Brics expansion gaining ground as hedge against West

The Brics group of emerging-market nations — the acronym stands for Brazil, Russia, India, China and South Africa — has progressed from a slogan dreamed up at an investment bank two decades ago, to a real-world club that also controls a major development bank.

It doubled in size in 2024, pairing several major energy producers with some of the biggest consumers among developing countries and potentially enhancing the group’s economic clout in a US-dominated world. The Brics group expanded on January 1 to include Iran, the United Arab Emirates, Ethiopia and Egypt. Saudi Arabia was also announced as a new member, though the kingdom later said it was still studying the invitation.

A further expansion is on the cards after Malaysia and Thailand announced plans to join.

Economically, Brazil and Russia’s natural resources and farm products make them natural partners for Chinese demand. India and China have weaker trade connections with each other, partly due to political rivalries and an acrimonious border dispute.

The biggest obstacle is that the countries have diverging interests on major political and security issues — including relations with the US — and different governing systems and ideologies.

China’s gross domestic product is more than twice the size of all four other members combined. But, India — which has surpassed China in population — has been a counterweight.

Brics has not formally endorsed China’s big development push called the Belt and Road Initiative, partly because of India’s objection.
On the New Development Bank, there’s no dominant shareholder: Beijing agreed to the equal holdings advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and now by Brazil’s former president Dilma Rousseff.

The expansion push has been driven largely by China, now the world’s pre-eminent industrial power, which is trying to boost its global clout by courting nations traditionally allied with the US.
South Africa and Russia have backed the expansion.

India was initially hesitant because it was concerned that a bigger Brics would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West — although both governments eventually agreed to an enlargement.
For new members, Brics offers the potential for easier access to financing from its wealthier members, and a political venue independent of Washington’s influence.

Adding major fossil-fuel producers may give the bloc more scope to challenge the dollar’s dominance in oil and gas trading by switching to other currencies, a concept referred to as dedollarisation. However, expansion is “more about politics and less about economics,” according to analysts at Bloomberg Economics.

The biggest achievements of the group have been financial. The countries agreed to pool $100bn of foreign-currency reserves, which they can lend to each other during emergencies. That liquidity facility became operational in 2016.
Despite the intense interest in emerging markets, Brics is seen largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories.

US-led sanctions have put Russia off limits for most foreign investors, and some sectors in China — especially technology companies — have also been sanctioned or face potential investment bans. Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago. South Africa’s has been subjected to years of rolling power blackouts.

India is still a growth story that investment banks compare with China 10 or 15 years ago, though it’s unclear if it can follow China’s manufacturing-led model.

But Brics membership is also a way of signalling increasing frustration with the US-led international order and key institutions that remain firmly in the control of Western powers, like the World Bank and International Monetary Fund.

In a wider sense, the Brics alliance is gaining ground as a hedge against the West.