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France is looking to give political impetus to reform of the global financial architecture. Others should swing in behind its gambit  Almost 500 days into the war in Ukraine, Europeans and Americans are anxious about their relationship with the global south. While the transatlantic allies are united, they have been left perplexed by the often tepid reaction of third countries to Russia’s aggression. And the gap between north and south appears only to be growing. The global crises of the last five years – covid-19, Russia’s war on Ukraine, inflation, climate change – have pushed Europeans’ focus inward, while these challenges have plunged much of the developing world into economic decline alongside exacerbating energy and food insecurity. Worse, some of the solutions put in place to overcome these crises – border closures, sanctions, re-shoring – have had major negative impacts on the global south. Meanwhile, the multilateral system has spiralled further into crisis, accelerated by the effects of the US-China rivalry, and has failed to provide relief to developing and vulnerable countries. More deeply affected by this ‘polycrisis’ than the global north, they have much less resource to tackle its consequences: dozens of low-income and medium-income countries now face crippling debt. To start to address these problems, President Emmanuel Macron is holding an ambitious event that seeks to focus political attention on the injustices and inequities of the current global financial architecture. Hurriedly decided on after last year’s COP27 in Egypt, his Summit for a New Global Financing Pact will bring leaders, civil society advocates, private actors, and international financial institutions together in Paris. The gathering’s goal is to find ways to build a more inclusive and equitable financial system, one that enables the climate transition and promotes biodiversity without jeopardising development. From its colonial and post-colonial history, and with its permanent seat on the United Nations Security Council, France maintains many close relationships on other continents. In response to brewing discontent and despair, Macron has stressed the need to address global south grievances, using frequent speeches to do so, whether in New York, Washington, or Bratislava. He is now once again engaged in an ambitious yet hasty endeavour: inspired by COP21 in Paris in 2015, the president believes diplomatic elbow grease goes a long way in mobilising around global issues, and he has made good use of it. As early in his first presidency as 2018, he launched the Paris Peace Forum, an annual event bringing together leaders and civil society to work towards a revived and innovative multilateral order. After President Donald Trump rescinded the Paris Agreement on climate change, Macron launched summit after summit on aspects of the issue (One Planet, One Ocean, and One Forest). To tackle the impact of covid-19 on Africa, in May 2021 France hosted the summit on the financing of African economies. This time, the goal is to reinvent the global financial architecture. Ever since the paradigm shift brought about by the pandemic, Macron has argued for a new approach – a “Paris consensus,” in a reference to the 2015 Paris agreement on climate change – to replace the market-orientated Washington consensus with net zero, sustainable economic development goals. In his view, the metrics used in the past are “not valid any more to fight against poverty, for the decarbonisation of our economy, and for biodiversity”. He is therefore pushing to reform the global architecture to incentivise net zero investments for a sustainable future. Macron’s idea behind the new summit is to give a political boost to an issue all too often discussed only on a technical level, and in silos. No one expects an actual “pact” to be signed, but France – along with the summit’s steering committee, which is composed of states and international organisations – is aiming for a political declaration that would muster firm commitments from world leaders, and force consequences down the line. And world leaders are indeed showing up: the secretary general of the United Nations, the new president of the World Bank, the president of the European Commission, the US Treasury secretary, the president of Brazil, the German chancellor, and the Chinese prime minister are all expected to attend, along with 40 heads of state, one-third of whom will be from Africa. As so often before, Macron hopes to be transformational in record time. The summit planning started with high ambitions, but sources say it has had to adapt due to a lack of time and focus. Initially launched around the Bridgetown initiative of Barbados prime minister Mia Mottley, France had aimed to include topics other than climate, such as health and poverty, and sought a G20 presidency endorsement by India. Unfortunately, Indian prime minister Narendra Modi will be in Washington during the summit and, despite the fact that India is co-chairing the summit’s steering committee and the expected presence of Lula and Li Qiang, the event may not in the end be a show of force for the global south. NGOs have been privately critical of the lack of inclusivity and transparency of the working groups, and disillusionment is running high. Some concrete results could still emerge from the four working groups, if negotiations are successful. Among the ambitions floated are debt suspension clauses for natural disasters, reallocation of special drawing rights, scaling up private capital flows through improved de-risking instruments, freeing up more concessional resources from multilateral development banks, and new international taxes (such as a levy on maritime transport). In an increasingly fragmented world, a united political declaration in support of these changes at the conclusion of the summit would be a win for everyone. However, a more modest but attainable goal from the summit would be the emergence of a “coalition of ambition,” in which a number of committed countries, or “champions,” take on specific challenges and sustain the diplomatic effort beyond the summit in Paris. Many other opportunities to build on momentum created in Paris will shortly follow: the African Climate Action Summit, the SDG summit, the New Delhi G20 Leaders Summit, and COP28 in Dubai. Since this summit has no mandate, it can only be a success if it is able to agree actions that then endure. For global south countries, the gathering should in turn create opportunities to strengthen support for their demands in all these upcoming forums. The success of the Paris summit will also depend on the capacity of states and other major players to take on the challenge – including Europeans. Germany is backing France in this effort, but most Europeans have yet to show their commitment to the process. Thirteen world leaders have penned a declaration of good will in an op-ed ahead of the summit, although without offering specific pledges or a timeframe for results. Unfortunately, the American president will not attend the summit, nor will the Italian, Canadian, or British prime ministers. The choice to stay away may stem from irritation at yet another grandiose French summit. But rich industrialised countries have no excuse for lacking interest in the dire situation of developing and vulnerable countries. It also puts responsibility on France to continue to move the ball forward after the summit – and not be content with the impression that it tried. Even if France may indulge in summit-mania, and however imperfect the event will inevitably turn out to be, Europeans and Americans must realise that France’s solo act is worth supporting. With clear steps taken by France ahead of the summit, such as the reallocation of 30 per cent of its special drawing rights (about €7.8 billion), Macron is defending his concept of an effective multilateralism in action, one that delivers. With Russia seeking to peel global south states away from the West, Europeans and the United States need to take up concrete actions that correct the imbalances of the current system and offer developing countries greater voice and power. By finally accepting that the institutions set up after the second world war must change, they would enhance their own credibility among global south states while escaping multilateralism limbo. The only way to salvage international cooperation – and to push back against the narrative of an inevitable north-south polarisation – is to demonstrate that it bears fruit for all.

