Fast Approaching BRICS Summit Could Prove Decisive

During the first BRICS meeting with its new members earlier this year, the ‘sherpas’ who made up the working group were tasked with formulating an agenda for the up-coming leaders’ summit in Kazan. The minutes from the meeting provide insights into the group’s priorities and the evolving dynamics between the new and original members.  

Following directives issued by the leaders at last year’s summit in Johannesburg, discussions took place regarding further BRICS expansion plans, the increased use of national currencies, and the development of new payment mechanisms for cross-border transactions.

While a new BRICS payment system to facilitate trade in local currencies could prove beneficial as inter-BRICS trade grows, it remains to be seen whether the bloc is able to continue integrating new members in pursuit of this goal. The upcoming leaders’ summit could prove decisive in this respect, determining the pace and scale at which the group is able to realise its ambitions.

Spending Priorities

During the meeting, Russian Foreign Minister, Sergey Lavrov, emphasised the need for BRICS to reconfigure the global order to better represent the interests of developing countries. He drew parallels between the BRICS and the concept of multilateralism, advocating for inclusiveness to reshape the global economy. This rhetoric may resonate with states who feel their voices tend to go unheard, especially during times of global crisis.

Lavrov specifically criticized the disproportionate financial support the G7 have offered Ukraine, contrasting it with the lack of similar support for other struggling countries. The Foreign Minister claimed financial support for Ukraine was prioritized over projects in Africa and the Middle East. He contrasted this with Russia’s approach, reminding the delegates that the Kremlin had gifted vast quantities of free wheat and fertilizer to several African countries. 

Considering the European Union has provided financial support to Ukraine equivalent to Africa’s entire infrastructure financing gap (roughly $100 billion), Russia’s argument may prove effective in convincing developing countries that their needs are being neglected. Meanwhile, the United States approved $95 billion for a single military aid package earlier this year, a figure larger than the foreign reserve holdings of 85% of the world’s nations.

While the US has spent trillions on destructive wars, Beijing has spent over $1 trillion building ports, power plants, railways, roads, and bridges across the world as part of its Belt and Road initiative. Similarly, with new BRICS members like Saudi Arabia and the UAE pouring billions of petrodollars into emerging markets, developing countries are justifiably interested in joining a fast growing and resource-rich BRICS alliance. 

New Members Express Their Views

During the meeting, the BRICS officially welcomed representatives from its new member states following the decision made in Johannesburg to include several new countries in the grouping. These countries became full-fledged members from January 2024, and each in attendance was afforded the opportunity to share their views on the proposed agenda for the up-coming year. 

The Egyptian delegation urged Russia's BRICS chairmanship to address pressing challenges in food and energy security, both crucial issues for the North African nation. Egypt faces multiple economic challenges and was forced to devalue its currency to secure a $8 billion bailout from the IMF. The Egyptian pound plunged nearly 40% after the removal of the currency peg, dropping to a record low of 50 to the US dollar and heightening Cairo’s economic concerns.

Investors have shied away from Egypt since Russia invaded Ukraine. This has led to a surge in import costs, particularly for wheat, depleting Egypt’s foreign reserves. The Houthi’s Red Sea blockade of Israel, intended to force a ceasefire in Gaza, has also had an impact, halving the revenue from the Suez Canal, another significant source of foreign income for Egypt valued at around $10 billion per annum during peace time.

Although it imports natural gas from Israel and buys weapons from the United States, Egypt has chosen to join to BRICS and co-operate with Russia and Iran. This may seem odd considering the negative effects the wars in Ukraine and Gaza have had on the Egyptian economy, although for Cairo, BRICS is seen as a vehicle for ameliorating these effects and shoring up its finances.

The BRICS have certainly ramped up investments in Egypt this year. China has been a dominant player, with substantial investments in infrastructure, green energy, and the expansion of the Suez Canal Economic Zone. Saudi Arabia and the UAE have also pledged billion towards the country’s tourism and real estate sectors while Russia is building Egypt’s first nuclear plant.   

The Iranian Deputy Foreign Minister, Mehdi Safari, also attended the meeting and called for an increase in payments in national currencies within BRICS. Iran is motivated to explore the use of local currencies in cross-border transactions to mitigate the negative effects of US sanctions.

In general, the new members seem particularly focused on economic and financial cooperation within BRICS, especially new payment instruments and national currency utilization. Considering a heavily sanctioned Russia holds the rotating BRICS presidency, financial reform will likely prove a major theme of the upcoming summit. 

Future Expansion

Despite receiving numerous membership applications over the last few years, the BRICS have only welcomed a handful of new members and there are rumours that there could be a pause. Nevertheless, more and more countries appear interested in joining with dozens submitting official applications, including Nigeria, Bangladesh, Bolivia, Turkey, and Khazakstan.

However, further expansion may prove contentious. For example, India may object to Pakistan’s inclusion, while the addition of new countries such as Belarus, Cuba, or Palestine, could spark controversy due to wars and sanctions. That said, Iran and Russia are already members, despite sanctions, making it difficult to predict who might be invited to join the grouping.

There have also been rumours of a new category of ‘partner country’ which would allow new nations to be included in BRICS initiatives without immediately being granted full membership status. This suggests that like the development of new financial architecture, further expansion is likely to be a gradual yet on-going process.