BRICS Expansion and Corresponding Implications

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Jack Capizzi:  Hello, and welcome to today's FedSoc Forum.  Today, February 5, 2024, we are excited to present "BRICS Expansion and Corresponding Implications." My name is Jack Capizzi, and I am an Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today's call.

 

Today, we are joined by Dr. Mihaela Papa, a Senior Fellow at the Fletcher School of Law and Diplomacy at Tufts University. We are also joined by Margaret Myers, the Director of the Asia & Latin America Program at Inter-American Dialogue. And our moderator today is Nitin Nainani, who is a law clerk at Mayer Brown.

 

      After our speakers have given their remarks, we will turn to you, the audience, for any questions you might have.  If you have a question at any point, please type it into Q&A function at the bottom of your screen, and we will handle your questions as we can towards the end of the program. With that, thank you all very much for being with us today.  Nitin, I'll turn it over to you.

 

Nitin Nainani:  Thank you, Jack.  And to everyone joining us this afternoon, welcome.  I'm excited to host today's discussion on BRICS expansion and the corresponding implications. Just last week, five countries confirmed they're becoming part of BRICS, joining Brazil, Russia, India, China, and South Africa.  Now, the ones I just named, collectively, the BRICS nations, had been flagged as future growth economies back in the 2000s. 

 

But, since then, some of the fanfare around BRICS has fizzled. With this latest round of expansion, the group has regained momentum and is back in the news. And it now represents 42% of the world's population and more than one third of the global GDP. Today's panel will start with background on what, exactly, is BRICS. And then, we'll talk about the expansion more specifically, followed by the ramifications for BRICS, its members, the United States, and the global arena. 

 

So, I'll start first by introducing our distinguished guests. And then we'll get into directed Q&A. Just to reiterate what Jack said, audience members are encouraged to leave questions in the Q&A box. If your question lines up with ones that I'm asking, I will try and incorporate it during our structured questions portion. But, if not, I'll make a point to get to it afterwards.

 

Now, without further ado, I'm honored to introduce today's guests, Dr. Mihaela Papa and Professor Margaret Myers. Dr. Papa is a Senior Fellow at the Fletcher School of Law and Diplomacy at Tufts University, where she has co-founded and led the Rising Power Alliances Project and served as faculty in sustainable development and global governance. She started her BRICS research as a post doctorate fellow at Harvard Law School and a visiting scholar at Fudan University Center for BRICS studies.

 

Her recent publications analyze BRICS convergence and BRICS - U.S. relations, whether BRICS can de-dollarize global finance, and BRICS resilience.  Her publications have appeared in Global Environmental Politics, Global Environmental Change, Climate Policy, and other journals, and her commentary has been featured in Foreign Affairs and The Conversation, as well as on CNN, Bloomberg, the Associated Press, News24, and other media outlets. 

 

She's an active practitioner who has advised institutions on global strategies and leading international collaborations and programs, including at MIT and the Croatian Ministry of Foreign Affairs. She has served as a consultant for the U.S. government, the European Commission, and the International Institute for Sustainable Development. Originally a trade economist with a BA from Croatia, she completed her MA in Law Diplomacy and the PhD in International Relations at Tufts Fletcher School.

 

Professor Myers is Director of the Asia & Latin American Program at the Inter-American Dialogue and a senior advisor at the United States Institute of Peace. She established the Dialogue's China and Latin American Working Group in 2011 to examine China's growing presence in Latin America and the Caribbean. Professor Myers has published numerous articles on Chinese leadership dynamics, international capital flows, Chinese agricultural policy, and Asian-Latin American relations, amongst other topics.

 

She has testified before the House Committee on Foreign Affairs, the Senate Finance and Foreign Relations Committees, and the U.S.-China Security and Economic Commission on the China-Latin America relationship. And she is regularly featured in major domestic and international media, including the Economist, Financial Times, New York Times, Wall Street Journal, and the BBC. 

 

Before arriving at the Dialogue, Professor Myers worked as a Latin American analyst and China analyst for the U.S. Department of Defense, during which time she was deployed with the Navy in support of the Partnership of the Americas. She has also served as a faculty member at Georgetown University, George Washington University, and Johns Hopkins SAIS. 

 

Professor Myers received her bachelor's degree from the University of Virginia, and conducted graduate work at George Washington University, Zhejiang University of Technology, and the Johns Hopkins University/Nanjing University Center for Chinese - American studies. Mihaela, Margaret, thank you both for joining us today.

 

Margaret Myers:  Thank you.

 

Mihaela Papa Ph.D.:  Thank you so much for having us. 

 

Nitin Nainani:  So, I'd like to start off today's conversation with you, Mihaela. And I'd like to, first of all, ask, what exactly is BRICS?  And, in answering this, could you perhaps draw on the relevant history, and then trace how things have evolved or changed alongside broader global trends or shifts?

 

Mihaela Papa Ph.D.:  Certainly.  So, to start off, what is BRICS?  Bricks is a strategic partnership. That's what BRICS countries call themselves. And strategic partnership means it's a group. It's not a formal organization. So, it's a group of countries. And these countries are in an informal setting. And they are coordinating policies. It's strategic because it requires strategic engagement, which means that they have a certain mission. And the mission, in this case, is to create a more democratic and multipolar world order. That's part of their mission.

