As US election jitters hung over this week’s meeting of global finance chiefs in Washington, a smiling Vladimir Putin was in the Russian city of Kazan welcoming leaders of countries which together make up nearly half the world’s population.
The Brics club of emerging economies may be a long way from rivalling the IMF or challenging US dollar dominance, but the first summit with its new batch of members showed clear signs of its growing weight.
The final communiqué was long on words and short on detail about creating new payment and trade mechanisms that could bypass Western-dominated structures — including, notably in Russia’s case, sanctions imposed after its invasion of Ukraine.
But the summit scored a series of diplomatic wins — the presence of UN secretary-general António Guterres and Tayyip Erdoğan, president of Nato member Türkiye, which has expressed interest in joining Brics.
India and China chose the summit to profile new efforts to nurture ties. For Putin, the simple fact that so many leaders travelled to Russia for the talks was useful in countering the narrative his country is being shunned by the global economy.
“They [Western capitals] are not getting the importance of this thing,” said Alicia Garcia-Herrero, a senior fellow at the Bruegel economic think-tank. “It all signals that the West is losing power.”
For South Africa, top of mind is narrowing the trade deficit between it and the four original members the bloc — Brazil, Russia, China and India.
Understanding patterns
Stavros Nicolaou, a member of the Brics business council, said a report compiled by the council and presented by President Cyril Ramaphosa to the heads of state summit focused mainly on understanding trade patterns and working out ways to increase exports to especially the original partner countries. South Africa runs a trade deficit with all of them — the biggest, at $21bn (about R371bn), with China.
“Are we using the Brics formation as [an] instrument [for] our economy? There has been a growth in trade, [but] we haven’t yet got to grips with the policy we want to push of converting primary [products] into value-added products. It’s the part we need to work on quite extensively — finding the opportunities to export products and start bridging that trade deficit,” he said.
Nicolaou said South Africa was also keen on exploiting the opportunities offered by the African Continental Free Trade Area for both the continent and Brics members.
“You’ll see how big a representation Brics is of [the] global economy, and the free-trade area represents an opportunity to attract investment from Brics countries into Africa for industrialisation purposes.”
This week’s talks in Kazan underlined dissatisfaction with an international system seen as under-serving much of the world, with a collapse in capital transfers to developing economies over the past decade and emerging countries underrepresented in IMF decision-making.
“See how many people are scrambling to apply to join Brics,” Mo Ibrahim, a Sudanese-British business-person who runs a foundation that tracks governance in Africa, said.
Are we using the Brics formation as [an] instrument [for] our economy? There has been a growth in trade, [but] we haven’t yet got to grips with the policy we want to push of converting primary [products] into value-added products.
— Stavros Nicolaou, Brics business council
Putin has said more than 30 countries have applied to join the group.
“People see institutions that are not really representative or democratic — infrastructure established in 1945 or so after [World War 2] — and nothing changes,” added Ibrahim.
Consensus-building harder
Many commentators also note that, as the group grows, imbalances in size and influence among member countries and sometimes duelling national agendas will make consensus-building on joint initiatives harder. But those queuing up to join it see it as a de facto trade forum already accounting for a fifth of global commerce.
“There is a huge upside in linking these corridors,” Pakistan’s finance minister, Muhammad Aurangzeb, said on the sidelines of the IMF meeting in Washington. “So, indeed, we are keen to become a member of Brics.”
While most observers doubt Brics’ pact to launch its own payment system will challenge the dollar’s supremacy any time soon, such initiatives appeal to countries who fear their domestic policies might one day lead to Western sanctions.
“You’re kind of geopolitically cushioning yourself against future friction with the West by coming up with this alternative structure,” said Hamish Kinnear, a senior analyst at global risk intelligence firm Verisk Maplecroft, who described Brics as “the signal and not the cause of the changing world order”.
Rather than being an outright alternative to the IMF, as some have suggested, many Brics members and aspirant joiners view it as an opportunity to hedge their bets in a world facing geopolitical change.
“Brics is [for China] not a strategic and economic coalition,” said Shi Yinhong, a professor at the School of International Studies at Renmin University of China, noting that many Brics members were also nurturing their ties with the West.
Meanwhile, Russia’s proposal for a new international grain exchange could take years to get off the ground, despite the plan being welcomed by Brics members at the Kazan summit.
Russia has been pushing to establish the exchange as part of a broader plan to create new financial instruments, detach its trade from the US dollar and help Moscow combat Western sanctions. Putin said at the summit that Brics countries — which are among the world’s largest producers of grains, legumes and oilseeds — could establish such an exchange, potentially expanding it to trade in other important commodities.
The plan to create the exchange has been approved by leaders of the Brics nations in their communiqué at the summit, who backed proposals to subsequently develop and expand it into other agricultural sectors.
Eduard Zernin, head of the Russian Union of Grain Exporters (RUGE), whose members export 80% of Russian grain, said that, based on the experience of creating the Brics New Development Bank, launching the joint exchange would require years of preparatory work. Zernin said the proposed new exchange should have international status to protect it from potential Western sanctions.
“The main stage of the process has been completed, [and] the initiative to create an exchange has been approved at the level of Brics country leaders,” Zernin said.
The Russian government, concerned about high export volumes at low prices in the past few months, has informally agreed with leading exporters not to sell Russian grain to sovereign buyers through intermediaries, according to the RUGE.
The government has also recommended that exporters not sell wheat at a price below $250 (about R4,417) per tonne, which is well above current levels.
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