BRICS Group and Its Economic Dynamics

By Guy Faulconbridge

MOSCOW (Reuters) – The notion that the BRICS group could challenge the U.S. dollar seems unrealistic as long as China and India remain divided and unwilling to collaborate on trade, according to Jim O'Neill, the former Goldman Sachs economist who coined the BRIC acronym.

Russian President Vladimir Putin is utilizing the BRICS leaders' summit to demonstrate that Western efforts to isolate Russia due to the Ukraine conflict have been ineffective, and that Russia is fostering ties with emerging Asian powers.

Initially, Jim O'Neill introduced the BRIC concept in 2001 in a research paper emphasizing the growth potential of Brazil, Russia, India, and China, calling for reform in global governance to incorporate these nations.

O'Neill stated, "The idea that the BRICS can be some genuine global economic club is quite fanciful, akin to the G7's notion. It is concerning that they aspire to be an alternative global entity, as this is not realistic."

He remarked that the BRICS summits mainly serve as symbolic gatherings for prominent emerging countries, particularly Russia and China, to showcase their participation in a grouping that excludes the U.S. while questioning the efficacy of global governance.

Despite being identified with BRICS, O'Neill believed the group had achieved very little in the past 15 years. He stressed that addressing global issues is impossible without cooperation from the U.S. and Europe, just as the West cannot manage these challenges without China, India, and to a lesser degree, Russia and Brazil.

BRICS began as informal meetings between Russia, India, and China and later expanded to include Brazil, South Africa, Egypt, Ethiopia, Iran, and the UAE. Saudi Arabia has not yet formally joined. The bloc represents 45% of the global population and 35% of its economy (measured by purchasing power parity), though China contributes over half of this economic weight.

During the summit, Putin mentioned that more than 30 states had shown interest in joining BRICS, but any expansion necessitates a careful balance. O'Neill cautioned that adding more members would complicate achievement and collaboration.

Dollar Challenge

Russia is trying to persuade BRICS nations to create an alternative platform for international payments that can withstand Western sanctions.

O'Neill noted that discussions about alternatives to the dollar began when he started his finance career, but no nation capable of challenging the dollar has made any serious moves. He suggested that any new BRICS currency would heavily rely on China, while Russia and Brazil would not play significant roles.

He added, "If they were genuinely serious about economic issues, why don’t they pursue more tariff-free trade among themselves?"

He expressed willingness to take BRICS seriously only if there were signs that China and India, the two crucial nations, were working to reach agreements rather than confronting one another constantly.

Since a border clash in 2020, India has been cautious about Chinese investments. Nevertheless, both countries committed to enhance cooperation following recent formal discussions after five years.

Chinese President Xi Jinping told Putin that the international situation is chaotic, but Beijing's strategic partnership with Moscow serves as a stabilizing force amid significant global changes.

O'Neill also pointed out that the G20 has failed to establish itself as a mechanism for global governance because both the U.S. and China have turned inward since around 2015. He concluded that BRICS lacks clear objectives and should tackle major global issues, such as developing vaccines for infectious diseases or combatting climate change.