Six new members as BRICS trade bloc targets growing markets

The choices by the current members — Brazil, Russia, India, China and South Africa — contained a few surprises, the biggest being the addition of Iran, which joined three other Middle Eastern states: Saudi Arabia, the United Arab Emirates and Egypt. Argentina and Ethiopia rounded out the half-dozen nations tapped for inclusion, while Indonesia, which was thought to be among the top candidates for admission, did not make the cut.

The expansion was a victory for China who strongly backed the rapid addition of new members. But India was said to be concerned about adding nations close to Beijing; India and China have border disputes and tend to consider each other potential adversaries.

“The global growth momentum has weakened and the economic prospects have declined, owing to trade fragmentation, prolonged high inflation, tighter global financial conditions and in particular the increase in interest rates in advanced economies, geopolitical tensions and increased debt vulnerabilities,” the group said.

The bloc was established in 2009, with South Africa joining in 2010. The latest BRICS expansion comes amid widespread forecasts that emerging economies would grow faster than mature markets caught up in persisting inflation and geopolitical headwinds.

By volume, China and India have traditionally dominated trade among the BRICS countries. According to available data, between January and July this year, China’s intra-BRICS trade expanded 19% year on year, to some $331bn, representing approximately 10% of its total foreign trade. India reported more than $100bn in member nation trade last year.

Efforts have begun among BRICS members to develop alternative cross-border “non-dollar” payment systems, to sidestep the Swift network, after trade flows to/from Russia hit a roadblock with Ukraine invasion-related western sanctions.

China and India have significant trading interests with all the new BRICS entrants and, under the common platform, they will attempt to grab more opportunities through shared efforts. BRICS collectively accounts for some 26% of global GDP and is projected to reach about 37% at the expanded scale.

“With each of the BRICS members regional heavyweights in their own backyards, its development into the major global economic and trade powerhouse has every potential of manifesting itself,” said the chair of consulting firm Dezan Shira & Associates.

“It represents a huge consumer market, having large middle-class, natural resources, good communication and networks, a sound legal system and modern infrastructure.”

Transport industry observers generally believe the BRICS expansion will drive logistics demand across the territories as trade volumes ramp up and investors increasingly target growing and resilient markets.

A reliable source told The Loadstar that given BRIC’s growth potential, it could become the dominant economic bloc by 2050.

The past two decades have resulted in changes in the distribution of power and growth points in the global economy, reflected in the increasing economic power of emerging market economies. The broader bloc will create higher growth, thus influencing trade lanes, logistics policies and initiatives.

Also spotting this growth potential, container carriers have expanded connections between the Middle East and India in recent months. And there has been almost frenzied network expansion on intra-Asia trades, as trade diversification within the continent gains ground.

Here is a look at some of the new BRICS members:

Iran
Iran, which holds the world’s second-largest gas reserves and a quarter of the oil reserves in the Middle East, sought membership in BRICS to strengthen its economic and political ties with non-Western powers.

For the past few years, Iran has forged a deepening security and military partnership with Russia and bolstered its economic ties with China. The invitation to join BRICS was viewed by many as a reward.

Iran’s addition will almost undoubtedly increase geopolitical tensions with the West, which could make other current members of the bloc, like India, uncomfortable.

Iran’s economy ranked the 22nd-largest in the world in 2022, has been plagued by inflation, slow growth and economic sanctions from the United States. But the country has stayed afloat by selling discounted oil to China, among other maneuvers. It has also diversified its economy away from oil and increased trade with BRICS members.

Iran called the invitation to join BRICS a “historic achievement and a strategic victory.”

Saudi Arabia
The inclusion of Saudi Arabia and the United Arab Emirates, the Persian Gulf’s two biggest political and financial heavyweights and two of the world’s largest energy suppliers, is likely to give the bloc added heft in its quest to challenge the U.S.-dominated world order.

Both countries are longtime American allies who rely on the United States to protect them in a volatile region. But at the same time, both have chafed at the partnership in recent years, increasingly going their own way on issues like oil production, the war in Ukraine and their relationships with Iran and Syria — countries the United States would prefer to keep isolated.