 

      Then, there is to reform global economic institutions and reform global governance more broadly, and also advance the interests of emerging economies in developing countries. So that's the overall mission. And the way they are executing this mission is that first they started meeting in 2006 on the sidelines of the U.N. General Assembly in the form of foreign minister meetings. And then, afterwards, in 2009, they, under Russia's leadership, set up a self-standing body called BRIC.

 

      And then, South Africa joined in 2011 to form BRICS. And then, they kept growing. They started different international institutions, an international organization called the New Development Bank. And then, as you introduced initially, we see the second expansion of BRICS to these new five countries. So, basically, the doubling of membership.

 

Nitin Nainani:  Just to kind of condense this a little bit, what sort of framework do you think is most appropriate for understanding BRICS, then? Ultimately, is it a partnership? Is it an alliance, consensus, or a forum? How would you summarize it, then?

 

Mihaela Papa Ph.D.:  So maybe to visualize it, it's like an iceberg where the part that's most visible are the summits, the summits of leaders that produce joint declarations. But then there is this transgovernmental cooperation. There are working groups. There are strategies, action plans. There is intergovernmental cooperation. There is people-to-people cooperation. Cooperation among think tanks, academics, business councils, and so on. So, maybe if people are more familiar with G7. So that is a very similar format to G7. But G7 does not have this extra international organization body.

 

      So, basically, we're talking about cooperation on very many issues. Just to give you an example, Russia will hold now, during its presidency, 200 different events where people of different professional capacities will meet: ministers, officials, and so on. So, it's a very broad and wide cooperation, working on very many different issues in a coordinated manner.

 

Nitin Nainani:  So, we've heard a little bit about the organization's founding principles and interests, in a collective sense. Margaret, I want to turn it over to you, though, and ask, what, in your view, are each member's individual motivations for being part of this?

 

Margaret Myers:  That's a really critical question. And I think it's one, probably, where we've seen some evolution over time. As was pointed out at the beginning, this is a grouping that's been in place for a number of years now. And I think the original motivation was, first of all, to capitalize on this notion of the growing importance of emerging economies, which is still quite critical, even though some of these emerging economies that we were speaking about several years ago, a decade ago, have lost some stem in recent years, as you mentioned, Nitin. So, that.

 

There was this sort of natural momentum that brought these countries together and created a platform for more in the way of potential cooperation on what, at that time, was shared interest, just as Mihaela has mentioned, and addressing what, I think, all perceived at the time as a sort of overreliance on the dollar, or dollar dominance and some of the challenges that that can present certain countries, also, a disproportionate reflection of developed country interest in international organizations — again, this was mentioned — and, also, just a sense that the interests of emerging economies, and of the Global South, in general, were not being well-represented, whether in international organizations or not.

 

I think that continues, in many ways, to be the thrust of so much of what we heard about during the previous forum in South Africa, and what we continue to see being referenced in formal speeches and remarks made during these fora and in reference to the BRICS bi-member nations. But there are major areas of divergence as well.  Not necessarily as concerns interests within the BRICS configuration.

 

I think there's some consensus about potentially where to head. Maybe there are some countries that are more interested in a common currency than others, for example, or that will even mention a common currency. There are some that will be much more, I think, forthcoming about their concerns about U.S. dominance in various forms, but especially in the financial realm, than others. But there is this general consensus that some of these issues are worth continuing to pursue and continuing to discuss in fora across the board.

 

Where you see the most divergence is at the bilateral level, frequently just areas of ongoing tension between existing members, tensions about, actually, this notion of expansion, the doubling that we were talking about. Who should be included? Who should not be included? Ought the BRICS to expand at all?  And if it does expand, what are the implications? Certainly, this was not something that everybody agreed on. And this, I think, played out in very interesting ways in the announcement in Johannesburg.

 

Nitin Nainani:  You've given us a lot to work with there. But I do want to home in on a couple of points. Not all of the countries' economies have experienced the same growth within the organization. For example, China being an outlier here. How has that sort of imbalance affected the organization's dynamic, if at all?

 

Margaret Myers:  My perception — I'd be very interested in what Mihaela has to say about this — is that, in many ways, this is not a Chinese organization, by any means. This is a configuration of five very different countries, now ten, that have wide-ranging interests. But it has been, in many ways, China motivated. A lot of this activity, and even the frameworks that were developed and established initially, very much resemble some of the things that China has looked to establish elsewhere, including at the regional level, for example, in Latin America.  And so, you see a similar framework again.

 

Just as Mihaela said, this is not entirely novel either.  G7 and other frameworks resemble what BRICS is trying to do, too. But my sense is that China — given its economic might, in a comparative perspective, and the interest among the various members in ensuring that they have a sort of specialized access to China through this particular grouping — has sort of held this group together for a number of years now when it otherwise may not have had the same sort of momentum that it has, and, I think, in many ways, has led to what we saw in the way of disagreement about whether BRICS should be expanded and how it should be expanded.

