BRICS prepares for economic competition against the West with new members

The BRICS, made up of major emerging economies such as China and India, are preparing to emerge as a new geopolitical and economic powerhouse against the West by sending out invitations to six more countries to join.

Created in 2009 with the participation of Brazil, Russia, India and China, the BRICs was often seen as a counterbalance to the Western-led world, having first expanded to include South Africa in 2010 and evolved into BRICS.

OIL RICH COUNTRIES INCLUDED

Trying to position itself as a center of power vis-a-vis Western alliances, the BRICS group included 6 countries, including Saudi Arabia, Iran, the oil-rich United Arab Emirates (UAE) and Egypt, which have the largest economies in the Middle East region, in the group since 2010. It is entering the enlargement process for the first time since then and aims to increase its international influence against the West.

The BRICS countries, made up of Brazil, Russia, India, China and South Africa, attended the 15th Leaders’ Summit held in Johannesburg, South Africa, in order to restore world order and accelerate their steps to increase their global influence. accepted applications for bloc membership from Saudi, Iran, the United Arab Emirates, Egypt, Ethiopia and Argentina.

South African leader Cyril Ramaphosa, host of the BRICS Leaders Summit, announced that new countries will become members of the bloc from January 1, 2024. With this decision, the number of BRICS members will increase from 5 to 11 in the new Year.

The political and economic power of the BRICS in the international arena is predicted to increase at a time when the importance of energy in the world is increasing, as countries such as Saudi Arabia, Iran, the United Arab Emirates and Egypt, which have the largest economies in the Middle East. The eastern region and the world’s largest oil and gas reserves become members of the bloc.

PUTIN EXPLANATION

Russian President Vladimir Putin, who did not attend the summit due to an international arrest warrant, thanked Ramaphosa for his determination to expand.

“The selective and irreversible process of de-dollarization of our economic ties is gaining momentum,” Putin said. saying.

MORE THAN 40 PERCENT OF THE POPULATION IS IN THE BRICS COUNTRIES

More than 40 percent of the world’s population currently lives in the BRICS countries.

While the BRICS countries accounted for 7.7 percent of global economic output (GDP) in the early 2000s, this rate is more than 25 percent today. It is estimated that the organization’s impact will increase with the addition of new members, and that proportion will increase to approximately 30 percent.

By comparison, the G7 countries, which comprise the United States, Canada, Germany, England, France, Italy and Japan, still account for 45 percent of global economic output. But 20 years ago this rate was 65 percent.

The economic weight is expected to continue to shift in favor of the BRICS countries in the coming years, mainly due to the growth of China and India. According to IMF forecasts, India will overtake Germany and Japan to become the world’s third largest economy in the next 10 years.

COMMON CURRENCY PROPOSAL

At the BRICS summit in Johannesburg, Brazilian President Luiz Inácio Lula Silva called on member states to create a common currency to trade and invest with each other as a way to reduce their vulnerability to dollar fluctuations.

Lula told the summit’s opening plenary session that the BRICS currency “increases payment options and reduces vulnerabilities” among member countries.

Officials and economists pointed out the difficulties involved in a project of this type, given the economic, political and geographical inequalities between Brazil, Russia, India, China and South Africa.

It is also known that the BRICS countries set different priorities in politics and business, and that China and India also find it difficult to follow a consistent policy because they are rivals in important areas.

South African officials also stated that the BRICS currency was not on the summit’s agenda. In July, Indian Foreign Minister Subrahmanyam Jaishankar stated that he had no idea about the BRICS currency, but said that increasing trade with national currencies would be discussed before attending the summit.

At the meeting, which he attended by videoconference, Putin said that the change of trade between the member countries from dollars to national currencies will be discussed.

China did not comment on the idea. President Xi spoke at the summit about supporting “reform of the international financial and monetary system.”

COMPETITION AGAINST THE DOLLAR

BRICS leaders said they want to use more of their national currencies instead of the dollar, which has been strongly strengthened by the Federal Reserve’s interest rate hikes and the Russia-Ukraine war last year, making it more expensive imports together with the external debt of many countries.

