BRICS UFA Summit 2015 What did it Offer?

Cover Story

In 2014, the group accounted for 13 percent of global services, 45 percent of the world's agricultural output and over 17 percent of global trade

BRICS Summit 2015 held at Ufa is the most significant diplomatic event of the year. Held under the theme ‘BRICS Partnership: A Powerful Factor of Global Development’, the high profile gathering manifested the new power arrangement of the world order as well as the prospective emergence of a multipolar world in the coming decades.

It is evident that hosting both the BRICS and the SCO Summits at Ufa had a symbolic underpinning. The Eurasian nation of Russia is at present confronted by a standoff with the West, namely Europe and the USA. The active Western endeavour to push it out of the Euro-Atlantic space has driven Russia closer to the global South. However, prior to this standoff, Russia stood as a bridge between the two worlds. Thus, Ufa being located in central Russia not only stressed the country’s colossal size, but also symbolically implied Russia’s position between the West and the East. The other reason was, Ufa being the capital of Bashkortostan Republic - a predominantly Islamic majority state - would promote its image of being a tolerant multi-ethnic country.

BRICS: A Significant Global Player?

Since its inception, the BRIC was viewed as a group of rising powers which would, in due course of time, transform global governance. At this point of time, the bloc represented only 15 percent of the GNP of advanced economies such as Britain, US, Japan, Germany, Italy and France. Economists Roopa Purushothaman and Dominic Wilson had then predicted that within a period of 40 years, the BRIC countries would become the world’s ‘engine of new demand and spending power’. 1Subsequently, the year 2011 marked a watershed in the history of the BRICS bloc, as South Africa joined the group.

In 2014, the group accounted for 13 percent of global services, 45 percent of the world’s agricultural output and over 17 percent of global trade. Further, the combined GDP of the member nations have surged from $10 trillion in 2001 to $32.5 trillion in 2014.2 At present, the member nations collectively account for 25 percent of global GNP and 40 percent of the world’s population. 3

Over a period of six years, the world has witnessed significant consolidation of intra-BRICS ties. The group has also drawn immense appreciation and visibility in the international sphere due to its innovations: the New Development Bank (NDB) and the Contingency Reserve Agreement (CRA).

The Present Geopolitical Scenario

The Ufa Summit was held at a time when the geo-politics of the world order is undergoing substantial transformation. Russia is on the brink of a full scale conflict with the West, while China’s growing power profile in Asia and its assertive foreign policy behaviour has fuelled US’s frustration.

Interestingly, the five BRICS (Brazil, Russia, India, China and South Africa) countries had gathered at Ufa to fulfil their own political and strategic agenda. To begin with, Russia hosted the two-day summit at Ufa to prove the non-existence of its diplomatic isolation in the face of its standoff with the West on the Ukraine issue and to garner support in its favour and against the unilateral sanctions imposed by the West.

Prime Minister Narendra Modi had put into play his deft diplomacy to arrive at a rapprochement with the US on one hand, and forging closer ties with the BRICS members to wheedle out political, economic and strategic benefits for India. He met Chinese President Xi Jinping and Russian President Putin prior to the BRICS Summit. As part of his neighbourhood diplomacy, he held bilateral talks with Pakistani Prime Minister Nawaz Sharif, Afghan President Ashraf Ghani and Iranian President Sheikh Hassan Rouhani on the sidelines of the SCO Summit at Ufa.

In particular, his interaction with Pakistani counterpart Nawaz Sharif was declared successful. The bilateral talks have concluded that both sides would expedite the 26/11 Mumbai attacks trial and that their national security advisors would soon meet in New Delhi to discuss the issue of terrorism. Further, PM Narendra Modi was invited to make his first ever state visit to Pakistan in 2016 to participate in the SAARC Summit, scheduled to be held in Islamabad.

South Africa viewed BRICS as a platform to promote its bilateral ties to forge commercial alliances and sought visibility and recognition for its global profile.

Brazil seemed cautious in its approach at the Ufa Summit. In view of its economic slowdown and internal political feud, it was careful not to antagonise the USA. Simultaneously, it had sought to balance its relations with the emerging countries by participating in the Summit. A case in point is Brazilian president’s sojourn to the US before his visit to Moscow.

Quite clearly, China offered active participation in the BRICS Summit to bring about an alternative to the West-led world and economic orders and promote the idea of its peaceful rise and its paradigm of Beijing Consensus. The momentous aspect of the Summit was clearly the newfound Sino-Russian bonhomie, which sought to challenge the West and commence a ‘new just world order’.

BRICS New Development Bank and the Politics Behind it

The commencement of the BRICS New Development Bank, on the eve of the Ufa Summit, was a challenge to the present economic status quo. Shortly after its commencement, it was announced that the bank would receive rating in the near future and would be adept at financing its first projects by the end of the year.

