The sixth BRICS summit, which took place at Fortaleza, Brazil, in mid-July, has started a new cycle in the life of this grouping. Not just because all the member countries had already hosted one summit and Brazil was organising its second. And not because of the worldview that was reflected in the final communique. This weltanschauung remains overdetermined by a strong attachment to state sovereignty that is not compatible with external interference. Hence the reiteration, in the final communique, that “national dialogue and reconciliation are key to the political solution for the Syrian crisis”. How the BRICS can help this dialogue take place does not seem to have been discussed in the summit. The list of the countries under review this year was longer — Mali, South Sudan, the Central African Republic, Iran, Ukraine, Israel and Palestine, Iraq — probably because the world has grown increasingly unstable. But the BRICS’s predicament remained the same.
Narendra Modi, in his speech, said: “We should explore how BRICS members can work together in helping end the conflict in Iraq”. But the final communique was much less action-oriented. Its co-authors simply declared, “We emphasise the importance of national reconciliation and unity in Iraq, taking into consideration the wars and conflicts the Iraqi people have suffered, and in this context we commend the peaceful and orderly holding of the latest parliamentary elections.” The Fortaleza meeting was not innovative on climate change either. The emphasis on the required energy transition remained equally abstract. The co-authors of the 53th resolution said: “We stand for strengthening international cooperation to promote renewable and clean energy and to universalise energy access, which is of great importance to improving the standard of living of our people.”
The sixth BRICS summit was different from the others because it resulted in a concrete decision, the establishment of a financial instrument. This innovation had been in the pipeline for at least two years. In fact, it was the brainchild of Manmohan Singh (but nobody acknowledged this fact), who had made this proposal during the 2012 BRICS meeting in Delhi. It was discussed again during the Durban summit, where an agreement was signed by the parties to prepare the ground for this significant achievement. The final product of this collective thought process is not as ambitious as its architects might have expected, but it may just be a beginning. This New Development Bank (NDB) will have authorised capital of $100 billion. The initial subscribed capital will be $50 billion, equally shared among the five members. This is clearly not enough to cater to the infrastructural needs of the BRICS countries. In parallel, Brazil, Russia, India, China and South Africa have signed a treaty “for the establishment of the BRICS Contingent Reserve Arrangement (CRA), with an initial size of $100 billion”. This CRA, which aims to forestall short-term liquidity pressures, is not likely to solve the BRICS’s problems in case of a major financial crisis.
In spite of their limitations, the BRICS bank and the CRA are meaningful because they foster the solidarity of the members of this coalition and put additional pressure on Western countries, which continue to resist the rise of the emerging states. Indeed, the idea of these financial instruments crystallised in reaction to Western attitudes. First, the Europeans and the Americans refused to appoint someone from the South at the helm of the IMF and the World Bank. Second, the 14th General Review of Quotas, generated by the 2010 Seoul meeting of the IMF, has not yet been ratified by the American Congress. This review upgraded the weightage of the BRICS in such a way that China, with 6.39 per cent of the quotas, should have become number three, after the US (17.41 per cent) and Japan (6.46 per cent), and the BRICS countries (except South Africa) should have been among the top 10 shareholders by now. But this development, reflecting the growing importance of the emerging countries in the world economy, has been blocked by Capitol Hill.
The final communique of Fortaleza suggests that the BRICS bank and the CRA have also been announced to show the world that emerging countries could develop an alternative financial system if they were not given their due share in the existing architecture. It calls on “the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay”. This is in tune with the attachment of the BRICS countries to the UN system that the IMF and the World Bank are part of. For instance, in Fortaleza they agreed to “strongly support the WTO dispute settlement system as a cornerstone of the security and predictability of the multilateral trading system”.
It is now up to the American Congress, which could choose to harden the anti-West solidarity of the BRICS by not endorsing the Seoul agreement or defuse this source of tension. This is a particularly urgent matter now, as the deadline for the next shareholding review at the World Bank is in October 2015.
While the US has to make a tough decision, the Fortaleza summit suggests that India is also facing a difficult choice. The creation of the NDB shows that when concrete projects are achieved by the BRICS, China takes the lead. The first director of the NDB will come from India — this is probably the “diplomatic victory” that the Indian media (more emotional than technical) have hailed emphatically. But Delhi wanted this institution to be on its soil. The new headquarters will see the light of day in Shanghai instead. If the BRICS, as a body, becomes more active, China is bound to prevail again and again simply because of its economic domination. Not only is its GDP larger than that of all the other members put together, but it also continues to grow much faster, partly thanks to the trade deficit of all its BRICS partners, including India, whose market is inundated with Chinese products.
For India, the China question will become even more pressing from a diplomatic point of view if the IBSA grouping — gathering together India, Brazil and South Africa since 2003 — is not relaunched. India was supposed to organise the IBSA meeting last year. It is now supposed to host it next year. But isn’t the IBSA coalition redundant now, given that all its members have been part of the BRICS since 2012, when South Africa was invited to join by the Chinese (perhaps a calculated move)? Through IBSA, India, Brazil and South Africa could promote their soft power as the largest democracies of three continents. Within the BRICS, this is bound to be constricted by the domination of Russia and China. This discomfort may increase if these two BRICS leaders rally around “their” grouping other countries that support their international agenda. In Fortaleza, this effort to reach out to other, smaller countries took the form of a joint session with leaders of South American nations. In the final communique, “China and Russia reiterate the importance they attach to Brazil, India and South Africa’s status and role in international affairs and support their aspiration to play a greater role in the UN”. The future will bear out whether this statement is sincere or whether it reflects a neo-colonial, patronising attitude.