The dominance of the dollar in the global system was discussed at the BRICS summit, while Russia’s removal from global financial systems due to sanctions last year raised speculation that non-Western allies would turn away from the dollar.

In his speech at the summit, Putin said: “The objective and irreversible process of de-dollarization of our economic ties is gaining momentum.” saying.

It is claimed that the current BRICS members, especially China and Russia, are currently pursuing different interests, except those of the United States and anti-dollar.

If we talk about the common currency of the BRICS countries, it should be noted that due to economic differences, they could not even form a common free trade zone.

Western high purchasing power markets such as the US, US, Canada, Germany, UK and France remain much more important to China than its BRICS partners.

85 PERCENT OF INTERNATIONAL TRADE IS WITH DOLLAR

According to data from the international payment service provider Swift, in June 2023 the dollar accounted for 85 percent of international trade financing, while the euro was second with 5.9 percent. The yuan trailed the euro with 4.2 percent.

According to data from the Bank for International Settlements (BIS), The dollar accounts for almost 90 percent of world currency transactions. and almost half of what countries owe to other countries in dollars.

However, according to data from the International Monetary Fund (IMF), the dollar’s share in official foreign exchange reserves fell to 58 percent in the last quarter of 2022, the lowest level in 20 years, and to 47 percent when adjusts to changes in the exchange rate. .

The weight of the dollar in world trade and financial systems not only gives the United States the privilege of financing its huge deficits, but also allows it to use the dollar as a tool of geopolitical power. Hardly any big bank, international company, or even developed country can afford to be cut off from US capital markets.

The use of the dollar is declining in Russia. While China, Brazil and Russia want to counter the dollar’s dominance with their own currencies, it should be noted that the yuan has become the most important trading currency in Russia as a result of Western sanctions on Moscow after the Russia-U.S. war. Ukraine.

DEPENDENCE ON THE DOLLAR MAKES IT FRAGILE DUE TO SANCTIONS

Boğaziçi and Koç University faculty member Dr. Speaking to Anadolu Agency (AA), Altay Atlı said that efforts by other countries to break the dollar’s dominance over the global economy have increased recently.

Atlı stated that there are several reasons for this: “The most important of these are the sanctions that have been increased recently. The sanction is the use of economic instruments for the purpose of a political and strategic foreign policy towards the opposite side. The dollar is increasingly used for these sanctions. So the more dependent you are on the dollar, the more fragile you become.” he said.

Atlı emphasized that the BRICS countries do not have much in common other than their opposition to a US-dominated world system and therefore a dollar-dominated global economic system.

The BRICS will open a loan of up to 10,000 million dollars

Looking at Brazil, Russia, India, China and the countries that will become new members, Atlı said that the theme that unites them has nothing in common other than the demands to reform the existing system, change it and have a more pluralistic structure. . .

“The BRICS New Development Bank (NDB) said that in the next period it will grant new loans in the amount of up to 10 billion dollars. He explained that at least 30 percent of this will be in local currencies. That is, greater use of local currencies.

This is already the case, for example, we saw it between Türkiye and China. There are agreements to promote the use of local currencies in bilateral trade. 30 percent will be in local currencies, but why not all?

All of these studies or initiatives, of course, are configured within the free market dynamics of the global economic system, within a global capitalism defined through free market dynamics.

‘Breaking the dominance of the dollar is not a realistic goal’

Atlı recalled that approximately 4 trillion dollars in currency transactions are carried out in the world every day and that approximately 60 to 65 percent of world trade is carried out in dollars.

Atlı asserted that free market dynamics maintain the dominance of the dollar, saying: “It is not a realistic goal to completely end the dominance of the dollar. But it is necessary to diversify as much as possible. Under current conditions, the dollar cannot lose its current position. But the more you diversify, the more you can implement; if different monetary sciences are used and their dependence on the dollar is reduced, it will be beneficial for the global economy.” saying. (AA)