The acronym BRIC was coined when Brazil, Russia, India, and China joined forces and founded a group of nations in 2009. In 2010, South Africa joined, adding an S to the existing acronym. The BRICS group today is a powerful bloc that allows countries outside the Western developed economies to forge alliances on economic issues.
Opponents of the group at first did not think much of it, labelling the BRICS bloc as being too diverse to succeed. However, despite this diversity and the dissimilarity of its original members, the BRICS group today is a powerful entity that together occupies approximately 28 per cent of the world’s territory and is home to 45 per cent of its population.
Together, the BRICS countries produce over 25 per cent of global oil and 50 per cent of the iron ore used to make steel. They also produce 40 per cent of global corn and 46 per cent of global wheat. This unified strength has resulted in the growth of the BRICS countries in terms of their presence and influence.
The objective of the BRICS group is twofold: to advance the national interests of its members and to gain autonomy. In the process, it counters Western hegemony economically and politically. Against the background of the ongoing war in Ukraine and the intensifying competition between China and the US, the momentum for expanding the BRICS group has been growing.
In 2014, the BRICS nations launched the New Development Bank as an alternative to the World Bank and the International Monetary Fund (IMF) and opened their doors to new members. The bank was established with a capital of $50 billion, of which 20 per cent was paid by the countries of the BRICS group, the equivalent of $10 billion.
In 2021, Egypt, the UAE, Uruguay, and Bangladesh took up shares in the New Development Bank. However, the value of these shares was much lower than the $10 billion investment made by the bank’s founding members. Even so, as the BRICS becomes a platform for cooperation, many countries are now more interested to join. Proposed BRICS members include Iran, Argentina, Turkey, Egypt, Saudi Arabia and many other nations.
Egypt’s President Abdel-Fattah Al-Sisi recently approved an agreement on the New Development Bank allowing Egypt to join it. Such a move is a major shift for Egypt and has the potential to reduce the domestic demand for US dollars. “Egypt’s joining of the BRICS Group’s New Development Bank will relieve the state budget of the pressure of finding US dollars to meet the country’s imports as members of the bank can use their national currencies for trade exchange,” Deputy Chair of the House of Representative’s Economics Committee Mohamed Abdel-Hamid has said.
This is a fundamental shift and is exactly what many nations hope to achieve. Amidst the current global economic crisis, all nations are looking to strengthen their own currencies, and the BRICS group can support them in accomplishing that goal. This is an alternative that could assist these nations in overcoming soaring prices, inflation, and acute dollar shortages.
During the 14th BRICS Summit in 2022, Russian President Vladimir Putin announced that the BRICS nations would launch a new global reserve currency made up of a basket of BRICS currencies. This would be a direct threat to the dominance of the US dollar and will help to undermine its supremacy.
From the perspective of the global monetary system, such a move could mark a significant development in the trend towards de-dollarisation, as countries try to trade in non-dollar currencies and seek to diversify their foreign-exchange reserves. If the BRICS nations’ goods and services are traded in the new reserve currency, this will become one of the foundations of a new world economy, helping to see a new world order emerge.
Various bombshells have begun to jolt the current world order. Russia is now using the Chinese Yuan in lieu of the US dollar for international payments, and the Yuan is now the most-traded currency in Russia. Brazil and China are ditching the US dollar in favour of their own currencies. Saudi Arabia is also in talks with Beijing regarding using the Yuan for payments. All this is clearly chipping away at the dominance of the US dollar.
Andy Schectman, CEO of US company Miles Franklin Precious Metals Investments, explained the magnitude of the situation. “All it would take would be for Saudi Arabia to stand up on the stage [and declare] we’re now going to consider taking up other currencies for oil. And all of a sudden, bang, all of the countries that have had to hold dollars for the last 50 years no longer have an interest in holding them,” he said.
“And if they all start to dump dollars, and I think it would happen quickly, you would have a tsunami of inflation hitting the shores of the West.”
In addition, the political arm of the BRICS group has also grown stronger with the ongoing war in Ukraine. Since the start of the war, the BRICS members have distanced themselves further from the Western perspective on the conflict. None of BRICS nations – India, Brazil, South Africa, and China – opted to sanction Russia, highlighting a distinct divide between the Western countries and Russia on this issue.
A recent article in Deutsche Welle, the German-owned broadcaster, said that “European and US policymakers worry that the BRICS may become less of an economic club of rising powers seeking to influence global growth and development and more a political one defined by their authoritarian nationalism.”
* The writer is former professor of communication based in Vancouver, Canada.
* A version of this article appears in print in the 13 April, 2023 edition of Al-Ahram Weekly