 

Because a lot of the concerns, from my perspective — and watching this, especially in Brazil, for example — were about the prospect of expanding to others in Latin America or in other regions — the Middle East, for example — and what that would mean in terms of the amount of input, the amount on leverage, the amount of influence that the existing members would have within this framework and, especially as concerns access to China, which is a very big part, I think, of this, and motivates a lot of this activity.

 

Nitin Nainani:  Mihaela, did you want to add anything to that?

 

Margaret Myers:  I think I definitely agree with the points raised. I think it's important to distinguish between the economic aspect and the political aspect. Because you can look at these countries from the get-go and say, "Oh these are large populations. They have a lot of productivity. So, we are looking at them as these growth areas." But that's an economic argument. And then you can say, "Yes, but out of the five BRICS, actually, China and India are the 'ICs' that have the growth argument going for them, and the others not so much."

 

So, you can make an economic argument, how these economies are going. And then, of course, economic growth projections change all the time.  You can see with Russia that, actually, the IMF changed the projection of Russia's growth recently, given how Russia's economy is going.  But the other part is the geopolitical argument, and basically the fact that, yes, there are instances where China seems to have extra power within BRICS. But then, the question is, can it actually exercise that power?

 

And what we've seen in our research in the Raising Power Alliances Project, we were tracing what are, actually, issues that China proposed, and how well it did on them. And one area is China, from the get-go, wanted a free trade zone. And it didn't go well. Like, other BRICS didn't pick it up. Or, even now, if we look at the expansion, China proposed expansion in 2017. So, it took it, like, six years to get others to buy into the idea. So, there are two reasons for that.

 

One reason is that, yes, China is powerful. But that's also, for some countries, disconcerting, because if you open your entire market to China, what happens then? And with the free trade zone, it depends on the issues where China can actually exercise influence, and where it can't. But the other thing is that countries are proposing their agendas and priorities once they have presidency.

 

And because they are rotating, it's not like one country can propose two years in a row. So, then, the next year, another country picks it up and says, "Oh, these are my priorities." So, for your priorities to actually see the light of day and to build momentum around them takes time. And even the most powerful countries, so to say, within BRICS, had to wait, and had to persuade, and had to get others' buy-in to get even their basic agendas across.

 

Nitin Nainani:  I think you touched on something that I want to ask a little bit more about.  You touched on, particularly, China and India as examples of economic growth. Margaret, back over to you. In some ways it seems odd even that China and India can go-exist in such a group, given their bilateral issues and, as far as geopolitics go, India's own concern about China's global influence.

 

Margaret Myers:  Right.

 

Nitin Nainani:  What does this, then, suggest about unity within BRICS, and, really, the organization's decision-making ability, since, from what I understand, each member-state has veto power?

 

Margaret Myers:  Right. This is, indeed, a critical question. And the institution itself, in its own right — it is not an institution; the configuration, or the block, in its own right — is, in many ways, a test of the resolve of Global South leadership or of major Global South nations to meaningfully or measurably change the status quo. And so, I think these are the metrics by which we will be measuring success as the years go by. There is a lot of discussion. There are points of consensus. There is a lot of interest in doing various different things.

 

But what actual outcomes or deliverables will we see from the BRICS? Aside from, of course, there's the bank, and there are efforts through that that are quite concrete, and then a few other meetings that will have concrete outcomes as well. But this is, in itself, a constant test of the resolve of five very different — now, ten very different — nations to do something all together. As concerns China and India, we're all aware of the tensions there, the political tensions there, the security-related tensions there.

 

And they have played out, I think, within BRICS, in that we have seen, absolutely, some very considerable disagreement, if not voiced particularly publicly, at least through pronouncements of what and how the group should advance. Specifically, for example, as was mentioned, China has been pushing this notion of expansion for a very long time. And India has not necessarily rejected the idea but has put certain conditions.

 

Most recently, it was understood that Modi had mentioned that expansion was possible, but only to countries that met a certain GDP threshold but also were not facing international sanctions. And that would have precluded Iran, which is not, as I understand it, something that China wanted to include as criteria. And so, you see these points of division which are a reflection of very different viewpoints, as concerns what constitutes a sort of eligible and responsible member of BRICS and what does not. And is it based purely on economic criteria or on other criteria?

 

And, of course, China, India, probably some of the issues that — if we're using the iceberg analogy, these divisions run much deeper under the surface in sort of sidebar conversations, whether as concerns membership, or the issue of a common currency or, if we're talking about using member currency, whose member currency and how to go about doing that in an effective way.  And then there's always a strategic dimension to a lot of these things, as well. And, as we know, India is part of the Quad. And so, there are these natural tensions that are going to present themselves in any sort of conversations that these organizations have.

 

Nitin Nainani:  Michaela, over to you, now. And I was hoping to get a sense of where you would situate BRICS, relative to other multilateral organizations or groups. So, I'm referring here, of course, to the Quad, which Margaret just mentioned, but, also, the United Nations and the G7.

 

Mihaela Papa Ph.D.:  So, maybe to follow up on Margaret's point, when we look at BRICS, it operates like U.N. If you are in conflict, you still come to the U.N. So, they have this practice internally that they don't want to touch each other's red lines. So, if there is something they disagree about, they do not touch it.  They just talk about things they agree on and then build on things that they agree on.

