The implications of the expansion of BRICS | 6 September 2023 | UPSC Daily Editorial Analysis

September, 2023 UPSC
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What's the article about?

  • It talks about the probable implications of the BRICS' expansion.

Relevance:

  • GS2: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.
  • Prelims

Context:

  • The 15th BRICS summit held in Johannesburg on August 24, 2023, announced the invitation of six new members, including Iran, Saudi Arabia, and the United Arab Emirates from West Asia, Egypt and Ethiopia from Africa, and Argentina from Latin America.
  • The article discusses the significance of this expansion, BRICS' challenges to the West-led world order, and the potential impact of the new members on regional and global affairs.

BRICS Grouping:

  • BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
  • The acronym “BRICS” was initially formulated in 2001 by economist Jim O'Neill, of Goldman Sachs, in a report on growth prospects for these economies.
  • In 2006, the four countries initiated a regular informal diplomatic coordination, with annual meetings of Foreign Ministers at the margins of the General Debate of the UN General Assembly (UNGA).
  • This successful interaction led to the decision that the dialogue was to be carried out at the level of Heads of State and Government in annual Summits.
  • The first BRIC Summit took place in 2009 in the Russian Federation.
    South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS.
  • BRICS does not exist in the form of organization, but it is an annual summit between the supreme leaders of five nations.
  • The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.

BRICS Summits:

  1. Yekaterinburg, Russia – 2009
  2. Brasília, Brazil – 2010 
  3. Sanya, China – 2011  
  4. New Delhi, India – 2012 
  5. Durban, South Africa – 2013 
  6. Fortaleza , Brazil – 2014 – NDB
  7. Ufa, Russia – 2015 – CRA
  8. Benaulim, (Goa) India – 2016
  9. Xiamen, China – 2017
  10. Johannesburg, South Africa – 2018
  11. Brasília, Brazil – 2019
  12. Saint Petersburg Russia – 2020
  13. India, 2021
  14. China, 2022
  15. Johannesburg, South Africa, 2023

15th BRICS Summit, 2023

  • The 15th BRICS Summit was held in Johannesburg, South Africa in August 2023.
  • The summit was attended by the heads of state or heads of government of the five member states: Brazil, Russia, India, China, and South Africa.
  • The summit discussed various issues such as geopolitical changes, global economic situation, and reforming financial institutions.
  • Major Outcomes are as follows:
    • The major outcomes of the 15th BRICS Summit, 2023 include the agreement to admit six new member countries: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and United Arab Emirates, who will officially join the group in January 2024.
    • The summit also decided on the transformation from the BRICS to the BRICS+.
    • The summit also focused on the possible expansion of BRICS, with more than 40 countries expressing interest in joining, including the six new members.
    • The leaders also discussed how they can improve economic ties between their diverse economies.
    • The summit also highlighted the importance of implementing the SDGs in an integrated and holistic manner, and highlighted the SDG Summit in September 2023 and the Summit of the Future in 2024 as “significant opportunities for renewing international commitment” to the 2030 Agenda.

New Development Bank (NDB):

  • It is a multilateral development bank jointly founded by the BRICS countries at the 6th BRICS Summit in Fortaleza, Brazil in 2014.
  • It was formed to support infrastructure and sustainable development efforts in BRICS and other underserved, emerging economies for faster development through innovation and cutting-edge technology.
  • It is headquartered at Shanghai, China.
  • Votes are based on the members’ shareholding.
  • Membership is open to all UN members.
    • Bangladesh, the United Arab Emirates, and Uruguay joined the NDB in September 2021. Egypt was welcomed as a new member of the NDB in December 2021.
  • In 2018, the NDB received observer status in the United Nations General Assembly, establishing a firm basis for active and fruitful cooperation with the UN.
  • The NDB has so far approved 14 Indian projects for an amount of nearly USD 4.2 billion.
    • It has committed funding to a number of major infrastructure projects in India, including the Mumbai Metro rail, Delhi-Ghaziabad-Meerut Regional Rapid Transit System and many Renewable Energy projects.

Contingent Reserve Arrangement:

  • Considering the increasing instances of global financial crisis, BRICS nations signed BRICS Contingent Reserve Arrangement (CRA) in 2014 as part of Fortaleza Declaration at Sixth BRICS summit.
  • CRA was established in 2015 during 7th BRICS summit in July 2015.
  • The BRICS CRA proposes to provide short-term liquidity support to the members through currency swaps to help mitigating BOP crisis situation, in case such a situation arises.
  • The CRA is generally seen as a competitor to the International Monetary Fund (IMF) and along with BRICS New Development Bank (NDB) is viewed as an example of increasing South-South cooperation.

Analysis:

  • BRICS' challenges to the West-led world order:
    • BRICS members have been dissatisfied with the West-dominated international institutions that emerged after World War II, such as the World Bank, the International Monetary Fund, and the United Nations.
    • BRICS promotes intra-BRICS economic and political cooperation, builds institutions outside western control, and agitates for wide-ranging reforms to accommodate the presence and interests of emerging economies.
    • The Johannesburg Declaration asserts that the members' “strategic partnership” will be directed at achieving “a more representative, fairer international order.”
  • BRICS' expansion and its impact:
    • With the proposed expansion, BRICS will have 46% of the world's population, and its share of the global GDP will go from 31.5% in PPP terms to 37%, far ahead of the GDP of 30.7% of the G-7.
    • The five core members account for 23% of global exports and 19% of global imports; with the new members, these figures will be boosted by 3.7% and 3%, respectively.
    • The major impact will be on the energy sector: out of global oil production of about 90 million barrels per day in 2022, the earlier five BRICS members had accounted for 20% of global output; this will go to 42%.
  • The new members' geo-strategic value:
    • The new BRICS members will bring considerable geo-strategic value to the grouping.
    • Those from West Asia are already closely tied to BRICS members, with 35% of Saudi oil production going to China and India, and Russia looking at Brazil as a market.
    • Despite sanctions by the United States, Iran has increased oil production from a low of 400,000 barrels per day in the Trump period to 2.2 mbd in August this year, most of it going to China.
    • Egypt and Ethiopia are an important presence in the strategically important Horn of Africa and the Red Sea, while Argentina is the second largest economy in Latin America.
  • Outlook for regional and global affairs:
    • The new BRICS members, particularly those from West Asia, naturally fit into this political and economic framework.
    • Saudi Arabia has pursued de-escalation and dialogue, ending the Qatar blockade in January 2021, engaging with Turkey, and opening interactions with Iran from April 2021.
    • These regional engagements culminated in the China-brokered accord with Iran in March this year.
    • The UAE has also normalized ties with Iran and is focusing on expanding its maritime footprint across the Gulf, the Gulf of Aden, the Red Sea, and the Horn of Africa.
    • Iran's entry into BRICS opens up opportunities for accelerated regional economic cooperation, besides the revival of the moribund north-south connectivity projects through the Chabahar port with which India is associated.

Way Forward:

  • BRICS' expansion and challenges to the West-led world order have significant implications for regional and global affairs.
  • The new members' geo-strategic value and their alignment with BRICS' political and economic framework make them valuable additions to the grouping.
  • The Johannesburg summit has been described as a “turning point in modern history,” and BRICS' continued growth and influence will be worth watching in the coming years.

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