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BRICS++: The West tries playing ‘catch-up’, but it’s too late

  • Alastair Crooke Alastair Crooke
  • Source: Al Mayadeen English
  • 24 Jun 2023 15:59
  • 11 Shares
5 Min Read

Until recently, the West has largely derided the BRICS project. But it finally is awaking to the fact that the BRICS initiative possesses the potential to turn both geo-politics, and the international monetary system, upside-down.

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  • ‘Catching-up’?  The horse already has bolted. The stable is empty.
    ‘Catching-up’?  The horse already has bolted. The stable is empty.

The seismic Geo-Political event of this era is the explosion of BRICS membership, and of even bigger potential BRICS membership. This movement has crossed a key threshold. It has transited from ‘vanilla’ multipolarity to being an anti-colonial expression -- a shift that should not be underestimated. It is an ethos drawing energy from deep layers of passionate feeling that was stifled in the immediate post-war years, but which is re-surfacing to invest the multi-polar framework with evident dynamism.

There are currently eight nations that have formally applied for membership and 17 others that have expressed interest in joining. If Saudi Arabia and Russia are both members, that is two of the three largest energy producers in the one camp.

If Russia, China, Brazil and India are all members, there will be four of the seven largest countries in the world measured by landmass -- possessing 30% of the Earth’s dry surface and related natural resources -- as BRICS members.

Almost 50% of the world’s wheat and rice production, as well as 15% of the world’s gold reserves are in the BRICS.

Meanwhile, China, India, Brazil, and Russia are four of the nine highest-population countries on the planet with a combined population of 3.2 billion people, or 40% of the Earth’s population.

“China, India, Brazil, Russia and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, then the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world”. 

“By every measure then -- population, landmass, energy output, GDP, food output and nuclear weapons -- BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony”, Jim Rickards asserts.

With a new trading currency framework likely to be fore-shadowed in August at the BRICS summit, the currency will descend upon a highly receptive audience. It will fall into an increasingly sophisticated network of capital and communications. This network will greatly enhance its chances of success.

The key mistake is the failure to distinguish between the respective roles of a payment (trading) currency and a reserve currency. Payment currencies are used in trade for goods and services. Nations can trade in whatever payment currency they want; it doesn’t have to be dollars. However, in so doing – in a large way – the demand for the dollar incrementally is drained away. Ultimately this loss of foreign demand for dollars circumscribes the ability of the US to go on spending well above its income.

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What has defined a reserve currency has been a large, well-developed sovereign bond market. No country in the world comes close to the US Treasury bond market in terms of breadth and convertibility.

And Western finance personnel therefore snort in derision at the prospects of the US dollar ever losing its hegemony. But they forget perhaps that there was no US bond market until WW1, when  Woodrow Wilson authorized Liberty Bonds to help finance the war. There were bond rallies and Liberty Bond parades in every major city. It became a patriotic duty to buy Liberty Bonds. The effort worked, and it birthed the US bond market. 

In short, the way to create an instant reserve currency is to create an instant bond market using your own citizens as willing buyers. As Jim Rickards earlier noted, were the BRICS to ‘use a patriotic model’ (by drawing on today’s anti-colonial spirit sweeping the BRICS countries) it would be possible to create international reserve assets denominated in the BRICS+ (trading) currency. 

Also, the recent Bank for International Settlements (BIS)-led experiments in real time and digital Central Bank foreign exchange transactions promises to transform such a project – and to lessen substantially the need for a large reserve-asset reservoir.

Until recently, the West has largely derided the BRICS project. But it finally is awaking to the fact that the BRICS initiative possesses the potential to turn both geo-politics, and the international monetary system, upside-down.

This month, the Chair of the Eurasia Group, Cliff Kupchan, wrote in Foreign Policy that "6 Swing States Will Decide the Future of Geopolitics":

“Middle powers today have more agency than at any time since World War II. These are countries with significant leverage in geopolitics. Much more interesting [however] are the six leading middle powers of the global south: Brazil, India, Indonesia, Saudi Arabia, South Africa, and Turkey. These swing states of the global south are not fully aligned with either superpower and are therefore free to create new power dynamics. These six also serve as a good barometer for broader geopolitical trends”.

 

“… the question remains whether the BRICS states are going to become a more formal institution under China’s direction … that prospect is a clear challenge to the West…But the threat is unlikely to materialize. These countries may have tacked away from the United States — but that’s different from joining a Chinese-directed, Russian-assisted body actively opposing the United States. As of now, BRICS has not shown the ability to develop and implement a common agenda, so there is very little institutional strength for China to co-opt”.

The blinkers are on. The Western Establishment just doesn’t ‘get it’. Kupchan’s article's conclusion: "the US has been playing catch-up - and not doing very well at even that". It needs a well-crafted strategy toward each of the key Swing States (to halt their ‘tacking away’ from the US, towards the Russia-China axis), he warns. Arm-twisting, threats and coercion, presumably, as usual.

‘Catching-up’?  The horse already has bolted. The stable is empty.

 

The opinions mentioned in this article do not necessarily reflect the opinion of Al mayadeen, but rather express the opinion of its writer exclusively.
  • United States
  • BRICS nations
  • BRICS
  • Russia
  • West
  • China
Alastair Crooke

Alastair Crooke

Director of Conflicts Forum; Former Senior British Diplomat; Author.

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