 

      In terms of, when you look at where it fits, we usually look at formal organizations, which are those that are based on a formal treaty, have a secretariat. If it's an international organization there is a building you can enter. So that would be the U.N. example. But, compared to that, BRICS is informal, which means there is no secretariat. So, it is a rotating presidency model. So, it's like a summitry model. And it is, in a way, like Quad, in terms of informal institutions. 

 

But it's more hybrid. It's much deeper, in terms of the issue areas it covers and how deep it covers them. And it also has this attached, in a way, BRICS-led New Development Bank. So, it would be, in terms of the type of institution — like Quad, like India, Brazil, South Africa — trilateral. But, in a way, people would argue, even within and outside BRICS, that it has developed into a life of its own, that it doesn't look like anything else, at this point, in this current stage of development.

 

Nitin Nainani:  So, to that point, then, is BRICS trying to offer an alternative platform to these other organizations?  Or is it pushing for greater reform to the international institutions, such as the United Nations?

 

Mihaela Papa Ph.D.:  So, when you look at BRICS, it is like a negotiation platform. So, I would say, it doubles. First of all, it's a platform through which states coordinate their policies on the issues that are of interest.  But, at the same time, it is a platform that seeks to renegotiate global governance, so, reform global institutions.  So, in a way, it has this life of -- internal life, where countries coordinate policies.

 

And then, it has this external life where their group can be used as a pressure coalition, as a campaign to put pressure on the institutions to change, which means, let's say, if BRICS can speak with one voice on an issue and say, "All agree that reform is needed on XYZ," then they can put much greater pressure. And this is a very important part of BRICS because, given their size, they can form a critical mass, and then, potentially, reform global governance.

 

Because, before, if you look at how we have been looking at competition in global governance, it was like, "Oh, U.S.-Russia, U.S.-China." But now, if you have a critical mass of countries trying to challenge the system, then the game is completely different. What can be negotiated is completely different.

 

Nitin Nainani:  So, before we move to more recent developments, Margaret, I was hoping -- you had mentioned this earlier, and I was hoping to better understand some of these institutions that have been facilitated by BRICS nations, themselves. I'm referring here to the New Development Bank, and the interbank cooperation mechanism.

 

Margaret Myers:  Yeah, so, to me, as somebody who tracks China policy bank finance to Latin America and who does this comparatively, as well, with other regions, it's fascinating to see. It was fascinating, first of all, the see the New Development Bank stand up, and then to try to understand how it would interact or supplement or, in any way, engage with some of these other financial flows that we're seeing from China and from other BRICS nations, BRICS member nations.

 

      And so, what we've seen so far, it's one of the more tangible, that we can see right now, outcomes of the BRICS, and one where there are concrete examples of deliverables, all of which will have some sort of implication for the recipient nation. So, there is lending that's been happening. It's seeming to be growing. Increasingly, we're seeing this interest in currency, in avoiding denominating loans in U.S. currency being articulated through the New Development Bank, and we see loans being denominated in member currencies, predominantly the renminbi, but others as well.

 

      But what we've seen so far with it, with the New Development Bank is, with its establishment, is, first of all, a very slow process of getting started. But then, a series of loans, mostly to BRICS nations, but that are focused, for the most part, from what I can tell — and we've done some analysis of this in Latin America, and I'd be curious if, I don't know if either of you has a sense of what's happening, as much, in other regions — on a couple of things.

 

One is sort of economic recovery, so small loans to banks to then be able to finance wide-ranging social and other projects themselves. And then, also, environmentally focused projects and/or climate change-related projects. Those can be infrastructure related, so building infrastructure to be able to adapt or repairing infrastructure that's been affected by climate change, or funds, funding funds that are intended to achieve these various objectives.

 

So, it's a very — at least in the Latin American context — a really very specific focus on a handful of issues that, as I understand it, or at least would assume, have been priorities within the BRICS Bank as areas of focus. It will be very interesting to see, because this is all still very new, what happens this year and next year. We'll put out a report in just a couple of months again, documenting various loans, from not just the Chinese policy banks, but also BRICS and other institutions to Latin America. But this is something that's been very fascinating to watch.

 

And, again, as I mentioned, this notion of addressing the issue of dollar dominance is one that is being carried out through the BRICS Bank. As we know, Dilma Roussef, the former president of Brazil, has been appointed as the president of the BRICS Bank. For some, that seems, perhaps, a somewhat controversial appointment, given that Dilma presided over some periods of very intense corruption in Brazil, but, nevertheless, has taken the helm. And that has been, I think, something of an effort to build stronger ties with the current administration in Brazil, the Lula da Silva administration.

 

Nitin Nainani:  I want to now shift gears a little bit to talk more specifically about the recent expansion. Mahaela, last week five new countries joined BRICS.  That's Egypt, Ethiopia, Saudi Arabia, the U.A.E. and Iran. And these countries were chosen from more than 40 nations that had expressed interest in joining, and 20 had formally requested to join.  So, we've heard a little bit about the kind of criteria that was being scrutinized as part of this process. But my question is why, these countries, specifically?

