When the Russian-Ukrainian war broke out, the world had barely begun to recover from the effects of the COVID-19 pandemic, which included closures, barriers to the mobility of capital and individuals, and supply chain disruptions. The new war in Europe added to the economic turmoil. Western sanctions against Russia increased the likelihood of a global economic slowdown due to the weaponization of Russian natural gas and international payment systems. Indeed, many countries that preferred neutrality and peace over taking sides with the West or Russia viewed the United States as weaponizing the dollar itself.
This highlighted the need to develop different forms of regional and international cooperation that are not exclusively under US control, especially given the widening gap between the emerging south and the developed north on many issues, including development priorities and achieving security in the broadest sense. This global context prompted China to call for two international initiatives: the Global Development Initiative and the Global Security Initiative.
Chinese Global Initiatives: Building a New World
The Global Development Initiative was proposed by President Xi Jinping in September 2021 at the 76th annual session of the United Nations General Assembly as an attempt to further strengthen the global development cause and help realize the UN Sustainable Development Goals. The United Nations as an entity and more than 100 countries gave support to this initiative.
Additionally, the Global Security Initiative, put forward by China at the Boao Forum for Asia, aims to eliminate the root causes of international conflicts, improve global security governance, encourage joint international efforts to bring stability and certainty to a volatile and changing world and promote durable peace and development worldwide.
China's recent mediation in the Arab-Persian conflict is a prime example of its wise approach to diagnosing the roots of development threats in the MENA region and identifying issues that should be tackled to unleash each country's capabilities without fear of security concerns that have been magnified by some Western powers benefiting from the status quo.
These two initiatives are pillars of global joint development and global security. They demonstrate China's responsible power and contribution to the development of the BRICS group and the global economy.
The Emergence of BRICS Plus in a Challenging Global Landscape
The BRICS group, consisting of Brazil, Russia, India, China, and South Africa, represents nearly 42% of the world's population, 27% of the land surface, and 32% of the global GDP. Despite this, the five countries hold less than 15% of voting rights in the World Bank and the International Monetary Fund. However, their collective economies are predicted to surpass those of the G7 countries by 2032.
Since 2013, non-BRICS countries have been invited to attend the annual BRICS Summit as observers or engage in dialogues with BRICS members. In 2017, during the BRICS Summit in Xiamen, Fujian province, China, proposed the "BRICS Plus" framework to promote cooperation between BRICS members and other emerging markets and developing economies. The "BRICS Plus" framework aims to encourage invitee countries to learn about the rules and spirit of BRICS cooperation.
China's proposal to expand BRICS is seen as being in the interest of all developing countries and aims to improve global governance by enhancing South-South cooperation.
BRICS-MENA Coalition and Its Potential Impact on the Region
The concept of 'BRICS Plus' suggests that the group can expand to embody the true spirit of multilateralism and multiculturalism to better protect and develop emerging markets and developing countries. Chinese State Councilor and Foreign Minister Wang Yi announced the idea of 'BRICS Plus' to expand the group and promote peace, development, equity, justice, democracy, and freedom among other developing countries during the current period of geopolitical uncertainty. Some states that China has supported joining include Argentina, Egypt, Indonesia, Kazakhstan, Saudi Arabia, UAE, Nigeria, Senegal, and Thailand.
Five new members are expected to join the bloc in 2023, namely Argentina, Egypt, Iran, Saudi Arabia, and Turkey, with the MENA region comprising the majority of the list. The region has been embroiled in conflict for an extended period, with limited and controlled warfare perpetuated to preserve business interests. The inclusion of MENA countries, specifically members of the Gulf Cooperation Council (GCC), is expected to foster geopolitical convergence and potentially reshape the global economic landscape. This could be the first time since the coinage of the new world regime on the wreckage of World War II that the Middle East is truly intended to be stabilized to seed soil for sustainable and equitable development. Other regions of the world, with fewer natural resources and potential, have utilized times of peace to achieve prosperity for their populations.
The expansion of BRICS is less about increasing the power base and more about creating alternative alliances and options, moving away from the current dependency on the dollar and Western hegemony.
De-Dollarization and the New Development Bank
As the dollar is increasingly politicized through sanctions against Russia, the BRICS members are exploring various ideas for future commodity-based trade currencies. The sanctions have led some countries to rely more on their national currencies in foreign trade. Additionally, there is increased talk about efforts to integrate payment systems and create an alternative to the SWIFT payment platform. The central banks of the BRICS countries agreed to conduct the fifth test of a banking mechanism that could allow for jointly pooled "alternative currency" reserves to shield their economies from external shocks. Although a full convergence of foreign policy goals is unlikely to happen in the BRICS-MENA partnership, both parties are eager to avoid taking sides on major issues that could escalate tensions between them. By choosing to avoid polarization over significant issues that provoke conflicts between the US and China/Russia, MENA aims to de-escalate regional and international security tensions in a way that contributes better to peace and sustainable development.