Pivot to Asia - The Global South is on the march in their attempt to reshape the international system. How will this new order impact the old world? An increasing number of countries from the Global South, especially in Asia, are pushing to redefine the current global order. Three key trends to watch in this attempt to reshape the international system are the (potential) creation of a new economic order, the expansion of the BRICS grouping, and the transformation of China-Russia relationship after the invasion of Ukraine. In this changing international balance, Europe is losing its influence in the Global South, including in Asia. After centuries of global predominance, Europe’s strongest legacy is its role as a major normative power in global affairs. However, this reputation as a rule-setting power is set to change.   Why it matters 1. A (new) economic order. The debate over a “new Washington Consensus” has gained momentum after US national security advisor Jake Sullivan delivered a speech at the Brookings Institution on April 27th. The final communiqué by the G7 countries which met in Hirosahima on May 19-20 is the result of a similar strategic shift within the group, one that implies a move from economic interdependence to economic security. This shift is coupled with a major change in how the G7 intends to deal with emerging economies, such as their rival China and other partners in Asia that might soon become economic competitors in critical technologies. The G7’s sentiment has moved from promoting globalization and open markets to building industrial capacity in critical sectors, while securing existing and creating new strategic supply chains. Europe’s efforts in this context might not be enough: the investments envisaged so far are too little to reverse Europe’s dependency (often on China) in critical sectors. The EU must focus increasingly on diversifying its supply chains through securing access to rising economies in the Indo-Pacific. Here, joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could represent an opportunity.  2. BRICS+? The BRICS foreign ministers’ summit in June was yet another steppingstone toward enlargement. The countries that expressed a significant interest in joining the grouping are Iran, Saudi Arabia, the United Arab Emirates, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan: all these countries sent their representatives to Cape Town. Egypt, Argentina, Bangladesh, Guinea-Bissau and Indonesia participated virtually. While the membership process might be a long one, the group’s upcoming expansion highlights the Global South’s political will to rise its voice, with a plethora of actors eager and able to leverage the new competition between powers which is shaping up after the Ukraine war. In this framework, Asian countries such as China and India are competing with one another to lead the BRICS.   3. China and the Stans. On May 19, Xi Jinping met in Xi’an with the (leaders of) the five Central Asian “Stan”-countries (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan). Russia, the region’s traditional kingmaker, was noticeably absent. The meeting kickstarted – for the first time offline – a summit named C+5 and highlighted Beijing’s belief that it can now make deals within the region without Moscow’s supervision. China’s newfound independence in Central Asia and Moscow’s growing dependence on Beijing after the war in Ukraine provides new insights the on China-Russia relationship: although the two countries are united by their common desire to contest the US-led world order, the Sino-Russian relation seems increasingly tilted in China’s favor. This instable relationship could result in a stronger Chinese presence in Central Asia.  4. Loss of strategic centrality. Europe does not only risk becoming increasingly peripheral in world affairs, but also losing its bargaining power with the emerging Indo-Pacific economies. On the one hand, the EU needs to diversify its supply chains away from China and likely towards the ASEAN; on the other, the Global South – and by default its Asian members – is more aware of the current strategic window of opportunity to redesign the global balance of power.   Our take We are witnessing rapid changes in the international arena. In the coming months there will be increasing requests to review global norms. Therefore, the leading event will be the upcoming BRICS Summit in August: the meeting will probably certify the process to accept new members. Among the countries that are voicing their desire to reset the rules, some are considered by the West (mainly) as rivals, such as China, and as partners, like India. Therefore, Washington and Brussels cannot simply accept or dismiss their requests. Asia is claiming its century: the integration of this claim for a renewed global order into the current world order has just started. Its most important implications will be on the economic side, namely the redistribution of industrial capacity and trade relation in the context of de-risking from China.  Spotlight: G7  The G7 Hiroshima Summit has sent some clear messages to the rest of the world. The decision to invite President Zelensky to the gathering was a move meant to reinforce the unity of the members regarding the Ukraine invasion in the face of Russia — and China, too. The West has criticized China’s 12-point position paper on the Ukraine war, since it does not call for Russia to abandon occupied territories. The G7 countries have also announced a strengthening of the sanctions, seeking to curb products that could be used by the Russian military. The other important takeaway of the G7 is the joint statement directed at China, which includes a strong criticism of Beijing’s “economic coercion” and invites the PRC to play according to international rules. The G7 have also reiterated their position on divisive topics such as security in the Indo-Pacific and Taiwan, retreating their commitment to preserve peace and stability in the region. Despite the joint statement and the declarations by the leaders on the challenges posed by China, the G7’s stance on Beijing is still a balancing act. While concerned about being overly vulnerable with China, G7 economies and their industrial base remain strongly interconnected with the Asian country and despite calls for “de-risking”, such as cutting China out from some sectors like raw materials, it is impossible at the time.  