missed the "BRICS+ moment"?
As the August 2023 BRICS summit draws near, there are more and more alarm bells ringing from various parts of the academic community regarding the "excessive ambition" coming from BRICS attempts to change global governance. One of such recent pronouncements came from no other than "Dr. Doom" himself, Nouriel Roubini, who argued that: "The idea that the BRICS are going to take over the world turned out not to be right… [as] this BRICS is a bit of a mishmash that, by itself, has very different countries: economically, socially, politically, and geopolitically". In reality, critical changes have already taken place and the advanced world has missed the "BRICS+ moment", i.e. the "big bang" expansion in the block in a matter of months. There may be more substantial changes that could take the incredulous observers by surprise in the coming years, most notably the creation of a new BRICS currency. The question that many will be asking themselves in the months to come is why did the world miss this momentous transformation in global governance?
The simple explanation may be the fast pace of the block's enlargement. This is due in part to the fact that BRICS and BRICS+ increasingly operate as an aggregation platform that brings together countries and regional blocks with ambitions to play a global role in building a new construct of "global governance". Platforms can operate quickly – much as the social platforms that were used within countries to mobilize financing, activism/opposition, so too cross-country/international platforms with a powerful purpose can achieve a high degree of participation in a short period of time. In the case of the flurry of applications to join the BRICS block the speed and the scale of this process may well feature in the "Guinness book of records" as dozens of influential developing economies (many of them among the leaders in their respective regions) have sided with the BRICS block in a matter of months. And once a critical mass of countries joins the block, then the "domino effect" kicks in as was the case with the expansion in the EU membership.
The key point is that even without a formal decision on the expansion of the BRICS core to include all candidates, the very fact that dozens of leading economies from the Global South applied for membership is a manifestation of the growing support exercised by BRICS in the developing world. This expansion in the pool of candidates may be in itself indicative of the changes in the global balance of power and governance that are under way. And apart from the sheer speed and number of countries applying to join the BRICS block, the expansion process has already exceeded some important threshold levels. At this stage, nearly all of the developing economies that are members of the G20 (apart from Mexico) have applied for BRICS membership. The combined GDP of the economies that applied for membership or featured in BRICS+ dialogues exceeds that of the rest of the Global South (outside of BRICS). With the upcoming expansion, the BRICS core is set to strengthen its presence in all the main regions of the Global South and widen its scope to include the GCC region (with Saudi Arabia) and ASEAN (with Indonesia). In other words, the BRICS+ is becoming more of a global majority and not just on the back of the presence of giants such as China or India, but increasingly via representing all of the main regions of the developing world.
Maybe another reason why many observers missed the "BRICS+ moment" is that some of the leading scholars from both the West and the developing world ignored the "BRICS+" theme for years, much as the mainstream media largely turned a blind eye on BRICS in the past decade – in the expectation perhaps that the whole openness of BRICS and the BRICS+ paradigm would fizzle away and be reduced again to the emphasis on "intra-BRICS" cooperation. Indeed, it is astounding how few academic publications have been devoted to issues of BRICS enlargement and BRICS+ in the past 5-6 years. Even still in some of the BRICS countries prominent scholars display aversion to any significant change in global governance that may be brought about by BRICS/BRICS+. But if there is nothing significant coming from BRICS, what is the purpose of that block anyway? Was change not the rationale for the creation of BRICS in the first place? And if in line with these experts' prescriptions the BRICS shifts back into "introvert mode" then we will yet again hear the usual pronouncements "we told you so" from these very same scholars about the "ineffectiveness" of BRICS and lack of results.
On that latter note, amid the elation surrounding the expansion of BRICS, several sobering observations are in order at this critical juncture for the Global South. Firstly, the BRICS expansion while an achievement of sorts, is not an innovation or a qualitative transformation of the global economic system just yet. So far this is more about the quantity of allies rather than the quality and the depth of the transformation of the global economic system. The creation of a new global reserve currency would be one such qualitative step that would elevate the stature of BRICS on the international arena. An expanded BRICS core together with BRICS+ provide a stronger foundation for launching projects such as a common currency alongside greater trade and investment openness.
