ED: This is the first article in a series looking the rise of the BRICS+ group of emerging economies, which are rapidly increasing their co-operation to proof themselves against possible sanctions by the West but at the same time want to keep their lucrative commercial ties with their leading Western trade partners.  

 

Has the US just made a strategic blunder? In leading the military support of Ukraine’s fight against Russia, introducing a massive package of sanctions and weaponising the dollar, Washington has caused a backlash that is rapidly driving the world’s leading emerging markets (EMs) together into a bloc led by the BRICS, who are clubbing together and de-dollarising in case they are next up to face US-led Western ire.

The Western world was outraged by the Russian invasion of Ukraine on February 24, the first large-scale war to be fought in Europe since the end of WWII, and acted almost immediately to make Russia a pariah as well as denigrate its economy.

However, the unintended consequence has been to undermine the basis of international commerce, introduce massive distortions into the global economy and degrade confidence in the dollar. No one approves of Putin’s war, not even his closest EM allies, but they are more concerned about the ferocity of the Western response that has highlighted their own exposure to censure should their relations with the West decay. Now they are being forced to choose sides, many have decided that President Vladimir Putin’s main complaint, that we live in a unipolar world where America calls the shots, is right and they would prefer to have a multipolar world, where every country makes its own choices and resolves problems collectively.

That is what is driving the EMs into the BRICS bloc, led by China and Russia, the only emerging markets with a seat in the UN Permanent Security Council, military and nuclear capabilities on a par with the rest and economically large enough to have real heft in geopolitics. Putin and Xi have become the unlikely champions of the now increasingly nervous emerging world.

And Russia and China have four things that draw the other EMs in. The first is the multipolar view includes an implicit promise not to push values on partners. There is no “global policeman” in the multipolar worldview.

The second is the EMs are coming of age but feel themselves under-represented in the current geopolitical set-up. The UN Permanent Security Council only has five members, but three of those are European, plus the US, born of Europe, as well as China. There are no representatives at all from Latin America or Africa, and even India, the most populous country on the planet, is not included.

Third, almost all of the rest of the world have suffered from the colonialism of the first world in the past, an abuse that still rankles today. India, Africa and large parts of South America were all captured by one colonial power or other. China was never conquered, but it was flooded with opium by the British and lost two wars trying to ban the trade, leading to the “century of humiliation”. The empires may be forgotten in the West but the scars are still raw today amongst the victims.

Finally, the smaller members of the EM bloc are simply not wealthy enough to afford to take principled stands; they are just trying to earn enough money to build their countries and keep their people happy. Sanctions that cut them off from vital raw materials or drive up costs are simply not an option. Unable to face down the G7 on their own, they are looking to the BRICS bloc for support in a common cause that can square up to the West.

It was never in the US interest to drive Russia and China closer together. Putin has always made it clear he would prefer to be part of Europe as he shares the same fears about China’s rise. Putin’s preference and long-stated foreign policy goal was to work with the EU to create a single market that stretches “from Lisbon to Vladivostok.” But his demands for a new security deal from the West and his security concerns about Ukraine’s move towards Nato were never addressed until he forced the issue onto the table at the start of 2022 with ultimata and then a war.

 

New BRICS on the bloc

The war in Ukraine has brought about a polarisation between the developed and the developing world. Three decades ago the world was united into a single market after the socialist experiment collapsed. Three billion capitalists were almost overnight joined by 3bn former communists into a common people united by a common ideology. The first decade was chaotic as the old systems collapsed. The second was a golden era as the new economies emerged and grew rapidly to catch up with the West. But now we are in a third period when the newly minted countries, some of them very large and powerful, are starting to flex their political muscles on the international stage.

The developed world is not comfortable with these changes. Rather than embracing China and Russia and welcoming them into the international capitalist community, in his first major foreign policy speech, US Secretary of State Antony Blinken called both rivals, and the US has policies designed to contain both.

The war in Ukraine has brought all these tensions to the fore as the US tries to fulfil its self-appointed role as “leader of the free world” and use its considerable power to persuade, cajole or bully EMs into signing up to its sanctions on the Russian regime.