Speaking at the BRICS summit in South Africa on Thursday, the Saudi foreign minister said his country and the BRICS members shared a strong belief in “respecting the independence and sovereignty of states, and not interfering in their affairs.”

Saudi Arabia sees joining the bloc as another step in its efforts to balance out its traditional partnerships with the United States and Europe with its largest trading partners in the East, China and India.

Saudi indicated that they had not yet decided on whether to join BRICS. They appreciated the invitation but were waiting for more details from the group on the nature of membership.

“Based on that and after our internal deliberations, we will make the appropriate decision,” Saudi told the local news media.

United Arab Emirates
The Emirates, like Saudi Arabia, has sought a bigger leadership role in the Middle East in recent years, even when that meant diverging from American interests.

Despite counting on American security guarantees, the Emirati ruler has cozied up to both Russia and China. He visited Russia twice over the past year to meet with its president and agreed to have the Emirati Air Force train with China in August 2023.

Economically, too, the Emirates has thrived on non-Western relationships. The glitzy city-state of Dubai is flush with Russian money, oil and gold that found a home there after Western sanctions hit Russia following its invasion of Ukraine. Its trade with India and China has flourished.

The country still gets most of its weaponry from the United States, and analysts say it is not about to abandon the United States’ security umbrella anytime soon.

But officials have expressed frustration with what they see as the United States’ failure to protect the Persian Gulf from threats from Iran, which gulf countries believe has launched attacks on both the Emirates and its close partner, Saudi Arabia, in recent years. And they are skeptical that the American leadership is truly committed to the Middle East.

Those concerns were factors in the Emirati and Saudi decisions to reach separate détentes with Iran, their longtime regional nemesis, making it possible for the first time in years for all three countries to belong to the same bloc.

Argentina
Argentina has the third-largest economy in Latin America, after Brazil and Mexico. Its backers in BRICS include India; Brazil, its largest trading partner; and China, with which it has increasingly close financial ties.

Argentina said in a recorded address on Thursday that entrance into BRICS represented an economic opportunity for his country which is mired in one of its worst financial crises in decades, with annual inflation surpassing 100 percent.

An international relations expert based in Buenos Aires said admission into BRICS would reinforce important markets for Argentina and open new ones. It will also provide new financing avenues once the country gains admission into the BRICS’s New Development Bank.

Egypt
Egypt is one of the top recipients of American aid but it has long maintained a strong relationship with Russia and has growing trade ties with China.

Its interest in weaning itself off American dependence strengthened over the last year and a half, as Egypt learned just how troublesome relying on the dollar can be. Russia’s invasion of Ukraine touched off a foreign currency crisis and then put the Egyptian economy in a tailspin.

Investors pulled billions of dollars out of Egypt in a panic, and crucial wheat and fuel imports, bought with dollars, soared in price. Some imports became scarce and prices rose.

The dollar shortage also made it harder for the country to repay its debts and forced it to devalue its currency steeply, worsening the pain for ordinary Egyptians.

Inside BRICS, Egypt could trade in local currency. It also hopes to attract more investment from member countries.

Ethiopia
Not long ago, Ethiopia was the rising star of Africa — one of the world’s fastest-growing economies, led by a dynamic young leader who had won a Nobel Peace Prize.

But two years of civil war in the Tigray region ruined most of that. The economy tanked, the United States cut trade privileges and suspended food aid to Ethiopia, and Ethiopia has struggled to hold together a volatile nation.

Although the Tigray conflict ended last November, Ethiopia’s forces have begun a new fight with powerful militias in another region.

For Ethiopia, BRICS offers an opportunity to move further from the American orbit. Ethiopia is already closely allied to the Emirates, which provided crucial military support during the Tigray war.

And economically, Ethiopia needs foreign help to bolster Ethiopia’s flagging currency and to seek new investments: This week, Ethiopia’s finance minister estimated it would cost $20 billion to rebuild from the Tigray war alone.