By Ian Proud, Website, 9/6/24

Ian Proud was a senior officer at the British Embassy in Moscow from July 2014 to February 2019, at a time when UK-Russia relations were particularly tense. He performed a number of roles in Moscow, including as Head of Chancery, Economic Counsellor – in charge of advising UK Ministers on economic sanctions – Chair of the Crisis Committee, Director of the Diplomatic Academy for Eastern Europe and Central Asia and Vice Chair of the Board at the Anglo-American School. He oversaw the Embassy’s preparations for the 2018 FIFA World Cup in Russia and rebuilt embassy staffing structures following the mass expulsion of staff that followed the March 2018 Salisbury nerve agent attack.

With Turkey – a key NATO member – having lodged an application to join, BRICS is set to get bigger, and this can only be a good sign for the collective strength of developing nations in a multipolar world.  It’s also a bad sign, longer term, for US political and economic dominance.

Two key moments in the acceleration of BRICS were 2014 when the Ukraine crisis started and 2022, when full blown war broke out.  The weaponisation of the global financial system by the west against Russia helped the core focus of BRICS coalesce around the need to create an alternative financial architecture for developing nations. A BRICS bank (now called the New Development Bank was established) to create an alternative to the World Bank. A Contingent Reserve Arrangement was established, providing an alternative to the IMF for countries who need access to a pool of reserves in the face of currency crises. As the Belgium-based Swift interbank communication service has become politicised, so BRICS Pay was created.

Throughout, a core aim is to reduce dependence on the US Dollar for global trade and, therefore foreign exchange reserves. Russia and China’s shift to trading oil in Yuan, Saudi Arabia’s abandonment of the Petrodollar Pact, and the UAE and India’s agreement on trading in rupees are good recent examples of countries choosing to de-dollarize.  While the dollar remains the pre-eminent global trading currency, we should expect to see its share of global trade decline slowly over the coming decade.  This will pose longer-term systemic risks to the USA’s ability to service its vast federal debt, as the cost of borrowing inexorably rises.  

BRICS is gathering momentum as the potential benefits of membership become clearer in the eyes of developing nations, and Turkey’s bold decision to apply for membership is a sign of that. While I was the economic counsellor at the British Embassy in Moscow, I watched in slow motion as dissatisfaction in developing countries grew about western domination of the international financial system. Take the International Monetary Fund. Today, 59.1% of the Fund’s voting shares are accounted for by countries with accounting for 13.7% of the World’s population. 57.7% of the bumper distribution of Special Drawing Rights during the COVID Pandemic went to the world’s wealthiest countries.

It’s not only that developing countries see that the western dominated financial bodies don’t represent their interests.  They have also became increasingly politicised; for example, under pressure from the US in 2015, the IMF changed its rules on debt servicing to allow Ukraine to avoid default, even though it was at that time refusing ever to service its debt obligations to Russia.  While IMF conditionality on its programmes is rigid, the rules can be changed quickly if the political imperative from Washington demands it.

Take the G7, which was the preeminent grouping of the world’s most affluent nations before BRICS found its feet. Following the outbreak of war in Ukraine, G7 countries coordinated over 20,000 economic sanctions against Russia. There is no plan in place for sanctions relief as and when an inevitable ceasefire in Ukraine starts and a peace process begins.  The G7 froze $300bn in Russian foreign exchange reserves; they have more recently established a funding vehicle in which the proceeds of those Russian assets held in Europe are used to fund weapons supplies to Ukraine. Bodies like the IMF, SWIFT and Euroclear have been decisively subjugated by the political interests of the G7.

The G20, was intended to be a more inclusive global grouping of the world’s leading 20 economies when it was set up to focus on international financial stability.  But it has also become increasingly dysfunctional as powerful G7 nations try repeatedly to politicise its agenda.

So, BRICS has emerged as a more appealing meeting point for developing countries. Its values of non-interference, equality and mutual benefit mean countries with troubled political relationships can come together to strengthen relations through economic ties.  Hence the China, Russia, India triangle, which over history has been beset by tension and conflict. Iran and Saudia Arabia joined BRICS in 2024, almost unthinkable a few short years ago, but made possible by a gradual thawing in their relations brokered by China in 2023. Pakistan is now looking to join BRICS, despite India’s prominent founding role in the group. This gradual rapprochement through trade should be applauded.When it was first convened in 2009, BRICS was seen as a developing nations’ counterbalance to the rich countries’ club of the G8 (now G7). Today, three of the BRICS founding members rank among the world’s top ten economies. Six are members of the G20 group.  The group accounts for 45% of the global population and 28% of its economic output now. Set free from the need to fit within a west-leaning normative set of rules and values, BRICS collaboration has been unleashed by putting the economics first, and letting the politics follow. It’s therefore no surprise that Turkey – which is also a G20 member – has turned to BRICS. After decades of trying to join the European Union, it’s clear that road is permanently blocked.

I don’t see Turkey’s future membership of BRICS and its NATO membership as mutually exclusive.  Indeed, straddling Europe and Asia, I think it’s very much to be encouraged that a prominent NATO member state should enjoy a less antagonistic relationship with the developing world. The very point of BRICS is that countries aren’t required to choose one side against another.  There is a long list of other countries who wish to join BRICS, including Mexico, Nigeria, Bahrain, Pakistan, Thailand and Vietnam. Before the end of this decade, BRICS will represent a majority of the global population.

The USA, the EU and the UK will continue to be powerful players, but their influence on developing countries and their dominance of the global financial system, seems set to wane as BRICS forges a more multipolar world over the longer term.