Some news stories fly below the radar of most readers, and the six new member countries in the BRICS economic organization is such a story. According to Reuters, these six new members are:
- Saudi Arabia
- United Arab Emirates
BRICS is an acronym that represents the economies of five countries – Brazil, Russia, India, China, and South Africa – and it seeks to combat Western power. BRICS countries are known for their significant influence on regional and global affairs, and they collaborate on various political, economic, and strategic issues.
The History Behind BRICS and Why It Is Significant
The concept of BRICS was first formulated by economist Jim O’Neill in a 2001 paper, “Building Better Global Economic BRICs.” In this paper, O’Neill identified Brazil, Russia, India and China as emerging economic powerhouses with the potential to play a significant role in the global economy in the 21st century.
According to Mark Kobayashi-Hillary’s book, “Building a Future with BRICs: The Next Decade for Offshoring,” the BRIC group gained official recognition and prominence when the leaders of Brazil, Russia, India, and China held their first formal summit in Yekaterinburg, Russia, in June 2009. This meeting marked the formal creation of BRIC as a political group. South Africa later joined the group in December 2010, leading to the formation of BRICS.
There are two institutional frameworks that were created as a result of the BRICS meetings:
- New Development Bank (NDB): The BRICS countries established the NDB in 2014 as a multilateral development bank to finance infrastructure and sustainable development projects in their countries and other emerging economies.
- Contingent Reserve Arrangement (CRA): In 2014, BRICS countries established the CRA, which is a framework for providing financial support to member countries facing balance of payments problems. Like the NDB, it’s not a treaty but a cooperative arrangement.
The CRA and International Affairs
At first glance, BRICS seems to be yet another international organization that gives an opportunity for diplomats to meet on the taxpayer’s dime, but this is not the case. BRICS is an alternative to the world order that evolved after the collapse of the USSR in 1991 and the rise of U.S. dominance over other areas in the world.
For example, BRICS has a monetary fund called the BRICS Contingent Reserve Arrangement. The CRA offers a way to circumvent a global financial system largely controlled by the U.S. and its banking system.
In his article “The BRICS Contingent Reserve Arrangement: A Subversive Power Against the IMF’s Conditionality?,” Aike Würdemann explained the purpose behind establishing the CRA. He noted, “In 2014, the BRICS countries established the Contingent Reserve Arrangement (CRA) purportedly to compensate for the BRICS’ frustration over the non-materialization of reforms in the International Monetary Fund (IMF) that had long been promised but blocked by the United States until late 2015. A contractual analysis of the CRA reveals that though all BRICS countries enjoy equality for strategic decisions, the CRA strongly resembles the IMF’s quota-based voting distribution where operational decisions are taken.
“It nevertheless provides a more balanced voting system, as it does not provide one single party with a veto position. The CRA further lacks legal personality and other fundamental features such as its own staff or macroeconomic research facilities. Financing approvals are thus linked to IMF on-track arrangements, which undermines the CRA’s significance. The CRA nonetheless holds the potential to be developed into a viable BRICS alternative to the IMF in the long term.”
The CRA fund of BRICS serves as an alternative to a financial system largely controlled by the U.S. Because six new countries have joined BRICS, they have indicated their interest in further developing the infrastructure of their strong economies and circumventing the use of U.S. dollars in transactions.
For example, if China is willing to accept local currency for a big infrastructure project located in South America or Africa, then there is no need to seek a loan in U.S. dollars and cope with a loan’s high interest rate. Similarly, if Iran can buy materials or pay for infrastructure projects with oil rather than currency, then it is much less susceptible to U.S. sanctions.
By Joining BRICS, What Are the New Members Saying to the World?
These new members joining BRICS send a message to the rest of the world; they see the future as a multipolar world. In a report by multiple fellows in the Atlantic Council, the new members of BRICS show that China is making headway in the global political arena.
Saudi Arabia and the UAE joining BRICS makes it clear that the Biden administration has lost its position in the Persian Gulf. Argentina joining BRICs is yet another example that it is drifting away from U.S. control.
While Putin was not present at the latest BRICS summit, he was there in spirit. During the entire summit, there were echoes of the Russian claims that the U.S. and the West are behind the prolonged war with Ukraine that places a limit on Russian expansionism.
What Is the Future of BRICS?
A key issue before the inevitable expansion of BRICS is the relationship between India and China. As Kapil Sharma of the Atlantic Council says, the future of BRICS as an alternative to U.S. dominance is dependent on the future of Chino-Indian relations.
Sharma notes, “For…BRICS to be effective over the long term, India and China will need to resolve their border challenges and collaborate on tough global issues as well as the deployment of capital for developing economies. If India is truly to take on the role of the ‘voice of the Global South,’ managing these disparate interests with one voice may prove to be a greater task than what it bargained for.”
The role of the U.S. in the global arena will be determined by the continued development of BRICS. If China has its way, the U.S. will have little to do with these growing economies.