The reaction of the biggest EMs has been to actively start building institutions to counter this US-led pressure. While on tour in Brazil in the middle of April, Lavrov noted that Brazil takes the presidency of the G20 next year, "and we will chair BRICS," Lavrov said. "In terms of co-ordinating our foreign policy activities, this creates a good opportunity to see how we could take advantage of a situation where all BRICS members are also part of the G20 to ensure mutual benefits," Lavrov emphasised.

China’s President Xi Jinping has taken a similar line, and travelled to Moscow in March in an ostentatious show of support for President Putin that was an open challenge to the US’ claim to lead on the international stage. Xi’s parting words to Putin were: “Right now there are changes the likes of which we haven't seen for 100 years – and we are the ones driving these changes together.”

The catalyst of the Ukraine crisis has put steel in the political will to break the US hegemony. EM countries are now actively building non-Western dependent multinational institutions and rapidly de-dollarising, amongst other things. As the biggest and most powerful of all the BRICS – its GDP is twice the size of all the other four combined – Beijing has become the epicentre of this change and has drawn in an endless string of leaders from both developed and developing worlds in the last months.

French President Emmanuel Macron toured Africa before going to Beijing with President of the European Commission Ursula von der Leyen to argue his case. German Foreign Minister Annalena Baerbock was also there a week later, followed by Brazilian President Luiz Inácio Lula da Silva.

Relations with India have also blossomed since the war started, with India going from nothing to one of Russia’s biggest buyers of oil together with China. And India is ramping up the purchase of all sorts of commodities from Russia as well as major investments in industry and the new Kudankulam nuclear power plant (NPP). Delhi has also joined the drive to get out of the dollar and settle its international trade in local currencies. Indian refineries last month started settling their import bill in rubles not dollars.

Oil, arms, nuclear power, commodities and trade. This is the cement Russia is using to build up the BRICS bloc and a programme China is happy to participate in.

When Lula joined the throngs of touring diplomats arriving in Beijing he signed joint investment projects and showed solidarity with the increasingly united BRICS front.

Like many, Lula would like to see the destructive showdown end, and made a point of flying on for a short tour of Europe after his Chinese trip was over. At the same time, he is hoping to increase Brazil’s standing as the leading economy in South America by raising his international profile. But in statements to the press, Lula made it clear he agrees with the BRICS basic premise: the EMs need to have more sway in international affairs and the US has too much.

Many countries in Africa and Latin America, long ignored by the international community, have willingly flocked to the BRICS bloc. The 15^th BRICS summit is due to be held in South Africa in August, where it will discuss taking in 17 new members from Asia, Africa, South America and the Middle East, among other things. The US applied to attend the event and was refused.

Many of the new would be members, including Venezuela and Iran, have already been on the receiving end of US sanctions and even bombing runs, while most of the others still bear a grudge for the “vaccine apartheid”, when the West not only withheld supplies of its own coronavirus vaccines, but actively put pressure on South American governments to refuse Russia’s offer to sell its highly effective Sputnik V vaccine cheaply.

The Middle East is another region where relations with the US have rapidly soured since the so-called shale revolution made the US a net exporter of oil in direct competition with the Middle East. Notably, Russia rebuffed OPEC’s first offer to join the oil cartel in 1983, but finally succumbed to OPEC+ in only 2016 after tensions with the Western ratcheted rapidly upwards after the annexation of Crimea two years earlier.

Another aspect of the new BRICS bloc is that between Russia, the Kingdom of Saudi Arabia (KSA) and Venezuela, it will control a large swathe of global oil and gas production. Indeed, most of the BRICS are also major commodity producers accounting for large shares in agriculture, minerals and metals, as well as major arms producers.

 

Trade booms

This is not a new Cold War. As everyone is a capitalist now, as bne IntelliNews has reported, this is an increasingly fractured world, but it is not divided into two camps. Most of the EMs want to maintain cordial and commercial relations with the West.