Another sobering observation is that there remain important countries from the Global South that are yet to be brought closer into the BRICS+ framework of economic cooperation. My assessment of the scope of these countries is the following: Thailand, Colombia, Vietnam, Singapore, Mexico, Malaysia, Philippines, Chile, Nigeria and Morocco. Some of these economies have already participated in BRICS+ activities – most notably Thailand and Mexico. Overall, however, greater cooperation with these economies would solidify the presence of BRICS+ in the key regions of the Global South. Half of these economies are from ASEAN and building closer cooperation with these countries via a BRICS+ platform for regional integration arrangements may be one of the more promising solutions in the future.
In the end, the truth of the matter is that Dr. Doom is wrong on two counts. Firstly, the fact that BRICS countries are "a mishmash" is not a weakness, but a strength – it is the diversity across the BRICS+ platform that will endow it with greater vitality and complementarities in development. Secondly, sizeable BRICS-induced changes in global governance have already transpired and are ongoing. Rather than dismissing or ignoring these important global shifts, the advanced economies could focus on exploring the opportunities that are opened in the changing global setting. Discussing cooperative frameworks along the lines of "BRICS++", a framework that would bring together the development institutions of the Global South and advanced economies may be one such promising venue. The world is changing fast and as Earvin "Magic" Johnson once presciently observed: "If you reach down for the popcorn, you might miss something".
Image of Gerd Altmann by Pixabay
Policy-makers waking up to the regionalization trends (Политики осознают тенденции регионализации) / Russia, July, 2023
Keywords: expert_opinion, global_governance
2023-07-16
2023-07-16
Russia
Source: brics-plus-analytics.org
On July 17-18, 2023 an EU-CELAC summit of the heads of state and governments is to be held in Brussels, with some of the possible themes for discussion featuring the progress in the EU-MERCOSUR FTA deal. Such an FTA agreement would be one of the most significant steps directed at boosting economic cooperation between regional integration blocks and would represent yet another sign of the rising prominence of regionalism in the world economy. In fact, throughout the past several months a number of state leaders have come up with important initiatives in the sphere of cooperation among the regional integration blocks and their development institutions.
In Latin America, one of the signs of the rising importance of regional integration issues is the greater momentum towards regional cooperation that is spearheaded by Brazil's President Lula Da Silva. Apart from bringing back Brazil into UNASUR, Lula is also actively advocating the creation of a regional currency for Latin America as well as a common currency for BRICS economies. MERCOSUR is also coming back to life and apart from the revitalized discussions on an FTA deal with the EU, there are efforts to advance the block's expansion and to explore the possibilities of trade liberalization with some of the key partners such as China.
Another interesting manifestation of country leaders coming to the realization of the rising importance of regionalism is the effort by French President Emmanuel Macron to create a platform for multilateral development institutions, most of which are represented by regional development banks such as the African Development Bank and the Asian Development Bank. In effect the declaration calls for the creation of a global platform among development institutions – something that has been absent thus far in the architecture of the global economy. The corresponding "Multilateral Development Banks vision statement" contains the following key provisions related to regionalism:[1]
"One global trend that will likely favour the creation of platforms among the regional development banks is the environmental agenda that transcends national boundaries and requires greater cooperation across countries and regions. Building shared portfolios of "green projects", harmonizing the standards across regional development banks on the implementation of such projects may enhance the prospects of meeting the ambitious environmental goals in leading developed economies and in advancing the green agenda across the economies of the Global South" [2].
Apart from the creation of a global platform for regional development banks, I also argued in favor of such a cooperative framework to be launched among the regional integration blocks and the regional development institutions of the BRICS countries[3]. And while there has been little headway on this front in the past 5-6 years, more recent developments in the sphere of "integration of integrations" are somewhat more encouraging. In particular, Belarus President Lukashenko spoke in favor of co-integrating the formats of BRICS, the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union. Such a platform of "integration of integrations" may well be launched in 2024 during Russia's BRICS chairmanship, with the main regional integration blocks from each one of the BRICS core members participating in this network. The eventual BRICS+ formation for regional integration blocks can bring together BIMSTEC, Eurasian Economic Union, African Union/AfCFTA, MERCOSUR, SCO – a potential grouping that has already been dubbed as BEAMS[4].
