NICHOLAS SHUBITZ: Fast-approaching Brics summit could prove decisive
Meeting in Russia may determine the pace and scale at which the group is able to realise its ambitions
03 October 2024 - 05:00
byNicholas Shubitz
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During the first Brics meeting with its new members earlier in 2024 the “Sherpas” who made up the working group were tasked with formulating an agenda for the leaders’ summit in Kazan, Russia, scheduled for October 22-24. The minutes from the meeting provide insights into the group’s priorities and the evolving dynamics between the new and original members.
Following directives issued by the leaders at the 2023 summit in Johannesburg, discussions took place regarding further Brics expansion plans, the increased use of national currencies and the development of new payment mechanisms for cross-border transactions.
While a new Brics payment system to facilitate trade in local currencies could prove beneficial as inter-Brics trade grows, it remains to be seen whether the bloc will be able to continue integrating new members in pursuit of this goal. The leaders’ summit in Russia later this month could prove decisive in this respect, determining the pace and scale at which the group is able to realise its ambitions.
Spending priorities
During the meeting earlier in the year Russian foreign minister Sergei Lavrov emphasised the need for Brics to reconfigure the global order to better represent the interests of developing countries. He drew parallels between Brics and the concept of multilateralism, advocating for inclusiveness to reshape the global economy. This rhetoric resonates with states that feel their voices tend to go unheard, especially during times of global crisis.
Lavrov specifically criticised the disproportionate financial support the Group of Seven (G7) nations have offered Ukraine, contrasting it with the lack of similar support for other struggling countries. The foreign minister claimed financial support for Ukraine had been prioritised over projects in Africa and the Middle East and contrasted this with Russia’s approach, reminding the delegates that the Kremlin had given free wheat and fertiliser to several African countries.
Considering that the EU has provided financial support to Ukraine equivalent to Africa’s entire infrastructure financing gap (about $100bn), Russia’s argument may prove effective in convincing developing countries that their needs are being neglected. Meanwhile, the US approved $95bn for a single military aid package earlier this year, a figure larger than the foreign reserve holdings of 85% of the world’s nations.
While the US has spent trillions on destructive wars, Beijing has spent more than $1-trillion building ports, power plants, railways, roads and bridges across the world as part of its Belt & Road Initiative. Similarly, with new Brics members such as Saudi Arabia and the United Arab Emirates (UAE) pouring billions of petrodollars into emerging markets, developing countries are justifiably interested in joining a fast-growing and resource-rich Brics alliance.
New members
During this year’s meeting, Brics officially welcomed representatives from its new member states following the decision made in Johannesburg to include several new countries in the grouping. These countries became full members in January 2024, and each in attendance was afforded the opportunity to share their views on the proposed agenda for the upcoming year.
The Egyptian delegation urged Russia as chair of Brics to address pressing challenges in food and energy security, both crucial issues for the North African nation. Egypt faces multiple economic challenges and was forced to devalue its currency to secure a $8bn bailout from the IMF. The Egyptian pound plunged nearly 40% after the removal of the currency peg, dropping to a record low of 50 to the dollar and heightening Cairo’s economic concerns.
Investors have shied away from Egypt since Russia invaded Ukraine. This has led to a surge in import costs, particularly for wheat, depleting Egypt’s foreign reserves. The Houthis’ Red Sea blockade of Israel, intended to force a ceasefire in Gaza, has also had an effect, halving the revenue from the Suez Canal, another significant source of foreign income for Egypt valued at about $10bn a year during peacetime.
Though it imports natural gas from Israel and buys weapons from the US, Egypt has chosen to join Brics and co-operate with Russia and Iran. This may seem odd considering the negative effects the wars in Ukraine and Gaza have had on the Egyptian economy, but for Cairo Brics is seen as a vehicle for ameliorating these effects and shoring up its finances.
The Brics grouping has certainly ramped up investments in Egypt this year. China has been a dominant player, with substantial investments in infrastructure, green energy and the expansion of the Suez Canal Economic Zone. Saudi Arabia and the UAE have also pledged billions towards the country’s tourism and real estate sectors, while Russia is building Egypt’s first nuclear plant.
Iranian deputy foreign minister Mehdi Safari also attended the meeting and called for an increase in payments in national currencies within Brics. Iran is motivated to explore the use of local currencies in cross-border transactions to mitigate the negative effects of US sanctions.
In general, the new members seem particularly focused on economic and financial co-operation within Brics, especially new payment instruments and use of national currencies. Considering heavily sanctioned Russia holds the rotating Brics presidency, financial reform is likely to prove a major theme of the upcoming summit.
Future expansion
Despite receiving numerous membership applications over the past few years, Brics has only welcomed a handful of new members and there is talk that there could be a pause. Nevertheless, more and more countries appear interested in joining, with dozens submitting official applications, including Nigeria, Bangladesh, Bolivia, Turkey and Kazakhstan.
However, expansion may prove contentious. For example, India is likely to object to Pakistan’s inclusion, while the addition of Belarus, Cuba or Palestine could spark controversy due to wars and sanctions. That said, Iran and Russia are already members, despite sanctions, making it difficult to predict who might be invited to join.
