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ECONOMY | 15-02-2023 11:41

BRICS debates expansion as Iran, Saudi Arabia seek entry

The proposal to expand BRICS will be one of the economic bloc’s main focuses this year, with Iran and Saudi Arabia among those who’ve formally asked to join.

The BRICS group of nations plans to decide this year whether to admit new members and what criteria they would have to meet, with Iran and Saudi Arabia among those who’ve formally asked to join, according to South Africa’s ambassador to the bloc.

Enlarging the group that includes Brazil, Russia, India, China and South Africa would benefit Beijing, as the world’s second-biggest economy tries to build diplomatic clout to counter the dominance of developed nations in the United Nations, International Monetary Fund, World Bank and other institutions. 

China initiated the conversation about expansion when it was chair last year, triggering concern among other members that their influence will be diluted, especially if Beijing’s close allies are admitted. China’s gross domestic product is more than twice the size of all four other BRICS members combined. 

The proposal to expand BRICS will be one of the economic bloc’s main focuses this year, said Ambassador Anil Sooklal. South Africa is the group’s current chair.

“There are over a dozen countries that have knocked on the door,” Sooklal said in an interview in Johannesburg last week. “We are quite advanced at looking at a further group of new members.” 

 

Vote imbalance

The potential repositioning of BRICS comes as developed nations in Europe and North America seek to bolster alliances to push back against the influence of an increasingly dominant and assertive China by forming new blocs and signing trade and security pacts. The so-called Quad, an alliance between the United States, Japan, India and Australia, has gained in prominence since being resurrected in 2017 after standing dormant for almost a decade. And in 2021, Australia, the UK and the US entered into a security alliance known as AUKUS.

We are living in “the world between orders. We don’t know what the new order is going to be,” Sooklal said. “We believe we need to play a role in ensuring that we have a more equitable, inclusive, transparent, global architecture.”

While BRICS accounts for 42 percent of the world’s population, its members have less than 15 percent of the voting rights in the World Bank and the IMF, according to the Pretoria-based Institute for Security Studies.

Originally known as BRIC, after an acronym coined in 2001 by then-Goldman Sachs Group Inc. Chief Economist Jim O’Neill, the bloc was formed in 2009 and South Africa was admitted the following year. It has since tried to forge closer trade relations between members through agreements between their development banks, currency-swap accords and an increase in intra-BRICS trade in local currencies to reduce reliance on the dollar.

 

IMF counterweight

Its five members founded the New Development Bank, intended as a counterweight to the IMF and World Bank, in 2014, and Bangladesh and the UAE joined the institution in 2021. Egypt and Uruguay are expected follow suit soon, according to the NDB’s website. 

With BRICS originally envisioned as a group of expanding emerging-market nations, there is concern that the admission of weaker economies could weaken the ties that the countries are trying to build within the bloc. O’Neill sees little economic logic for additional members. 

“The case for expansion is very weak in my view unless they really have better collective purpose,” he said by email. They would need clear objectives, when it comes to dealing with economic, trade, health, green energy and finance issues, he said.

Other countries that have expressed interest in joining include Argentina, the United Arab Emirates, Algeria, Egypt, Bahrain and Indonesia, along with two nations from East Africa and one from West Africa — which Sooklal didn’t identify.

 

Putin backing

Algerian media has reported the country’s interest and Argentina has expressed a desire to join the group. In Iran, the semi-official Fars news agency reported that the country had applied for membership, citing a foreign ministry official, while Russian President Vladimir Putin last year said he backed Saudi Arabia’s potential entry.

China’s Foreign Ministry Spokeswoman Mao Ning said at a press conference on February 10 that the country backs an expansion.

Not all BRICS members are as enthusiastic. 

While Brazil agrees with the principal of expanding, the nation is still considering its position and is wary of the group being geographically tilted toward Asia, said two people familiar with the South American country’s thinking who asked not to be identified as public comment is yet to be made. It also wants Latin American countries to join, the people said.

India doesn’t want countries to be allowed to join on the recommendations of existing members and wants a process established so that nations have to meet certain criteria to be admitted, said a person familiar with the Asian country’s thinking.

 

Relations tested

The implications of expanding BRICS — which South Africa backs — will be discussed in a series of meetings ahead of a full summit of the group in August. The government is confident all the BRICS nations’ leaders, including Russia’s Putin and China’s Xi Jinping, will attend the gathering.

South Africa will invite other African leaders to the August summit, be they heads of state or the chairs of regional organizations such as the African Union and East African Community, as part of an attempt to widen the influence of BRICS, according to Sooklal. 

Holding the group together hasn’t been without its challenges. South Africa and Brazil’s economies have struggled over the past decade, while Russia’s invasion of Ukraine a year ago has tested relations, with the NDB suspending new lending to Russia.

“Very often I am asked the question: You are so diverse in so many ways, how is it that you’ll function?” Sooklal said. “My extended answer has been there are far more points of convergence than divergence.”

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by Antony Sguazzin, Bloomberg

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