In the coming months there may be further crucial developments related to the rising role of regionalism in the global economy. The 2023 BRICS summit in Cape Town will feature efforts by South Africa to bring the African continent into closer cooperation with BRICS. There will also be greater coordination among the BRICS countries to support Africa's AfCFTA effort – something that will necessitate notable trade liberalization for African products not only from individual BRICS members, but also from their respective regional integration blocks. Apart from the possibility of the African Union working more closely with BRICS, there is also the likelihood that this African block may become a member of the G20 grouping.
Overall, it appears that the world's policy-makers are starting to wake up to a key global trend characterized by greater activism and role of regional integration blocks and their development institutions. These trends open up new possibilities for the world economy to build new communication lines, reduce trade barriers and boost economic growth. The hope is that this "regional track" will serve to bridge the widening North-South divides via creating cooperative global platforms for trade and investment.
[1] https://www.elysee.fr/en/emmanuel-macron/2023/06/23/multilateral-development-banks-vision-statement
[2] Y. Lissovolik. Transforming the global economy: a key role for the IFIs. July 29, 2022. Valdai club. https://valdaiclub.com/a/highlights/transforming-the-global-economy-a-key-role/
[3] Yaroslav Lissovolik. BRICS-plus: alternative globalization in the making? World Economic Forum (WEF), 2018: https://www.weforum.org/agenda/2018/01/brics-plus-an-alternative-to-globalization-in-the-making
[4] Lissovolik, Y. BEAMS of the Sunrise: A Look at BRICS 5-Year Cycles. / Valdai International Discussion Club. June, 2018.
Source: brics-plus-analytics.org
On July 17-18, 2023 an EU-CELAC summit of the heads of state and governments is to be held in Brussels, with some of the possible themes for discussion featuring the progress in the EU-MERCOSUR FTA deal. Such an FTA agreement would be one of the most significant steps directed at boosting economic cooperation between regional integration blocks and would represent yet another sign of the rising prominence of regionalism in the world economy. In fact, throughout the past several months a number of state leaders have come up with important initiatives in the sphere of cooperation among the regional integration blocks and their development institutions.
In Latin America, one of the signs of the rising importance of regional integration issues is the greater momentum towards regional cooperation that is spearheaded by Brazil's President Lula Da Silva. Apart from bringing back Brazil into UNASUR, Lula is also actively advocating the creation of a regional currency for Latin America as well as a common currency for BRICS economies. MERCOSUR is also coming back to life and apart from the revitalized discussions on an FTA deal with the EU, there are efforts to advance the block's expansion and to explore the possibilities of trade liberalization with some of the key partners such as China.
Another interesting manifestation of country leaders coming to the realization of the rising importance of regionalism is the effort by French President Emmanuel Macron to create a platform for multilateral development institutions, most of which are represented by regional development banks such as the African Development Bank and the Asian Development Bank. In effect the declaration calls for the creation of a global platform among development institutions – something that has been absent thus far in the architecture of the global economy. The corresponding "Multilateral Development Banks vision statement" contains the following key provisions related to regionalism:[1]
- Call on MDBs to work as a system, also in cooperation with regional and national development banks as well as UN agencies and philanthropies, forming the heart of a wider global financial architecture, based on comparative advantages, supported by civil society.
- Deepen cooperation among and between MDBs and concessional windows and thematic funds to improve co-financing, facilitate countries' ease of access to financing, streamline internal procedures, and achieve better leverage for LICs, MICs and Small Island Developing States.
"One global trend that will likely favour the creation of platforms among the regional development banks is the environmental agenda that transcends national boundaries and requires greater cooperation across countries and regions. Building shared portfolios of "green projects", harmonizing the standards across regional development banks on the implementation of such projects may enhance the prospects of meeting the ambitious environmental goals in leading developed economies and in advancing the green agenda across the economies of the Global South" [2].
Apart from the creation of a global platform for regional development banks, I also argued in favor of such a cooperative framework to be launched among the regional integration blocks and the regional development institutions of the BRICS countries[3]. And while there has been little headway on this front in the past 5-6 years, more recent developments in the sphere of "integration of integrations" are somewhat more encouraging. In particular, Belarus President Lukashenko spoke in favor of co-integrating the formats of BRICS, the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union. Such a platform of "integration of integrations" may well be launched in 2024 during Russia's BRICS chairmanship, with the main regional integration blocks from each one of the BRICS core members participating in this network. The eventual BRICS+ formation for regional integration blocks can bring together BIMSTEC, Eurasian Economic Union, African Union/AfCFTA, MERCOSUR, SCO – a potential grouping that has already been dubbed as BEAMS[4].
