Will the BRICS Union survive the next 10 years?

Courtesy of CageCartoon.com — Despite its divergent foreign policy goals, will the BRICS union usher in a new world order built on multi-polarity?

Despite being challenged with divergent foreign policy goals; the BRICS union will maintain its relevance because its members can leverage the non-prescriptive and non-binding nature of their union as a platform to achieve both their common and national interests. Constructivism theory can explain how the BRICS’ New Development Bank (NDB) can fulfil the common interests of its members to further develop infrastructure investment projects and provide an alternative financial system that builds upon the existing Bretton Woods institutions (Chin, 2014). Power transition theory will then explain how the BRICS members can use their union as a containment strategy against both the Global North and its own members within the group (Sharma, 2016). Finally. it will explore how the flexible governance structure of the BRICS union enables it to better adapt to a dynamic, multipolar world and successfully achieve tangible outcomes despite being a ‘new’ political grouping.

BRICS union as a platform to achieve common economic interests

Seeing an opportunity to reshape international economic governance away from the Bretton Woods institutions that advocated western neo-liberalism whilst also addressing a shortfall in their infrastructure development, the BRICS established the NDB and the Contingent Reserve Arrangement (CRA) in July 2014. As at 2014, the NDB’s capital of $100 billion USD proved to be a strong contender to the World Bank’s capital of $233 billion (Chin, 2014). A major factor that contributed towards the efficient establishment of both the NDB and the CRA was the non-binding nature of the BRICS union that allowed its members to implement tangible proposals as opposed to settling on poorly defined agreements that are often hindered by stalemates. Unlike the Chiang Mai Initiative Multilateralisation (CMIM) that was merely a broad agreement to provide funds in case they were needed, the CRA was a reserve fund to promote liquidity within the BRICS. As the BRICS does not have its own secretariat or a permanent supranational executive body, this flexibility eased the process of it establishing the NDB and CRA to promote their own economic independence without having to rely on existing multilateral financial institutions (Stephen, 2014). If this efficiency is maintained moving forward, the BRICS union could prove a successful platform for its member countries to pursue common economic interests.

Whilst the development of the NDB could be interpreted as a direct challenge to existing multilateral development banks, constructivist theory suggests that the BRICS economies can provide an alternative to existing multilateral financial by building upon the impacts of their historical and social constructs. The asymmetrical relationship between developed and developing countries in financial global governance is evident through the disproportionate voting rights of developing countries in the World Bank and IMF. As of 2014, the US controls 16.75 percent of voting rights in the IMF, while China, despite being the world’s second largest economy, has 3.81 per cent. The share of IMF voting rights of the BRICS totals 11.04% despite having a 21.2% share of world GDP (Chin, 2014). However, the BRICS union in its current state isn’t strong enough to completely revise the existing multilateral financial system nor is it cost effective for them to do so (Cheng, 2014). The BRICS despite their rise, are still functionally dependent on the existing institutional framework of global governance (Stephen, 2014). Instead, the NDB is more effective as both an alternative and additional forum where BRICS members do not challenge but build upon existing multilateral development banks. The Contingent Reserve Arrangement (CRA) of the BRICS builds upon the IMF because member countries that need to exceed their borrowing quote of 30 per cent from the CRA must first pass the prerequisites of the IMF for a structural adjustment loan. This demonstrates the ‘non-threatening’ nature of the NDB’s establishment that enables BRICS members to achieve their mutual goal of “strengthening mutually-beneficial cooperation for common development” (Brics2017.org, 2018). By presenting themselves as a non-threatening alternative to the ‘Washington Consensus’, the NDB and CRA serve as an additional forum for BRICS members to seek additional finance.

The emerging economies within the BRICS are also united by their common goal for additional infrastructure investment and can rely on alternative models of financing through the NDB as opposed to the traditional neo liberal model. Enthusiastic to emulate China’s economic success story, India, Brazil and South Africa also seek to further progress their infrastructure investment programs but find accessibility to global finance increasingly difficult. Since 2013, India’s ineligibility to access the World Bank’s International Development Association loans remains unresolved, Brazil’s BNDES needs an additional US $12.34 billion and South Africa’s DBSA is now undergoing deep restructuring after suffering from large unanticipated losses in 2012 (Chin, 2014). The crippling aftermath of the 2008 subprime mortgage crisis exposed inherent structural weaknesses within Western banking systems which resulted in private finance for infrastructure projects to fall by 33 per cent (Chin, 2014). During this period, major European banks after undergoing major deleveraging have severely reduced their lending capacity, resulting in it becoming harder for least developed countries to attract foreign direct investment (FDI) to fund their much-needed infrastructure projects. The World Bank also expressed reluctance to take on G20 instructions and told African representatives to focus on liberalisation and institutional adjustments to improve their economies attractiveness to attract FDI (Sharma, 2016). Increasing difficulty for developing countries to access infrastructure finance will only strengthen the relevance and need for an alternate financing system like the NDB and CRA to fund such projects in the future.