Experts’ viewsThe implications of China’s activism among the BRICS countries  The next BRICS Summit will take place at a critical juncture for the Global South. Russia is still at war, Brazil has a new administration eager to flex its muscles globally, and China has reached unprecedented influence across the developing world. Since they are all connected by the same desire of multipolarity away from US and Western hegemony, it is likely that the BRICS will try to offer a roadmap towards a new international order. This roadmap, however, is far from consensual: will Russia embrace the peace dialogues offered by Brazil or African nations – and what role will China play in brokering any such proposal? Will China and the other BRICS be able to cooperate economically to promote development worldwide? Are the BRICS ready for its first enlargement, and who is most likely to join in the coming years? This arrangement will require some mutual concessions and the outcome will help shape the future world order.  Guilherme Casarões, Fundação Getulio Vargas  The push to strengthen and even expand the BRICS, especially by China, should be viewed more broadly through the lens of a pragmatic Chinese foreign policy. It has not only sought to strengthen ties within BRICS but with other regions and countries who are instrumental for its trade and infrastructure connectivity imperatives.  This happens against the backdrop of a shift towards a multipolar world order with China as a rising power and rising geo-political tensions. Given that this bloc advocates for issues that are relevant to the Global South (global governance reform, support for a rules-based international order and multilateralism in times when countries retreat to unilateral measures), it is no surprise that other countries in the South wish to join. Regarding this summit, I see no major implications for the bloc, the core business of the BRICS will continue with South Africa advancing its five priority areas. However, we can anticipate a discussion on its formal expansion. Trading with local currency seems to have found new impetus following the sanctions placed on Russia. All this notwithstanding, it is important to note that the ‘de-dollarisation’ in trade debate is not a new concept for BRICS and its less about challenging the dollar but strengthening other currencies against external economic shocks. The real test is for the host country depending on whether President Putin attends the heads of state summit in August, given Pretoria’s obligations under the Rome Statute and domestic law.  Luanda Mpungose, South African Institute of International Affairs (SAIIA)  China’s push for a stronger BRICS on the global stage is advancing along a number of trajectories. Firstly, there is the BRICS expansion as well as the BRICS+ format that are likely to bring the majority of the Global South into BRICS-related platforms of economic cooperation. The implementation of the BRICS+ format may serve as a precursor for liberalizing trade across the Global South and exploiting the potential for boosting South-South trade and investment ties. The expansion in the membership of the Shanghai-based New Development Bank as well as the creation of its regional centers will increase the scope for connectivity projects across the developing world. There is also the greater use of national currencies (most notably the yuan) via de-dollarization as well as the R5 BRICS common currency project that if launched would mark a key transformation of the global financial system.  Yaroslav Lissovolik, BRICS+ Analytics   What and Where Thailand is ready to Move Forward   The May elections in Thailand resulted in a clear victory for the opposition parties. Led by Pita Limjaroenrat, Move Forward has won 152 seats, becoming the most voted party in the elections. This party is the heir to Future Forward, which was dissolved by the military government in February 2020, and was born out of the 2020-2021 protests against the army and the monarchy. The second party in the country is the historic Thai opposition party led by the Shinawatra family, the Pheu Thai. However, while the population has expressed its preference, there is no guarantee yet that Move Forward, and the opposition, will govern. Indeed, to be elected Prime Minister, and form a government, Pita will need to win the majority in the bicameral parliament made up of the elected 500 seats in House of Representatives and the 250 seats of the Senate – whose members are handpicked by the military. The Move Forward coalition with Pheu Thai and the other opposition parties so far can count on little more than 310 votes, a long shot from the majority needed to govern. The opposition must garner support among the senators – which generally have little interest in going against the military that put them in power – or among the parties that have yet to declare their allegiance.  