In the coming months there may be further crucial developments related to the rising role of regionalism in the global economy. The 2023 BRICS summit in Cape Town will feature efforts by South Africa to bring the African continent into closer cooperation with BRICS. There will also be greater coordination among the BRICS countries to support Africa's AfCFTA effort – something that will necessitate notable trade liberalization for African products not only from individual BRICS members, but also from their respective regional integration blocks. Apart from the possibility of the African Union working more closely with BRICS, there is also the likelihood that this African block may become a member of the G20 grouping.
Overall, it appears that the world's policy-makers are starting to wake up to a key global trend characterized by greater activism and role of regional integration blocks and their development institutions. These trends open up new possibilities for the world economy to build new communication lines, reduce trade barriers and boost economic growth. The hope is that this "regional track" will serve to bridge the widening North-South divides via creating cooperative global platforms for trade and investment.
[1] https://www.elysee.fr/en/emmanuel-macron/2023/06/23/multilateral-development-banks-vision-statement
[2] Y. Lissovolik. Transforming the global economy: a key role for the IFIs. July 29, 2022. Valdai club. https://valdaiclub.com/a/highlights/transforming-the-global-economy-a-key-role/
[3] Yaroslav Lissovolik. BRICS-plus: alternative globalization in the making? World Economic Forum (WEF), 2018: https://www.weforum.org/agenda/2018/01/brics-plus-an-alternative-to-globalization-in-the-making
[4] Lissovolik, Y. BEAMS of the Sunrise: A Look at BRICS 5-Year Cycles. / Valdai International Discussion Club. June, 2018.
Investment and Finance
Investment and finance in BRICS
How does the BRICS currency transform the world economy? (Как валюта БРИКС трансформирует мировую экономику?) / Russia, July, 2023
Keywords: economic_challenges, expert_opinion
2023-07-14
2023-07-14
Russia
Source: brics-plus-analytics.org
The creation of a BRICS currency has become throughout the past year one of the headline themes related not only to BRICS, but also the global financial markets. Along with the skepticism coming from most of the pundits from the developed world there is also an enormous number of misconceptions and unsubstantiated claims of the speedy "demise of the dollar" and the crumbling of the global financial system due to the creation of a common BRICS currency. In reality the actual scenario and the modalities of the introduction of such a currency are yet to be determined and it could well be that in the first stages of the launching of the BRICS currency it could take the form of an accounting unit rather than a full-fledged international transactions currency. But even in the guise of a unit of account for the economies of the Global South the R5 (taking its name from the first letters of BRICS respective currencies) could have a significant effect on the international financial system and deliver important benefits to the economies of the developing world.
The first forays into the R5 common currency project and the use of BRICS as a platform for de-dollarization, were undertaken by Y. Lissovolik back in 2017-2018 in a series of publications for the Valdai club1 as well as the South African Joburg Post and "The Thinker"2. The subsequent discussions around R5 while mostly revolving around the creation of a full-fledged euro-like currency for international transactions also featured such alternative paths as a reserve currency, or an accounting unit. The latter would in fact be the easiest and perhaps the most realistic scenario for the first stages of the R5 project. According to the leading experts in the field, the creation of an accounting unit for BRICS could be realistically undertaken with minimal resources and could be implemented in a relatively short period of time3.
Rather than rushing to create a physical unit to service international transactions, a staged approach that involves the creation of an accounting unit allows for tracking the volatility and stabilizing expectations around the operation of the future BRICS currency. The launching of the new BRICS currency in the form of a physical medium of exchange may well be greeted with speculative attacks and attempts to test the resilience of the new currency to the full force of global capital markets. Accordingly, in terms of the sequencing of the BRICS currency it may make sense to prioritize the creation of an accounting unit first and to accompany this effort with the development of market infrastructure in the main financial centers of the Global South that can support this project.
Apart from the simplicity of its introduction this mode of R5 is also in line with international best practice – in particular with such instruments as the Euro and the SDR. Furthermore, the "accounting unit" route has the advantage of being flexible, with one or several BRICS countries having the capability to launch such a currency format on their own, without the need for participation from all BRICS members. The resulting balance of pros and cons suggests that the creation of R5 as an accounting unit would minimize the risks, while retaining a lot of the benefits associated with a common currency, i.e. the easiest way to create the BRICS global currency – via the introduction of an accounting unit – is also the most optimal in the near term.
