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August 24th, 2015

The $17 trillion handshake: Looking back on the 7th BRICS Summit

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Estimated reading time: 5 minutes

Editor

August 24th, 2015

The $17 trillion handshake: Looking back on the 7th BRICS Summit

0 comments

Estimated reading time: 5 minutes

M NarasimhanOn 6-7 July 2015, as European leaders battled to strike a deal on Greece, BRICS leaders met in Ufa, Russia to discuss the next steps for their own partnership. Mridulya Narasimhan summarises the progress that has been made on the New Development Bank and the common goals that hold the alliance together. However, she highlights that conflicting aspirations and ideologies may yet undermine the young partnership.

Why they matter, why now?

Once seen as an incongruous body with no standing, the BRICS now seem to increasingly be gaining everyone’s attention. Google Trends shows the word ‘BRICS’ increased its search history 12 times between July 2015 to July 2015.

In 2007, the US economy was double that of BRICS – as of last year, the combined BRICS economic output almost equalled U.S’s GDP. Individually, these nations have had their share of stagnations but their collective contribution to global GDP only continues to rise.

But BRICS is not just another economic bloc with the sole intentions of harnessing trade relations – the summit was indicative of an economic partnership between nations as well as a strategic alliance with intent to develop long-term diplomatic ties. With India-China border tensions, China’s closeness to Pakistan, Russia at loggerheads with the West while India reaches out to them, there is little homogeneity amongst the member nations. What seems to however hold them together is the realisation of their growing importance and the common goal of shifting the locus of control away from the West.

The BRICS solution to break the West’s (including IMF and the Bank) economic monopoly is plain and simple – introducing competition. Headquartered in Shanghai, the New Development Bank finished its first board meeting and will soon be operational to lend internationally. Headed by India’s K.V Kamath, the bank is set to start off with a capital of $50 billion which will be hiked to $ 100 billion in less than two years.

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Image credit: flickr/GovernmentZA CC BY-ND 2.0

India – The odd man out

India seems like they might be caught between a rock and a hard place. China and Russia see the BRICS as an instrument to do away with the US hegemony while India is looking forward to a new-found albeit tactical ‘friendship’ with the US. Russian relations with the United States have reached boiling point a few times in the recent past.

China too has been in loggerheads with the US over maritime disputes in the South China Sea with the latter alleging that China’s strategic moves are provocative in nature. The relation is no better off between Brazil and US after it was recently made public by Wikileaks that the US intelligence has kept surveillance over President Dilma Rousseff and her aides. It will certainly be interesting to see how India manages to earn its keep at BRICS while continuing to forge a relationship with the US.

The new economic order – or just another ‘BRIC’ in the wall?

Without doubt, BRICS seems to make for a great example as far as unity in diversity is concerned. But what does not go unnoticed is also that these nations are not on the same page as far as agendas are perhaps concerned.

Brazil, India and South Africa are thriving democracies while China and Russia are believers of vigilance; wary of liberal ideas and open markets. With such different ideologies, the one main common thread that remains is the trade economics and development.

Another key question that remains unanswered is where does China’s priority lie? It remains to be seen how China will choose to prioritise the BRICS agenda as China’s main priority is the Asian Infrastructure and Investment Bank. With BRICS members also being a part of the Asian Infrastructure and Investment Bank and India and Russia being its second and third largest stakeholders, there seems to be a clear conflict of interest as so which institution shall get priority and the active role China chooses to undertake with regard to BRICS is yet to be seen.

The BRICS members have made it clear time and again that inclusive growth, economic prosperity and transparency are its raison d’être. But what is yet to be clarified is how much say each nation will have? Brazil, Russia and India will contribute $18 billion each, South Africa $5 billion and China intends to contribute $41 billion to the New Development Bank – a clear indication of their financial clout. If these numbers are anything to go by, goes without saying that key decisions will most certainly be influenced by China.

Lastly, even with this new economic order in place there, none of the nations presented a very clear plan of how to take things forward. Although, India did manage to present a ‘ten-step program’, the initiatives that include a soccer tournament, audit cooperation, a film festival etc. seem more like team-building exercises with little significance.

It is far too early to know what the future holds for BRICS but the summit is certainly a step closer to BRICS acknowledging its potential. These nations, together, can either develop a strong esprit de corps or can be the reason why BRICS, like many others before them, fades into oblivion.

This article originally appeared 18 August on the Development in Action blog. It is reposted with the author’s permission.

Note:  This article gives the views of the author, and not the position of the South Asia @ LSE blog, nor of the London School of Economics. Please read our comments policy before posting. 

About the Author

M NarasimhanMridulya Narasimhan recently graduated from LSE with an MSc in Public Management & Governance. She has been a Capstone Consultant with the World Bank and previously worked in Corporate Strategy for Intertek Plc. in India. Her interest in international development is grounded in the experience of living in India, Bhutan and China. She tweets @Mridulya.

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