Cambodia: Hun Sen is getting rid of the competition ahead of July elections  On the 14 of May, Cambodia’s opposition party – the Candlelight Party – has been disqualified from running in the upcoming July elections by the country’s election commission. The party has allegedly failed to submit the necessary documentation to participate in the electoral race. With the exclusion of the Candlelight Party from the coming elections, the only possible competitor to the ruling Cambodian People’s party (CPP) of PM Hun Sen – who has been in power for 38 years – has been eliminated. This is not the first time that the main opposition party has been cut out of the electoral race. For instance, in the 2017 the Cambodian court, which is heavily colluded with the CPP, dissolved the Cambodian National Rescue Party (CNRP) before the 2018 general elections – a party that was given new life when its members created the Candlelight Party. However, the members of the opposition continue to be persecuted by Hun Sen’s forces with many political exponents arrested on charges of treason, assaulted, or forced to leave the country. With the opposition forces largely depleted and the main party banned from running for elections, Hun Sen is likely guaranteed another term.   The United States seeks to expand influence in the Indo-Pacific  Washington took advantage of two key international events to strengthen its strategic position in the region. During the Quad Leaders’ Summit, which took place on the sidelines of the G7 in Hiroshima, President Biden, Australia’s PM Albanese, PM Kishida of Japan and PM Modi of India stressed their unity and stated their plans to invest in digital infrastructure in the region. Throughout the meeting they did not mention China directly in their statements, but their references to the country were clear. The Quad expressed concern over the militarization of the region and the use of both economic and military coercion to alter the status quo – a clear reference to Chinese activity in the South China Sea. Another important step for the US to consolidate its position in the region is the announcement of the Supply Chain Agreement under the framework of the Indo-Pacific Economic Framework for Prosperity (IPEF). The agreement includes the 14 IPEF partner countries, namely Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the US, and Vietnam. A year following the launch of the IPEF, this agreement is the first practical measure undertaken by the group. The group did not announce any official trade commitments, there is expectation among partners for increased cooperation and monitoring of supply chains fragility. The concrete development is still unclear, but the agreement signals the need for Indo-Pacific countries to avoid supply chain disruption and to minimize their dependence on the region’s main economic player, China.  Semiconductors: China fires back   China has gone on the offensive in competition over the semiconductor sector. The Cyberspace Administration of China (CAC) has stated that products by Micron, the US largest memory chip maker, are a “security risk for the information infrastructure supply chain” barring infrastructure operators from buying them. While additional information has yet to be revealed, some negative impacts are expected for Micron even if China and Hong Kong accounted for only 16% of the revenue of the company in 2022. The measure is a retaliation to America’s effort to cut China out from the semiconductor sector and slow the development of its industrial base. Since October 2022, the Biden Administration has imposed strict controls over chips export, followed by the Netherlands and Japan, preventing China from accessing and producing more advanced semiconductors. China’s declaration comes also after the leaders of the G7 grouping released a statement criticizing the country’s economic coercion tactic. After the move from Beijing, Micron fears that their products will be replaced by South Korean competitors, Samsung and SK Hynix, on the Chinese market. In the rising technological row between the US and China, there is also fear that Beijing might choose to put some export controls over other sensitive technologies, such as solar panels – where China dominates the whole supply chain.    TREND: Despite rate hikes, Asian unemployment is faring well (but not for everyone)  In the current context of high inflation and high rates, unemployment has turned out to be one of the main socio-political issues of Asia. With skyrocketing prices hurting businesses and consumers, many central banks in the West have adopted more hawkish monetary policies during the last year. Yet, the soaring cost of money has forced many businesses into a tight spot with concerning consequences on the employment level. Some countries though – like Japan, China, and Indonesia – have made the unorthodox choice to not significantly raise rates during the last year, while others – like South Korea and India – have adopted similar policies to those of the FED and the ECB. However, the results vary. In Japan the unemployment rate has been quite steady at around 2.6% for some time now, but in China the range (5.2-5.7%) was wider, especially due to the uneven nature of the post-Covid economic recovery. Yet, as the economy is slowly returning to normal, Beijing’s unemployment rate is gradually decreasing. Meanwhile Korea has consolidated a positive trend, with the last available figure at 2.5%, but the reforms of the labor market proposed by President Yoon Suk-yeol may cause some issues. The critical indicator though will be youth unemployment. Employment in aging societies, like those of East Asia, will increasingly become a core issue to maintain the viability of existing social welfare programs. So far China has a staggering 20.8% unemployment rate in the 16-24 years old age group which is particularly concerning, as it is the 7.2% recorded in South Korea. Japan is faring quite well but unemployment in the 25-34 years old age bracket has risen since the beginning of the year from 3% to 4%.