Given the choice, most countries would prefer to sit on the fence, especially the poorer ones that are simply trying to earn enough money to fund their ongoing development. A survey of MENA countries made by bne IntelliNews’ sister publication bna IntelliNews found that most of the northern African countries see the war in Ukraine as a European problem that has little to do with them. Their relationship with Russia is simply as a trade partner that provides essential energy, raw materials and arms. To earn some brownie points with Moscow, Egypt, one of Russia’s closest partners in Africa, briefly considered selling Moscow 40,000 rockets, according to recently leaked US intelligence documents, but backed away from the idea as too risky.

However, as the West increasingly finds itself playing a game of whack-a-mole in trying to enforce the sanctions, fence-sitting is becoming increasingly difficult. Russia has largely managed to evade sanctions so far and indeed so successfully that in 2022 it earned more money from oil and gas exports than it has earned in any year since the fall of the Soviet Union; the current account surplus was an astonishing $227bn – twice the previous all-time record set only a year earlier.

Russia has been able to co-operate with “friendly” countries to find alternative routes to import banned goods. Western and Russian diplomats are travelling the world to drum up support for their sides, and as soon as one route is closed another opens. In April, Turkey, Hungary and Serbia – all strong Russia supporters in Europe – said they were going to “rethink” their relations with Russia after coming under intense US pressure. Turkey even went as far as halting exports to Russia overnight, but within weeks Russian trade via the breakaway and Russian-backed Abkhazia sprang up to replace it.

Blinken travelled to Kazakhstan and Uzbekistan in April to exhort their leadership to enforce Western sanctions with mixed results. He received due lip service. Kazakhstan has imposed stricter inspections on exports to make sure they are sanctions-compliant in the last month, while its leading metallurgical companies have broken off relations with their Russian counterparts in May, a month after a Blinken trip to Central Asia.

However, Russia is too big to ignore and its trade with all these countries has soared in the last year. Washing machines have been a particularly hot item, as they carry chips that Russia can use to build smart missiles and repair tanks. And new routes are constantly appearing.

Kazakh and Uzbekistan have increased the number of joint projects they do with Russia threefold over the last year, according to Industry and Infrastructural Development Minister of Kazakhstan Marat Karabaev. Trade between Kyrgyzstan and Russia hit a new all-time high after expanding by more than 40% in 2022 to a record $3.23bn, according to Kyrgyz Chairman of the Cabinet Akylbek Japarov. And trade with Georgia has also hit an all-time high. In the first quarter, Russian goods imports to Georgia grew by 79% year on year, while Georgia's export of goods to Russia increased by 61%. Georgia has become more economically dependent on Russia than at any time since its independence in 1991.

 

Talking past each other

Countries in Central Asia and the Caucasus have little choice but to trade with Russia, which dominates their regions, and the same is true, to a lesser extent, with other EM countries; North Africa remains heavily dependent on Russian wheat, fertilisers, energy and arms.

But the Western diplomats on the road don't seem to understand the commercial imperatives for these countries and instead give long lectures about values and international law.

The EMs are getting thoroughly fed up with being lectured to by the West – a theme that Putin has been happy to play on. During his speech to 40 African lawmakers who were in Moscow at the same time as President Xi’s visit in March, Putin said: ““Ever since the African peoples’ heroic struggle for independence, it has been common knowledge that the Soviet Union provided significant support to the peoples of Africa in their fight against colonialism, racism and apartheid, how it helped many African countries to gain and protect their sovereignty, and consistently supported them in building their statehood, strengthening defence capabilities, laying the foundations of their national economies and workforce training,” Putin told the delegates to a ringing round of applause.

Russia was the first to make explicit its intolerance of being told what to do – and sanctioned if it didn't comply. In February 2020, during a visit to Moscow by the High Representative of the European Union for Foreign Affairs Joseph Borrell, Russian Foreign Minister Sergei Lavrov threw down the gauntlet in his “New rules of the game” speech. In a new hard foreign policy, Lavrov said that the Kremlin would no longer tolerate the dual policy of being told what to do on one hand, and expected to do business with the other. He went on to threaten to break off diplomatic relations with Europe if Brussels didn't agree, and expelled three European diplomats while he was physically in a meeting with Borrell, who was still unaware what was going on.

Most of the EMs have the same complaint but they are not willing to risk war with the West over the dual policy of sanctions and business. But that dual policy remains the mainstay of Western diplomacy. However, now there appears to be a creeping realisation that a carrot and stick approach to international relations may not work as well any more.

