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Could Brics Plus reshape the world economy?

Saudi Arabia and Iran are among six new members to join the alliance.

By Jonny Ball

In 2001, when Chinese economic output was worth around $1.3trn (less than the UK’s GDP), the Goldman Sachs economist Jim O’Neill wrote a briefing note: Building Better Economic Brics. In it, he predicted the growing importance of emerging markets in Brazil, Russia, India and China (South Africa was added in later). Today, Chinese economic output is worth around $18trn, or about five and a half times the size of UK GDP. Now, as China’s economy slows, India is outpacing it with phenomenal rates of growth (around 7.8 per cent in this year’s April-June quarter).

In 2009, the Brics went from being a handy acronym to a formal organisation. Last week, they announced the admission of six new members: Iran, Saudi Arabia, Egypt, Ethiopia, Argentina and the United Arab Emirates. The move was heralded as “historic” by the Chinese premier Xi Jinping. Some even declared it the beginnings of a “Brics world order”.

O’Neill, for one, is unconvinced. Speaking to Spotlight‘s Green Transition newsletter, the former Treasury minister said: “I don’t think [the Brics] have really achieved much in their first 14 years as a political entity.” Nor is he optimistic about the expanded set of members: “I don’t really see the purpose beyond symbolism.”

In the organisation’s joint declaration, the Brics Plus (as it is now called) promised “multilateral cooperation” to ensure “a just, affordable and sustainable transition to a low carbon and low-emission economy”. Eyebrows were raised at the inclusion of Saudi Arabia and UAE in the new members’ list. The Brics Plus now encompasses 45 per cent of the world’s oil production.

There are few concrete policy proposals between the members – this isn’t a free-trade agreement like Nafta, or a transnational common currency bloc like the eurozone, nor is it a military alliance like Nato. There’s no cross-governmental agreement on topics such as climate change, either. The choice of new members is odd too, O’Neill adds, because they don’t share common characteristics other than wanting to join.

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But even the original members are less than united on many issues. “India and China rarely agree about anything,” says O’Neill. More appropriate candidates like Indonesia are biding their time before being seen to join what some are billing as an anti-Western alliance (a reputation enhanced by the inclusion of Iran as a new member, as well as the reluctance of the Brics to toe the Western line on the Ukraine conflict). “[The expansion] suggests that China and Russia had a bigger say on the choice of countries than India or Brazil,” O’Neill tells me. “Because if you look at the six [that have joined], arguably, there’s only one of them that’s a democracy.”

But the Brics expansion does have consequences, even if they are symbolic. The US is consciously attempting to “decouple” its economy from China’s. O’Neill points me towards figures suggesting that “decoupling” is reducing trade with China while upping trade with third countries, which themselves are trading more with China. This makes the trade adjustment less a “decouple” and more of an increasingly polygamous arrangement. Part of that process began with Trump’s protectionist tariffs, but much is centred around the big-ticket industrial strategy policies of the Biden administration, including the Inflation Reduction Act.

There’s just one problem: China currently controls the supply chain for key green industries that the Inflation Reduction Act subsidises in the billions of dollars. Research by the Centre for Strategic and International Studies shows that Beijing controls 53 per cent of the raw materials, 89 per cent of the components and 70 per cent of the production and manufacturing capacity for solar. For wind energy, its share is 54 per cent, 56 per cent, and 23 per cent, respectively. Its control over the lithium-ion battery market (essential for electric vehicles), has been estimated as high as 80 per cent, and the country is now the world’s number one electric vehicle exporter.

If the Brics expansion is partly about sometimes oil-rich nations placing their bets with the Chinese, even if initially only symbolically, then they could do worse than siding with the principal technological and financing leader for the green transition. The group will likely continue trading in fossil fuels for as long as it sees fit – but when it comes to intensifying trade wars and geopolitical standoffs, it is less likely to side with the US hegemon than ever before.

This article was originally published on the Green Transition newsletter. To see previous newsletters and subscribe, click here.

[See also: The age of hyper-globalisation is ending]

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