Will BRIC be a real power?

New kids on the bloc – but will BRIC be a real power?

Published Date: 21 June 2009

IT BEGAN eight years ago as an acronym coined in an economic paper by an investment bank. The BRIC group – Brazil, Russia, India, China – was identified by Goldman Sachs as being the four countries expected to grow so fast that they would surpass today's largest economies by 2050. Last week, BRIC became more than a paper exercise when the four leaders of the nations involved met for their first summit in the Russian city of Yekaterinburg.

The two-day meeting between Chinese premier Hu Jintao, Russian leader Dmitri Medvedev, India's prime minister Manmohan Singh and the Brazilian president Luiz Inácio Lula da Silva may not have produced anything more concrete than a pledge to meet again in Brazil next year. But it nevertheless signalled the emergence of a new power bloc that could become a serious player in global financial and territorial politics.

The feeling is that for too long the United States and its western allies have dominated global strategy. As the 21st century progresses, there will be a tectonic shift that will eventually nudge the US and Western Europe away from the centre of world productivity and power. As that happens, the thinking goes, why should the US and its allies be the dominant players even in the backyard of growing Eastern European, Asian and South American powerhouses?

Yet although the four countries already produce about 15 per cent of the world's gross domestic product and hold about 40 per cent of the gold and hard currency reserves, they are not a unified bloc. The formation of BRIC is intended to both put that right and flag up to the existing superpower blocs that their era of global dominance may be coming to an end.

According to Gregory Chin of York University in Toronto, who is studying the international roles of the BRIC and other emerging economies, the Yekaterinburg summit was to ensure a "common front" in negotiations with the currently richer powers.

"This was to make sure the developing countries' interests continue receiving attention at the G8 and G20 meetings," said Chin. The next G8 summit for developed powers takes place in Italy next month, and the US will host the next G20 summit later in the year.

It's not just a matter of displaying a vague solidarity, however. To win real sway, BRIC governments need to agree a shared agenda that goes beyond simply asking for more places at the global top tables. Sharp differences between them make this difficult.

Russia's Medvedev insisted the main point of the summit was to show that BRIC should and could work towards creating conditions for a "more just world order". China, by far the most powerful BRIC nation, was largely silent in Yekaterinburg, however, and did not echo Russian and Brazilian calls for the BRIC powers to try to loosen the grip of the dollar on the world financial system.

Medvedev said: "There can be no successful currency system, and particularly a global system, if the financial instruments that are used are denominated in only one currency. Today, this is the case and the currency is the dollar."

China's silence on the subject was for good reason: Beijing's huge holdings of US bonds – $1.2 trillion, equivalent to about £768 billion – make it nervous about any tough talk that can drive down the value of those holdings.

The differences between China and Russia reflect style as well as substance. Zhao Huasheng of Fudan University in Shanghai, an expert on the two countries' ties, said: "Russia likes to take a high-profile, assertive stance at events such as this. That's long been a part of its foreign policy make-up. China prefers a more mild, low-key style … But that difference in style also reflects different strategic interests."

There is potential conflict between Russia and China on their strategies in Central Asia, a key source of energy and metals for Europe and Asia, and where both are vying for influence along with the US and other western powers.

At an earlier summit of the Shanghai Co-operation Organisation, China announced plans to give $10bn (about £6bn) of loans to Central Asian countries such as oil-rich Kazakhstan, regional power Uzbekistan and poorer nations Tajikistan and Kyrgyzstan, upstaging traditional power Russia, whose promises of aid have not been fully delivered amid the financial crisis.

"That raises the stakes for Russia," said Chris Weafer, chief strategist at Moscow brokerage Uralsib. "For while both China and Russia are keen to keep the US and Europe out of the region, Moscow is none too keen to be displaced as the political power in the region."

For now, the four-way courtship will continue, but how effective the bloc becomes will depend on how far it can agree a common agenda.

Pang Zhongying, an international relations expert at Renmin University in Beijing, said: "In many respects, their level of mutual closeness is far lower than their closeness to the West. The West could easily use conflicts between these forces to weaken their embryonic international co-ordination."

Russian political analyst Mikhail Vinagradov believes, China apart, that the bloc's usefulness is limited: "With India we have at least some co-operation in the military-technical sphere, (but] it is difficult to imagine what we might want from Brazil."