BRICS is an intergovernmental organization comprising Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. It’s an amalgamation of countries that, in many ways, is a follow-up of non-aligned regional development concepts, albeit with a twist.
Brazil, Russia, India, and China created the “BRICS” group in 2006. South Africa joined in 2010, making it “BRICS.” The group was designed to bring together the world’s most important developing countries and challenge the political and economic power of the wealthier nations of North America and Western Europe.
As the idea begins to settle in, the harsh reality blunts the dream’s pace of realisation. The elephant in the room is the economic disparity among member countries. This article investigates the undertow in this organization that offers hope to many in Africa and the rest of the global poor.
The Western world’s ironclad vice on the global economy has been a reason for worry for those who are not part of it. The Western world’s envious economic pole position has been used to sustain its economies at the expense of other countries.
Imagine the rest of the World funds the US debt. When any government buys American treasury bills, few may know they are buying American debt. The Federal Reserve pinches interest income with a policy of low interest rates, leaving lenders in American debt and getting a raw deal.
More concerning is that lenders to the American Federal Reserve who need funds to run their governments find themselves at the behest of Anglo-American banks, charging them higher interest rates while earning a pittance for investing in Treasury Bills.
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The Bretton Woods financial institutions advised most independent nations in developing countries to grow cash crops to earn foreign currency. That policy was adopted without much ado, leaving our puny economies vulnerable to hunger and poverty. Criminal indictments and jail terms faced those who defied cash crop government export policy by uprooting cash crops such as coffee trees and planting food crops such as banana plantains, cassava or maize!
Cash crops were exported without processing, not adding value to the final products. The import-export balance of payment continues to widen, leaving us operating in debt to support our growing appetite to consume what we did not produce and produce what we did not consume. The lack of domestication of production and consumption to meet local demand gained traction on paper and rhetoric but was, indeed, vacuous.
As a result, our economies became satellite channels to support industrialised nations, entrenching ourselves in debt, aiding and begging the former for forgiveness and the latter for resumption. We rarely looked at home to integrate our economy, linking production and consumption to speak one language of self-sustenance.
The dominance of the US dollar in the global economy began in 1973. The petrodollar system was created through a deal between the US and Saudi Arabia. The countries agreed to price and trade oil in US dollars. With oil standardized in terms of dollars, any country that purchased oil from Saudi Arabia would have to use dollars.
Since all countries need oil, the global acceptance of the Petrodollar as an international currency has been simplified. The US had promised not to deploy its vintage, global currency position as a tool to wage wars. However, that conspicuously changed two years ago after Russia launched special operations in Ukraine.
Apart from the Ukrainian conflict, the US dollar benefited the US more than the rest of the World. The US prints the dollar to solve her economic problems and spread the cost to the rest of the World. In all stimulus packages running into trillions of dollars, the US government did not have the cash but printed the money to resuscitate her sputtering industries. This was possible because the cost of being a heavily indebted nation was not felt at home, given that the rest of the World depended on the dollar to transact business among themselves.
The US budget in key areas such as defence, healthcare, and social welfare has been growing disproportionately to the revenue collected. This has led to the nation living beyond its means, generating an unsustainable debt-to-GDP ratio, and may ultimately lead to budgetary cuts in popular programs aforementioned above.
Other countries, particularly those with economic means behind BRICS, have been asking themselves about funnelling the US economy formatted to undermine them. In other words, why should they, through US dollar transactions, contribute to the US national budget? Once the US dollar is not a dominant global currency, her budget is her business, not a global onus. Then, the perks to please healthcare, defence, and retirees will have to be slashed, or inflation will render the US dollar joining the Zimbabwe dollar in terms of worthlessness.
BRICS, on her part, has a longer journey to travel. Apart from simmering border disputes along China- India and China with her neighbours such as Malaysia, regional development disparity poses a more serious threat in the long run. After the US and the EU imposed historical economic sanctions against a major oil-producing nation, Russia, the latter is shifting her economy to align it with BRICS aspirations of more or less the “South-South” idealism espoused by Malaysia.
Russia is learning currency convertibility and reining in against national security. In a particular example, new customers of Russian oil are another BRICS member, India. To her credit, India has invested heavily in oil refineries and has become a major exporter of refined oils, mostly bought on credit from Russia.
