BRICS: the Alternative G7 or the Collapse of China and Russia?

Photo: BRICS: the alternative G7 or the collapse of China and Russia. Source: The Presidency of the Republic of South Africa.
Photo: BRICS: the alternative G7 or the collapse of China and Russia. Source: The Presidency of the Republic of South Africa.

The BRICS grouping (Brazil, Russia, India, China, South Africa) has expanded to include six new members (Argentina, Iran, Ethiopia, Egypt, Saudi Arabia, and the UAE). Now the bloc has 11 members. Currently, the BRICS can be perceived as a geopolitical revolution of the Global South and the formation of a new world peace system according to Wallerstein. 

BRICS is a new reflection of the global world, different from the "reflection" of the traditional collective West. Let's recall how all bourgeois revolutions, including the French Revolution, took place. 

It was a revolt of the "third estate" that gained economic opportunities but was deprived of political rights. A revolt against an outdated superstructure. Whether we agree with this or not, the Global South perceives the "golden billion" as the same "outdated superstructure" as the French bourgeois perceived the nobility in the late 18th century. 

In other words, the BRICS is, first and foremost, a "new world war" for a fairer equivalent global exchange, in which natural resources, labor, technology, and financial instruments are exchanged between countries within global value chains. 

It is a "war" for the place of concentration of this added value and for the establishment of a fairer equivalent exchange, when oil, gold or grain is exchanged for fiat currencies (dollar, pound or euro), the value of which is set by the issuing countries. 

That is why the BRICS includes India and China, Saudi Arabia and Iran, Egypt and Ethiopia, Argentina and Brazil, i.e. countries with quite strong mutual contradictions. 

For example, poor countries of the Global South (Ethiopia) and very rich countries (Saudi Arabia, UAE). 

Countries under sanctions (Iran, Russia) and the world's largest democracy (India). 

A Russian Project? No!!!

The fact is that the expansion of the BRICS devalues the importance of the Eurasian Economic Union (EAEU) among Asian countries. After all, there were plans to sign free trade agreements with Iran and China. 

The FTA with the EAEU includes Vietnam. Countries such as Egypt, Thailand, Mongolia, Serbia, India (in June 2017, negotiations on the creation of an FTA were initiated), and Singapore were on the verge of joining the EAEU. 

In addition, at different times, the idea of an FTA with a Euro-Asian conglomerate was discussed in Hungary, Israel, Indonesia, Japan, and South Korea. 

Why do the countries of the Global South need the Russian project, the EAEU, if there is a larger BRICS platform? 

The New BRICS Currency 

The BRICS is likely to move towards creating its own internal settlement instrument, similar to the IMF's Special Drawing Rights. 

At the initial stage, it will simply be a tool to support mutual trade exchanges, so as not to use the dollar or euro for intra-bloc payments. 

The BRICS will probably not be yuanized in the near future either. 

I think the development vector will be shaped towards the creation of digital currencies. They can be used as an anti-sanctions screen. Iran was the first to say this, a country whose phenotype was formed in a closed, self-sufficient economy focused on the domestic market and limited exports of raw materials, which has been developing for many years under Western sanctions. 

In addition, there are ideas of creating a Eurasian golden triangle consisting of Iran, Russia and China, where, in order to support local currencies in the face of a strengthening dollar model and corresponding pressure on emerging markets, the revived gold standard will ensure exchange rate stability in national capital markets amid global turbulence. 

In other words, local rather than bloc-wide currency models will be implemented.

A Viable Format

Nobel laureate Paul Krugman once created the theory of international trade and the theory of demographic self-sufficiency, according to which a state (or a union of countries) with a population of up to 250 million cannot create a closed model, which is possible with parameters of 250-350 million. With a population of up to 250 million, the country is dependent on imports. But if the population is above 350 million, such a conglomerate also depends on exports, which are necessary to create a sufficient number of jobs. 

That is why the BRICS is doomed to create an export-oriented model and will have to cooperate with both the West and other segments of the developing world.

Are there any common values in the BRICS association?

At the BRICS meeting, six new members were admitted to the organization: Argentina, Ethiopia, Iran, Saudi Arabia, Egypt and the UAE. But this is not the last wave of expansion. Most likely, Indonesia, Vietnam, Turkey, Mexico, Venezuela, Thailand, Kazakhstan, and a number of other countries will join the bloc. 

Along with the economic aspect, the ideological aspect also plays an important role. 

In fact, we are witnessing the emergence of a new union of countries in which the basic state ideology is not generally accepted democratic values and humanistic principles, but a theocratic form of social organization with a weak injection of so-called sovereign democracy. 

It will be based on an ideology/religion supported at the state level: in Iran, Saudi Arabia, Egypt and the UAE - Muslimism, in Russia - Orthodoxy, reinforced by post-Soviet ideology in the form of a hybrid mixture of capitalism and socialism. 

In China, it is a synthesis of two systems, communism and capitalism; in South Africa, a form of blackness; in Argentina, Peronism; in India, the secularization of Hinduism through the sacralization of the nation and Nehru's Fabian socialism. 

To a certain extent, only Brazil stands out from the general picture. 

Ideologically, the BRICS will stand on three pillars: 

  • economic nationalism; 
  • conservative anthropology (as opposed to, for example, transgressive transhumanism); 
  • strengthening the role of the state in the economy.

All of this differs significantly from the usual image of the world that we have in our minds. 

