BRICS By Default

07/18/2014 - 11h05

President Dilma Rousseff of Brazil, President Vladimir Putin of Russia, Prime Minister Narendra Modi of India, President Xi Jinping of China, and President Jacob Zuma of South Africa, met in Fortaleza, Ceara, this week for the sixth BRICS summit.

BRICS is an acronym conceived by Jim O'Neill, the head of global economics at Goldman Sachs in 2001, to describe major emerging economies.

It was not intended as a geopolitical description. Two of the principal members of the group, China and India, were long time rivals. The idea originally was a construct for investment bankers.

The BRICS concept was launched when the world was in a "unipolar" moment. Washington was in the ascendancy.

It was seen to be the world's remaining superpower. The Soviet Union had collapsed. The US dollar was the currency of last resort. The US dominated the world's financial institutions.

But the world has changed dramatically. The terrorist attack on New York City and Washington on 9/11. US overreach in Afghanistan and Iraq, the rise of bitterly partisan politics in Washington. US domestic disenchantment with overseas engagements. The financial meltdown of 2008.

President Obama's disinclination to use US power. The rise of newly assertive Russia and the annexation of the Crimea. The insatiable appetite of the US to spy, not only on potential terrorists, but also on friends like Angela Merkel and Dilma Rousseff.

All these factors have transformed the rules of the game. The BRICS share a antipathy towards the US. But they are not alone. Less than 40% of Germans regard the US as a trustworthy partner. Most Americans no longer personally trust Obama and less than 30% trust the office of the presidency.

Despite continuing scepticism about the BRICS in the West, its role has expanded by default. The BRICS leaders met with all of South America's presidents in Brasilia after the Fortaleza summit.

On his way to Brazil President Putin visited Cuba (where he met Fidel as well as Raul Castro and cancelled all of Cuba's Soviet era debts). He visited Argentina (where he supported Argentina's claims to the Falkland island). The BRICS summit avoided criticising Russia over its actions in the Ukraine.

The US and its western allies denied China a share of voting rights at the IMF commensurate with the weight of its economy.

The BRICS summit announced the launching of a BRICS New Development Bank, a joint project with an initial US$10 billion capitalization, to which each member contributed equally, headquartered in Shanghai, with an Indian as its first president.

The BRICS also made a commitment to establish a reserve pool in local currencies to do business with each other hence avoiding the dollar.

Small steps to be sure. But an important beginning. Despite their evident differences the BRICS are beginning to transform themselves into a new force to be reckoned with.