Now with 11 members, BRICS’ decision-making by consensus will be that much more difficultOnce upon a time, the BRICS were nothing but a slogan devised by Goldman Sachs’ economists to describe four emerging market economies to which South Africa was later added. But more than a decade later, the grouping, now with an investment bank—New Development Bank—of its own is besieged by dozens of countries of the Global South for membership.The Johannesburg summit of BRICS has drawn unusual interest around the world. There was a time when it barely merited a mention in the western press, but now it has been the subject of major stories, in which some saw BRICS as brittle whiel others thought it was  seeking to challenge the G7 and the western world through a process of enlargement. While the BRICS puts itself forward as a unified face of the emerging economic powers, the reality is that within the organisation—which  is neither a trade nor military bloc—there is considerable jostling between two Asian powers who are developing a global imprint—India and China.BRICS expansion announced in JohannesburgOne of the issues where this jostling played out in was the BRICS expansion process. Reportedly, 40 countries have expressed interest in joining BRICS, though some 22 nations had formally expressed interest in joining the bloc. With the latest expansion, Iran, Egypt, Argentina, Ethiopia, Saudi Arabia and UAE have been offered membership effective 1 January 2024. That there was a bit of lobbying is evident from the fact that  last week, President Ebrahim Raisi of Iran spoke on the phone with Prime Minister Modi. According to the official spokesman, they talked about “regional and bilateral matters” as well as issues like the expansion of BRICS. The two leaders later met in Johannesburg as well.There was some doubt at the beginning of the summit as to whether expansion would actually be announced. This was because of the intense negotiations over the names of the proposed members.Earlier this month, an Indian official spokesman had clarified that India believed that BRICS expansion should take place through “full consultation and consensus” among members of the bloc. In his speech at the summit, the Prime Minister made it clear that “India fully supports the expansion of the BRICS membership. And welcomes moving forward with consensus in this.” On Thursday, too, there were reports that there were “eleventh hour negotiations” over the potential new members. Reuters claimed that an agreement had meant to be adopted on Wednesday, but it was delayed by India’s introduction of new criteria for membership. On Tuesday President Lula of Brazil had made it clear that his country was did not want to be any kind of “a counterpoint to G7, G20 or the United States. We just want to organise ourselves.”In an organisation that acts through consensus, getting in is difficult, but global politics is about give and take and a certain degree of persuasion and arm twisting does go on. So does the notion of giving a push to countries who you see eye to eye with and blocking countries that you don’t. Sometimes the negotiation involves two powerful players splitting the difference and negotiating the entry of countries in such a way that a balance of sorts is maintained. This is the way India became a member of the Shanghai Cooperation Organisation dominated by China. India’s case was pushed by Russia to balance China, and Beijing finally agreed to have India, if Pakistan, its “iron” friend, could become a member at the same time.Another element in such organisations is that countries seek membership not just to further their interests but to block the ambitions of others. In this way, China sought and became a member of the Asia Pacific Economic Cooperation (APEC) arrangement and once in there, it has used its vote to block efforts by the United States (US) to shape APEC into an Asia Pacific Economic Community in the manner of the European Economic Community that finally gave rise to the European Union.India has been reportedly joined by Brazil in resisting the haste and suggesting that new members may first be given the status of observers. The Indian position has been that while it was all for expansion, there was need to develop and standardise mechanisms to consider the applications and move on them.As of now, BRICS is more of a symbol than a unified and purposive entity. True, it has members like China and India who wield substantial power in their respective regions, but the entity itself hardly functions as an economic bloc of any kind. It does have the New Development Bank headquartered in Shanghai, which, in 2021, sharply stepped up its disbursements to US$7.6 billion, with its total disbursements being of the order of US$32 billion for infrastructure and sustainable development in four continents . The initial subscribed capital of the bank is equally distributed among the BRICS members.China’s role in and vision for BRICSBeijing, no doubt views BRICS as a means of offsetting US global power. In a page 2 commentary in the People’s Daily by someone with the nom de plume  “Huanyu Ping,” said that currently the world governance system was “at a historical turning point”. The growth of the emerging market and developing countries has enhanced their influence. But the western-dominated global order was a “stumbling block to world economic development and social progress.” The multilateralist BRICS was therefore providing a model for decisions to be made on the basis of equality and consensus, as testified by the share-holding of the New Development Bank. They also actively promoted reform of the global governance system and upheld the validity of multilateral and multipolar solutions.There should be no doubt about the weightage China has within BRICS. It has a GDP more than twice the size of the other members combined. Its economy may have slowed down but it is still growing, with IMF predicting a 5.2 per cent growth as against 5.9 for India. The others are growing at less than 1 per cent.  It has played a significant role in getting together two of the new incoming members, Saudi Arabia and Iran. In 2022, China was the largest trading partner of South Africa, India and Brazil.There should be little doubt that China sees Africa as a battleground in the global struggle against the US. In a meeting with President Cyril Ramaphosa on Tuesday, President Xi spoke of the urgent need for China to promote cooperation with Africa because of “changes and chaos” in the world, an indirect allusion to the US. He took up the theme in the Business Forum meeting that he did not attend, but where his speech was read out: “Right now, changes in the world, in our times, and in history are unfolding in ways like never before, bringing human society to a critical juncture.”China may swear by multilateralism, but it is not really comfortable with it. What it is seeking to do is to shape institutions like BRICS in its own image for countering its principal rival, the United States of America. In this, it is unlikely to get Indian support, so what it is trying to do is to pack its membership with countries where it has already made significant investments through its Belt & Road Initiative. Such countries would be inclined to follow its global agenda, which is now manifesting itself as the Global Security Initiative, Global Development Initiative and the Global Civilisation Initiative.The Chinese aim, according to James Kynge in the Financial Times is two-fold. The first is to ensure that large parts of the world remain open to Chinese investment and trade in an environment where western attitudes are increasingly hardening. And the second is to have a bloc of votes in multilateral forums like the United Nations (UN) to project Chinese influence.In the turbulent world, China’s path is not an easy one. Its economy is slowing down and its global security calculations have been roiled by the Russian adventure in Ukraine. Further, in promoting the Global South it runs up against India which has its own ambitions, as well as the backing of the west. Even while promoting the UN and its institutions, China is not interested in any serious reform there because that could result in a bigger role for its adversaries like Japan and India.Done increases with the expansion of its membership. Now, with 11 members, things will be that much more difficult. The BRICS countries have economies and geopolitical profiles that are hugely divergent, and which makes consensus-based decision-making hugely difficult.

