- The BRICS group, with its growing economic influence, stands as a formidable alternative to the G7 and fast-tracks the transition to a multipolar world.
- Over 40 nations, including major economies, have shown interest in joining BRICS, further enhancing its global influence.
Growing Economic Power and Global Influence
Born from the acronym ‘BRIC’ in 2001, signifying Brazil, Russia, India, and China as emerging economic giants, the inclusion of South Africa in 2010 transformed this group into BRICS. Over the years, these nations have not only shown robust economic growth but have also emerged as a significant rival to the G7 bloc.
- Economic Shifts to the East and South: Accounting for nearly a third of global GDP, BRICS nations have surpassed the G7 in their contribution. Key players like China have dominated global trade, becoming the top trading partner for over 120 countries. The rapid economic growth in BRICS nations, especially in the last decade, has come at the expense of the G7, whose global trade share has seen a steady decline.
BRICS: An Answer to Economic Sanctions
Economic sanctions and the weaponization of the US dollar have affected trade relations, particularly between Russia and the G7. However, BRICS nations have become a buffer against these sanctions.
- Trade between Russia and its fellow BRICS nations has seen a tremendous increase despite Western-led sanctions. Notably, China and India have become significant importers of Russian oil, circumventing bans by the EU.
This solidarity within BRICS undermines the effectiveness of sanctions as a tool, with nations like Russia showing economic resilience, even in the face of external pressures.
Challenging the Dominance of the Dollar
The weaponization of the US dollar in international trade and sanctions has propelled discussions around dedollarisation. The shift towards using local currencies for bilateral trade payments within BRICS nations suggests an initial move in this direction.
- China and India, despite their distinct geopolitical interests, have benefited from using their own currencies in trade. Their push towards settling trade in local currencies signals a broader move to challenge the dominance of the dollar in global transactions.
BRICS and the Future Financial Infrastructure
The foundation for an efficient cross-border transaction system is already present within BRICS. With the BRICS Interbank Co-operation Mechanism, BRICS Pay, and the Contingent Reserve Agreement, there’s an integrated infrastructure ready to facilitate trade between these nations.
The New Development Bank (NDB), aiming to enhance local currency financing, has taken initiatives that might reduce the dollar’s content in BRICS cross-border trade and investment.
Membership Expansion: A Double-Edged Sword
The 15th BRICS summit in Johannesburg focuses on expanding its membership, with over 40 countries showing interest. While the inclusion of new members will bring a myriad of benefits, including a dramatic increase in consumption power, it also presents challenges. The group will need to navigate potential interests’ divergence and increased coordination hurdles. However, the potential reward of advancing towards a common BRICS currency and minimizing global dollar-dependent trade is a tantalizing prospect.
In essence, the growth and potential expansion of BRICS not only challenge established global economic orders but also present opportunities for a more diversified and multipolar world order.