Brussels –During their last summit, which was held in Durban (South Africa) at the end of March, the grouping of emerging countries collectively known as BRICS – Brazil, Russia, India, China and South Africa – gave formal birth in basic principle to a new development bank.
This is the culmination of a negotiation process among BRICS finance ministers, who have been meeting regularly for the past 12 months. The idea is to create a South-South bank that would help and lend money to developing countries. It would act as an alternative to the existing international financial institutions, mainly the International Monetary Fund (IMF) and the World Bank (WB), traditionally dominated by the United States and Western European countries and, as such, it could be the basis of a new financial world order.
The five leaders could not agree on a series of concrete issues, like the location of the bank (each state would like to host it), membership fees, capital contributions and the projects to be financed – either exclusively BRICS projects or third-party projects as well. The structure and functioning of the bank will probably be worked on between now and the next BRICS summit in Brazil next year. In other words, the absence of consensus on the technical details of the new bank only seems to be a temporary complication.
More fundamentally meaningful than any other consideration though is the fact that BRICS are showing they perceive a reason for grouping themselves. And that these five major countries in the world have felt the need to create an alternative development bank is, in itself, revealing of their growing frustration with the way the existing financial institutions function.
In the IMF, for example, each member country is awarded a quota that broadly reflects the size of its economy: the larger a country’s economy, the larger its quota tends to be. Quotas also determine countries’ voting power; and they help determine how much countries can borrow from the IMF. As a consequence, and since the United States is the world’s biggest economy, it has the largest quota and overwhelming voting powers. Additionally, the director of the institution is traditionally Western European. As a consequence, these institutions are widely felt to promote the interests of the West.
A changing international landscape
Since the creation of the IMF and the World Bank after the Second World War though, other economies have developed considerably. China has become the second most important economy in the world, Brazil the seventh, Russia the ninth and India the 10th. As a result, the BRICS bloc is now a serious economic contender in the world economy, representing 43 percent of the world’s population and accounting for 21 percent of global GDP. This year, the BRICS will on average grow at almost 5 percent, well above the world average forecast by the IMF at 3.6 percent.
But this new global economic reality has not translated into a new financial institutional architecture. And the emerging powers consider they are not sufficiently represented in the existing structures. In substance, they are asking for a reform of the global financial and economic system. More specifically, the focus is on the redistribution of the quotas and votes in the IMF and the World Bank. But any attempts at reforming the system so far have failed.
In other words, the BRICS’ decision also serves to establish an argument that has been present in each of the five member states’ foreign policy for quite some time now, namely that the global economy is shifting and that global financial institutions must adapt to suit this new landscape.
Not only that. The BRICS have also begun to move beyond economic considerations to coordinate positions on political issues of international security and global governance. Again, what is important here is that they have begun to move in that direction because they felt the current order is not balanced or legitimate. They say they want to work toward a more egalitarian and representative form of global governance.
In Durban, the five leaders concluded their summit by reaffirming“our commitment to the promotion of international law, multilateralism and the central role of the United Nations. Our discussions reflected our growing intra-BRICS solidarity as well as our shared goal to contribute positively to global peace, stability, development and cooperation. We also considered our role in the international system as based on an inclusive approach of shared solidarity and cooperation towards all nations and peoples.”
No repetition of Libyan scenario
On the political front, the five leaders are, for example, wary of a repetition of the Libyan scenario in the Syrian case. After the U.S. and other countries threatened to intervene militarily and deployed missiles on Turkey’s southern border with Syria, a Russian naval flotilla was dispatched off the Syrian coast to send a strong message to Washington not to have any ideas of starting another war. And in Durban, the BRICS leaders issued a clear warning against any adventurism in Syria and other countries.
“We reaffirm our opposition to any further militarization of the conflict. A Syrian-led political process leading to a transition can be achieved only through broad national dialogue that meets the legitimate aspirations of all sections of Syrian society and respect for Syrian independence, territorial integrity and sovereignty,” the final declaration of the Durban summit read. This is another sign that the current world system is being challenged.
Moscow has strongly wanted the BRICS group of emerging economies to broaden its role and to include more involvement in geopolitics. Just before the summit, the Russian authorities released a document outlining their priorities. According to the document, which is entitled “Concept of the Russian Federation’s participation in BRICS,” Russia wants the bloc to be seen as “a new model of global relations, which supersedes the old division lines between the East and the West, or between the North and the South.”
The document lists Russia’s key objectives, among which the main one is “a transformation of BRICS from a forum for dialogue […] into a comprehensive mechanism of strategic and day-to-day cooperation on key issues of the world economy and politics.” Other Russian objectives include facilitating closer cooperation between BRICS and the U.N., safeguarding and strengthening the role of the U.N. Security Council and preventing the use of the U.N. for legitimizing the policies of regime change and use of force to resolve conflicts. As for Chinese President Hu Jintao, he called BRICS cooperation “necessary” as the “defender and promoter” of developing countries’ interests, South-South cooperation and North-South dialogue.
The BRICS have the potential for reordering the international system because it is a group of the strongest states most patently disconnected from the current world order. The fact that the BRICS bloc wants to become a sort of a counterweight to the Euro-American center of global power is part of the wish for a better balanced and just global order, in which developing countries can have their say on global economic and political arrangements.
The BRICS bloc is important because for the first time in many years, some countries have the ability to change the nature of existing institutions, thereby potentially altering the prevailing order. They are the crux of any debate on reordering contemporary international relations. What remains to be seen is to what extent they will be able to contest the current world order and make it more balanced, hence more legitimate.
The views expressed in this article are the author’s own and do not necessarily reflect Mint Press News’ editorial policy.