As for the R5 impact, perhaps the most important aspect in which the BRICS currency changes the world economy is the change in the mindset and the mentality of economic agents and businesses that is currently centered very much on the greenback. This "mental dependency" on the dollar arises from the fact that it is central in pricing, accounting and statistics across the globe – whether in advanced or the developing economies. The introduction of a BRICS accounting unit that replaces the dollar in the major economies of the developing world would provide a different reference point for emerging markets and a different lens through which businesses track the BRICS+ economies. Expectations of economic agents would be increasingly geared towards the new BRICS currency with greater attention accorded by global markets to the monetary policy decisions in BRICS countries rather than being overly fixated on the minutest of signals from the Fed.
Another reason why the issue of a BRICS currency is seen as being so critical is the credibility and stature that it delivers to BRICS as a block with a global reach. Thus far, the main achievements of BRICS have largely been associated with the creation of the New Development Bank – something that falls short of sizeable transformation in global governance or the international financial system. It is the creation of a new global currency by the BRICS bloc that would represent a veritable innovation and a transformation of the global economy with a qualitatively different stature attained by the grouping on the international arena.
In qualitative terms the introduction of a BRICS currency could impact the direction and the quality of macroeconomic policy pursued by BRICS members. My sense is that the emergence of R5 would somewhat reduce the tolerance of BRICS monetary authorities to sizeable swings in the exchange rate of their respective national currencies. There may also be greater coordination of macroeconomic policies of BRICS and BRICS+ economies to ensure a smoother trajectory towards implementing the subsequent stages of the introduction of R5. The overall quality of macroeconomic policies is also likely to improve to ensure a secure macroeconomic foundation for the operation of the future common currency. In fact, recent developments may be suggestive of such trends in the monetary policy sphere as some of the emerging markets acted earlier and more decisively in warding off inflationary pressures compared to the Fed and other Central Banks from developed economies.
And then there is of course the reaction from global financial markets to the introduction of the BRICS currency. The very introduction of R5 as an accounting unit could feed expectations of greater future demand for BRICS currencies as the R5 project advances to the stage of reserve currency and/or physical unit of exchange. The creation of R5 could also fuel the use of national currencies (including those of BRICS) in international trade. At the same time, the dollar may start to lose ground due to expectations of lower shares in global FX and commodity trade transactions. Accordingly, on balance the emergence of R5 would likely favor EM currencies, most notably the yuan, with some negative effect for the US dollar – the scale of these effects will depend on the exact modalities of the BRICS currency. The impact on the greenback is unlikely to be sizeable in the short-term as uncertainty concerning the future of the BRICS currency will remain significant. The effect on the yuan will be relatively more pronounced compared to other EM currencies due to the higher weight that the Chinese currency may have in the R5 basket and the relative importance for China of the resulting change in the geo-economics of the global financial system.
There could also be risks associated with the introduction of a common BRICS currency such as the scenario of the excessive zeal in introducing "advanced modifications" of the R5 in the form of a physical unit of exchange. There is a somewhat disconcerting predilection on the part of many market participants to advocate the creation of such a BRICS currency in digital form with lots of supplements such as oil or gold to be used to back this currency. This may be due in part to the abundance of speculative appetites around the creation of the new currency that favor a price boost to bitcoin, gold or other dollar competitors. But the end purpose of the BRICS common currency is greater wealth creation for the households and businesses of the Global South rather than servicing the interests of market speculators. In this regard, it may be preferable to make things transparent and simple during the early stages of the R5 project for the sake of its credibility. Another risk is the volatility issue of the R5 basket and its underlying national currencies – this calls for preparatory work to be done with respect to the depth and quality of supporting market infrastructure.
