Lord Jim O’Neill (Baron O’Neill of Gatley) invented the acronym BRIC in 2001 to describe the rising economic powers of Brazil, Russia, India and China. Jim O’Neill originally developed the idea in the context of Goldman Sachs foreign investment strategies when he was the chairman of Goldman Sachs Asset Management.
But the original protagonists of his asset management strategy took up his acronym and made it a reality. South Africa joined in late 2010 at the invitation of China making it the BRICS.
The initial meeting of the foreign ministers of the four countries met in September 2006 in New York City on the fringes of the UN General Assembly. A full-scale diplomatic meeting was held in Yekaterinburg, Russia, on June 16, 2009.
At this first formal summit Luiz Inácio Lula da Silva represented Brazil, Dmitry Medvedev Russia, Manmohan Singh India, and Hun Jintao China. When South Africa joined the BRICS became a formal intergovernmental organization with the heads of state meeting annually in formal summits.
The expansion of the BRICS to incorporate six new members (Argentina, Ethiopia, Saudi Arabia, Iran, Egypt and the United Arab Emirates) was agreed at the BRICS summit in Johannesburg on August 24th, 2023, and will take place on January 1st next year.
Lord O’Neill, however, does not see much traction from this expanded BRICS, nor does he see it as much of a challenge to the dominance of the US dollar in global international exchange. He dismissed the notion of BRICS developing their own currency as “ridiculous.”
But this is a very economist-centric view. The geopolitics of the enlargement are much more challenging in the emerging poly-centric world. The Manchester born Jim O’Neill served briefly in the British conservative-liberal democrat coalition government under David Cameron when he was charged by the Chancellor of the Exchequer, George Osborne, with the developing the “Northern Powerhouse” aimed at “leveling up” northern Britain.
This is when he was made Lord O’Neill. But he resigned under prime minister Theresa May and he now sits in the House of Lords as a cross-bencher.
The eleven members of the expanded BRICS will collectively represent 37% of the World’s GDP and 46% of the World’s population, contesting the Western-led G-7. Six of the ten oil producing states will be members. Chinese President, Xi Jinping, who pushed for the admission of the new members of the group, described the expansion as “historic.”
Vladimir Putin did not attend the BRICS Summit in Johannesburg as there is an outstanding arrest warrant for him for war crimes committed by the Russian forces in Ukraine issued by the international criminal court (ICC). He attended “virtually” from Moscow and he was represented in Johannesburg by Sergio Lavrov, the long-time Russian foreign minister. Chinese president Xi Jinping described the expansion of BRICS as “historic.”
Next year Russia will host the expanded BRICS summit and the gathering of the BRICS+ heads of state. The meeting in 2024 will be chaired by Vladimir Putin.
A BRICS Development Bank headquartered in Shanghai already exists. It is now led by the former (but impeached and removed from office) Brazilian president, Dilma Rousseff, who was nominated to the position by the current (and formerly imprisoned) Brazilian President, Luiz Inácio Lula da Silva. Dilma Rousseff and Lula are strong promoters of an ‘independent” foreign policy for Brazil that favors the “global south.”
This stance has as its principal critical proponent within the Planalto, the presidential palace in Brasilia, Celso Amorim, Lula’s former foreign and defense chief, who is profoundly anti-American.
This is in striking contrast to the role of José Dirceu in Lula’s first term. Ze Dirceu was then Lula’s de-facto chief of staff. Dirceu was exiled during the military regime when he and several other imprisoned leftist activistas were exchanged for the kidnapped American Ambassador.
But Dirceu was a highly pragmatic guide to Lula and he personally greatly soothed Lula’s relationship with a skeptical (and at the time in large part hostile) Washington. Lula since his long and contentious imprisonment seems much less willing to compromise and much more committed to a policy hostile to the west.
Dirceu meanwhile fell victim to the corruption scandals (essentially the buying of votes and political support in Congress) during Lula’s first terms in office (the “mensalão” affair). President Cyril Ramaaphosa of South Africa said on the eve of the Johannesburg summit, that South Africa “would not be bullied” into taking sides with global powers. President Luis Inácio Lula da Silva has been promoting a “peace plan” for the war in Ukraine.
