By Shakthi de Silva
Of late, headlines have been dominated by news of the BRICS deciding, at its 15th Summit in Johannesburg, to add six new members from 2024. The news should not necessarily come as a surprise, as the original members, Brazil, Russia, India, China, and South Africa, agreed during the 14th BRICS Summit in Beijing to add new members to the bloc.
What is of importance are the ramifications that multilateral forums like the BRICS and SCO may have on the international order. How should the increase in members be interpreted? Will a multipolar order augur more stability in the world? Before we unpack both questions, let us first explore what makes the group important.
BRICS presently accounts for 42 percent of the world’s population and 32 percent of the global economy, and has been viewed by some as a Global South alternative to the G7, especially after it formed the New Development Bank in 2014. The grouping was initially formed with the intention of facilitating the transition from a unipolar world, dominated by the United States and its 1945 institutions, to a multipolar world order.
These countries believed that the latter, i.e. a multipolar order, would allow developing nations greater opportunities to enhance economic cooperation and establish alternative financial arrangements and institutions. Indeed, the fact that, to date, 40 nations have applied to be part of the BRICS shows that the forum has effectively tapped into the Global South’s apprehensions towards US financial dominance.
Although BRICS nations have surpassed the G7 in terms of GDP based on purchasing power parity, starry-eyed analysts remain disconsolate as BRICS economies have not done well in recent years. This has intensified claims from some quarters that the bloc is no longer as significant as it was once thought to be. It is in this backdrop that BRICS admitted Argentina, Egypt, Ethiopia (Africa’s second most populous nation), Iran, Saudi Arabia, and UAE to its fold. Many believe that China played a major role in this expansion.
In recent years, China has gradually increased its footprint around the world. As recently, as March this year, Beijing brokered a major breakthrough by rekindling diplomatic ties between Saudi Arabia and Iran after a hiatus of seven years.
The inclusion of both nations in the BRICS a few months later could, therefore, also be attributed to Beijing. Speaking at the China-Africa Leaders’ Dialogue, Chinese President Xi Jinping stated that African nations should join the People’s Republic of China in “unequivocally opposing vestiges of colonialism and hegemonism” and help create a more “just and equitable international order”, presumably more along the lines of Chinese interests at the expense of the West.
De-dollarization involves a country’s decision to reduce dependence on the US dollar in global trade and instead shift to alternative exchange methods such using local currency. Studies indicate that the share of the US dollar (USD) in Russia-China bilateral trade fell from nearly 90 percent in 2015 to just 46 percent by 2020.
The two nations also launched a cross-border payment mechanism in response to Western efforts to keep Russia out of the US-dominated Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. In that regard, Western concerns of de-dollarization intensified following news that Saudi Arabia, UAE and Iran – three major oil producing nations – are among those newly included in the bloc.
Oil has historically been traded using the US dollar. Some argue that if all BRICS nations decide to permanently trade oil using their local currency it would have significant ramifications on American economic hegemony. Others debunk such claims citing examples where oil has already been settled in Yuan, Russian Ruble, and the Indian Rupee without a corresponding move to comprehensively de-dollarize.
Regardless of whether BRICS nations do end up permanently using local currency to trade oil or not, trends towards de-dollarization are already visible according to some who cite IMF reports indicating a declining share of USD held by Central Banks and Argentina’s decision to pay off its debt to the IMF using Yuan.
Gita Gopinath, the IMF’s Deputy Managing Director, among others, have warned that the US decision to weaponize the dollar against some nations would contribute to the erosion of its role in the global financial architecture. Such apprehensions intensified after Saudi Arabia’s Finance Minister announced earlier this year that they were considering the possibility of trading in other currencies alongside the US dollar.
Others discount such fears by claiming that de-dollarization requires the harmonization of economic policies of BRICS nations, which unlikely, as each BRICS nation has a unique economic landscape and varied economic interests. They argue that the difficultly of harmonizing economic policies, coupled with the fact that the US maintains strong trade relations with most of the BRICS economies, make this possibility doubtful.
Regardless of whether de-dollarization does or does not materialize in the near term, BRICS powers appear to be increasingly inclined to wield their agency in global politics and enhance existing relations with other nations from the Global South.
This trend is also evident when one examines recent developments in the Shanghai Cooperation Organization (SCO). The organization was founded in Shanghai in 2001 and, at the onset, consisted of several Central Asian nations alongside China and Russia. It was formed chiefly to deal with three evils in the region (terrorism, separatism, and extremism), as well as to enhance diplomatic and economic ties between its members.
Sri Lanka was granted Dialogue Partner status in 2009 while India and Pakistan became full members in 2017. Iran became the latest member to join the grouping in 2023. Speaking at the SCO, Iranian President Raisi stated, in no uncertain terms, that the grouping should actively look into using their national currencies and it should limit the use of the US Dollar for international financial transactions.
Including Iran, the SCO now has 43 percent of the world’s population and a combined GDP of 30 percent, a 13-fold increase since its founding. If SCO members do decide to adopt such measures, a combined SCO and BRICS move to transact with local currencies would spell out serious negative ramifications on the US economy.
Does a multipolar world carry a higher probability for international peace and stability? Should we welcome steps taken by great powers to join multilateral arrangements? On both questions, international relations scholars disagree. Classical Realists who follow the writings of Hans Morgenthau and Henry Kissinger believe multipolar arrangements are more likely to result in a balance of power. Such balances of power would ensure that great powers are not able to easily engage in belligerent measures.
This is because other great powers would clamp down on such aspirations and actively balance against it, thereby ensuring international stability. Stability is, therefore, most likely to ensue through multipolarity according to Classical Realists.
Structural Realists or Neo-Realists such as Kenneth Waltz, on the other hand, contend that bipolarity – as was visible during the Cold War between the United States and the Soviet Union – is more likely to lead to international stability. They cite the multipolar power arrangement during the pre-World War I period as evidence suggesting that multipolar orders are inherently more dangerous and unpredictable.
Although disagreements persist over which international power configuration is most likely to engender international stability, it is increasingly evident that the world is becoming more multipolar. The growth in membership of SCO and BRICS makes this evident to all of us. If so, should Sri Lanka welcome these developments? Yes.
Increased interactions may lead to stronger connections between nations and may also limit tendencies to behave aggressively. Moreover, as a small state dependent on amicable ties with contending great powers such as the US, China, and India, it makes strategic sense to use multilateral forums as avenues to enhance existing bilateral ties with great powers. In sum, I believe that the increase in membership should be welcomed.
Moreover, if extant norms and rules of international conduct continue to be formally acknowledged and adhered to by both institutions’ members, then the probability of international stability in a multipolar world order is equally likely.
Shakthi de Silva is a Non-Resident Vasey Fellow at Pacific Forum International (2023-2024) and a Visiting Lecturer at the Royal Institute of Colombo, where he teaches courses on International Relations. He previously served as a Lecturer at the University of Colombo (Sri Lanka) and as a Researcher for think tanks in the Sri Lankan Defence Ministry and Ministry of Foreign Affairs. His publications have been featured in the Journal of the Indian Ocean Region, Journal on Defence & Policy Analysis, and South Asian Survey.
Factum is an Asia Pacific-focused think tank on International Relations, Tech Cooperation, and Strategic Communications accessible via www.factum.lk.
The views expressed here are the author’s own and do not necessarily reflect the organization’s.
