In the months before August’s gathering of BRICS leaders in South Africa, rumors of a new BRICS currency swirled—only to fail to manifest at the summit itself. But don’t confuse a single summit’s headlines with evidence of a trend.
The wake of the BRICS summit splashes into a world much riper for de-dollarization now than it was even six months ago. BRICS, now BRICS+ due to the admission of new members, deserves only partial credit. In the last six months, tectonic shifts in China’s economy and in Washington have cleared the path for de-dollarization—an open route that BRICS+ can now step into.
BRICS+ may bring the global south’s economic statecraft from the 20th to the 21st century. In the 20th century, non-Western economic blocs, such as OPEC, gained geopolitical power through their control over the supply of specific economic commodities, such as oil. In the 21st century, non-Western economic blocs, such as BRICS+, can gain influence over the West through several economic channels at once. Twentieth-century oil embargoes may seem passe, even puny, relative to the 21st-century trade and financial actions that BRICS+ could theoretically now manage.
You can preview these new tools of economic statecraft in the composition of the admitted members who expanded the bloc from BRICS to BRICS+.
With Egypt, Ethiopia, and Saudi Arabia, BRICS+ can disrupt world trade not just in oil, but in everything. These three countries encircle the Suez Canal and effectively turn it into a BRICS+ lake. The canal is a key artery of the world economy. Some 12 percent of all global trade runs through the canal, which runs from the Mediterranean into the Red Sea. And it is the Red Sea that BRICS+ now encircles. Embanked by Egypt on the west and Saudi Arabia to the east, the Red Sea may not have beaches in landlocked Ethiopia, but Ethiopia is a regional power in East Africa. It has influence over the other East African countries, like Sudan and Somalia, that fill out the rest of the Red Sea’s western shore. If you wanted to weaponize the Suez’s importance in global trade, you’d have admitted Egypt, Ethiopia, and Saudi Arabia. BRICS admitted Egypt, Ethiopia, and Saudi Arabia.
The admission of Saudi Arabia also broadens the economic leverage at the disposal of BRICS+ in financial holdings. Saudi Arabia owns more than $100 billion in U.S. government bonds. BRICS+ countries now own more than $1 trillion in Uncle Sam’s bonds by a comfortable margin. And the amount of U.S. government holdings understates the influence that Saudi Arabia’s money grants it over the U.S. and Europe. The Saudis turn money into geopolitical power by buying influential private organizations such as “the entire sport of professional golf,” a recent purchase of Riyadh’s.
The new membership of BRICS+ also represents a range of commodities that offers a spectrum of power both now and in the future. Iran, Saudi Arabia, and the United Arab Emirates—among the new BRICS+ members—are also fossil fuel exporters. Meanwhile, countries such as Brazil, China, and Russia are significant producers of the metals and rare earths that the energy transition will depend on.
The history of OPEC is a story of cooperation on issues of shared economic interests between even countries literally at war with each other. In the 1980s, through OPEC, Iran and Iraq cooperated on setting oil prices even while each targeted the other side’s oil production facilities, including tankers at sea, and killed hundreds of thousands of its people. There are understandable doubts that countries like China and India can cooperate on issues of shared interest because of areas of conflict on other issues, like their shared border.
But if Iran and Iraq could cooperate on shared economic interests within OPEC in the 20th century as a war that included “some of the most brutal conventional warfare in modern history” raged on their shared border, in the 21st century, China and India can cooperate within BRICS+ to advance shared economic interests even as skirmishes fought with clubs instead of guns erupt along their shared border.
If OPEC was powerful in the 20th century, BRICS+ is now set to be more than a little more powerful in the 21st century. But for the prospects of de-dollarization, the story gets even better. Any BRICS+ push toward de-dollarization will benefit from developments in Beijing and Washington that have little to do with BRICS or BRICS+.
A case for skepticism about the efficacy of some version of BRICS moving the ball forward on de-dollarizing, or much of anything, once came from the relative enormity of China’s economy. After all, China’s economy is 2.3 times the size of the rest of the original BRICS and 1.7 times the rest of BRICS+ in terms of GDP. That gives other countries grounds to fear BRICS could just be a new chance for China to treat other developing countries as its subordinates. With China’s rate of economic growth slowing to the point that it may even be shrinking, however, that changes. A smaller Chinese economy means a more balanced BRICS. And a more balanced BRICS is one that more believably serves shared interests rather than those of a domineering China. That’s a gift to BRICS+.
Joe Sullivan is a senior advisor at the Lindsey Group and a former special advisor to the chairman and staff economist at the White House Council of Economic Advisers during the Trump administration.
Foreign Policy
Source: foreignpolicy.com
By Joe Sullivan
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