Courtesy of Zhang Chengliang, China Daily — Could the BRICS development bank be an alternative to the Washington Consensus institutions?

BRICS union as a national interest’s platform to contain both external and internal members

Power transition theory hypothesises that great powers who are dissatisfied with the current global order will challenge the existing hegemonic power if they can achieve a net positive outcome (Stephen, 2014). A plethora of reasons could explain why states are dissatisfied and each BRICS countries’ reasons for dissatisfaction will vary accordingly to their foreign policy goals. However, these divergent goals do not render their union redundant. Rather the non-binding structure of the BRICS allows each member country to interpret it as a flexible platform of governance that varies accordingly with their national interests.

From a military perspective, the BRICS countries aren’t strong nor are their foreign policies convergent enough to justify challenging US hegemony. In 2016, the US’s defence budget of $639 billion surpassed that of the BRICS combined $286 billion (Zhang et al, 2016). Out of the five-member countries, Moscow is most dissatisfied with the existing system of global governance which it perceives to be still highly dominated by the United States. Russia frequently uses its veto power in the UN security council to annul Western decisions in Libya and Syria and currently supports the Assad regime militarily. Russia’s involvement in the BRICS is considerably more influential than its involvement with older political groupings. During the Ufa Declaration at the 2015 BRICS summit, Russia was highly involved with China in the development of the NDB and CRA. In contrast, Russia’s struggles to be recognised as a great power in the G20 and was even suspended from the G8 in 2014 following its annexation of the Crimea (Wadja-Lichy, 2014). As the BRICS is one of the few global bodies not dominated by the West, Russia can then leverage off its considerable influence within the BRICS as a platform to project a narrative of Kremlin defiance to challenge and contain the post-cold war Western dominated global order.

On the contrary, China has expressed relative satisfaction with the current global order as it has successfully been able to navigate the rules of the “Washington Consensus” to grow its economy significantly. The fact that China’s ascension into the WTO before Russia is testimony of China’s superior ability to adapt to the current global order relative to Russia (Callahan, 2016). Instead of using the BRICS as an instrument to contain the influence of the West, it would be more efficient for China to use it as soft power platform to achieve the goals of its 2025 Grand Strategy to be a ‘benevolent leader’ of the developing world (Cheng. 2014). During the Brisbane G20 Summit in 2014, China heavily pushed for the BRICS foreign ministers to issue a joint statement that ensured that Russia wasn’t excluded. China could utilise its leadership in the BRICS to unite its members as a coalition of voices to prevent one of its members from becoming geopolitically isolated (Glosny, 2010). Though geographically distant, the inclusion of South Africa and Brazil in the BRICS also serves as an economic containment strategy for the Asian continent BRICS members to ensure that the Global North’s market access into these economies is limited.

Power transition theory equally applies within the BRICS union as Russia and India might grow increasingly wary and cautious of China’s rise, given the political tension that emanates from their previous territorial disputes. To address potential rising dissatisfaction within other BRICS members, China can use the BRICS to reassure India and Russia that it will not threaten them or challenge their interests as it grows more powerful. The aftermath of the 1962 Sino-Indian war over the Arunachal Pradesh border dispute and India’s “Look East” policy that threatens China’s interests in Myanmar and Vietnam leaves scope for unresolved tension in the Chindia relationship. The USA could exploit this tension and cultivate its relationship with India to contain a rising China. Keen to absorb India into a US-Japan-Australia-India quadrilateral alliance, the US has offered India advanced weapons whilst also having concluded a nuclear energy co-operation agreement with Delhi (Cheng, 2014). Paradoxically, it would be in India’s national interests to gain the best of both Eastern and Western political groupings by leveraging its attractiveness as an ally for the US to contain China whilst still being a member of the BRICS. By promoting increasing economic interdependence to further develop common interests, China can use the BRICS to prevent the US from pulling India into a strategic coalition to contain China. Although its headquarters is in Shanghai, the first director of the NDB was from India. Furthermore, during the 2017 Xiamen Summits, the Indian minister of state for external affairs General V. K. Singh and Chinese foreign minister Wang Yi added that the extent of the BRICS relationship was sophisticated enough to include counter-terrorism and environmental policies as opposed to merely focusing on common economic interests (Brics2017.org, 2018). Increasing both economic and geopolitical interdependence enables Chindia to use BRICS as a containment strategy platform both against each other and against the US.