Overall, there may be important dividends for BRICS even with a minimalist approach of opting at first for the path of an accounting unit for R5. The impact of the creation of such a currency for the global economy, business operations and the international economic policy debate could also be significant in the near term. Going forward, it is crucial that the creation of the new BRICS currency is not centered solely on the creation of an alternative to the dollar – rather at an early stage the key priorities of the R5 project need to be focused on building greater trust in the financial systems and currency instruments in the Global South, to facilitating greater South-South trade and investment as well as the development of deeper capital markets. The BRICS currency will also need to serve as a credible anchor for those developing economies that will be increasingly re-orienting their trade and investment flows to the Global South. In the longer term as it advances to the stage of a reserve currency the R5 will contribute to a more balanced global monetary system and will compete for greater prominence alongside the US dollar and other leading reserve currencies. After all, as Western economic thought has it (compliments of Vilfredo Pareto), fair competition is one of the cornerstones of efficient and wealth-enhancing markets.
1 Y. Lissovolik. Monetizing BRICS+: introducing the R5 initiative. Valdai club. August 30, 2017. https://valdaiclub.com/a/highlights/monetizing-brics-r5/
2 https://eng.globalaffairs.ru/articles/boosting-the-use-of-national-currencies-among-brics/
3 https://tass.ru/interviews/17281219
Imagem de Squirrel_photos por Pixabay
Source: brics-plus-analytics.org
The creation of a BRICS currency has become throughout the past year one of the headline themes related not only to BRICS, but also the global financial markets. Along with the skepticism coming from most of the pundits from the developed world there is also an enormous number of misconceptions and unsubstantiated claims of the speedy "demise of the dollar" and the crumbling of the global financial system due to the creation of a common BRICS currency. In reality the actual scenario and the modalities of the introduction of such a currency are yet to be determined and it could well be that in the first stages of the launching of the BRICS currency it could take the form of an accounting unit rather than a full-fledged international transactions currency. But even in the guise of a unit of account for the economies of the Global South the R5 (taking its name from the first letters of BRICS respective currencies) could have a significant effect on the international financial system and deliver important benefits to the economies of the developing world.
The first forays into the R5 common currency project and the use of BRICS as a platform for de-dollarization, were undertaken by Y. Lissovolik back in 2017-2018 in a series of publications for the Valdai club1 as well as the South African Joburg Post and "The Thinker"2. The subsequent discussions around R5 while mostly revolving around the creation of a full-fledged euro-like currency for international transactions also featured such alternative paths as a reserve currency, or an accounting unit. The latter would in fact be the easiest and perhaps the most realistic scenario for the first stages of the R5 project. According to the leading experts in the field, the creation of an accounting unit for BRICS could be realistically undertaken with minimal resources and could be implemented in a relatively short period of time3.
Rather than rushing to create a physical unit to service international transactions, a staged approach that involves the creation of an accounting unit allows for tracking the volatility and stabilizing expectations around the operation of the future BRICS currency. The launching of the new BRICS currency in the form of a physical medium of exchange may well be greeted with speculative attacks and attempts to test the resilience of the new currency to the full force of global capital markets. Accordingly, in terms of the sequencing of the BRICS currency it may make sense to prioritize the creation of an accounting unit first and to accompany this effort with the development of market infrastructure in the main financial centers of the Global South that can support this project.
Apart from the simplicity of its introduction this mode of R5 is also in line with international best practice – in particular with such instruments as the Euro and the SDR. Furthermore, the "accounting unit" route has the advantage of being flexible, with one or several BRICS countries having the capability to launch such a currency format on their own, without the need for participation from all BRICS members. The resulting balance of pros and cons suggests that the creation of R5 as an accounting unit would minimize the risks, while retaining a lot of the benefits associated with a common currency, i.e. the easiest way to create the BRICS global currency – via the introduction of an accounting unit – is also the most optimal in the near term.
As for the R5 impact, perhaps the most important aspect in which the BRICS currency changes the world economy is the change in the mindset and the mentality of economic agents and businesses that is currently centered very much on the greenback. This "mental dependency" on the dollar arises from the fact that it is central in pricing, accounting and statistics across the globe – whether in advanced or the developing economies. The introduction of a BRICS accounting unit that replaces the dollar in the major economies of the developing world would provide a different reference point for emerging markets and a different lens through which businesses track the BRICS+ economies. Expectations of economic agents would be increasingly geared towards the new BRICS currency with greater attention accorded by global markets to the monetary policy decisions in BRICS countries rather than being overly fixated on the minutest of signals from the Fed.