Although the scope of the new bank adheres to financing infrastructural projects for the BRICS nations as well as other developing countries and emerging markets, yet its immediate priority rests on focusing on investments in projects within the BRICS countries.

The bank has begun operation with a currency reserve pool of $100 billion. China’s contribution is $41 billion; India, Brazil and Russia committing $18 billion each and South Africa offering a sum of $5 billion. The objective behind establishing this pool is to facilitate the Central Banks of the member nations to lend each other resources when the concerned country is confronted with crisis of dollar liquidity. However, behind this vision a deep rooted politics is at play. China, in line with its desire to emerge as a global power, seeks to expand its political clout within the BRICS grouping as well. Not only has it contributed the largest share in the reserve pool, but also contested successfully in making Shanghai the headquarter of the Bank. Once again, it has sought to use the path of commercial diplomacy to gain a foothold in these five developing economies.

However, despite the meticulous articulation of an economic strategy to bind the member nations together, the issue of a currency union did not feature in the agenda of the Ufa Summit. This is because the creation of such a financial union would require the implementation of several measures such as technical regulation, and the integration of budgetary, custom and fiscal legislations.

Further, the establishment of the bank has brought with it a host of moral responsibilities for the member nations. Since at the outset, it has been viewed as an institution that seeks to challenge the grand old tradition of American monopoly and global banking strangulation, it is imperative that the Bank lives up to the expectations of its members in the years ahead. Offering democratic decision-making procedures would be a key ingredient to its success. A few months ago, as many as 132 nations, which had for long appealed to the UN for a new financial paradigm, found hope in the BRICS Bank. Overall the BRICS body offers a constructive alternative to the G-7 grouping, in terms of being less bureaucratic and more democratic. It also poses a latent challenge to the idea of Washington Consensus.

Significance

The Ufa Summit was inaugurated at a time when power parity in the international order had undergone substantial variation from what existed during the previous summit at Fortaleza in Brazil last year. However, the satisfactory aspect of the meeting was that, it had been a step forward from the previous summit. Foremost evidence to this end was the resolution of differences between the heads of state and the successful establishment of the New Development Bank.

The Ufa Communiqué, adopted by the member countries, reflected the present global political and economic situation. It spelt out their concerns about the potential spillover effect of the ‘unconventional’ monetary policies of the advanced economies, asserted that the New Development Bank would be instrumental in financing infrastructure investment and sustainable development projects of the BRICS and other developing nations, welcomed the idea that the BRICS Bank would work closely with the China-led Asian Investment Infrastructure Bank (AIIB) in the first quarter of 2016, signed agreements of cooperation between the Central Banks of the member states and the New Development Bank, agreed to the creation of a joint BRICS website, criticised the adoption of double standards and the interventionist US foreign policy behaviour.4

The Communiqué endorsed consensus on several critical international issues such as world economic situation, 70th anniversary of the victory of World War II, UN reform and on a few regional issues such as Ukraine crisis, Iranian nuclear problem, Afghanistan issue and the Israeli-Palestinian conflict.

Another important document, proposed by Russia, was the ‘Strategy of BRICS Economic Partnership’. This is primarily a blueprint of the bloc’s commerce, trade and investment ties till 2020.

The significance of the Ufa Summit lay in falsifying certain verdicts of the Western pundits. Foremost being the perception that Russia would be isolated due to the Ukraine crisis. The solidarity expressed by the member nations against the economic and political sanctions released by the West over the last one year and especially in the Ufa Summit have proved this pre-conceived notion wrong. In fact, in the Ufa Communiqué, unilateral military interventions and economic sanctions in violation of international law was strictly condemned.

The group, which was once viewed by the West as deeply flawed and ‘a disparate quartet’, has over time emerged as a coherent faction, which seeks to work towards mutual advantage of all its members. In a way, the position of BRICS defines the manner in which global politics stands today. A case in point is the solidarity showcased by the member countries during the Victory Day celebrations held in Moscow on May 9, 2015, to commemorate the role of the Red Army in defeating Germany during World War II. The resolution of differences and the establishment of the BRICS New Development Bank and the Contingency Reserve Agreement have proved the Western notion wrong and recognised that diverse development models could ideally work together.

The new dynamism of the Sino-Russian ‘Strategic Partnership’ had found pronounced expression at the Ufa Summit. The bilateral relationship that has undergone substantial transformation from being the ‘worst security nightmare’ to an alliance based on ‘common strategic vision’ poses significant challenge to the West-led unipolar world order and the idea of Washington Consensus. In a way the West has, through its activities, pushed the two countries towards each other. A case in point is the statement made by US Deputy Secretary of State Antony Blinken where he had compared the crisis in eastern Ukraine to that of the South China Sea territorial dispute. This has reinforced the belief in both China and Russia that Washington was a common adversary and closer ties would serve mutual strategic interests. Thus, Ufa was a platform that not only brought China and Russia closer, but also drew India towards them.

