Is the BRICS Now a Thing?

The upstart global club has rallied concerns about U.S. geopolitical dominance but has yet to show it can deliver a “multi-polar world”

DUBAI - The question for Sheikh Mohamed bin Zayed Al Nahyan is not why he will attend the BRICS+ Summit in Russia tomorrow.? The question is: Why not??

The United Arab Emirates president will join three other new members who are adding a plus sign to this awkward international confab, conceived as an acronym and fueled by a shared distaste for heavy-handed American leadership.? Now, in its 16th summit, the BRICS+ is no longer a meaningless sideshow, but it's not yet clear what it can do to reshape the global order.

For the UAE, sitting atop vast oil and financial wealth in one of the world's angriest neighborhoods, there's very little downside to joining as many clubs as possible.? And in a world of rising barriers to trade and payments, global hubs like Dubai and Abu Dhabi welcome as many connections as they can get.

Still, it’s remarkable that this grouping of very different countries has managed any momentum at all.? Sure, it’s a great photo-op for any leader, but the original members truly share very little economically or politically.? Russia and China are autocracies, while India and Brazil are proudly democratic.? Russia and Brazil are big commodity exporters, while China and India are voracious consumers.? South Africa, which joined in 2010, added neither coherence nor heft, and it’s even harder to spot the common thread that unites the newest members signing on with the UAE: Iran, Egypt and Ethiopia.? (Crown Prince Mohammed bin Salman canceled plans to attend at the last minute, raising questions about Saudi Arabia’s intentions to sign on.)

But the BRICS+ has now built enough buzz that there’s apparently a queue.? Russia has invited representatives from two dozen other countries that have expressed interest in joining, from Algeria and Azerbaijan to Vietnam and Venezuela.? How this group can realistically hope to make substantive decisions remains to be seen; even China won’t be able to muscle through its preferences as the membership grows.

Of course, what binds them most are feelings that range from polite skepticism to outright hostility toward U.S. dominance of the world's politics and payment systems. ?Over the years, BRICS leaders have developed an agenda that is now something less than a plan but more than mere fist-shaking. ?

Early efforts included the establishment of a New Development Bank (also known as the BRICS Bank) and a Contingent Reserve Arrangement, intended as alternatives to the World Bank and International Monetary Fund.? But these are placeholders at best.? Recent talk of a BRICS currency has gone quiet for now, perhaps on the realization that if Germany and Greece have trouble sharing the euro, it may be much harder for India and Brazil.

When Brazil’s president asks : “Who decided that the dollar was the currency after the disappearance of the gold standard?”? The answer is: “Everybody.”

But Anton Siluanov, Russia’s enduring finance minister, has advanced several more ideas to help build out payment paths that avoid dollar sanctions : an alternative clearing and settlement mechanism for BRICS members to access each other’s financial markets even after dollar sanctions, BRICS reinsurance services when Western reinsurers refuse coverage and BRICS cooperation on credit ratings should the dominant global firms withdraw ratings.

Perhaps most eye-catching is an idea to build out a payments mechanism that would allow BRICS currencies to be exchanged through digital tokens that would avoid the dollar financial system altogether.? This sounds a lot like other blockchain-based payments that are currently being tested, but avoiding U.S. sanctions may not be so easy.

Already, trade between Russia and China is settled overwhelmingly in renminbi, and India pays for Russian oil in rupees.? But the fact that 88 percent of foreign exchange transactions involve dollars is because they are easier to borrow, cheaper to hedge and far more convenient for global business accounting.? When Brazil’s president Luiz Inàcio Lula da Silva asks : “Who decided that the dollar was the currency after the disappearance of the gold standard?”? The answer is: “Everybody.”

So countries will grumble about dollar dominance, but no self-respecting finance minister will be building reserves in another currency before there are enough dollars socked away.? And while they may all be interested in exploring alternatives, few will risk being shut out of the dollar system.? Even the BRICS Bank stopped lending to Russia.

Moreover, for all the talk of fairness and multipolarity, is it really credible that China and Russia would sponsor a global payments system that is truly above geopolitics?? Just ask Korean retailers or Georgian wine producers who have suffered sudden boycotts and trade restrictions from Beijing and Moscow.

This is why Washington’s best reaction to Sheikh Mohamed and others heading off to Kazan this week is to wish them a safe journey.? Rather than forcing anyone to choose sides in an increasingly uncertain world just weeks before a crucial U.S. election, it’s far more constructive to build out bilateral relationships with each of these countries hedging their bets.?

On a political level, Lula doesn’t want to be a Chinese pawn any more than an American one, so how can more creative diplomacy engage fence-sitters like him so it’s easier to stay on the fence?? On a technical level, what can the Treasury do to make sanctions more transparent and to modernize payments technology--including with blockchain—to better balance the dollar’s attractiveness with the world’s security concerns?

“BRICS is a structure that cannot be ignored,” a Kremlin aide told reporters last week .? That’s hardly a rousing battle cry of an emerging global order, but maybe it’s at least a prod for the dollar system to refresh the value proposition it continues to deliver to the rest of the world.

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