Another reason why the issue of a BRICS currency is seen as being so critical is the credibility and stature that it delivers to BRICS as a block with a global reach. Thus far, the main achievements of BRICS have largely been associated with the creation of the New Development Bank – something that falls short of sizeable transformation in global governance or the international financial system. It is the creation of a new global currency by the BRICS bloc that would represent a veritable innovation and a transformation of the global economy with a qualitatively different stature attained by the grouping on the international arena.
In qualitative terms the introduction of a BRICS currency could impact the direction and the quality of macroeconomic policy pursued by BRICS members. My sense is that the emergence of R5 would somewhat reduce the tolerance of BRICS monetary authorities to sizeable swings in the exchange rate of their respective national currencies. There may also be greater coordination of macroeconomic policies of BRICS and BRICS+ economies to ensure a smoother trajectory towards implementing the subsequent stages of the introduction of R5. The overall quality of macroeconomic policies is also likely to improve to ensure a secure macroeconomic foundation for the operation of the future common currency. In fact, recent developments may be suggestive of such trends in the monetary policy sphere as some of the emerging markets acted earlier and more decisively in warding off inflationary pressures compared to the Fed and other Central Banks from developed economies.
And then there is of course the reaction from global financial markets to the introduction of the BRICS currency. The very introduction of R5 as an accounting unit could feed expectations of greater future demand for BRICS currencies as the R5 project advances to the stage of reserve currency and/or physical unit of exchange. The creation of R5 could also fuel the use of national currencies (including those of BRICS) in international trade. At the same time, the dollar may start to lose ground due to expectations of lower shares in global FX and commodity trade transactions. Accordingly, on balance the emergence of R5 would likely favor EM currencies, most notably the yuan, with some negative effect for the US dollar – the scale of these effects will depend on the exact modalities of the BRICS currency. The impact on the greenback is unlikely to be sizeable in the short-term as uncertainty concerning the future of the BRICS currency will remain significant. The effect on the yuan will be relatively more pronounced compared to other EM currencies due to the higher weight that the Chinese currency may have in the R5 basket and the relative importance for China of the resulting change in the geo-economics of the global financial system.
There could also be risks associated with the introduction of a common BRICS currency such as the scenario of the excessive zeal in introducing "advanced modifications" of the R5 in the form of a physical unit of exchange. There is a somewhat disconcerting predilection on the part of many market participants to advocate the creation of such a BRICS currency in digital form with lots of supplements such as oil or gold to be used to back this currency. This may be due in part to the abundance of speculative appetites around the creation of the new currency that favor a price boost to bitcoin, gold or other dollar competitors. But the end purpose of the BRICS common currency is greater wealth creation for the households and businesses of the Global South rather than servicing the interests of market speculators. In this regard, it may be preferable to make things transparent and simple during the early stages of the R5 project for the sake of its credibility. Another risk is the volatility issue of the R5 basket and its underlying national currencies – this calls for preparatory work to be done with respect to the depth and quality of supporting market infrastructure.
Overall, there may be important dividends for BRICS even with a minimalist approach of opting at first for the path of an accounting unit for R5. The impact of the creation of such a currency for the global economy, business operations and the international economic policy debate could also be significant in the near term. Going forward, it is crucial that the creation of the new BRICS currency is not centered solely on the creation of an alternative to the dollar – rather at an early stage the key priorities of the R5 project need to be focused on building greater trust in the financial systems and currency instruments in the Global South, to facilitating greater South-South trade and investment as well as the development of deeper capital markets. The BRICS currency will also need to serve as a credible anchor for those developing economies that will be increasingly re-orienting their trade and investment flows to the Global South. In the longer term as it advances to the stage of a reserve currency the R5 will contribute to a more balanced global monetary system and will compete for greater prominence alongside the US dollar and other leading reserve currencies. After all, as Western economic thought has it (compliments of Vilfredo Pareto), fair competition is one of the cornerstones of efficient and wealth-enhancing markets.
1 Y. Lissovolik. Monetizing BRICS+: introducing the R5 initiative. Valdai club. August 30, 2017. https://valdaiclub.com/a/highlights/monetizing-brics-r5/
2 https://eng.globalaffairs.ru/articles/boosting-the-use-of-national-currencies-among-brics/
3 https://tass.ru/interviews/17281219
Imagem de Squirrel_photos por Pixabay
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