 

Mihaela Papa Ph.D.:  So, the process was messy to start with. So, BRICS initially, in 2009, said that they will develop as an open-interest parent entity. But there was so much build-up before the summit, it wasn't really clear who will be joining, which countries applied. Then, eventually, the list of countries was published to understand who applied. When we look at the five countries that joined eventually, two of them are almost, like, expected. So, the two of them being Egypt and the U.A.E., because they already are part of the New Development Bank.

 

      So, in a way, that's a continuation of the relationship that they already have. But what's interesting is that you see, out of all of these countries, that only this small number was taken. And there are so-called official criteria. But official criteria are not as specified so that you exactly know who is in and who is out, why.  BRICS operates like a club.  So, basically, for you to get in, you need to have people in the club liking you, and you need to have people in the club not vetoing you.

 

      So, that's the ultimate criterion. But, if you look at what was actually written in the criteria, the country needed to have strong economic standing and be influential in the region, and globally have substantial trade relations with BRICS countries. And what's interesting is that it needed to have good diplomatic and friendly relations with member states and should not impose sanctions without U.N. Security Council authorization. So you immediately know, in the official criteria, which countries are kind of "no need to apply." 

 

      Regarding the countries that did apply, it is somewhat weird to have formal applications for an informal institution. And then you have these formal applications. But when you look at which countries got in, there is the geographical representation. So, in terms of who got invited, there is this component of all of these countries are important trade partners. So, BRICS wants to develop this trade agenda, wants to develop a transition to local currency.  So, who are the trade partners, and who are the partners who are interested in transitioning to local currencies? 

 

And, of course, questions like that also in the context of energy deals. So, with that, that would be like an overview of those who got in. But then, the question is what happens to those on the waiting list? And I think it's also one area that people don't talk about. But who didn't get in, and who didn't want to get in? And these are countries like when we think about Indonesia, for example, that would be a completely great case for BRICS.

 

And there were so many different reports whether it was invited or not invited.  Then there was Jakarta Post said, yes, it was invited, but it doesn't want to rush. And then, no, it's not the right time, and so on. So, there is a lot of politics, in a way, of enlargement, and politics of inviting, accepting, especially, case in point, with Argentina, that did not want to join, eventually. 

 

Nitin Nainani:  Well, that was actually my next question. And, Margaret, I'll let you take that. Why did Argentina announce its withdrawal from the group?

 

Margaret Myers:  I think this sort of points to this notion of the BRICS being China-run, whether it is, effectively, or not, in all ways. But it is viewed, largely, even by members of the Global South, as something that has been, in many ways, directed by, shaped by, influenced by China in an outsized way. Whether that's an accurate characterization or not is another question, right?  But this remains the viewpoint.

 

And that was a big part of the decision by the new Argentine government, the Milei government, recently elected, to vote not to, in fact, join the BRICS. And, of course, the interest had been indicated by the previous administration, which was very friendly with China. Milei, during the elections, was vocally critical of the relationship with China, of an overreliance on China, and of a need to scale back, in many ways, relations with China. So, it was a natural extension, then, to be concerned about and critical of BRICS participation, especially given this, again, perception that a lot of this is China-driven. 

 

      There is also, of course, Brazil, and Argentina, now under the new government in Argentina, have a degree of political tension that they didn't under the previous administration. And so, you have these neighbors, both of whom would be BRICS members, who would not have outright conflict, by any means, but where there are tensions that exist and persist. 

 

So, for Brazil to be a member, in many ways precludes Argentina, at least conceptually, from also joining this particular grouping. And so, there were a number of reasons, I think, all in all. But Argentina, as we know, is also facing its own economic challenges and has much to focus on other than BRICS participation.

 

Nitin Nainani:  I want to stay with you just a second, Margaret, and ask, how does the United State view this expansion? And I'm also going to ask this with reference to a question that we just got from the audience and take this opportunity to remind everyone that if you submit your questions through the Q&A then we'll definitely try to get to them. 

 

But U.S. politicians, news pundits, think tanks and others have wildly different opinions about the BRICS expansion, ranging from mocking it as irrelevant, and then there are others who see it as an existential threat to the U.S. leadership. So, in your view, how should the United States view this?

 

Margaret Myers:  That's a sort of perfect characterization. And, even within one article you'll see both of those points being made. You'll see that it starts out noting that there's a major challenge afoot and that this has been a grouping expressly developed to challenge U.S. or broader western interests in various forms, whether in the economic realm or the political realm, but also noting the degree of perceived incoherence in some of the proceedings and the degree of, seemingly, disconnect, as concerns even the policy objectives that many of these countries have in common, or have expressed interest in over time.

 

      So, just how to achieve those seems a bit out of reach, at the moment. So, these two narratives are happening, coexist, and they continue to coexist in Washington in discussions about the BRICS. How should the U.S. view the BRICS? I think, on the one hand, it is important to note that the BRICS has, in many ways, not yet advanced some of the major objectives that it sought to advance, the more concrete objectives.