In a major policy speech in April, US Treasury Secretary Janet Yellen in a continuation of the dual policy of carrots and sticks with one hand she reached out to Beijing, calling on it to maintain “constructive and fair economic relations”, but on the other warned that the US would have “frank” talks with Beijing if the US strategic interests were threatened, for which most commentators read “Taiwan.”

“The US will assert ourselves when our vital interests are at stake,” the Treasury Secretary said. “But we do not seek to ‘decouple’ our economy from China’s. A full separation of our economies would be disastrous for both countries. It would be destabilising for the rest of the world.”

That is just what Russia has done – and to Europe’s cost, although it has affected the US much less, as it is not reliant on Russian imports. The US, however, is very reliant on Chinese imports after the globalisation of the last decades has led to the US moving much of its factory work to EMs. If trade relations with China were broken off, then making iPhones, and many other products across a wide spectrum of industries, suddenly becomes difficult.

Yellen’s comments on maintaining economic co-operation must ring hollow in the Chinese capital after the introduction of the new CHIPS legislation, which specifically bans exports or sharing the US’ best electronic technology with China.

Lecturing EMs is not limited to US diplomats. Europeans regularly indulge in the same and German Foreign Minister Annalena Baerbock did the same thing, lambasting Beijing for not condemning Russia’s invasion of Ukraine and threatening China with “consequences” if it sold arms to Russia from a podium next to her counterpart Qin Gang.

"We cannot get around China," she clarified, adding that the economic relations between the two countries are "good and important." German trade turnover with China is €300bn a year, a third more than Russia and on a par with Russia’s entire trade with all the EU. Bilateral co-operation should continue, but Germany "should not be naive," Baerbock said. As part of the government's planned China strategy, Baerbock said that "we must safeguard freedom and the rule of law in the long term" and "stand up for the international order with a clear stance."

Qin’s response was rather bemused, as China has already pledged not to sell arms to Russia, explaining that China’s policy is not to inflame the situation, before he politely went on to say that China will do whatever it feels is in its best interests and doesn't need German advice.

Macron was in Beijing in April, where he took a much more conciliatory and statesman-like line. He caused waves by telling journalists on the plane on the way home that Europe should take charge of its own destiny and “not follow where the US leads.” He went on to add that Europe should become its own superpower – a third pillar of the international order – but was accused of being tricked by Xi into peeling Europe off from the US ahead of a widely anticipated confrontation between the two.

Macron got roasted for his comments, accused of appeasement and being tricked by Xi, who was trying to peel the EU off from the US by offering France a series of lucrative investment deals.

Despite Macron’s statesmanship, his message will not be welcomed by EMs, as for them it is just a reshuffle at the top, with the West intending to continue to dominate the rest but reshuffling the chairs at top table. What the EMs are calling for is a wholesale remake of the global order, a “democratisation” at a sovereign level, that takes their interests more into account.

It is something that all the members of the emerging BRICS bloc have in common: they reject the Western premise that they are the “leaders of the world” and don’t see themselves as in competition with the West but partners. Except they reject the West’s self-appointed role as “global policeman” or the right to interfere in any country’s domestic affairs.

Colonial resentment

This resentment of living in a two-tier system where the US, France, German and the UK make all the rules is becoming more visible thanks to the Ukraine war.

Hungarian President Viktor Orban has long admired Putin and Hungary’s economy remains one of the most dependent on Russian supplies of materials and energy. But Orban has been an outspoken supporter of Putin and frequently clashed with Brussels, and not only over Russia; Hungary resents getting orders from Brussels in general.

Likewise, Turkish President Recep Tayyip Erdogan has sought to benefit from the sanctions on Russia by boosting trade and playing middleman between the two warring sides.

But maybe the most outspoken of the second tier European states is Serbia. Sofia too has long and deep historical and cultural ties to Russia and Serbian President Aleksandar Vucic has emerged as one of the most outspoken critics of the sanctions regime who, like Lavrov, has taken the unusual step of speaking out against the pressure the rest of the EU has exerted on Serbia to join the sanctions regime.

