Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
Russian President Vladimir Putin hosted the first ever summit of BRICS+ from October22 to 24 in Tatarstan, capital Kazan -- a beautiful city also considered as the third capital of Russia. The 16th BRICS summit hosted by Russia is believed to be one of the major economic, political and cultural events of the decade. The past year has seen BRICS grow both in size and influence.
Russia is the Chair of the group for 2024, and Putin played host to 36 nations including China, India, Iran, Egypt, Turkey and UAE. These countries account for 57 per cent of global population and a third of the global economy. The UN secretary general, António Guterres, also attended the conference.
BRICS undertook a major expansion recently, adding Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. Turkey had also applied to join the group, and its BRICS application is a watershed moment in geopolitics. It would become the first NATO member and long time candidate for European Union membership to join the grouping considered as a challenger to the US-led Western global dominance and a counterweight to Western-led organisations like the EU, the G7 and the G20. However, it is yet to develop formal structure, enforcement mechanisms, and uniform rules and standards.
One of the major objectives of Putin in hosting the summit was to demonstrate that is Moscow as anything but isolated. In fact, the gathering in Kazan was meant to send an unmistakable message that despite the US and its allies' best efforts to isolate it, Russia has many friends around the world.
Putin also warned the West that it was an "illusion" to think Moscow could be defeated on the battlefield and that any peace deal would have to recognise Russia's control of the large areas of Ukrainian territory.
China's President Xi Jinping greeted Putin as his dear friend, praising the profound friendship between the two countries. South African President Cyril Ramaphosa described Moscow as a "valued ally" and praised Russia for its support for the country in its struggle against apartheid. Even Indian Prime Minister Narendra Modi while fomenting political unrest in neighbouring countries, now especially in Bangladesh, tried to cast himself as a peacemaker in the Russia-Ukraine conflict wishing the conflict to be resolved peacefully.
Venezuelan President Nicolas Maduro, speaking at the summit, outlined the vision of BRICS advocating for a new economic and monetary system that challenges Western hegemony. He emphasised the need for practical solutions for international trade and currency exchange, urging reforms to strengthen the BRICS New Development Bank and promote independent economies. Maduro also called for a radical transformation of the United Nations, condemning its failure to address conflicts, like those in Gaza and Lebanon.
A BRICS + format is now taking place, with world leaders and heads of the Eurasian Economic Union, Commonwealth of Independent States and the Shanghai Co-operation Organisation, among many others.
Five new members were formally welcomed into the group - Egypt, Ethiopia, Iran, Saudi Arabia and United Arab Emirates (UAE). Putin also invited more than two dozen other countries that have applied for or are considering membership in the expanding group. It is now increasingly becoming clear that an expanding BRICS, now labelled as BRICS+ reflects a shared belief among many important countries that the US dominated and crafted rule based global order against their interest including the global economic governance system.
In fact, the current global economic and political architecture is a product of the foreign policy choices of the West. The gathering of BRICS+ and other countries at the summit also spotlighted a growing convergence of nations who hope to see a shift in the global balance of power that directly counters the United States-led West.
The US has a well-documented history of weaponising just about any institution, policy, or even a crisis and above all its own currency to advance its political agenda. It also exploited the EU's strategic weakness to render it subservient with no hope of strategic autonomy.
BRICS was established 2009 on the premise that international organisations were overly dominated by the West and had ceased to serve developing countries. The bloc sought to coordinate its members' economic and diplomatic policies that are immune to US pressures by circumventing the dollar. This also aimed at mitigating the US ability to use the threat of sanctions in imposing its political will. Iranian President Masoud Pezeshkian expressed the similar view at the summit and said, "BRICS can be a way out of American totalitarianism and create a path of multilateralism. BRICS can be a solution to deal with the dominance of the dollar and deal with the economic sanctions of countries."
As the world's reserve currency, countries around the world have been forced to acquire the US dollar to trade with other countries. This has granted the US enormous power to shape the world order to its advantage. Because of the unique position of the US dollar, the US has for decades run vast trade and current account deficits of hundreds of billions of dollars every year. It financed its deficits just by printing dollars including to finance massive bail outs. This is now being directly challenged by BRICS+, proposing to facilitate trade in nations' own currencies. Putin said at the summit that nearly 95 per cent of trade between China and Russia is now conducted in the rubble and the yuan.
But the US dollar's domination of the global currency landscape is deeply entrenched, both for trade transactions and foreign exchange reserves. More than 80 per cent of global trade transactions are invoiced in US dollars, which also accounts for nearly 60 per cent of central bank reserves. 50 per cent of global debt is denominated in the dollar. However, the U.S. dollar's share of global reserves has seen a steady decline, from around 71 per cent in 1999 to 59 per cent in early 2024. This trend reflects a shift in reserves towards other currencies, including the euro, Chinese yuan, and smaller currencies like the Australian dollar and Swiss franc, which are being increasingly used for diversification purposes.
It would not be easy to shed their dependence on the US dollar. Neither China nor India has fully convertible currencies. This hype about the potential shift out of the US dollar hegemony is also unrealistic given the economic structure of the member countries. China now holds the World's largest foreign exchange reserves which stood at US$3.32 trillion as of September this year with significant portion held in the US dollar. Even Putin remarked at the summit that Moscow was not trying to undermine the US currency but was "forced to look for alternatives" in trade with its partners.
BRICS remains a disparate group ranging from China to a relatively very small economy, South Africa. India is now a member of a military alliance with the US, Japan and Australia (the Quad) to contain China and Modi is a regular attendee at the G-7 summits, so is Cyril Ramaphosa of South Africa. Some in the US see the US-India relationship as the defining partnership of the century. From the Indian perspective, the US sanctions against China could even hold advantages for India.
Therefore, to ease out the dollar will be an uphill task. Also, Brazil and India do not share the same degree of enthusiasm for de-dollarisation as China and Russia do. The US President elect Donald Trump has already warned of serious economic consequences if BRICS and other countries sideline the US dollar and will impose BRICS countries with 100 percent tariff on goods that enter the US if they go for de-dollarisation. If the tariffs are imposed, it could change the global trade dynamics leading to a paradigm shift in global trade flows and BRICS nations could face serious challenges as 100 per cent tariff could be a serious financial burden.
The rise of BRICS and BRICS+ reflects a shared belief that the US and its European allies' rule based international order and particularly the system of global economic governance is stacked against their interests and has become outdated.
Also, the US-led unipolar neo-liberal international order gave rise to neo-liberal globalisation and many consider it as the West's new civilisational mission having recolonising characteristics. The Western liberal approach also underpins the work of the World Bank, the IMF and the WTO. It is argued that the existing power asymmetry is essentially the consequence of the colonial past of countries belonging to the Global South and as such the BRICS perspective poses a challenge to the West.
Therefore, the expansion of BRICS goes beyond the purely economic effects. This will enhance the capacity of all developing countries to more effectively deal with the West dominated multilateral organisations including the UN. Tomofey Bordachev of the Valdai Club, a Russian think-tank rightly argued, "As it has developed, the BRICS group has become the literal embodiment of a revisionist approach to the transformation of the international order".