As the Brics summit approaches, Russia emphasizes the bloc’s economic strength, projecting a 4.4% growth for its members, compared to 1.7% for G7 nations. With new members like Saudi Arabia and a focus on boosting trade and investment among Brics countries, their influence, especially in energy, is rising. Yet, challenges remain, including political differences and external pressures. Russia advocates for a shift towards dedollarization in response to sanctions, seeking to establish a multi-currency trading system.
As the Brics summit approaches, set to begin in under two weeks, Russia, this year’s host, is proactively shaping the narrative for the event.
At a recent Moscow conference, Finance Minister Anton Siluanov proclaimed, “The Brics nations are the driving force behind global economic growth.” He projected an average economic growth rate of 4.4% for Brics countries this year and the next, a stark contrast to the G7’s expected 1.7% growth. Siluanov’s comments clearly aimed at highlighting the relative dynamism of the Brics economies compared to Western counterparts.
The 15th Brics summit will kick off in Kazan, Russia, where the nation is eager to advance the integration of its still-developing alliance. This push comes as a response to the extensive sanctions imposed by the West following Russia’s actions in Ukraine, prompting an emphasis on enhancing trade and investment among Brics members.
New Memberships on the Horizon
Looking at the trajectory of the alliance, it appears to be on a growth path. Several new nations have joined the Brics coalition in recent years, driven largely by China’s influence. Since South Africa joined the original group of Brazil, Russia, India, and China in 2010, the alliance has expanded significantly. At last year’s summit, invitations were extended to Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia, although Argentina opted not to join, and Saudi Arabia is still deliberating its involvement. Despite this, interest remains high, with twelve additional countries seeking membership.
A recent study by the Boston Consulting Group suggests that recent crises have spurred renewed momentum for Brics expansion. Countries that remain neutral in the geopolitical landscape are resisting Western pressure to impose sanctions against Russia, and many feel overlooked by the G7 in discussions surrounding climate change and global health crises. This discontent bolsters the Brics alliance’s appeal.
As the grouping expands to cover nine nations representing half of the global population, its economic influence has also surged. The Brics nations now contribute over 35% to worldwide GDP, surpassing the G7’s 30%. Additionally, they account for nearly 40% of global trade.
Significant Energy Sector Influence
The Brics nations have established considerable influence in the energy sector. Should Saudi Arabia join, the group would represent 43% of global crude oil production and 32% of natural gas output. If countries such as Kuwait, Kazakhstan, and Bahrain were to follow suit in joining, these percentages would rise even further. Furthermore, led by China and India, Brics members handle 38% of oil imports.
This shift could have significant ramifications for Western economies. Experts from BCG note that a coalition of major energy producers and importers may foster alternative systems for energy trade amid current market volatility.
Trade relationships within the Brics alliance have also thrived, enhancing their economic interconnections. The share of global trade within the alliance increased from 20% to 40% between 2002 and 2022, largely due to China’s rapid development. Notably, China has emerged as a key supplier for many Brics nations.
Brazil’s Resource Exports
Brazil’s role as a significant exporter shines especially in its trade with China, which imports vast quantities of iron ore and soybeans. In return, China supplies Brazil with electric vehicles, solar panels, and heavy machinery. Additionally, sanctions on Russia have redirected a significant amount of Russian goods to India and China instead of Western nations.
In terms of investment, Brics countries have dramatically increased their attractiveness as investment destinations. According to UNCTAD, foreign direct investment in the four original Brics states surged from $84 billion in 2001 to $355 billion in 2021, with these nations accounting for 22% of global foreign direct investment compared to just 11% two decades ago.
China’s Investment Boom
Much of this investment surge has notably favored China, which was experiencing rapid economic growth. However, there has also been a substantial increase in investment directed towards India, Brazil, and South Africa. The period from 2001 to 2011 saw an average annual growth of foreign direct investment in Brics countries of 13.5%. In the subsequent years, this growth slowed to an average of just 1.7% due to challenging global investment conditions.
Despite these advancements in economic strength, concerns loom regarding the future of integration within the Brics alliance. The diverse political systems, institutional frameworks, economic models, and cultural traditions among member countries may hinder cohesion and collaboration.