Basic parameters of the BRICS: 

  • up to 4 billion people; 
  • 25-30% of global GDP; 
  • over $25 trillion in gross domestic product per year; 
  • more than half of world trade; 
  • 70% of the global oil market. 

The main advantage is high, outstripping growth rates: in the decade before the pandemic, the bloc's GDP doubled, while the global economy grew by only 40%. 

The weakness is the low internal trade turnover of about 10-15%, which makes the bloc dependent on the markets of developed countries. 

In addition, the bloc does not have foreign exchange reserves like the IMF and its own unit of account like the SDR. The latter drawback may be resolved in the coming years. 

As for trade turnover, a tectonic shift is only possible if China opens its market to the bloc's countries. Only then will commodity flows begin a global reversal from west to east. This will turn China into a country with a trade deficit and will require it to issue its own financial instruments to attract free liquidity from the bloc members (analogous to Chinese Treasuries - US Treasury bonds). 

In other words, China will allow earnings on its domestic commodity market, but in return will demand that part of the earnings be invested in its bonds. 

India's New Chance and Ukraine's Role

The Europeans have already estimated their benefits from the free trade agreement with India at 8.5 billion euros per year. India and the EU have agreed to start working together to create an "alternative Silk Road" to the Chinese one. This is not only about strengthening logistics and transport communications to move Indian goods to the EU and European goods to India. It is also about the construction of supra-regional infrastructure projects in Asia and Africa to squeeze Chinese investors out of the region.

Analysts at Standard Chartered Bank have predicted that "the share of countries in global GDP should eventually coincide with their share in the world population, due to the convergence of GDP per capita between developed and developing countries. This means that in the next ten years, India could become the third largest economy in the world after China and the United States. And the GDP growth rate in India will be approximately 7-7.5% per year, while in China this figure will be reduced to 5% or less.

US President Joe Biden also spoke about an alternative New Silk Road at a meeting with former British Prime Minister Boris Johnson: "I suggested that we should have essentially a similar initiative coming from democratic nations that would help those communities around the world that really need that help."

What awaits us at the exit: "Euroindia" or "Amindia"? That is, the European or American format of co-opting India. Most likely, a synthesis. The West is, in fact, rediscovering India, and it is no longer an exotic in the style of the East India Company.

It is important for the United States to close the belt of "containment countries" around China: Japan, South Korea, partially recognized Taiwan, Vietnam (with which Washington is now actively flirting, despite the difficult history of relations), and Australia.

But India should be the key element in this belt around China. And the ideal puzzle is also the involvement of Myanmar in the anti-Chinese alliance (so the West puts pressure on the local military junta). 

Then there is the matter of technology - more precisely, the protection of human rights (the Uyghur problem, Tibet, Hong Kong) and sanctions as a derivative of this policy, the main goal of which is to weaken China economically, technologically and militarily.

For Europeans, the main thing in this format is not to suffer economically and not to provoke the emergence of an "instability belt" in Asia and Africa as a result of a weakened Chinese New Silk Road, which could cause migration risks and economic losses in the EU.

In other words, the parties will be addressing multilevel challenges: The United States - changing the global architecture of the world economy and geopolitical solitaire in Asia, and the EU - tactical goals of smoothly shifting the role of a development driver and investment donor for a number of developing countries from China to India (at the expense of financial funds from Europe, Japan, the United States and the British Union).

The platform for such a rapprochement will be an attack on the "Beijing Consensus" and the alternative concept of an "alliance of the largest democratic forces in Europe, Asia and America," i.e. the EU, India and the United States, as opposed to China's surrogate "sovereign democracy." 

The key element that will "malfunction" in this system is the unpredictability of high economic growth rates for India's internal stability and the uncertainty of the ideological concept (neoliberal discourse as an element of risk).

For Ukraine, such globalism can result in both losses (if we do not adapt to changes properly) and chances for development. India and China are our largest trading partners. We have a billion-dollar trade surplus with the former and a billion-dollar deficit with the latter. 

India does not overwhelm our consumer market with its goods and at the same time buys not only agricultural raw materials but also Ukrainian industrial products. We could cooperate in the supply of turbines, reactors, aircraft and rocketry. On the other hand, in terms of military orders, India is now focusing on Russia, which is increasing supplies of agricultural products to the Indian market. Will the West be able to force India to abandon the Russian vector in exchange for investments? This is an open question.

China was able to play its own game within the framework of the "Kimerica", and it is quite possible that India will be able to do so in the "Amindia" concept.

On the other hand, with the conclusion of the FTA between India and the EU, we have unique opportunities for so-called diagonal trade accumulation with India (similar to the Pan-Euro-Med agreement). That is, Indian goods, for example, fabrics used in the manufacture of clothing in Ukraine for sale in the EU, will be considered as produced in our country in terms of localization (localization requirements for Ukraine are set at 30-40% for different groups of goods). And Indians will be able to sell their industrial goods in the EU based on components and assemblies from Ukraine. In addition, we have a window for cross-trade cooperation and a huge Indian market.

The strengthening of India and the weakening of China is the collective West's program for the next 10 years, and we need to be prepared to reformat our basic raw materials and commodity flows. 

Ukraine has a unique opportunity to take a convincing revenge by becoming a key link on the "alternative Silk Road" from India to Europe with accompanying investments in our infrastructure and logistics. This is a significant chance for Ukraine after the war on the geopolitical axis: Washington - London - Berlin - Kyiv - Delhi.



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