These views are far from being isolated. They reflect the widespread skepticism revealed at the UN general assembly last year in the vote on the the U.S. motion to suspend Russia for human rights violations in Ukraine. 58 countries voted to abstain. These included in the Middle East, Bahrain, Saudi Arabia, Egypt, Qatar, Oman, Iraq, Kuwait, and Jordan.
They were joined in the abstentions by India and South Africa. Brazil under former Jair Bolsonaro voted with the U.S., though he criticized his vice-priesident, Hamilton Mourão, for condemning the Russian invasion of Ukraine, saying that it “was not Mourão’s job to speak about Eastern Europe.” China, which promoted the expansion of the BRICS, has recently brokered the opening of diplomatic conversations between Saudi Arabia and Iran.
The new configuration of the expanded BRICS should not be underestimated. In fact, the results have been quick. India has just done a deal with the UAE which ditched the U.S. dollar and purchased one million barrels of oil paid for in rupees, the first sale in a currency other than the US dollar. 90% of oil deals are settled since 1973 in petrodollars.
Saudi Arabia will be the next to watch. Saudi Arabia’s de-facto ruler, Crown Prince Mohammed bin Salman, is reported to be prepared to commit US$ 16 billion from Saudi Arabia’s foreign reserves to BRICS initiatives: South Africa and Egypt and potentially Argentina could be beneficiaries. Saudi Arabia and the UAE supply most of China’s energy imports. Saudi Arabia and UAE could make local currencies the only way to procure oil and gas.
China has also just completed a deal with Petrobras, the Brazilian oil and gas giant. In late August Petrobras signed a memorandum of understanding (MOU) with China’s Development Bank (CCHDB.UL) and the Bank of China (601988.SS) to partner in a series of projects covering low carbon initiatives, green finance, supply chain investments, and trade exchanges. The chief executive of Petrobras, Paul Prates, said that Petrobras plans to create a Chinese subsidiary in an effort to triple oil exports to China over the next decades, and that Chinese partnerships were foreseen in oil refineries, fertilizer projects, and in efforts to renew the Brazilian naval industry.
President Lula recently visited China where he attended the instalment of Dilma Rousseff at the BRICS Bank in Shanghai, criticized the IMF, visited the Huawei research center, and was received with full honors in Beijing by President Xi. China has since 2009 been Brazil largest trading partner, receiving soya beans, beef, iron ore, poultry, pulp, cotton and oil. Lula dropped in on the UAE on the way home from China were he was received by the UAE prime minister, Sheikh Mohamed bin Zayad Al Nohyan. He signed a series of deals including an investment of $2.5 billion for a biodiesel project by UAE controlled Matasipa refinery in Brazil. The two leaders also discussed the Ukraine and Lula promoted the idea of a BRICS based currency.
Lord O’Neill is right that the BRICS+ currency is an illusion, and there is no serious indication that the BRICS are currently contemplating this. Much more likely are deals in currencies other than the dollar. The notion of the “global south” is also a shibboleth. Most of the countries involved in BRICS+ are north of the equator, including China and India and the Middle East. Argentina which was invited to join the BRICS at the insistence of Brazil, and most of Brazil, and South Africa, are south of the equator. But so too are Chile and Australia, and there is little indication of any Australian desire to join the BRICS+.
China and India are at loggerheads over a border dispute in the Galwan region of Ladakh and Indian and Chinese armed forces clashed in the high Himalayas in mid-2020. Xi Jinping will not apparently attend the G-20 meeting in New Delhi hosted by Indian prime minister Narendra Modi. India is basking in its recent (and very cost effective) successes in Space, where unlike the Russians, it landed a vehicle on the moon and has just successfully launched a rocked towards the sun. President Xi will send his prime minister, Li Qiang. It will be the first time he has not attended a G-20 summit since he became president of China in 2013.
Lula believes the G-20 needs revision to better reflect the changing global distribution of power.
