BRICS Seize Chance To Counter U.S. With Expansion, Common Currency

(Bloomberg) -- The BRICS group of emerging markets is ramping up its bid for greater global influence, sensing a moment to capitalize on the splintering world order to build out its ranks beyond Brazil, Russia, India, China and South Africa.

Foreign ministers from BRICS nations meeting over two days in Cape Town starting Thursday will be joined by counterparts from countries including Saudi Arabia, the United Arab Emirates, Egypt and Kazakhstan. On the agenda is expansion, with as many as 19 countries aspiring to join, and the potential establishment of a common currency. 

The gathering, a precursor to an Aug. 22-24 summit of BRICS heads of state in Johannesburg, will showcase the bloc’s goals to establish itself as a serious economic and political force. Coming at a time of heightened tensions between Washington and Beijing, the talks are also likely to fan western concerns that the group is moving to become a counterweight to the US and the European Union.

Read more: How BRICS Became a Real Club and Why Others Want In: QuickTake

Already, members have refused to join the likes of the Group of Seven in blaming — and sanctioning — fellow BRICS nation Russia over President Vladimir Putin’s full-scale invasion of Ukraine. The goals of expansion and a shared currency are aims espoused by China, and at least two of the country attendees in Cape Town — Iran and Cuba — are subject to US economic penalties.

“BRICS has acquired a very important stature in the world, with many countries across various continents of our world seeking to be part of it,” South African President Cyril Ramaphosa told lawmakers in Cape Town on Wednesday. Naledi Pandor, the foreign minister and meeting host, said last month that the bloc could be “transformative,” representing those nations “that wish to play a role in world affairs, ensuring benefit to the Global South.”

Brazilian President Luiz Inacio Lula da Silva is a vocal supporter, championing the use of a shared currency and dispatching his Finance Minister Fernando Haddad to attend a meeting of the New Development Bank, the Shanghai-based lender created by BRICS nations, to lobby for assistance for beleaguered neighbor Argentina. Argentina’s foreign minister is due to attend the BRICS meeting remotely.

Lula’s protege and the bank’s president, Dilma Rousseff, said this week that the lender was looking to widen its membership further. Bangladesh and the UAE joined in 2021, while Egypt became a member in February. Now Saudi Arabia is discussing membership. 

Riyadh’s accession to BRICS would bolster Crown Prince Mohammed bin Salman’s attempts to diversify his nation’s economy, an effort that has bought it much closer to Russia and China in recent years. China is the kingdom’s most important oil customer, while it relies on relations with Russia to help prop up crude prices through OPEC+. 

For the Gulf region, joining major trade blocks makes sense as countries seek to expand trade ties and develop as global transit hubs, a person familiar with Gulf thinking said. Plans to join have been in the works for a while and momentum has been building toward this point, the person said.

Read more: BRICS Debates Expansion as Iran, Saudi Arabia Seek Entry  

The acronym BRIC was coined in 2001 by Jim O’Neill, then Goldman Sachs Group Inc.’s chief economist, to highlight those countries’ rapid economic expansions. South Africa was invited to join in 2010, but BRICS has failed to punch its weight as a group. That’s despite its members representing more than 42% of the world’s population and accounting for 23% of global gross domestic product and 18% of trade, giving credence to demands for more sway.

The prospect of adding more members was first raised at last year’s summit in China and 13 nations have formally asked to join, with at least six others expressing interest. 

Still, while all the current members have backed the concept, India wants an agreement to be reached on the process to ensure it isn’t sidelined by China and its allies, according to people familiar with matter who spoke on condition of anonymity. O’Neill, who favors expanding the group, has called for strict criteria on membership. 

Read more: O’Neill Urges BRICS Bloc to Expand, Challenge Dollar’s Dominance

The feasibility of plans for a shared currency has also been met with some skepticism, not least with South African central bank Governor Lesetja Kganyago cautioning that the creation of a form of legal tender would likely have to be accompanied by the creation of a single central bank.

For Robert Schrire, a politics professor at the University of Cape Town, the composition of the group makes no political or economic sense, with China and India destined to be geopolitical rivals and the Brazilian, Russian and South African economies all reliant on commodity exports, making them likely competitors. That reality “precludes effective collective action based upon common interests, and an expansion in membership will only make these basic contradictions more unmanageable,” he said.

Even just hosting the meeting is proving to be a thorny diplomatic undertaking for South Africa, which has already drawn the ire of the US, its second-largest trading partner, for its close ties to Russia. What’s more, the host nation will be obliged to execute an arrest warrant issued by the International Criminal Court for Russian President Vladimir Putin on charges related to the war should he turn up for the summit. 

South Africa said this week it will provide diplomatic immunity to attendees of both BRICS meetings in what it called a routine practice, although that won’t necessarily override the ICC warrant. 

--With assistance from Sudhi Ranjan Sen, Matthew Martin, Paul Richardson and Karl Maier.

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