While it is prudent to be cautious, it may also be wise to explore cooperation in those areas where there are shared interests rather than assume that the BRICS and the West are strategic rivals on all fronts. This analysis was first published in the Global Observatory, 30 August 2023. When Jim O’Neill coined the BRIC acronym in 2001, the point he was trying to convey was that the global economic system needed to incorporate the world’s largest emerging economies. His advice fell on deaf ears and in 2009, Brazil, China, India and Russia decided to take matters into their own hands and formed the BRIC grouping. South Africa joined the group in 2010 to form the BRICS. This July, the group held its 15th summit in South Africa, where they decided to add six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. More are likely to join in the future, including countries like Indonesia and Nigeria.  What these countries have in common is a frustration, if not a grievance, about being side-lined to the periphery of the world economy. Together, the BRICS represent approximately 40% of the world’s population. The combined size of their economies are approaching approximately 30% of the world’s GDP, which puts them roughly on par with combined size of the economies of the G7 countries, depending on whether size is measured in GDP or PPP.  More importantly, in the next few decades, the combined size of the BRICS economies will surpass that of the G7. Despite this growing parity, all the members of the BRICS, with the exception of Russia, self-identifies as being part of the Global South, i.e., they feel excluded from a global system dominated by the Global North. Their stated aim is to work towards a future system of global governance where they will have equal political and economic say in global institutions, and where no one state will dominate others. In pursuit of this aim, BRICS countries have established their own development bank, set up their own contingency reserve arrangement, are developing their own payment system, and have started to trade with each other in their own currencies.  The BRICS want to free their economies from the dollar-based international financial system. They feel exposed to United States interest rates that can have a negative effect on their economies, for no domestic reasons. The dollar-based financial system also provides the US with significant advantages in the global economy, which the BRICS see as unfair. They also feel a dollar-based financial system gives the US hegemonic influence in global affairs, through for example, exerting US jurisdiction on all dollar-based trade or investments that flow through US banks or financial institutions.  While the BRICS countries have these clear shared macro-economic interests, many of the members also have competing interests in other domains. China and India are geopolitical rivals in South Asia. Egypt and Ethiopia are at loggerheads over the Nile. Brazil, India, South Africa and the newly-added Argentina are democracies, while other countries in the group are governed by a diverse set of autocratic regimes, which could set up an irreconcilable clash of values on some issues. Many of the members of the BRICS also have close ties to the United States and Europe, including Egypt, India, Saudi Arabia and South Africa. South African President Cyril Ramaphosa, in a televised statement to the nation on the eve of hosting the BRICS summit in South Africa, explained that South Africa remains non-aligned, and he announced that in 2023 the country will also host a major United States-Africa trade meeting and an EU-South Africa summit. South Africa will also host the G20 in 2025, the first in Africa. For many countries, membership of the BRICS does thus not necessarily imply aligning themselves with one global alliance versus another, but rather cooperation in a group around a series of shared interests.  Where does this place the BRICS on the Russian war in Ukraine? The BRICS summit in Johannesburg steered clear of taking a position on the war, other than welcoming mediation aimed at resolving it through dialogue and diplomacy. Some BRICS members like Iran are clearly supporting Russia, while most others have stopped short of either supporting or condemning Russia. For many such as Egypt, the war has adversely affected their economy. Two of the BRICS members, Egypt and South Africa, are part of an African initiative to seek a mediated end to the conflict, which is perhaps the first African initiative to mediate an international conflict. Overall, however, the BRICS have their eyes on the medium- to long-term transformation of the global macro-economic and financial system, and countries like China are probably frustrated that the Russian war in Ukraine has drawn attention away from this larger objective.  Are the BRICS and the West headed for a new cold war? The shift in the center of gravity of the global economy to the East is an unstoppable fact driven by demographics and economic factors like the cost of production. At the same time, Europe and the United States will remain major economic players. In tandem with these changes in the global economy, it is clear that the global political order will become more multipolar, with China, Europe, India, and the United States representing some of the major centers of influence.  In an August 27 article, Jim O’Neil argues that the influence of the BRICS will be determined by their effectiveness, not their size. An expanding BRICS will most likely succeed in helping its members to break free from a dollar-based international financial system, but that will take several decades of incremental change before it reaches a tipping point. Whether that is a good or bad thing depends on the degree to which your economy is tied to the United States. Many of the BRICS countries, including China, Egypt, India, Saudi Arabia, and South Africa all have economies whose prosperity are closely tied to the Unites States. They will thus have an interest in a slow, stable freeing up of the international financial system, and this should give everyone that is prudent time to adapt.  The same logic also applies to changes in global governance architecture. Apart from Russia, all the other BRICS countries have an interest in making sure that changes in the global order are managed at a slow steady pace that does not generate instability. All the BRICS countries, apart from Russia, are also strong supporters of multilateralism, with the United Nations at its center. Many Western countries and BRICS members may thus have more shared interests than the doomsday headlines suggest. While it is prudent to be cautious, it may also be wise to explore cooperation in those areas where there are shared interests rather than assume that the BRICS and the West are strategic rivals on all fronts.