The geo-politics of Middle East are certainly in flux. The Persian Gulf states and Saudi Arabia have very successfully deployed their “soft power” (backed by the hard cash of their vast and gas wealth) into the heart of Western Europe. Middle East money is irresistible to golf and soccer stars who care little about human rights when vast payouts are involved. Qatar found this by hosting the soccer World Cup last year.
Moreover, the Trump Administration initiated Abraham accords have brought Israel and the Gulf States together in a mutually reinforcing agreement, and Saudi Arabia cannot be far behind. This is smart. Soccer engages many millions, many more than the antics and bluster of Western politicians.
But the clandestine and open links are not inconsiderable. The pipelines bringing Russians oil to China. The clandestine at sea transfers of Russian oil to India. The consequences of catastrophic withdrawal of U.S. (and NATO) from Afghanistan by Joe Biden.
The consequences of the endless and non-UN sanctioned Bush-Blair invasion of Iraq on the false pretense of searching of Saddam Hussain’s supposed weapons of mass destruction. The rise and fall of Isis in Iraq and Syria and the Islamist international terrorist cells it inspired in Western Europe. The consequences of the British and French intervention in Libya to overthrow Gaddafi.
Is it any surprise that the Sheikhs in the Gulf and the potentates in Beijing and Moscow (let along the rulers in Brasilia and New Delhi) draw their own conclusion. The issue is not whether the BRICS+ will form a coherent block. What matters is that are a congruent bloc where they may agree on some questions but not on all.
And that does not matter. What matters is they are a forum of nations which are not automatically in favor of the West, and many are hostile to the institutions which have defined the international order since WW2, and they going about consciously to create alternatives.
Is is not as Lord O’Neill would have only a question of the continuing dominance of the U.S. dollar, and of the World Bank, and the IMF.
The challenges are real and ongoing for Europe and North America. The migrant crisis was first weaponized on the border of Belarus and Poland. The Sahel in Africa is consumed by military coups and proxy Russian military interventions. The Sahel is the route for many migrants from West Africa who are crossing the Sahara and entering Europe across the Mediterranean from North Africa.
This migration is aggravating the cross-channel surge of small boats crossings from the coast of Belgium and France into England, reviving and reversing the route of the heroic escape on small boats of British and French soldiers evacuated from Dunkirk during WW2. For years Turkey has been the route for refugees fleeing from Syria and into Greece and the Balkans and on to Germany.
Like the migrant crisis on the southern border of the U.S., with hundreds of thousands fleeing from Central and South America, this large-scale illegal migration fuels populist anger and opposition in the U.S., Britain, France, Germany and Italy.
And underlying these very visible challenges is the vast clandestine commerce in cocaine from South America to Europe, undermining regimes like that in Ecuador, and corrupting police and custom officials, and young “county line” drug runners from Amsterdam and Rotterdam to small towns in rural England.
Meanwhile the war in Ukraine continues with its innovation in the use of killer drones matched on the ground with the return of the grinding, bloody, and man consuming, old fashioned WWI style trench warfare in the killing fields of the battles on the eastern Ukrainian front.
Meanwhile the U.S. faces endless internal disarray and deep political, social, and cultural divisions, with an utterly sclerotic leadership. Biden is deeply unpopular even among Democrats, and barely seems to know at times which way he is facing and is lost without his cue cards. The senate Republican leader, Mitch McConnell, freezes mentally at news conferences. Senator Feinstein does not seem to know what is going on half the time or where she is. Not to mention the phenomenon of the “mug shot” resurgent and indestructible Trump.
The UK has just appointed as defense Secretary, Grant Shapps, who has had five jobs in the past year, and was revealed to be a fantasist “multimillion dollar web marketeer’ when first elected as an MP.
In Germany the creaky coalition under Olaf Scholz has not begun to meet its promised 3% defense commitment. In France President Macron is once again promoting the idea of a compromise settlement between Russia and Ukraine.
The one thing that can be said with any certainty is that it is not a pretty picture. The outdoing UK Defense Secretary Ben Wallace, was quite right to say in his resignation letter to the Prime Minister: “I genuinely believe that over the next decade the world will get more insecure and more unstable”. He is quite right. The world is becoming a very much more dangerous place.