 

There has been expansion, certainly. But, as concerns challenging dollar dominance, I don't know that they've achieved much in that particular respect. And I don't know that the U.S. needs to worry at this particular juncture about this affecting the dollar over multiple functions of money. The dollar continues to be widely preferred to many, many other currencies in that particular respect. That said, I would caution against being dismissive of the BRICS, just because, as Mihaela has said, it serves a kind of dual function.

 

And one of those is to articulate what is just a broad sort of discontent among many members of the Global South, whether they participate actively in the BRICS or not, in the way that things are being done and have been done, and this sense of exclusion from those traditional well-established decision-making bodies, and a sense that there are, if not alternative organizations, there is a need for platforms for these concerns to be vocalized, and that there is something of a momentum to this. 

 

And so, while one can be dismissive of the technical functions within the BRICS and the concrete objectives that are being achieved on a summit-by-summit basis, in general, it represents something quite critical, in that there is this sense that the global system, as is, is dysfunctional, and especially dysfunctional for a specific set of countries. And that is something that needs to be, I think, well understood.

 

Nitin Nainani:  Mihaela, did you want to add anything to that?

 

Mihaela Papa Ph.D.:  I think that was really, well, comprehensively said.  I think one area I would emphasize is that we need to be geo-strategically aware, which means I don't think that the United States can afford not to look at BRICS, not to analyze BRICS. It needs to know, basically, all of these BRICS countries, new countries. And the criterion for joining is that everybody wants to reform global governance.

 

To reform global governance, you need the United States. The United States needs to exactly know what are the areas it prioritizes? Because BRICS can be a constraint in some areas. But it can also be an opportunity. So, if the United States wants to say, "We are not isolationist, and we are not overextended. We will be just right. We will have a third way of foreign policy," then how do you basically see the areas?  How do you identify the areas? And then, you identify it by looking at issues, issue-by-issue, by looking at U.N. specialized agencies.

 

So, already, BRICS is forming different entities, has MOUs with different U.N. specialized agencies. So, where, exactly, is the U.S. strategic vision that includes BRICS and that counts on the context in which BRICS can potentially constrain its range of options? Also, if we look at AI, for example, now BRICS formed "AI study group." And that will be focused on standardization.  That will be focused on thinking about governance frameworks. 

 

So, there are very many issues that the U.S. is currently engaged in where BRICS are either forming or already developing cooperation. It's very important to understand how — when all of them come to the negotiation table, when you're looking at international treaties, when you're looking at new regulation — how, basically, this will play out, not only in existing institutions, but also in the new regulation that's still emerging, and where the United States has a very clear stake and interest in seeing it emerge the way that reflects its interests. 

 

Nitin Nainani:  So, I want to ask very specifically then — and I'll start with Margaret on this — is the United States doing anything, or offering anything to other countries — for example, Argentina — so that they don't take part in BRICS? This was a question from the audience. And, as a reminder, please feel free to submit your questions through the Q&A function.

 

Margaret Myers:  I don't know of any particular efforts to engage with this particular objective in mind, to dissuade a country from joining BRICS. And, under the previous government, it was unclear what the outcome of this election would be. Under the previous government, it was sort of assumed that this would happen, regardless of U.S. engagement in whatever form, whether any new promise of investment or more extensive trade engagement or any other.

 

What we do see, just specific to the Latin American region, for example, are efforts to stand up, again, platforms for work with partner nations — so those more like-minded nations in the region, including those with which the U.S. has free trade agreements — to begin to expand opportunities for primarily economic collaboration, and to do so by removing some of the trade and non-trade barriers that are in place at the moment. The U.S. is not in a position to strike new trade deals in the region, which would be the most transformative means by which to strengthen relations, bilateral dynamics, at present.

 

But the politics at play are preventative of those sorts of things, at the moment. So, what can be done, under those constraints, is being done through something in the Latin American region called APEP. There are other similar initiatives underway in other parts of the world.  Whether these are extensive enough to change countries' minds about engagement with organizations such as BRICS or others is another question. And I don't know that Argentina, for example, or any of these other nations, see these things as mutually exclusive.

 

On the one hand, they see joining the BRICS as potentially supporting of a certain set of interests, while engaging with the U.S. on economic or policy-related cooperation mechanisms is also supportive of some of the things that they would hope to achieve. And I don't know that the APEP, for example — and it hasn't been presented as a "If you do this, if you join the APEP, if you're part of this initiative, then you may not," for example, "engage in these other platforms or organizations or groupings." It's not been -- there's not that restriction placed by the U.S. on membership.  

 

Nitin Nainani:  I want to stick on the topic of the United States for just a moment, and — Mihaela, coming over to you — we have touched on this a little bit. But I want to get in a question on this. One of the big headlines from the last summit was Brazil's president proposing the creation of a common BRIC currency to rival the U.S. dollar. 

 

Now, building on this theme, Vladimir Putin, through his video address, kind of unsurprisingly blamed the U.S. sanctions for global economic volatility, and broached the idea of a reversible process of de-dollarization. So, my question to you, then, is, is this even remotely a possibility? Or was this just rhetoric from both Lula and Putin?

