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International Last Updated: Feb 6, 2024 - 2:52:50 PM


Strategies Against BRICS
By German Foreign Policy, 29 Aug2023 
Aug 30, 2023 - 9:41:41 AM

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Berlin debates how to deal with BRICS’ increase in influence. The group admits six new members, embeds itself intensively in the Middel East and weakens the position of the US dollar.

Berlin is debating reactions to the BRICS group’s increase in influence following its successful summit in Johannesburg last week. The West’s attempt – Germany’s included – to drive a wedge into the group has failed: Despite disputes over Russian President Vladimir Putin’s participation, the summit made two major advances. BRICS will admit six nations as members by January 1, 2024, including the four most powerful in the Middle East, where the West’s influence will be noticeably reduced. The bloc’s share of the global GDP will rise from around 25 to approximately 37 percent. In addition, BRICS countries will shift their trade transactions from the US dollar to national currencies, to an even greater extent than before, most likely including Saudi, Emirati and Iranian oil trade. This will gradually reduce the US currency’s global importance. German government advisors are promoting a shift from a strategy of division to one of inclusion vis-à-vis BRICS to prevent a further loss of the West’s influence.

The BRICS Summit in Johannesburg
The BRICS nations (Brazil, Russia, India, China, South Africa) consider their summit held last week in Johannesburg to be a full success. The Western powers have failed to drive a wedge into the group itself or between BRICS members and the numerous nations seeking to join. The threat of apprehending Russia’s President Vladimir Putin on his way to South Africa was aimed at stirring up tensions within the BRICS group. Just before the summit and fully in line with the strategy of division, German Foreign Minister Annalena Baerbock declared that every country must keep asking itself, “which partnership best suits its own values and interests.” It would not help to coordinate internally with Moscow, if Russia, “at the same time, literally bombs the grain deal, and countries such as Brazil or South Africa also suffer as a result.[1] The strategy did not work. Putin participated in the summit, albeit only via video link and there was no dissociation from Russia. The BRICS members even succeeded in advancing two major projects.

BRICS Expansion
They agreed on a major round of expansion. This success could not be taken for granted. For years, China had been promoting the admission of new members, but had met with resistance particularly from Brazil and South Africa. Because most potential accession candidates maintained closer relations with Beijing than with Brasilia or New Delhi, it seemed evident that an expansion would strengthen China’s influence within BRICS at the expense of other members. This was complemented by the fear that any expansion would weaken the group’s decision-making capacity – reference was made at times to the EU, as a warning example. The West’s attempt to consolidate its global hegemony by eliminating Russia as a major power, have only heightened resistance to the transatlantic powers and made Brazil and India more receptive to accepting new members. The fact that Argentina is to join the group is considered advantageous for Brazil, because it will increase South America’s influence within BRICS. Ethiopia’s admission will be advantageous for Soutth Africa, because it will enhance the position of the African continent. The African Union (AU) is headquartered in Addis Abeba and Ethiopia is also considered as potentially the strongest power in East Africa.

Loss of Middle East Dominance
The fact that four Middle Eastern countries (Egypt, Saudi Arabia, United Arab Emirates, Iran) are set to join BRICS has wide-ranging consequences. Until recently the West’s, particularly the USA’s, hegemony over the region was undisputed – with the exception of Iran, which was kept largely isolated and in a weak position through sanctions. The simultaneous integration of Iran and its nemesis Saudi Arabia into the BRICS group – made possible by Chinese mediation in the recent rapprochement between Riyadh and Tehran (german-foreign-policy.com reported [2]) – has the potential of pulling that country out of its isolation. Russia is cooperating closely with Iran, and, to some extent, with Egypt. China has close relations to all four future BRICS members from the Middle East. India is intensifying its cooperation with Iran. In early May, India’s National Security Advisor Ajit Doval was received by Iranian President Ebrahim Raisi.[3] Saudi Arabia and the United Arab Emirates are seeking to tap the huge, relatively close Indian market. Indian-Emirati trade exceeds German-Emirati trade threefold. India is developing “into a major player in the Middle East,” reports the specialized journal Foreign Policy.[4] The West’s influence is further diminished by the firm integration of the region into BRICS.