In two years, India bought over $100 billion of Russian oils and refined it, with two-thirds retained for domestic consumption and one-third for overseas exports. Paradoxically, NATO countries that shunned buying Russian oils directly are now coughing up more to buy them through intermediaries such as India, China, and Turkey, which are major importers of Russian oils!
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Russia is finding getting its money from India another hurdle to jump because the Indian currency, the Rupee, is not easy to convert. Due to hostilities with China, the Chinese currency, the yuan, which would have eased the transactions, has been snubbed, leaving Russian oil money in Indian Banks. Russia needs its oil money to wage wars with NATO in Ukraine, and this is proving to be a thorn in the flesh of BRICS.
According to the Minister of Russian Foreign Affairs, Mr. Sergei Lavrov, the business situation with India was unacceptable since Russia needed her money sooner rather than later. With the BRICS experiment suffering teething issues, Russian enemies in NATO are resilient and import Russian energy. Mr Lavrov intoned that there is nothing significant they can buy from India regarding the Russian money stranded in India.
A reflection of the latest other business transactions between BRICS and Non-BRICS Russia indicates a tougher journey ahead:-
Pipeline gas: The EU was the largest buyer, purchasing 39% of Russia’s pipeline gas, followed by Turkey (29%) and China (26%). No sanctions are imposed on Russian pipeline gas imports into the EU.
Coal: China has imported 39% of all Russian coal exports since 5 December 2022. They are followed by India (20%) and South Korea (13%).
Crude oil: China is the largest buyer of Russian crude oil, purchasing 52%, followed by India (33%), the EU (8%), and Turkey (5%) since the EU’s ban on crude oil from Russia on 5 December 2022. Oil via pipeline is only partially sanctioned. The EU’s crude oil imports have arrived via sea to Bulgaria and via pipeline for the Czech Republic, Slovakia, and Hungary.
LNG: The EU was the largest buyer, purchasing 50% of Russia’s LNG exports, followed by China (21%) and Japan (19%). No sanctions are imposed on Russian LNG shipments to the EU.
Oil products: Turkey, the largest buyer, has purchased 24% of Russia’s oil products, followed by China (12%) and Brazil (10%). The EU’s sanctions on seaborne Russian oil products were implemented on 5 February 2023.
Despite the shadow fleet attempting to usurp this harsh reality, Russia remains highly reliant on the European and G7 shipping industries. Apart from China, no other member of BRICS can alter this dynamism.
Unequal regional development is a challenge to integrating BRICS economies. Fewer countries have more resources and technologies than the rest. While having a common currency is a tantalizing option, that alone will not change the fact that the imbalance of trade among BRICS members will likely slow the pace of melting these disparate economies into one market.
Natural resources in poor countries may act as collateral. Still, most of these strategic resources have already been handed over to the same Western nations that BRICS is attempting to distance itself from.
To work effectively, BRICS may need to borrow ideas from integrating West Germany to East Germany after the Cold War, where the former invested billions of dollars to bring the latter onto equal footing. Unless regional economic disparity is taken as a pressing issue, BRICS may be another photo-taking opportunity garlanded with inspirational rhetoric just like her previous gig: “the South-South” cooperation that we seem to forget what happened to it.
Does Tanzania See Opportunity in BRICS?
Tanzania might see a potential interest in the BRICS (Brazil, Russia, India, China, and South Africa), with this partnership reflecting its strategic positioning within the global economic landscape. The BRICS countries, known for their rapid economic growth and emerging global influence, present Tanzania with opportunities and challenges.
From an economic standpoint, Tanzania could benefit from enhanced trade relations with BRICS nations. These countries, particularly China and India, have shown a keen interest in investing in African markets for resources, infrastructure, and trade partnerships. Tanzania’s participation in the BRICS could open new avenues for investment, technology transfer, and market access, stimulating economic growth and development.
Furthermore, the BRICS platform could provide Tanzania with a forum to engage in discussions on global economic governance and reform. By aligning itself with these emerging powers, Tanzania could amplify its voice on issues such as trade, development financing, and climate change, which are critical to African nations.
However, Tanzania’s engagement with the BRICS is not without challenges. The competition for resources and markets within the BRICS bloc could potentially disadvantage Tanzania, particularly in securing favourable trade agreements and investment deals. Moreover, Tanzania’s participation in the BRICS could be constrained by its domestic economic and political challenges, including infrastructure deficits, regulatory hurdles, and governance issues.
