Another BRICS+ in the Wall
Another BRICS+ in the Wall
BRIC and BRICS+ | Economics and Geopolitics | BRICS Institutions
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“Barbershop Whispers….Russia (BWR)” begins with “My Takeaways” on the main topic, followed by a discussion on the main topic. The last two BWR sections are “Follow-ups” on previous publications and “Quick Bites” on emerging events.
In last week’s BWR, I discussed the Russian automobile sector and the impact of Putin’s war on it. Exit left, Western automakers; enter right, China, Inc., and others. Can the Russian automakers survive? Dealerships? The ecosystem as a whole?
In this week’s BWR, I discuss Russia’s 2024 chairmanship of BRICS and Russia’s drive to grow its membership. New BRICS members and partners add economic and political value, but it also creates internal challenges.
Takeaways:
CONSENSUS—As the membership grows, so do the consensus challenges. The members' differing goals, such as reforming or tearing down the existing global and economic system, add to the challenge.
INTRA-BRICS TRADE—Cross-border trade between BRICS is rapidly growing, particularly in the commodities sector.
Another BRICS+ in the Wall
BRIC and BRICS+ | Economics and Geopolitics | BRICS Institutions
The BRIC term was coined in 2001 by Jim O’Neill, at the time an economist for Goldman Sachs (GS) and later Chairman of GS Asset Management, in his publication Building Better Global Economic BRICs. Later in 2006, at the September UN Assembly meeting in NY, the foreign ministers of the original BRIC (Brazil, Russia, India, and China) met on the sidelines to discuss the organization's formation.
In 2009, BRIC was formalized in Yekaterinburg (Russia) and expanded in 2010 to include South Africa, thus changing the acronym to BRICS with the ‘S’ representing South Africa.
In August 2023, Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) were invited to join the organization. In January 2024, the BRICS was again expanded to include Egypt, Ethiopia, Iran, and the UAE. Argentina withdrew its candidacy, and Saudi Arabia is participating as an observer.
Russia holds the 2024 BRICS Chairmanship and this year’s motto is “Strengthening Multilateralism for Just Global Development and Security”. From the BRICS website,
BRICS is attracting an ever increasing number of supporters and like-minded countries that share its underlying principles, namely, sovereign equality, respect for the chosen path of development, mutual consideration of interests, openness, consensus, the aspiration to form a multipolar international order and a fair global financial and trade system, and pursuit of collective solutions to top challenges of our time.
Last week, the foreign ministers of the BRICS convened on the sidelines at the UN Assembly in NY to discuss the upcoming October BRICS summit topics, which will be held in Kazan, the capital of the semi-autonomous Republic of Tatarstan, from 22 to 24 October. The ministers were expected to release a joint statement on several issues, including plans for a common currency and the accession of more countries into BRICS. However, the joint statement ended in an impasse due to Egypt and Ethiopia refusing to sign on the grounds no consensus had been reached as to which country should be Africa’s representative at the UN.
In June, President Putin said 34 countries had shown interest in joining BRICS, and he wanted to address this “growing interest” and discuss how new BRICS candidates could participate. Türkiye, Azerbaijan, Malaysia, and Thailand have formally applied to join the organization. If Türkiye joins, it will be the first NATO country to join BRICS.
In 2023, Venezuela formally applied for BRICS membership, and the application was well received by the Kremlin. However, Putin cannot formally invite any nation to the group until there is agreement among all current members. Brazilian President Luiz Inácio Lula da Silva refused to recognize Nicolás Muduro’s self-declared presidential election victory and criticized Maduro over the wave of repression he has unleashed against political opponents. Brazil will take over the BRICS+ rotating presidency in 2025, and adding Venezuela to the club would be a problem for Lula. Brazil recently blocked the BRICS invitation to Nicaragua, also over oppression and fraudulent election results in that country.
Russian BRICS Economics and Geopolitics:
As discussed in BWR’s “Rusxit—Russia’s Exit from the Global Economy” publication, the combined GDP of the BRICS in 2023 was $27T, representing 26% of the global economy. Russia represents 7% and 2% of the BRICS and global GDP, respectively.
As the co-founder of BRICS, Russia exercises outsized political influence within the organization relative to its small $2T economy. Russia’s influence is drawn from its permanent membership status in the UN Security Council, its nuclear arsenal, its vast mineral resources, and its Soviet DNA for supporting anti-Western movements. It also draws influence from its junior partnership role with China, another UN permanent member, on the global stage. As discussed in BWR’s publication, “Russia’s Useful Enablers,” dated 14 Jul 2024, without China’s a’s $17T economy, Russia could survive its exit from the global economy.
Accelerated by Western sanctions, Russia’s trade with the BRICS has dramatically increased. For example, 2023 bilateral trade between Brazil and Russia reached a record $8.4B. Russia has established itself as the leading mineral fertilizer and diesel fuel supplier to Brazil in 2024.
Brazil is the world’s largest importer of fertilizers and has increased its purchases due to growing export demand for soybeans, corn, and sugarcane. The country’s agriculture sector represents 20%+ of its GDP. While Brazil sources fertilizer from Canada, China, Morocco, and the United States, 30% and 15% of Brazil’s total fertilizer imports are from Russia and China, respectively.
