While the BRICS countries maintain their geopolitical differences, they are finding common ground on the economic front as trade volumes increase.
As the BRICS approach the most significant summit in their history, to be held from 22 to 24 August in Johannesburg, South Africa, a few things need to be noted. The main three BRICS cooperation platforms concern politics and security, finance and economics, and culture. Therefore, the idea that a new gold-based BRICS reserve currency will be announced at the South Africa summit is baseless. What is underway is project R5: a new common payment system. All current currencies of the BRICS begin with the letter "R": renminbi (yuan), ruble, real, rupee, and rand. R5 will allow current members to increase mutual trade by avoiding the US dollar and reducing their US dollar reserves. This is just the first of many practical steps on the long and winding path of de-dollarization.
An expanded role for the New Development Bank (NDB) - the BRICS bank - is still under discussion. For example, the NDB could make gold-denominated loans from the BRICS, making it a global unit of account in trade and financial transactions. The BRICS exporters will therefore have to sell their goods in exchange for the gold of BRICS, rather than in US dollars, just as importers from collective Western countries will have to be willing to pay in BRICS gold.
Within the BRICS, there are a number of important unresolved issues between China and India, while Brazil is caught between a slate of imperial dictates and President Luiz Inacio Lula da Silva’s natural desire to strengthen the Global South. Argentina was practically forced by the United States to "postpone" its request to join BRICS+.
And then there is the weakest point by definition: South Africa. Sandwiched between East and West, the organizer of the most important summit in the history of the BRICS has opted for a humiliating compromise, not exactly worthy of an independent mid-level Global South power.
South Africa has decided not to host Russian President Vladimir Putin and has instead opted for the presence of Foreign Minister Sergey Lavrov, as initially suggested in Moscow. The other BRICS members validated the decision.
The compromise means that Russia will be physically represented by Lavrov, while Putin will participate in the entire process and subsequent decisions via videoconference.
This South African decision in itself raises serious questions about how far the BRICS geopolitics is just an illusion.
Geoeconomically, however, the group has entered a completely different game, illustrated by the multiple BRICS interconnections with China’s Belt and Road Initiative (BRI).
China’s trade with BRI nations increased by 9.8% in the first half of 2023, compared to the same period last year. This contrasts sharply with the overall 4.7% contraction in trade between China and Western countries: a 4.9% decrease with the EU and 14.5% with the United States.
Chinese trade with Russia, meanwhile, along with exports to South Africa and Singapore, increased exponentially by 78%.
The Arctic Silk Road will be increasingly strategic. China will be able to keep it open from at least July to October each year: unsurprisingly, the Arctic Silk Road development has been part of the BRI since 2017. All of this demonstrates a clear shift towards the Global South in China’s trade ambition. Trade with China’s BRI partners now accounts for 34.3 percent of China’s total global trade by value – and this percentage is rising.
On the Russian front, all eyes are on the 7,200 km long, multimodal North-South International Transport Corridor (INSTC), which alarms the Western collective as a de facto replacement for the Suez Canal. The INSTC cuts shipping costs by approximately 50 percent and saves up to 20 travel days compared to the Suez Canal route.
Trade via INSTC - by ship, rail, and road linking Russia, Iran, Azerbaijan, India, and Central Asia - is expected to triple over the next seven years: Russia to invest over $3 billion in INSTC through 2030.
The increase in trade between Russia, Iran, and India via the INSTC is linked to something that until recently would have been considered a utopia: the Trans-Afghanistan Railway.
The Trans-Afghanistan Railway is a complementary work to what was achieved in a recent agreement. This was when Pakistan, Uzbekistan, and Afghanistan signed a joint protocol to connect Uzbek and Pakistani networks via Mazar-i-Sharif and Logar in Afghanistan.
Uzbeks estimate that the 760 km-long railway will cut travel times by five days and costs by at least 40 percent. The project could be completed in 2027.
The forthcoming 573km-long Trans-Afghanistan Railway already has its roadmap: it will link the crossroads of Central and South Asia to ports on the Arabian Sea.
All of this expands Chinese trade in several directions. This brings us to the fascinating ongoing synergy between southern China and Western Asia - symbolized by the Great Bay Area.
As Saudi Crown Prince Mohammed bin Salman accelerates his ambitious Vision 2030 modernization project, the Great Bay Area is being hailed by Saudis as nothing less than "the future of Asia".
Every investor from Jeddah to Hong Kong knows that Beijing aims to transform the Great Bay Area into a premier global technology hub, centered on Shenzhen, with Hong Kong playing the role of prime global financial hub and Macau as the cultural hub.
The Great Bay Area is a key building block of the BRI. Collectively, the nine cities of Guangdong, plus Hong Kong and Macao (more than 80 million people, 10 percent of China’s GDP) will emerge as a stunning first-class economic powerhouse by 2035, far surpassing the Tokyo Bay, the New York metropolitan area and San Francisco Bay.
With Saudi Arabia aiming to become a full member of both BRI and SCO, Beijing and Riyadh will step up their technological cooperation, as well as in energy and infrastructure.
All eyes are on South Africa to see how the BRICS resolve their internal issues as they organize BRICS+ expansion. Who will be included in the club? Saudi Arabia? The United Arab Emirates? Iran? Kazakhstan? Algeria? The two main BRICS countries, China and Russia, continue to invest in a geo-economic role that has prompted dozens of countries to line up to join.
Original article published on Money.it Italy 2023-08-01 07:00:00. Original title: Verso un Nuovo Ordine Mondiale? Le tensioni tra i BRICS nell’espansione globale
