Date : 22/09/2023

Relevance: GS Paper 2 - International Relations

Keywords: BRICS, UN, IMF, New Development Bank

Context-

The recent BRICS summit in Johannesburg, South Africa, garnered significant attention due to the expansion of its original membership, which has raised expectations about its influence on the global economy and global governance. Established in 2009 with Brazil, Russia, India, China, and later South Africa as founding members, BRICS has witnessed the addition of six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. Here we look into the reasons behind the growing interest in BRICS among countries of the Global South, the challenges it faces, and the potential implications for India.

Expanding BRICS Membership: A Political Compromise

The decision to expand BRICS membership, led by China and supported by Russia, has prompted speculation. While India and Brazil initially showed reluctance towards expansion to avoid transforming BRICS into an anti-Western platform, the choice of new members appears to be more of a political compromise rather than the application of agreed-upon criteria. Notably, the new members, except for Iran, maintain significant ties with the West, indicating that BRICS has not become an anti-Western alliance.

Hedging in an Uncertain World

The interest in BRICS among Global South countries stems from a desire to hedge against an increasingly uncertain world marked by shifting political and security dynamics. These nations are concerned about their vulnerability to U.S. sanctions, as exemplified by the freezing of a portion of Russia's foreign exchange reserves. Additionally, there is a cautious expectation that China may lead an alternative global currency initiative, although the dominance of the U.S. dollar in global financial markets persists. In the interim, BRICS has been promoting trade in local currencies and the issuance of local currency bonds, offering a modest yet constructive start.

Frustration with the Status Quo

Developing countries' growing frustration with being overlooked by developed nations in international institutions like the UN, IMF, and World Bank has fueled their interest in BRICS. As the major emerging economies' economic and security influence expands, there is a growing demand for greater representation in global governance. India, in particular, identifies with these sentiments, making its active participation in an expanded BRICS valuable.

BRICS Achievements and Challenges

Achievements of BRICS

• Influence on Global Institutional Reforms: BRICS nations initiated their cooperation in response to the 2008 financial crisis, which cast doubts on the sustainability of the dollar-dominated monetary system. They called for the reform of multilateral institutions to better reflect the evolving world economy and the growing role of emerging markets. This push for institutional reform resulted in the 2010 reform of International Monetary Fund (IMF) quotas, which was ultimately implemented in 2016. During this period, the BRICS countries briefly assumed the role of "agenda setters" in multilateral institutions, challenging Western legitimacy.
• Establishment of the New Development Bank (NDB): At the Fourth BRICS Summit in New Delhi in 2012, leaders discussed the possibility of creating a new Development Bank to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries. The Agreement establishing the New Development Bank (NDB) was signed during the Sixth BRICS Summit in Fortaleza in 2014. The Fortaleza Declaration emphasized that the NDB would enhance cooperation among BRICS and complement the efforts of existing multilateral and regional financial institutions to promote global development and sustainable, balanced growth. The NDB focuses on key areas such as clean energy, transportation infrastructure, irrigation, sustainable urban development, and economic cooperation among its member countries. It operates on a consultative mechanism where all BRICS members have equal rights and contribute equal capital. The NDB has achieved significant progress with 44 projects and lending amounting to $12.4 billion within just five years.
• BRICS Contingent Reserve Arrangement (CRA): Recognizing the increasing occurrence of global financial crises, BRICS nations established the BRICS Contingent Reserve Arrangement (CRA) in 2014 as part of the Fortaleza Declaration at the Sixth BRICS Summit. The primary objective of the BRICS CRA is to provide short-term liquidity support to member countries through currency swaps, helping to mitigate balance of payments (BOP) crisis situations and bolstering financial stability. The initial committed resources of the CRA amount to $100 billion, contributing to the enhancement of the global financial safety net and complementing existing international arrangements such as the IMF.

Challenges Facing BRICS

• Internal Divisions and Weaknesses: BRICS encounters several internal challenges, including economic instabilities within member countries, disagreements among members regarding UN Security Council reform, and territorial disputes between India and China. These internal divisions can impede the group's ability to present a unified front on global issues.
• The dominance of Russia, China, and India (RCI): The pronounced dominance of the big three BRICS nations—Russia, China, and India—poses a challenge as the group evolves. To truly represent large emerging markets worldwide, BRICS needs to become more pan-continental by including countries from other regions and continents, reducing its reliance on the RCI trio.
• Narrow Scope of Agenda: BRICS must broaden its agenda to increase its relevance in the global order. Currently, its focus is primarily on climate change and development finance for infrastructure projects. Expanding its scope to address a wider range of global challenges is essential.
• Inadequate Counter-Balancing: Critics argue that BRICS has not established new counter-balancing institutions or presented an alternative ideological framework. Consequently, it lacks the ability to challenge the dominance of the United States and NATO in global affairs.
• Lack of Consensus: BRICS member countries uphold diverse political systems, ranging from active democracy in Brazil to entrenched oligarchy in Russia and communism in China. Their economies also vary significantly in size. These differences can make consensus-building challenging as they pursue their national agendas within BRICS.
• Testing Foundational Principles: As BRICS progresses, its foundational principles of respecting sovereign equality and pluralism in global governance may be put to the test. Member countries may prioritize their individual national interests over collective objectives.
• China's Belt and Road Initiative (BRI): China's efforts to involve nation-states in its Belt and Road Initiative have the potential to create conflicts within BRICS, especially between China and India. Differences in approach and interests related to BRI participation may strain the group's cohesion.
• Limited Progress in Multilateral Financial Institution Reforms: BRICS has made limited headway in reforming multilateral systems such as the International Monetary Fund (IMF), World Trade Organization (WTO), United Nations (UN), and other international organizations. This lack of progress can hinder efforts to reshape global financial governance.

BRICS and the Western Apprehension

Western apprehensions that BRICS aims to undermine the international order established during the West's ascendancy are met with counterarguments. The Western countries themselves have been accused of eroding and flouting the established rules and norms of this order. These actions include marginalizing the UN, adopting protectionist trade measures, and attempting to shift the responsibility for sustainable energy transition onto developing countries. Consequently, emerging powers are seeking a new, mutually acceptable international governance architecture, possibly through forums like the G20, where both advanced and emerging economies are represented, rather than BRICS or the G7 leading the charge.

India's Diplomatic Strategy

India's diplomatic strategy of participating in multiple groupings, including BRICS, the Shanghai Cooperation Organization, and the Quad, and engaging with the G7, serves its multifaceted interests and aspirations. Such engagement provides India with diplomatic flexibility and aids in navigating an increasingly polarized global landscape.

Conclusion

BRICS, with its expanded membership and evolving dynamics, continues to hold promise as a platform for the Global South's aspirations and interests. However, it faces challenges in achieving coherence and realizing its goals, making it imperative for member nations, including India, to navigate these complexities while pursuing their broader diplomatic strategies.

Source- The Indian Express