EuroChem, one of Russia’s largest fertilizer producers, is opening a new plant in Brasil to meet the growing demand and secure its market position. The $1B facility will have an annual production capacity of 1MT tons of phosphate fertilizers.
Russian diesel fuel market share rose from zero in 2022 to 50% of imports in 2023. In 2024, that figure Conversely, the U.S. share plummeted from 57% to 24%, now resting at 15%.
According to Sergio Araujo, CEO of Abicom,
“Russian diesel has become highly sought after due to its competitive pricing on the international stage. This trend is expected to persist, given the ongoing conflict and consequent international sanctions.”
China and India are other examples of growing Russian cross-border trade with BRICS members. China is now Russia’s largest trading partner, accounting for more than 31% of all Russian exports and 38% of imports. China/Russia bilateral trade in 2023 reached a record $240B, in contrast to the pre-second Ukrainian invasion trade of $140B in 2021. As of July 2024, India is now the biggest importer of Russian crude, taking 44% (2.07 million barrels per day (bpd)) Russia’s oil exports, surpassing China’s import of 1.76bpd.
Emerging BRICS Multilateral Institutions:
China and Russia have carefully integrated development and project finance facilities into the BRICS ecosystem. The New Development Bank (NDB), capitalized at $100B, has equal share distribution between the original BRIC members. However, by NDB charter, any member of the UN can also apply to become a member/sharehloder of the NDB. Egypt, India, Russia, Saudi Arabia, and UAE are shareholders in the China-led Asian Infrastructure & Investment Bank (AIIB) and have received loans from it. By 2023, the NBD and AIIB had committed more than $71B in credit across various sectors, including infrastructure, public health, and clean energy. China leverages these two institutions to complement its Belt & Road program.
Conclusion:
Russia is driving the BRICS program, with China serving as the economic powerhouse and political senior partner. They are creating an ecosystem that rivals Western institutions such as the IMF, World Bank, and EBRD.
BRICS is also bringing together some of the world’s biggest energy producers and buyers. With the addition of Iran, Saudi Arabia, and the UAE, BRICS will account for around 32% of world output of natural gas and 43% of crude oil. BRICS will also account for 38% of global petroleum imports, led by China and India. Could BRICS be an alternative to OPEC?
Intra-BRICS trade is a significant incentive driver for BRICS members. This trend becomes clearer when looking at the increasingly symbiotic relationship between the BRICS economies. Russia’s dependence on China and India for energy export revenues and their growing dependence on Russia energy. Brazil has become an important market for Russian mineral fertilizers and diesel fuel.
Nevertheless, as the BRICS membership grows, so do the organization’s consensus challenges. Last week’s BRICS foreign ministers’ impasse on releasing a joint statement because two members could not agree on who would represent Africa in the UN Assembly demonstrated this. That is the lesser of the challenges. The greater challenge will be achieving consensus with regional adversaries, such as Iran and Saudi Arabia, at the table or differing forms of government, such as Brasil and Venezuela.
For Russia and China, BRICS is an instrument of influence on the existing Western-dominated economic system and geopolitical systems. The IMF, World Bank, G7, and G20.
Additional Reading(s)
RUSXIT—Russia’s Exit from the Global Economy, (Barbershop Whispers…Russia, 15 Sep 2024)
Putin Pays Homage to Emperor Xi, (Barbershop Whispers…Russia, 19 May 2024)
An Evolving BRICS and the Shifting World Order, (Boston Consulting Group, 29 Apr 2024)
An Expanding BRICS Seeks to Reform not Replace the Global Order, (The Diplomat, 16 Jul 2024)
Indian Foreign Minister Meets BRICS at UN, (Indian News Network, 28 Sep 2024)
Follow-ups & Quick Bites
Follow-ups
Alliance of the Aggrieved - Russia and North Korea
North Korea is portraying itself as part of a larger collection of countries standing against the United States (US). It is painting itself as part of a group of “independent sovereign states” being threatened.
It has suggested the next step will be the formation of a “just strategic axis” to redress what it calls an “imbalance” of forces on the Peninsula and in the region created by new US-led defense alignments in the Indo-Pacific.
The new term “just strategic axis” first appeared in a press statement issued by the Foreign Ministry’s Institute for Disarmament and Peace on September 13, the same day Sergei Shoigu, Secretary of the Russian Security Council, arrived in Pyongyang.
North Korea, an Alliance of the Aggrieved member, is recasting itself as a victim in alliance with other victims of Uncle Sam and his tormentors.
Additional Reading(s)
The Emerging Alliance of the Aggrieved – Russia and North Korea (Barbershop Whispers…Russia, 23 Jun 2024)
Pyongyang’s New Frame (38North, 25 Sep 2024)
Quick Bites
Putin Revises Nuclear Doctrine
Putin, in a televised warning to the West, has put forward amendments to Russia's nuclear doctrine, which sets out the circumstances in which nuclear arms can be used by the Kremlin.
President Vladimir Putin warned the West that under the proposed changes Russia could use nuclear arms if it was struck with conventional missiles and would consider any assault on it supported by a nuclear power to be a joint attack.
This warning was inspired by Ukraine’s request to use Western long-range conventional weapons to strike deep into Russian territory. This request is being considered by the US, UK, and other Western powers.
Vol 2, No 45 - BWR 29.09.2024
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