Away from the Dollar
At the same time, BRICS is intensifying its efforts to reduce the significance of the US dollar. To this end, the member states have decided at their summit in Johannesburg, that cross-border trade should be transacted more in national currencies. Already back in the spring, it was reported that only 84.3 percent of the trade being transacted between BRICS members is in US dollars, and the remainder in other currencies. Russia and China are already regularly doing their transactions in rubel or yuan. Brazil and China have agreed to transact in reais or in yuan.[5] This approach is still meeting obstacles. Russia, for example, no longer accepts rupees for payment of its exports of oil products to India, because until now, it can import but little from India and therefore can only spend a limited amount of rupees. However, the transition to national currencies still has great advantages. It serves the purpose, explains the German Institute for International and Security Affairs (SWP), of “restricting the ability of the USA” to impose its global interests “by using financial sanctions.”[6] Pretoria’s Institute for Security Studies (ISS) predicts major consequences, should oil prices no longer be set in US dollars. This was probably the main consideration for including Saudi Arabia and the UAE as new BRICS members.[7] Nevertheless, removing the US dollar from its throne will still be a slow process.

Loans in National Currencies
The New Development Bank (NDB), founded by BRICS in 2014 as an alternative to the World Bank, and which began work in 2015, is also transitioning away from the US dollar. Over the past few years, the NDB has accepted Egypt, the UAE, and Bangladesh. Uruguay is in the process of joining. Other new members are due to follow. Since its inception, the Bank has supported 98 investment projects, corresponding to approximately US $33 billion, and for 2023 and 2024 it already has a pipeline of 76 projects, totaling US $18.2 billion.[8] The NDB is also converting its transactions from US dollars to national currencies – not least of all, to avoid the risk of a disastrous, inadvertent increase in its own interest payment obligations due to a spike in US interest rates.[9] The portion of NDB activities that are not being transacted in US dollars is already at 22 percent, the major portion of which are loans denominated in yuan. According to NDB President Dilma Rousseff, in the period from 2022 – 2026, that amount should be increased to 30%.[10] This will include loans in Brazilian reais, South African rand and Indian rupees. Because the NDB is still dependent on the dollar, it had to freeze its activities in Russia. However, in the long run, this should become no longer necessary.

From a Strategy of Division to One of Inclusion
With its expansion and its increasing shift away from the US dollar, BRICS is developing into an effective counterweight to the West, whose dominance is thus dwindling. According to Berlin, continuing the attempt to divide BRICS will hardly be successful. Already before the BRICS summit, SWP was recommending that it would be better to adopt a sort of strategy of inclusion. This could possibly consist of opening major events, such as the Munich security Conference, more to issues pertaining to the Global South.[11] This could help prevent the perception of the evolving world order as “having been imposed by the West.” The first declaration made by Germany’s Foreign Minister Annalena Baerbock after the BRICS summit in Johannesburg contained elements of this strategy of inclusion. Baerbock announced that cooperation would continue, not only with the BRICS countries – with the exception of Russia and to a limited extent with China – but also with the new members. “We want to cooperate with the countries around the world, of course also with those who have views that differ from ours.”[12] It is unlikely that BRICS members would forego genuine independence for such offers of integration.

 [1] Baerbock sieht keine Schwächung der G-20. tagesspiegel.de 22.08.2023.

[2] See also The End of US Domination at the Persian Gulf (III).

[3] SD Pradhan: Doval visits Iran: India-Iran ties moving to a new level. timesofindia.indiatimes.com 04.05.2023.

[4] Steven A. Cook: India Has Become a Middle Eastern Power. foreignpolicy.com 30.06.2023.

[5], [6] Günther Maihold, Melanie Müller: Eine neue Entwicklungsphase der BRICS. SWP-Aktuell 2023/A 52. Berlin, 17.08.2023.

[7] Jakkie Cilliers: BRICS+ and the future of the US dollar. issafrica.org 25.08.2023.

[8] NDB President Dilma Rousseff Reported to BRICS Leaders at the 15th BRICS Summit. ndb.int 24.08.2023.

[9] Jakkie Cilliers: BRICS+ and the future of the US dollar. issafrica.org 25.08.2023.

[10] Michael Stott: Brics bank strives to reduce reliance on the dollar. ft.com 22.08.2023.

[11] Günther Maihold, Melanie Müller: Eine neue Entwicklungsphase der BRICS. SWP-Aktuell 2023/A 52. Berlin, 17.08.2023.

[12] Baerbock: Gespräche auch mit Brics-Beitrittsländern. handelsblatt.com 24.08.2023.


Source:Ocnus.net 2023

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