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском As Beijing’s investment approach to Latin America focuses on industries of strategic importance, the EU and US will need to contend with growing Chinese competition China is pouring less foreign direct investment (FDI) into Latin America. But while this may seem like a sign of Beijing’s disinterest in the region, data suggests that Chinese companies are simply recalibrating, not retreating. In doing so, they are becoming important players in sectors key to Western interests: critical minerals, fintech, electric vehicles, and green energy. While the European Union and the United States have long been top investors in Latin America, increased competition with Chinese investment now jeopardises their interests in the Latin American industries that will become most crucial to the digital and green transitions. The number of Chinese projects in Latin America grew by 33 per cent from 2018-2023, compared with the previous five-year period of 2013-2017, even as the total value declined. In other words, Chinese companies are making more investments in the region but are pursuing smaller-scale projects on average. These investments are also more focused on what China calls “new infrastructure“ (新基建), a term which encompasses telecommunications, fintech, renewable energy, and other innovation-related industries. In 2022, 60 per cent of China’s investments were in these frontier sectors, a key economic priority for the country. Beijing also views smaller projects in these industries as incurring less operational and reputational risk, especially compared to some of the large-scale infrastructure investment projects often associated with the Belt and Road initiative. Like China, the investment priorities of the G7 grouping – particularly the US and the EU – are centring on critical minerals, fintech, electric vehicles, and green energy as they aim to grow and reinforce existing economic and political partnerships in Latin America. However, both the US and the EU risk falling short of China’s investment strategy in the region. The US has signalled want for greater economic engagement with the region, especially in sectors of strategic interest. However, to date, US efforts to compete with China remain largely focused on building US domestic capacity in these strategic sectors, even as some US companies, such as Intel, are increasingly focused on including regional partners in their supply chains. Some see opportunity for Latin America in Joe Biden’s landmark legislation, the Inflation Reduction Act (IRA), which is aimed at incentivising the energy transition while also de-risking critical supply chains. For example, certain countries in the region may benefit from preferential market access for their lithium or other key inputs to new energy and technology supply chains. However, the reach of the IRA – which remains a largely domestic policy – does not stretch as far as China’s current investment reshuffle. The Americas Act, announced by members of Congress in March could generate promising new investment opportunities for the region, as it encourages US companies and others to move their operations out of China, to which Latin America stands as a promising replacement. But Americas Act reshoring would primarily incentivise textiles and potentially medical equipment manufacturing, with less overall focus on the range of “new infrastructure” industries that China is prioritising. Chinese interests in information and communication technologies reveal a similar story. While the US has focused its policy on 5G equipment sales, China is undertaking a process of vertical integration in Latin American tech sectors that will dramatically boost its competitiveness. For instance, Chinese company Huawei is rapidly expanding its focus to include data centres, cloud computing, cybersecurity, and other services, especially in Argentina, Brazil, Chile, Colombia, Mexico, and Peru. (Computing accounted for a sizable 41 per cent of total Chinese information technology investment in the region between 2018 and the first half of 2023.) At the same time, Global Gateway, the EU’s proposal for a global investment initiative is yet to reach its potential in the region. Brussels is looking to be Latin America’s partner of choice by building local capacity for making batteries and final products like electric vehicles, as European Commission president Ursula von der Leyen noted last year. Yet even as the EU signals renewed commitment, China is becoming increasingly dominant in the electric vehicle market in Latin America and other regions. China surpassed the US in electric vehicle sales in 2023, with Chinese companies accounting for 45 per cent of total global sales and three times that of Germany’s. What is more, China has invested $11 billion in lithium extraction in the region since 2018, as part of a bid to control a third of global lithium-mine production capacity. Meanwhile the EU has secured some access to lithium as part of trade deals with Chile, alongside other nations, but this pales in comparison to what will be required to fuel the future of EU battery production. Latin America as a whole accounts for an estimated 60 per cent of the world’s lithium reserves. Based on its current levels of engagement in the region, the EU risks falling short of lithium, stalling its battery production and subsequently, its electric vehicle sales, just as China advances in this field. The window is closing for the EU, the US, and other partners looking to both maintain market share and compete with China in these Latin American industries, despite still-high rates of US and EU investment in and trade with the region. Indeed, US automakers increasingly see Chinese competition across the globe as an “extinction-level event.” Ensuring competitiveness in “new infrastructure” and related sectors will require a continuous commitment by partners to building and supporting project pipelines, and to delivering products and services at price points that can compete with China’s subsidised offerings. Both the EU and the US remain critical economic partners for Latin America and are contributing in ways that China is not. Still, complacency risks allowing China to take the lead in emerging industries in the region, some of which weigh heavily in the EU’s green and digital transformation. To protect their own future industries, the EU and the US need to first take a longer look at Latin America’s – especially as China vies for a dominant position.