BRICS union flexibilities allow it to achieve significantly more than existing political groupings despite being relatively ‘new’ in the global political arena

Courtesy of the World Economic Forum

The last time the Global South co-ordinated a coalitional challenge to the “Washington Consensus” and western supremacy in the world economy manifested in their formation of the Non-Aligned Movement (NAM) in 1961. The NAM’s primary objectives was non-alignment with the bi-polar world order that underpinned the Cold War and the national liberation of decolonisation of Third World states. However, not much has amounted since the NAM’s demands for a New International Economic Order (NIEO) because their restrictive governance structure and overly aggressive revisionist policies have undermined their ability to address challenges for the Global South. On the contrary, a dynamic BRICS union is better equipped to address these challenges despite only being a formal political grouping established in 2009.

A combination of having a manageable political grouping of 5 members and a constructivist policy that advocates cooperation can explain why the BRICS has achieved considerably more than the NAM. The NAM summit of 1973 in Algiers called for an ambitious NIEO that sought to introduce a new international economic order which was unfeasible as many of the NAM’s 29 states were still crippled with domestic issues of poverty and underdevelopment despite the almost total elimination of colonialism (Keethaponcalan, 2016). Furthermore, public denouncement of the US’s invasion of Iraq and its sanctions against Iran and North Korea have only further antagonised the US who often undermines and ignores NAM’s suggestions to reform the UN security council (Keethaponcalan, 2016). On the contrary, instead of advocating a revisionist model like the NAM; the BRICS has demonstrated a willingness to comply with existing institutions whilst also presenting its union as an alternative platform. The NDB has partnered with the IMF, the Multilateral Investment Guarantee Agency (MIGA) and other financial and non-financial institutions that can make otherwise high-risk investments more attractive through insurance arrangements, inflation hedges and other financial instruments (Montenegro and Mesquita, 2017). The extent of the BRICS union’s cooperation with existing multilateral institutions also allows it to focus on energy efficiency initiatives through the establishment of a BRICS Energy Cooperation Platform that abides by the Paris Agreement and principles of the United Nations Framework Convention on Climate Change (UNFCCC) (Brics2017.org, 2018).

Furthermore, the 5 members of the BRICS in contrast to the NAM’s now 125 members makes it more efficient for initiatives to be followed through cohesively. A lack of internal cohesion and what many member states describe as “cumbersome and often painful speeches with little to no action” from its 125-member states as of 2017 further accentuates the political grouping’s infamy as an “empty vessel” despite being in existence for nearly half a century (Keethaponcalan, 2016). The NAM isn’t the only political grouping hindered by stalemates due to its inability to cohesively manage all the national interests of its members. These similar problems are persistent in the UN which has often been described as a “toothless tiger” due to its large membership. Unlike the NAM’s aggressive denouncement of the US’s infringement of nation-states’ territorial sovereignty during the 2003 Iraq War, the BRICS have subtly expressed their disapproval with the sanctions and “No Fly Zone” in Libya by refusing to support a draft resolution that condemned the Assad regime’s violence against its own civilians when all the BRICS members were coincidentally part of the UN security council in 2011(Wajda-Lichy, 2014). Not posing itself as a threat to the existing global order but as a cooperative alternative has enabled the BRICS’ success as a coalitional platform to implement dynamic solutions that better addresses the multilateral interests of southern states more effectively than the NAM.

Conclusion

The non-prescriptive, non-binding political manoeuvrability of the BRICS union allows its members to achieve both their national and common interests simultaneously through multiple institutional forums without jeopardising the strength of the BRICS as a non-aggressive, non-revisionist constructive coalitional voice for the Global South. Such dynamism better equips the BRICS to adapt to an increasingly multipolar world regardless of whether their union is analysed through a containment strategy lens or as a platform to ensure mutual economic interdependence and growth through additional infrastructure investment. Finally, its small and manageable membership enables its success as an effective platform for its members to achieve both their national and common interests when juxtaposed against existing multi-institutional political groupings. If the BRICS union can maintain such flexibility in their governance structure, not only will they survive the coming decade but they will also possess tremendous potential to peacefully build upon the existing global order and usher in new models of global governance.