 

Mihaela Papa Ph.D.:  So, just to follow up briefly on the threat to U.S. part, one area is where we see that BRICS is becoming more of a block. Because when you expand so many issue areas for cooperation, and when you deepen them, then, basically, these countries are oriented toward each other more and more. So, if you look at, like, U.S. willingness to isolate Russia, and then, on the other hand, BRICS willingness to incorporate and deepen cooperation with Russia at the same time, in the aftermath of its invasion of Ukraine, you can see how this plays out. 

 

So, I think these are some of the areas where, security-wise, BRICS plays a very different role, in terms of narratives, in terms of what's possible for countries that the United States finds adversarial. So, to go back to your currency question, actually, the currency debate seemed like it was a new debate around the summit, because it was just so highlighted.  It was like this big drama event, because currency was supposed to be on the agenda initially, but then it wasn't.

 

The question of transition to local currencies and de-dollarization, in our work, we have actually, a book on that, Can BRICS De-dollarize the Global Financial System? And we trace down to the beginnings of BRICS cooperation, the question of the de-dollarization. It's called transition to local currency for two reasons. One is the risk of sanctions. And one is the currency risk.  Especially over the last two years, you've seen a lot of talk about the volatility, the inflation, the concerns with servicing dollar debt.

 

The question of de-dollarization in the context of currency, BRICS currency, it's almost like when you're looking at euro. It's like, a big stretch. And you see euro, it has existed for so long and it's nowhere near the dollar now. So, when we look at the dollar, the dominance of the dollar is really enormous, whether you look at it in terms of the reserves or you look at it in terms of the use of dollar in international transactions. And in none of these areas is the idea that you can, overnight, create a new currency that gains, somehow, overnight, buy-in and trust and changes the game. 

 

So, it's a very long shot. The first reason being that after both President Lula and Russian officials came out with this talk about BRICS currency, the Indian officials said, "We are not interested in a joint currency." So, basically, that threw water all over this, whether it will be on the agenda, or it won't be on the agenda. But it was basically in June, all of these back-and-forths, whether it's on the agenda or not.  And, eventually, it wasn't on the agenda.  But one thing to watch is that BRICS are trying now to focus on developing their BRICS PAY payment system. 

 

So, whether they can develop a multi-currency payment system and actually operate it between the BRICS group and the BRICS bank and what will be that linkage, is questionable. Where I see most of the action is in bilateral deals. So, basically, if you are doing a deal between Saudi Arabia and China, and you are looking at import/export in the energy sector, that deal can be now in yuan. It doesn't need to be in dollars. And then, the question would Saudi Arabia prefer to use dollars, or yuan? So that's another question, here. But most of the action right now is in the bilateral setting. There is also group-level action, in terms of the New Development Bank.

 

So, New Development Bank is a good signal of de-dollarization because it's very dependent on the dollar. And it had de-dollarization ambition from the get-go, from the start. And it still, if you look at the numbers, only, like, 22% of the bank's portfolio is local currency. And then, the new president says that she wants to increase that to, I think, 30. She said 30% by 2026, which means that you are still talking about their own institution not being able to convert.  So, you can see how difficult it is after over a decade commitment to that.

 

Nitin Nainani:  And, aside from de-dollarization — Margaret, back over to you — what other effects do you see BRICS expansion having on the global economy, whether that's trade, investment, or even the energy sector?

 

Margaret Myers:  It will be very interesting to see. Mihaela, you'll have a better sense of this, having tracked, probably, the bilateral dynamics between all of these countries. But what I would look for is, on the one hand, increased — just as was mentioned — bilateral activity between the various members, and the extent to which we see major expansion of lending, if at all, on the part of the BRICS bank to new members, so, an expanded portfolio there of loans, and, again, for what purposes. 

 

I wonder to what extent these new members will have some say in shaping the nature of lending or those areas of focus that we see at the New Development Bank. Obviously, this has become a geographically heavy set of countries, very focused and also focused on -- their wealth comes from very specific sectors. Oil and gas are really quite dominant when you look at the entire grouping now.

 

And, so, understanding how that, that new configuration and the various sectors that, again, are going to be much more formative, in terms of the overall influence that this groups wields will have on policy making, within the block or at the bilateral level, on the nature of trade, on how, if at all, trade patterns change in interesting ways as, potentially, this block solidifies, as was mentioned. But I don't know. Mihaela, you may already have done some really interesting research on some of these trends and may have some predictions to share. I'd be thrilled to know those.

 

Nitin Nainani:  Go ahead.

 

Mihaela Papa Ph.D.:  We've seen, on the bilateral level, that it's quite difficult to transition to local currencies. So, for example, there was this effort to trade, basically to get, like, for India to get energy from Russia and then pay in rupees. And then, Russia wasn't interested in having rupees. So, in a way, there is a lot of buildup, "Let's do rupee collaboration," and then, the question is what do you do? Are rupees liquid enough? And how do you use them? So, it hasn't been easy on the bilateral front. 

 

So, the question is, I think, when we look at the proliferation of different bilateral deals, what kind of negotiation packages will be available? And to what extent are there some extra benefits? So, let's say, if you are using local currency, is there something else that you are getting through it? Or what is the co-benefit to that? 

 

Nitin Nainani:  And what would you say, Mihaela, are the ramifications for the global balance of power and decision-making?