The three countries have also engaged with each other through several projects initiated by China, such as the ‘One Belt One Road’ and the Asian Investment Infrastructure Bank (AIIB). The ratio of the voting share of China, India and Russia in the AIIB are 26.06 percent, 7.5 percent and 5.92 percent respectively.5 The core issues that have acted as a common ground bringing the three countries together is the desire to shift out of the shadow of US hegemony and build a multipolar world. Russia, which sought to admit India as a member in the Shanghai Cooperation Organisation, had definitely used the BRICS Ufa Summit as a platform to forge closer ties with it.

It has been long since the demand of BRICS members for a greater voice in the West controlled World Bank and IMF has been met. A case in point is the voting share of US, Japan and China (16.75%, 6.23% and 3.81% respectively) in IMF. These US-led organisations have for long wielded a stranglehold over the world and have left the Second and Third World countries in great debt. Currency wars are a manifestation of such state of affairs. The Greece-EU standoff is evidence to this end, pushing Athens towards the BRICS paradigm of doing business. Exasperated by US high handedness, these countries have found a viable and ‘just’ alternative in the China-led Asian Investment Infrastructure Bank and the BRICS New Development Bank (NDB).

At the Ufa summit, the BRICS group had also announced measures that would be undertaken to reform the intra-group by using local currencies. Successful implementation of such a reform would insulate the group from the present over-dependence on the US dollar and the West dominated financial system.6

Mention must be made of the first ever conference of BRICS environment ministers that took place in Moscow, just days before the summit leading to the establishment of a steering committee to coordinate efforts and share technologies. Hereafter, BRICS would provide a platform to its members to share environment-friendly technologies and knowhow with their public and private stakeholders to their mutual benefit. To add to it, the commencement of the BRICS Development Bank would now facilitate various environment projects to gain funds and consequently curb the menace of environment degradation.

The summit witnessed history being made with the commencement of the BRICS Development Bank. Away from the monopoly ridden regime of the IMF and World Bank, the element of democracy is visibly strong in the very structure of the BRICS NDB. Former Chief of India’s ICICI Bank, K V Kamath has been appointed as the first head of the $100 billion bank for the first five years, to be followed by Brazil and Russia; the headquarter is located in Shanghai and the board chair hails from Brazil.

Although the BRICS nations have ritually reiterated the fact that the NDB and CRA are enmeshed in the prevailing principles of the World Bank and IMF, yet in reality they offer a viable alternative to them. It is expected that in due course of time, both the NDB and the CRA would be instrumental in conferring a greater voice to the demands of the BRICS nations in the West-led institutions.

Apart from reaping economic benefits, the summit has also provided a platform to its members for harping onto the chords of harmony both at the political level as well as in terms of expanding their soft power strategies. The immensely diverse cultures, political systems and societies of the five members create fertile ground to engage with each other in the international sphere in new ways.

Final Thoughts

The dynamism of the BRICS grouping lay in its diversity. Neither is there consistency among member nations with regard to their present stage of development nor do they share the same geopolitical outlook. However, a common factor that binds them together is their brand of being labelled as ‘Resource Powers’. The BRICS nations, which are well endowed with energy and mineral reserves, underline commercial diplomacy as the cornerstone of their foreign policy. It is quite evident from the Ufa Summit that ‘economics’ has once again dominated the agenda of the meet. To add to it, issues of global governance and democratisation of international relations have also been key topics of deliberation. Thus, in view of the increasing coherence of the BRICS bloc and its stance on critical issues of international affairs, the group is likely to be a force to reckon with in the near future.

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Author

Shaheli Das

Shaheli Das (M.Phil - East Asian Studies with specialization in China) is a Research Associate at the Centre for Air Power Studies.

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    References

    1 Leslie Elliot Armijo, “The BRICS Countries (Brazil, Russia, India and China) as Analytical Category: Mirage or Insight?”, Asian Perspective, Vol 31, No. 4, 2007, pp-7-42.

    2 Alexey Timofeychev, “ BRICS Development Bank Begins Operation on the Eve of Ufa Summit”, Russia Beyond the Headlines, July 8, 2015.

    3 ‘BRICS Members Aim to Introduce Business Travel Card’ , India and Russia Report, May 21, 2015 http://in.rbth.com/world/2015/05/21/brics_members_aim_to_introduce_business_travel_card_43245.html

    4 “BRICS Adopts Ufa Declaration”, The BRICS Post, July 9, 2015.

    5 “ BRICS Face Down Global Instability”, The BRICS Post, July 8, 2015.

    6 Vladimir Mikheev and Sergey Strokan, “ Would Hillary Clinton Reset Relations With Russia?; BRICS : Credible Rival to the G7 AT Last ?; SCO : No Longer a ‘Paper Tiger’ ?, Russia Beyond the Headlines, July 9, 2015

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