Why Do Brazil, Russia, India, and China Need BRICS?

Brazil’s Interests

Sergei Vasiliev, Vice Chairman at VEB Bank for Development, member of the Advisory Council at the Carnegie Moscow Center, Chairman of the Russian-Brazil Business Council

First of all, by participating in BRICS, Brazil derives several economic benefits.One of Brazil’s largest trade partners is China, and Brazil is also Russia’s largest trade partner in South America. Brazil also has very large economic interests in South Africa. In addition, India, South Africa, and Brazil have been partners within the IBSA framework since before BRICS was created.

On the other hand, its political benefits are even more critical to Brazil. Brazil has always had geopolitical ambitions but could never develop them because of its weak economy and disorganized internal politics. Domestic, political, and economic stability over the last 20 years, however, has allowed Brazil to dramatically elevate its international profile. Let’s also recall the active role Brazil played in the WTO negotiations. The Brazilian elite has found BRICS’ format quite suitable for attaining its long-term goals – particularly, in terms of moving out of America’s shadow. At the same time, this format prevents direct confrontation with the U.S.

Russia’s Interests 

Andrey Movchan, director of the Carnegie Moscow Center’s Economic Policy Program

The BRICS countries are trying to create an institution that will serve as a potential alternative to the IMF – WB (IBRD) system and that will not directly depend on the US (of course, indirect dependence will continue to persist). Despite Russia’s active participation in this project, it’s hard to imagine that Russia will emerge as one of themost  important sponsors of such a system; after all, Russia is far behind other member states in terms of the scale and dynamics of its own economy.

Nevertheless, it is possible that Russia might be able to use BRICS Bank and reserve currency pool in the future in order to alleviate its economic problems and even to possibly launch Perestroika-2 – this time without any political demands associated with financial assistance provided by IMF, IFC, or IBRD. Thus, while being mindful of the BRICS members’ economic realities, Russia is effectively trying to create a system that will be controlled by China, the country that, unlike the scrupulous US, doesn’t scrutinize its partners’ domestics policies.

It’s still too early to tell whether this system can become successful enough to induce serious World Bank sponsors to make a switch. Its success appears unlikely for a number of reasons. The US and US-controlled World Bank are familiar and rule-oriented partners, while China has so far presented itself as a more active and self-interested creditor.

At any event, Russia has nothing to lose.. The regime considers self-preservation as the country’s priority and sees any possibility of external influence on its domestic policies as the main danger. In this light, plans to create BRICS financial institutions are quite reasonable despite their low chances for success.

India’s Interests

Petr Topychkanov, an India scholar and an associate in the Carnegie Moscow Center’s Nonproliferation Program

What India appreciates  in BRICS is the association’s informal character that allows the country to further its agenda on the international stage with little political and so far little economic costs. The political component of India’s agenda has to do with New Delhi’s effort to play a global role.  Indian politicians understand that the UN reform will take a long time. They also understand that India is unlikely to become a member of the UN Security Council any time soon, despite Moscow’s and Washington’s assurances of the contrary. It’s also clear that the SCO is more of a regional organization than a global one. Moreover, India has yet to be granted  full-fledged membership to that organization.

India is also interested in BRICS because it would give Indians an opportunity to continue their maneuvering between alliances and associations, enabling them to further develop relations with states that are in conflict with one another.  While improving its relations with the US, India continues to develop ties with both Russia and China. It’s easier for India to shield its joint initiatives with Russia and China from Western criticism if these initiatives were to be conducted under BRICS’ umbrella.

India’s participation in BRICS is also important for its domestic politics. This is due to the fact that anti-colonial and anti-Western sentiments are still strong in the country and are being exploited by all political parties. Were it not for BRICS, India’s rapprochement with the US would encounter greater resistance inside the country. Yet as of now, the Indian authorities can always cite BRICS as proof of the country’s balanced foreign-policy course.

On the economic front, India is in dire need of investments. The country will hardly be able to sustain its current industrial and agricultural growth. Without reforms in these areas, India will be unable to lay the economic foundation for the global role it wants to play in the 21st century. Indeed, in orderto conduct reforms, it requires investments that no single country can provide. In this case, Indians see BRICS and the Asian Infrastructure Investment Bank, which was created under its umbrella, as a source for new opportunities.

China’s Interests

Alexander Gabuev, the chair of the Russia in the Asia-Pacific Program at the Carnegie Moscow Center

Originally, China didn’t start the process of turning BRIC into a semblance international organization (incidentally, the acronym was coined by then-chairman of Goldman Sachs Asset Management, Jim O’Neill, as a marketing move). It was actually Russia who came up with the idea first. Nevertheless, Beijing had and still has at least three reasons to sponsor BRICS’ format.

First of all, it is quite appropriate for the largest developing countries to demand that the West revamp the global financial architecture. Indeed, the IMF vote structure no longer reflects modern realities. Furthermore, as theworld’s second largest economy (first in terms of purchasing power parity), China is quite justified in its quest for greater privileges.

However, Beijing has hesitated to voice its demands until just recently and was always on the lookout for good company – preferably high-profile and authoritative partners. Thus, the format that emerged in 2009 as a result of the financial crisis allowed China to make a more assertive claim for its rights while speaking on behalf of developing countries and while avoiding a direct clash with the West.

Secondly, Beijing lacks its own original ideas on how to organize global financial architecture (apart from replacing the U.S. with China as its center). Therefore, intellectual cooperation with other large powers that think alike will help generate some creative ideas. Besides, by participating in BRICS Banks and the currency reserve pool, China will gain invaluable practical experience in the implementation of development projects – this time by playing a leadership rather than an auxiliary role.

Thirdly, the BRICS format gradually conditions the world to allow for the possibility of parallel centers in the global financial architecture. It also creates an infrastructure for promoting yuan as one of reserve currencies.

The emergence of the Asian Infrastructure Investment Bank is the first practical outcome of China’s participation in BRICS. In addition to the US Congress’ obstinacy and China’s wide-open wallet, the project owes its current success to the feeling that it’s quite normal and in fact good to have another institution in the ever-more-complicated global financial architecture. Furthermore, the ideas formulated and absorbed by Chinese diplomats and financiers in the course of their work on BRICS Bank have also contributed to the project’s success.