Major emerging market nations invited top oil exporter Saudi Arabia, Iran, Egypt, Argentina, Ethiopia and the United Arab Emirates to join their bloc in a push to expand its global influence.
Leaders from Brazil, Russia, India, China and South Africa agreed to enlarge their BRICS group from 2024 at a summit held this week in Johannesburg, South African President Cyril Ramaphosa said on Thursday.
It will be the first expansion since 2010.
The inclusion of Saudi Arabia, the world’s largest oil exporter, alongside Russia, Iran, the UAE and Brazil, brings together several of the largest energy producers with the developing world’s biggest consumers, giving the bloc outsized economic clout.
With most of the world’s energy trade taking place in dollars, the expansion also enhances its ability to push more trade to alternative currencies.
“We have consensus on the first phase of this expansion process, and other phases will follow,” Ramaphosa said at a joint briefing with the group’s other leaders.
Agreement had also been reached on the need to overhaul the global financial architecture and key institutions to make the world more equitable, inclusive and representative, he said.
An expanded BRICS would also mean more say for the alliance in world affairs and may lead to a different type of global economy, according to Bloomberg Economics. That’s because, in comparison to the Group of Seven, the BRICS are less market-oriented.
What Bloomberg Economics Says…
“The original BRIC members had two things in common: large economies and high potential growth rates. The expanded BRICS-11 is a less coherent group — some are going through crises, others are thriving. This could signal an expansion of the agenda beyond economics”
— Ziad Daoud, chief emerging market economist
“The enlargement of the BRICS is driven by the desire to build an alternative to an international system centred on US hegemony,” said Hasnain Malik, a strategist at Tellimer in Dubai.
“A distinction should be drawn between the use of the US dollar as a trading currency, which may erode as many seek an alternative, and as a reserve currency, which almost no other country or group of countries have the size, institutional credibility, and freely convertible characteristics, to rival.”
The push for expansion was largely driven by China but had the backing of Russia and South Africa. India was concerned a bigger BRICS would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West.
Charlie Robertson, head of macro strategy at emerging-market investment firm FIM Partners, said BRICS had done little since its formation in 2009-10 and doesn’t expect that to markedly change.
“A meaningful BRICS creation is the New Development Bank. Expanding BRICS and, therefore, membership of the NDB matters,” he said.
“Whether it is Saudi or UAE injecting capital, or Egypt, Argentina, Ethiopia and probably Iran drawing on that capital, the bank has been a welcome addition to the global financial architecture.”
More than 20 nations from the Global South had formally requested to join ahead of the summit.
Indonesia asked for its membership to be deferred because it wanted to consult with its counterparts in the Association of Southeast Asian Nations and could be admitted in the next year or two, Anil Sooklal, South Africa’s ambassador to BRICS, said in an interview.
“There was ready consensus on all other countries, which made the selection very easy.”
Chinese President Xi Jinping described the expansion of BRICS as a historic event and a new starting point for cooperation among developing nations, while Indian Prime Minister Narendra Modi said his nation will work with aspirant members to join the grouping.
“In a sense, the Saudis, the Emiratis in particular, and the Egyptians to some extent have ambitions for global governance and see membership as a way of exercising leadership and achieving their global ambition,” said Hasan Alhasan, Research Fellow for Middle East Policy at the Bahrain-based International Institute for Strategic Studies.
That doesn’t mean they are abandoning their strategic security partnership with the US, but they are “building coalitions on an issue-by-issue basis depending on where their national interests are,” he said.