New Middle East members expand Brics reach

Marco Longari/Pool via Reuters

• Saudi, UAE, Iran, Egypt to join bloc
• Move seen as victory for China
• Currency issue could hamper progress

Four Middle East countries are to join the Brics bloc of developing countries, bridging regional political divides and signaling increased Chinese influence around the world.

The new memberships of Saudi Arabia, Iran, the United Arab Emirates and Egypt, as well as those of Argentina and Ethiopia, will be effective from 2024. 

The decision to add another six members, including Saudi Arabia, the world’s number one oil exporter, is a political victory for China in its bid to bolster the “Global South” against perceptions of US domination. 

• With Saudi on side, the Brics can change the world
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• Saudi and the Brics: a test case for multi-polarity

But unless progress is made on using currencies other than the US dollar to settle trade transactions, the announcement is likely to have only a limited economic impact, economists warned. 

President Cyril Ramaphosa of South Africa, the current Brics chair, made the announcement on August 24 after two days of discussion with President Luiz Inácio Lula da Silva of Brazil, Narendra Modi, the Indian prime minister, and representatives of China’s President Xi Jinping. 

An arrest warrant from the International Criminal Court in The Hague over the war in Ukraine forced Russian president Vladimir Putin to join via video conference. Russia sent foreign minister Sergei Lavrov in Mr Putin’s place – a reminder of the continuing power of Western institutions. 

“It is an important geo-strategic move, the bloc can focus on issues and objectives relevant to them as opposed to a Bretton Woods agenda set by the West,” said Nasser Saidi, a prominent Lebanese economist and former government minister. 

The Bretton Woods conference held in 1948 saw the creation of the International Monetary Fund and the World Bank, both of which are based in the US.

Dr Saidi said that the current and future Brics members are not holding common currency discussions. But the potential for using local currencies for trade financing and settlement is critical if the announcement is to have lasting significance. 

“This is extremely important for the emerging market nations which are currently dependent on dollar fluctuations and the Fed’s rate decisions,” he said, referring to the US Federal Reserve. 

Alet Pretorius/Pool via Reuters

Formed in 2009 by Brazil, Russia, India and China, with the addition of South Africa in 2010, the bloc represents around 40 percent of the world’s population.

It contributes more than a quarter of global GDP but that figure is set to increase with the addition of Saudi Arabia, the UAE and Iran, three of the world’s biggest oil producers. 

The summit took place during heightened tension between the US and Russia over Ukraine, where the US has funneled billions of dollars to Vlodomir Zelenskyy’s government to help fight Russian forces. Internationally, the US and China are sparring over Beijing’s rising global political and economic influence. 

Speaking in Beijing, President Xi said: “This membership expansion is historic. It shows the determination of Brics countries for unity and development.” 

Mohammad Jamshidi, a political deputy of Iran’s President Ebrahim Raisi, called Iran’s membership a “strategic victory for Iran’s foreign policy” in a post on social media site X (formerly Twitter). 

The decision to admit the six nations is a compromise between China and Russia, which want to expand it as a rival to the G7 countries, and India and Brazil, which are currently seeking to improve ties with the West. 

Iran has been under US sanctions since 1979. Washington pulled out of a UN-sponsored deal to monitor its civilian nuclear programme, the Joint Comprehensive Plan of Action, in 2017, severely harming Iran’s economy. 

Egypt is currently seeing record inflation and experiencing severe currency pressures. Egypt and Argentina are major IMF debtor nations which have often needed bailouts in the past. 

“De-dollarization efforts are also a significant factor for Egypt,” said Ali Metwally, MENA economist and director of economic intelligence at ITI consulting. He said Egypt would also look for access to funding from the Brics New Development Bank. 

Egypt is a major wheat importer and the government said this year it was considering doing trades in foreign currencies other than the dollar, including the Indian rupee and Chinese yuan. 

“By joining Brics, these countries can expand their trade ties with other member nations, reducing their reliance on Western markets and currencies, and potentially mitigate the impacts of global economic fluctuations,” Metwally told AGBI.

The new memberships follow a rapprochement between Saudi Arabia and Iran signed in March with Chinese mediation. China is a major importer of oil from both countries.