Vucic complained in a recent interview with TV Prva that the Swedish Foreign Minister Tobias Billstrom told him “over and over again” to impose anti-Russian sanctions, and threatened to block Serbia’s accession to the EU if it did not join Nato.

"He said our European path depends on that," the Serbian leader related. "He said that Serbia must join Nato, because Russia had shown that it is a threat to everyone. We cannot join Nato, because it was Nato that threatened us – a country whose troops have never crossed another country’s border. Yet you were the ones to come to our territory and kill our people here. We will never join Nato, we will maintain our military neutrality.”

Serbs are already angry at the US, which has spent more than $1bn on upgrading Camp Bondsteel in Kosovo, which was established during the Nato campaign in the Balkans and used to bomb Serbia, as bne IntelliNews reported in feature Playing Real Risk. It continues to threaten the region and is hugely controversial.

The Serbian example is especially telling, as the Balkan campaign at the end of the 1990s is one of the examples where Nato acted as an aggressor and not defensively, bombing Serbia, albeit to stop the genocide that was going on in the country at the time.

The resentment at Western lectures is even more pronounced in Africa, which is still visibly smarting from their colonial experience. Lavrov was touring Africa in the middle of April to warm receptions all round, but when French President Emmanuel Macron went on a four country tour of francophone countries he faced protests at nearly every stop.

Macron was badly caught off guard and roasted on live TV by Felix Tshisekedi, the President of the Democratic Republic of Congo, during a joint televised press conference two weeks ago. “This must change, the way Europe and France treat us, you must begin to respect us and see Africa in a different way,” Tshisekedi said. “You have to stop treating us and talking to us in a paternalistic tone. As if you were already absolutely right and we were not.”

On each of the stops Macron made on his trip he was met by demonstrations outside the French embassy with locals protesting against their colonialist past.

Part of the problem is that the EMs don't believe that the “values” espoused by the West are genuine, but merely an excuse by the West to continue profiteering from such EMs.

And the West is compromised by commercial interests, as illustrated by the dispute over Ukraine’s grain exports in April. Poland, by far Ukraine’s most ardent supporter in Europe, banned imports of Ukrainian grain because it had knocked the bottom out of the local grain market, and its own powerful farm lobby was losing money. Moreover, the need to cut the Black Sea grain deal that was renewed in March was widely reported as necessary to avoid a global food crisis and famine in Africa. As bne IntelliNews reported, the bulk of Ukraine’s grain was sent to the EU, where it was sold cheaply to fulfil commercial contracts, feed Spanish pigs or make biofuels. Only 17% of Ukraine’s exports went to Africa last year – a point not lost on the Kremlin.

"It is an open secret that the lion's share of shipments are effectuated under commercial contracts in the interests of developed nations, while the deliveries of agricultural products to the poorest countries, which the White House is so vigorously concerned about in public, fell to a meagre 2.6%," the Russian Embassy in Washington said in a statement in April, a fact that has been backed up by EU official export statistics.

The rise of the EMs and their insistence on more say in global politics is a dangerous situation. At the turn of last century the rapidly industrialising Germany had similar complaints as it pushed for more say against the diplomatic hegemony of Britain, at the height of its power, and France that dominated European politics. The two old war powers were unwilling to give, and that dispute resulted in WWI.

Today we find ourselves in frighteningly similar circumstances. The Nato involvement in the war is slowly escalating. In a recent interview with bne IntelliNews, Russian oligarch-turned-dissident Mikhail Khodorkovsky said: “If we had given Ukraine all the weapons we have given them in the last year then this war would have been over in a week.”

A Ukrainian spring offensive is due in Ukraine soon and Nato Secretary-General Jens Stoltenberg says that 98% of the military equipment promised to Ukraine “has been delivered”, including 230 tanks. If they are all thrown into the fray at once then Russia could receive a hammer blow, which the West is hoping will result in peace talks, but it could just as easily lead to further, and a much more serious, escalation. Until now the Western line has been that it is helping Ukraine to defend itself, but if Russia actually starts losing the war, the Kremlin could take the line that the West has changed from defence to offence – and that would constitute an attack by Nato on Russia. Then all bets are off.