The Growing Role of the BRICS New Development Bank
The founders of BRICS established the New Development Bank (NDB) to provide guarantees, loans, and support for public and private projects, including public-private partnerships, in any borrowing member country. The bank is also ready to invest in the equity of any business, industrial, agricultural, or service enterprise with projects in the territories of borrowing member countries.
The initial authorized capital of the bank is $100 billion, divided into one million shares. The initial subscribed capital of the NDB ($50 billion) was equally distributed between the founding members (Brazil, Russia, India, the People’s Republic of China, and South Africa). The Agreement on the NDB specifies that each member will have one vote, and no member will have veto powers. On 15 July 2014, the BRICS nations set up a reserve currency pool worth $100 billion in a separate agreement.
In April 2020, the NDB established an Emergency Assistance Facility to finance costs related to the fight against COVID-19 and mitigate the impact of the related economic crisis.
On March 3, 2022, in response to the Russia-Ukraine War, the New Development Bank announced that it put new transactions with Russia on hold. Despite the swift decision to cut ties with Russia following the war, Fitch Ratings downgraded the NDB from stable to negative on its Long-Term Issuer Default scale. This implies Western dominance over the rating agencies as a key players in the global economic order.
According to the Bank's General Strategy 2017–2021, the NDB plans to expand membership gradually to avoid overburdening its operational and decision-making capacity. In September 2021, Bangladesh, the United Arab Emirates, and Uruguay joined the NDB. In December 2021, the NDB admitted Egypt as a new member with a subscribed capital of 2.27% of the total capital of the bank. The UAE holds 1.06% of the subscribed capital, where each founding member exclusively holds 18.98%.
Challenges facing BRICS Plus
Since its inception in 2009, BRICS has struggled to achieve its goals due to internal governance crises. Although new regionalism is emerging as an alternative to the failing globalization scheme, the BRICS group does not consist of members from a specific region or territory, nor does it incubate countries that share a common culture. The multicultural nature of BRICS and its openness to new members create an opportunity for integration and promoting positive externalities from diversity. However, it also makes BRICS subject to the risk of dilution, where a group becomes large enough to lose its very purpose of existence. BRICS lacks specific features that make it unique or special, similar to a top achiever's class that gets grouped with 100 other classes, losing its value. This challenge could be managed by giving the founders of BRICS a higher weight in the decision-making process, but not veto rights, as to avoid repeating the old UN mistakes.
The greatest challenge for BRICS is resolving disagreements between China and India and accepting new members who may have conflicting worldviews. India opposes the expansion of BRICS, fearing that new members will align with Beijing. The relationship between India and China has been tense due to perceived intrusion in the Indian sub-continent, conflict over the Ladakh border, and inherent distrust around China’s technology. India also remains suspicious about China-Pakistan strategic collusion, despite an early 2021 India-Pakistan cease-fire declaration along their disputed border in Kashmir.
The second limitation to expansion is related to finances. South Africa, Russia, and Brazil are all facing their own domestic and external finance issues, which pose limitations on their economic impact and efficiency in the group. This implies that the institutions underpinning the new formation would be primarily funded by China, allowing the large state to form and rule them in line with its values, as is the case with BRICS New Development Bank.
Third is bureaucracy. China has not yet indicated the criteria for who precisely should become new members of BRICS Plus. The 23rd June virtual summit declaration said leaders would continue discussing the possibility of admitting new members based on "full consultation and consensus." This rule, if strictly applied, eliminates countries that have a slim chance of adding power to either China or India.
What all BRICS founders apparently share is a desire for more influence over the rules governing international finance and economic policy since the mid-20th century. Each member state has an alternate perspective on the prevailing global economic order.
BRICS Plus, with new members and other members in the pipeline, does not necessarily join the bloc on the same ground of expectations, even if they all share the goal of softening the grip of the United States and its allies on the global regime. Countries with an external surplus seek to play a bigger role in the new world regime and to benefit as much as possible from their natural resources by adding domestic value to their supply chain, making their national economies more sophisticated and diversified. On the other hand, deficit countries (such as Egypt) aspire to get out of the loop of external debt and the hegemony of the US dollar on better terms that do not include interference in their political decisions or their human rights files.
While the founding countries of BRICS appreciate the enrollment of some deficit countries based on strategic importance, market size, and the vital anticipated role in China's development initiatives, including its grand project (the Belt and Road), they also welcome surplus countries with a relative advantage in the capital endowment that will be necessary in the next stage to reshape the international economic regime on more equitable and sustainable terms.