 

Mihaela Papa Ph.D.:  So, the question of U.S. decision-making, the question is, are we seeing now -- right now, in a way, if you look at the key economic data, the world looks bipolar. BRICS wants to make it multipolar, formally. But then there is also the question, is the world multiplex, where you're not focused on some top powers, but you take the comprehensive view of everybody in the system and what it looks like? 

 

One area where I see movement is the effort to basically make mainstream United Nations General Assembly politics into the overall politics. The question of Global South and how to engage with Global South becomes preeminent, because you can see that the U.S. has had the tendency to engage in small security groups with northern countries. So how do you make more effective coalitions, even alliances, with countries from the Global South?

 

Another area where I see major geopolitical maneuvering is, now with the expanded BRICS, it's much harder to accept new countries. So, you have these countries that outed themselves. They are on the waiting list. And it's not necessary that they are on the waiting list for BRICS. Because they are all, supposedly, invested in south-south cooperation, non-alignment ideas. So, if the U.S. and NATO and G7 are becoming more block-like, on the other hand, BRICS becoming more block-like, you have this pool of countries that can potentially form a new non-aligned movement.

 

You could potentially have, like, a new Mexico, Indonesia, Malaysia as leaders of Global South, because what we are now seeing is China trying to position itself as leader of the Global South, Brazil trying to position, India trying. And then, they're all kind of competing to be leaders of Global South. But maybe the real leader of Global South is none of them. And now that they got, like, Iran involved in the BRICS, and kind of focused more on the specific agendas that are more like de-dollarization, or potentially more controversial, in terms of the U.S. relationships, maybe there is a new venue for a new non-aligned movement that's taken up by waitlist countries.

 

Nitin Nainani:  I want to quickly get in a question about human rights here. And I ask this because you see tensions between members already, given their respective postures on these types of questions, whether it's Putin's Russia and South Africa, for instance. But what does it signify, Margaret, when some of these members have such notoriously poor human rights records? I think you're on mute.

 

Margaret Myers:  So sorry about that. Just as Mihaela mentioned, this is a configuration in which those areas of interest, those intersections of interest, are addressed. And those areas where there may not be so much consensus or disagreement tend to be at least brushed under the table, in the interest of advancing what could be a common agenda in the best interest of member nations, and, potentially, the Global South. And so, I think that's precisely what's happening here, is that you have real concerns on the part of some members about the way that other members have carried things out. 

 

      And there were, when you read into the statements about Ukraine, and you saw the way that Putin delivered his speech during the most recent summit, there was, even in these issues of a common currency, there was very blatant disagreement on all of the statements that were made. But, on these others, there were moments of clear, I would say, just a sort of palpable unease among a number of the members and representatives. And so, it is. It's reflective of major differences, not only in terms of understanding how this thing ought to function, but in values and in systems of governance.

 

And so, that could very well have an effect on the efficacy of these institutions, this particular block, over time, even as it becomes more of a block, or may threaten prospects for block coherence over time, if these cleavages, indeed, deepen or persist. So, yes, and it's stark, the contrast. But you do see, at least initially, just as Mihaela mentioned, the sort of block dynamic and the increasing blocking of this block, that there is this tendency to, if not fall entirely behind members, to just not rock the boat.

 

      And so, we saw that with Ukraine and Russia's position there was not a formal critique, at least at first, of what Russia was doing, and a real effort to try to maintain or not muddy the waters or rock the boat, whatever sort of phrase you want to use to describe it, to keep things more or less on track. 

 

Nitin Nainani:  I see we're running short on time. I do want to get one last question in, to both of you.  The next BRICS summit will be staged in Kazan, Russia in 2024. Mihaela, starting with you, do you have any predictions for what we should look out for there?

 

Mihaela Papa Ph.D.:  It's interesting that the summit is really late. So, one thing Russia is trying to do, it's trying to socialize the new members. The other thing, it's trying to produce a major output. Right now, a major output means that these new members will need to align to certain agendas and then see what, exactly, where they want to head next. I would assume that the de-dollarization agenda will be relevant, science and technology agenda will be relevant, and economic agenda more broadly.

 

Every time Russia had the presidency, Russia made most of the use of its presidency. So, it's always some major institutional development. And we've seen it three times that Russia held the presidency, that there is some institutional development and push. And, right now, Russia is really eager to develop BRICS, because that's like Russia's lifeline.  So, either we see it now, or we don't see it. 

 

Nitin Nainani:  Margaret, go ahead. Any predictions for next year's summit?

 

Margaret Myers:  That sounds absolutely accurate to me. I don't know that I would add anything more to it. And I think we'll see a lot of countries across the globe watching how this new expanded BRICS operates, whether it's functional, more functional, or less so, whether we see more cleavages or fewer, and whether these issues of interest that have been articulated are really advanced in any substantive way. But this coming year will be quite telling.

 

Nitin Nainani:  So, I just want to wrap things up today by giving a sincere thank you to both Michaela and Margaret for sharing their time with us. We're really grateful for your insights and perspectives. And this has been informative. To those that have tuned in, thank you very much for joining us. Enjoy the rest of your day. And we hope to see you at future programming. All the best.