There has also been talk of a new category of “partner country”, which would allow new nations to be included in Brics initiatives without immediately being granted full membership status. This suggests that like the development of new financial architecture, further expansion is likely to be a gradual yet ongoing process.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
NICHOLAS SHUBITZ: Fast-approaching Brics summit could prove decisive
Meeting in Russia may determine the pace and scale at which the group is able to realise its ambitions
During the first Brics meeting with its new members earlier in 2024 the “Sherpas” who made up the working group were tasked with formulating an agenda for the leaders’ summit in Kazan, Russia, scheduled for October 22-24. The minutes from the meeting provide insights into the group’s priorities and the evolving dynamics between the new and original members.
Following directives issued by the leaders at the 2023 summit in Johannesburg, discussions took place regarding further Brics expansion plans, the increased use of national currencies and the development of new payment mechanisms for cross-border transactions.
While a new Brics payment system to facilitate trade in local currencies could prove beneficial as inter-Brics trade grows, it remains to be seen whether the bloc will be able to continue integrating new members in pursuit of this goal. The leaders’ summit in Russia later this month could prove decisive in this respect, determining the pace and scale at which the group is able to realise its ambitions.
Spending priorities
During the meeting earlier in the year Russian foreign minister Sergei Lavrov emphasised the need for Brics to reconfigure the global order to better represent the interests of developing countries. He drew parallels between Brics and the concept of multilateralism, advocating for inclusiveness to reshape the global economy. This rhetoric resonates with states that feel their voices tend to go unheard, especially during times of global crisis.
Lavrov specifically criticised the disproportionate financial support the Group of Seven (G7) nations have offered Ukraine, contrasting it with the lack of similar support for other struggling countries. The foreign minister claimed financial support for Ukraine had been prioritised over projects in Africa and the Middle East and contrasted this with Russia’s approach, reminding the delegates that the Kremlin had given free wheat and fertiliser to several African countries.
Considering that the EU has provided financial support to Ukraine equivalent to Africa’s entire infrastructure financing gap (about $100bn), Russia’s argument may prove effective in convincing developing countries that their needs are being neglected. Meanwhile, the US approved $95bn for a single military aid package earlier this year, a figure larger than the foreign reserve holdings of 85% of the world’s nations.
While the US has spent trillions on destructive wars, Beijing has spent more than $1-trillion building ports, power plants, railways, roads and bridges across the world as part of its Belt & Road Initiative. Similarly, with new Brics members such as Saudi Arabia and the United Arab Emirates (UAE) pouring billions of petrodollars into emerging markets, developing countries are justifiably interested in joining a fast-growing and resource-rich Brics alliance.
New members
During this year’s meeting, Brics officially welcomed representatives from its new member states following the decision made in Johannesburg to include several new countries in the grouping. These countries became full members in January 2024, and each in attendance was afforded the opportunity to share their views on the proposed agenda for the upcoming year.
The Egyptian delegation urged Russia as chair of Brics to address pressing challenges in food and energy security, both crucial issues for the North African nation. Egypt faces multiple economic challenges and was forced to devalue its currency to secure a $8bn bailout from the IMF. The Egyptian pound plunged nearly 40% after the removal of the currency peg, dropping to a record low of 50 to the dollar and heightening Cairo’s economic concerns.
Investors have shied away from Egypt since Russia invaded Ukraine. This has led to a surge in import costs, particularly for wheat, depleting Egypt’s foreign reserves. The Houthis’ Red Sea blockade of Israel, intended to force a ceasefire in Gaza, has also had an effect, halving the revenue from the Suez Canal, another significant source of foreign income for Egypt valued at about $10bn a year during peacetime.
Though it imports natural gas from Israel and buys weapons from the US, Egypt has chosen to join Brics and co-operate with Russia and Iran. This may seem odd considering the negative effects the wars in Ukraine and Gaza have had on the Egyptian economy, but for Cairo Brics is seen as a vehicle for ameliorating these effects and shoring up its finances.
The Brics grouping has certainly ramped up investments in Egypt this year. China has been a dominant player, with substantial investments in infrastructure, green energy and the expansion of the Suez Canal Economic Zone. Saudi Arabia and the UAE have also pledged billions towards the country’s tourism and real estate sectors, while Russia is building Egypt’s first nuclear plant.
Iranian deputy foreign minister Mehdi Safari also attended the meeting and called for an increase in payments in national currencies within Brics. Iran is motivated to explore the use of local currencies in cross-border transactions to mitigate the negative effects of US sanctions.
In general, the new members seem particularly focused on economic and financial co-operation within Brics, especially new payment instruments and use of national currencies. Considering heavily sanctioned Russia holds the rotating Brics presidency, financial reform is likely to prove a major theme of the upcoming summit.
Future expansion
Despite receiving numerous membership applications over the past few years, Brics has only welcomed a handful of new members and there is talk that there could be a pause. Nevertheless, more and more countries appear interested in joining, with dozens submitting official applications, including Nigeria, Bangladesh, Bolivia, Turkey and Kazakhstan.
However, expansion may prove contentious. For example, India is likely to object to Pakistan’s inclusion, while the addition of Belarus, Cuba or Palestine could spark controversy due to wars and sanctions. That said, Iran and Russia are already members, despite sanctions, making it difficult to predict who might be invited to join.
There has also been talk of a new category of “partner country”, which would allow new nations to be included in Brics initiatives without immediately being granted full membership status. This suggests that like the development of new financial architecture, further expansion is likely to be a gradual yet ongoing process.
• Shubitz is an independent Brics analyst.
READ MORE BY NICHOLAS SHUBITZ
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