Squiz Shortcuts - BRICS

Your Shortcut to… BRICS

The leaders of some of the world’s biggest developing economies have just wrapped up a major summit in Brazil. They’re part of an alliance called BRICS, which aims to be a counterweight to Western economic and political influence in the world. The group has been growing fast in recent years and it now includes 11 nations - one of which is our close neighbour, Indonesia. So in this Squiz Shortcut, we’ll look at:

• what BRICS is

• who’s in it

• and why its growing influence is something to note…

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Let’s start with the basics, what does BRICS stand for?
BRICS stands for Brazil, Russia, India, China and South Africa. And it’s thought of as an alternative to the G7, or the Group of 7 - so it’s basically another economic club.

Why does the world need another one of those?
It was first formed to promote trade and economic support between the member nations, but as we said, it’s been growing rapidly in recent years… The originals just got together in Rio de Janeiro for the BRICS annual summit, and they were joined this year by some new members…

Who are the newbies?
Egypt, Ethiopia, Saudi Arabia, the UAE, Iran, and the first South East Asian country to join, Indonesia. That’s now 11 nations…

How come they’re not in the acronym?
That’d be a lot of vowels - the best we could come up with was Curie Ibises which isn’t as catchy as BRICS. To account for the others, it’s sometimes written as BRICS+ but its formal name is still BRICS.

How influential is it?
With that expanded membership, the alliance now makes up 56% of the global population, and reports say it accounts for 44% of the world’s Gross Domestic Product, or GDP - which is the total value of all goods and services produced in the world. That includes 44% of the world’s crude oil. So it’s a bloc that represents a lot of people and controls a significant chunk of the world’s money. 

And how far does the alliance go - does it extend to defence?
No - one thing we should clear up early is that BRICS is often mistaken as an answer to NATO (the North Atlantic Treaty Organisation) which is a military alliance between 32 nations that was formed after WWII. But BRICS is an economic alliance rather than a military one. 

What are its agreements like?
In a word, loose. There are no formal agreements in place, so decisions are made by consensus. But like other big global meetings, each year one member nation takes the lead and hosts the annual summit… the group then sets its agenda there for the year ahead.

What are its goals?
Pretty broad. It says it’s not anti-Western, but a big part of what it wants to do is to shift global power away from Western countries to make room for growing economies to have more say.

How does it aim to do that?
By boosting trade between member countries, pushing for a bigger voice in international organisations like the United Nations and the World Bank, and working together to build infrastructure. One of the key moments in history that brought about the alliance was the 2008 global financial crisis (GFC)…

What happened then?
The GFC hit many of the BRICS countries hard, and from there, they began working together to change up the global financial system. To that end, they formed their own version of the World Bank in 2014, called the New Development Bank (known as the NDB). It lends money to emerging economies to build things like roads, railways, power grids and water infrastructure. And it’s a serious endeavour…

What are some examples of projects it’s funded?
By the end of 2022, the NDB had approved more than $32 billion in funding. A few examples of what it’s helped to fund include water sanitation plants in Brazil, housing and renewable energy projects in India, and also Chinese port and logistics projects. But it’s not without its critics…

How so?
Economic experts have had a lot to say about the bank’s lack of transparency, and the environmental and labour standards it’s willing to overlook in the projects it funds. But even though the NDB is still dwarfed by the World Bank, the big picture is that BRICS is trying to create alternatives to the Western-led global financial system, which it sees as being biased in favour of rich countries. As UN Secretary-General Antonio Guterres once put it: “This system was created by rich countries to benefit rich countries”. 

So what’s in it for countries with large economies?
Those in the know say that Russia sees trade with BRICS members as a way to get around the sanctions imposed on it by Western countries since it invaded Ukraine. And now with Iran on board, commentators say that anti-Western sentiment within the group could spread. They say Iran’s already a country facing sanctions from the US and Europe - and the recent strikes on its nuclear facilities by the US have only increased those tensions…

How does that affect us in Australia?
Well, we’ve been seeing China lobbying our neighbours and trying to increase its influence in the Indo-Pacific, so Indonesia’s membership is something our leaders are keeping a close eye on. It’s worth noting though that Indonesia has a foreign policy of multi-alignment, meaning it fosters relationships with lots of different foreign powers rather than sticking with one or 2, so it might be more that President Prabowo Subianto sees it as another chance to boost the country’s economy in line with his election promise, rather than a turning away from his friends in the West, like us. 

And what does China get out of BRICS?
Reports say it’s also very much focused on the monetary opportunities that the group presents… It sees it as access to new markets and a way to profit from BRICS-led investment. As for other members, it’s a chance to be part of a bloc that has real negotiating power on the world stage. And then there’s talk of reducing reliance on the US dollar… 

What’s that about?
So right now, most global trade is done in USD, but BRICS countries have been exploring ways to trade in their own currencies - or even setting up a shared digital or crypto currency. That idea has been floated before, but it hasn’t gotten much traction - although, if BRICS keeps expanding, it could create an opportunity for that to happen. But it’s something US President Donald Trump has warned the group against.

Is it likely to expand?
Yep - more than 30 countries have applied to join the alliance. We won’t list them all, but they include another of our Asian neighbours, Malaysia, as well as countries that border Europe/the east like Turkey and Azerbaijan. Then last year, the group created another category called ‘partner countries’. They’re not full members, but they can still be involved in trade and the summits. And so far a further 10 countries including Thailand, Cuba, Kazakhstan, Nigeria and Vietnam have signed up. 

Does everyone in the club get along?
Competing interests and global tensions have created some divisions within the group - particularly in light of recent world conflicts and the fact that most members are trying to negotiate tariffs with the US. Other pressures include a long-running border dispute between India and China, criticism of Russia’s war in Ukraine, and Trump’s threats to the group if it messes with the value of the US dollar by creating its own currency…

What has Trump said about that?
He hasn’t minced words about it in the past, saying “BRICS is dead if they play games with the dollar”. That’s created a tricky situation for member nations who also have ties with America - like Saudi Arabia, who’s recently agreed to buy billions of dollars’ worth of US-made weapons. 

And what happened in Rio?
Relations with America won’t have been helped along by a group statement from the summit condemning the US and Israeli strikes on Iran’s nuclear facilities and criticising Trump’s Liberation Day tariffs. But the edge was taken off somewhat by a couple of notable absences…

Who was missing?
Chinese President Xi Jinping sent his Premier Li Qiang in his place. And Russian President Vladimir Putin also stayed away - he would’ve risked arrest by the International Criminal Court (ICC) over war crimes if he traveled to Brazil, an ICC member, so he appeared by video link instead. Both leaders have been in talks with Trump recently - Xi over trade, and Putin over the war in Ukraine.

Has Trump responded?
Yep - Trump has threatened to impose additional 10% tariffs on any country aligned with BRICS, which he’s labelled “anti-American” - and he’s said there will be no exceptions. 

So there’s a lot to navigate?
There sure is, particularly with so much financial uncertainty at the moment. But as we can see from the list of countries who are keen to join, the BRICS goal of a world where power is shared more equally between developed and developing nations is attracting support.

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Reading: This article from the Guardian about ⁠the alliance’s Rio summit⁠ gives a good insight into what the leaders focused on.

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