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском Elections in Europe demonstrate the growing popularity of far right parties as key outsiders gain on critical votes. In France, President Emmanuel Macron has moved to dampen Marine Le Pen’s success in the European Parliament with a snap national election. The election calendar for June has already thrown up some surprises, particularly in the northern hemisphere. To be sure, Prime Minister Narendra Modi was re-elected, though with a much-reduced majority which will place limits on his power. But the biggest shock is in Europe where French President Emmanuel Macron decided to call a snap election for 30 June after his most notorious far-right rival, Marine Le Pen, pulled off a decisive victory in the French election for the European Parliament. Macron is taking a massive gamble—that in a national election he can recover some of the popularity he has lost since his re-election as president in 2022, squashing Le Pen’s challenge to his leadership. The initial reaction of the commentariat is that Macron will manage a return to the Élysée palace, largely because the centrist parties holding the middle ground were the overall winners and the Left and the Greens failed to increase, or lost, shares of the vote. “I’ve decided to give you back the choice,” Macron said in an address to the electorate from the Elysée palace. In France, the Rassemblement National (RN) party led by Le Pen won 31.5 percent of the country’s vote, according to early results. In Germany, the three parties in Olaf Scholz’s fragile coalition—the Social Democrats (SPD), Greens, and the liberal FDP—were all overtaken by the far-right Alternative for Germany (AfD), which came in second behind the conservative CDU-CSU opposition. Significant gains by nationalist and ultra-conservative parties were also anticipated by exit polls in Austria, Cyprus, Greece, and the Netherlands. In Italy, prime minister Giorgia Meloni cemented her position in her governing coalition, and potentially her hand in negotiations with other European leaders, with her hard-right Brothers of Italy party taking over 28 percent of the vote in the European parliamentary elections. Attention will now turn to the campaign by Ursula von der Leyen, president of the European Commission, to win another five-year term in office. She has a good record and currently no obvious challenger. Nonetheless, her re-election will hinge on her ability to make uncomfortable choices and deals, taking into account the EU’s clear shift to the right in parliamentary elections on 9 June. Though her centre-right European People’s party won the election, securing 189 seats in the 720-strong assembly, von der Leyen’s allies fared worse and the hard right surged from a fifth to nearly a quarter of seats. Her fate is likely to be decided at an EU summit on 27 June when she will seek the personal backing of the EU’s 27 leaders and aim to demonstrate to them that she has the required support in the European Parliament. Mexico Another remarkable election result this month was in Mexico where the ruling left-wing Morena party won a landslide victory in presidential, congressional, and state elections. While president-elect Claudia Sheinbaum and Morena’s victory on 2 June was not a surprise, the scale of it was. Sheinbaum won more votes than the centre-right Xochiti Galvez across genders, age groups, and in every state bar one, coming in 31 points clear of her rival. After decades of high poverty, glaring inequality, and low wages, the ruling Morena party more than doubled the minimum wage and expanded social programs, endearing itself to Mexico’s long-neglected have-nots. The result has left Mexico’s conservative elite struggling to understand the left’s landslide win, living as they do in gated communities far removed from the lives and feelings of average Mexicans. There are unlikely to be any surprises in the other major election this month—that of Iran on 28 June. Iranian authorities have disqualified prominent moderates as candidates in the snap presidential election, called following the helicopter crash that recently claimed the life of Ebrahim Raisi, the country’s president, and other senior ministers. The field of candidates has been narrowed to five hardliners and one mid-ranking reformist. The United Kingdom has seen a frenzy of election activity this month following Prime Minister Rishi Sunak’s surprise decision to call an early election on 4 July. Polls show that there is likely to be a change of government to the opposition Labour party, which is currently holding a 22 percent lead, after 14 years’ Conservative government.

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском The pursuit of critical minerals does not come at the expense of the environment; a global moratorium on deep-sea mining should be the natural course of action The world is looking at a potential geopolitical and environmental point of conflict, which will affect every country in more ways than one. This dispute stems from a search for critical minerals in the deep sea. Critical minerals are considered the building blocks of contemporary technology. To say that they are crucial to the economic and national security of every country would be an understatement. Due to the inherited complexities of mining and attaining critical minerals from challenging geographies, the hunt for them has intensified. Beyond land, many countries are now looking at space as an alternative. Finding and commercially harnessing minerals from celestial bodies like the Moon and asteroids, however, is still a challenge. Therefore, the search for critical minerals in the deep sea has now entered a new phase of competition, where countries are no longer waiting but are actively engaged in the process of deep-sea mining. In this race, while some countries such as China, India, and South Korea (see Table 1) are preparing to grab the opportunity and are trying to build capacities and capabilities, others have raised the environmental and ecological impacts of deep-sea mining. Against this background, it is crucial to identify the key players in this race and understand the accompanying international legal nuances. Table 1: Exploration Contracts issued by the International Seabed Authority (ISA)   Source: ISA. What’s the rush? The urgency of the critical mineral problem is exacerbated by two factors: Fast-depleting reserves of critical minerals for human use and their rising demand. Behind this sudden rush are two important reasons: Firstly, the focus on clean and renewable energy, which is crucial in driving the green energy transition, and secondly, the increasing consumption of high-technology products, which depends on the heavy use of critical minerals. As an illustration, consider its application in high-tech items of various sizes, such as smartphones, electric car magnets, and intricate machinery like F35 stealth aircraft. A F35 aircraft, for example, needs 920 pounds of rare earth elements, demonstrating the significance of these minerals for any nation. Although deep-sea mining is not an exclusively Indo-Pacific phenomenon, competition is most felt in this region due to the high stakes involved. The major actors involved in this race are China, India, South Korea, and even non-state actors, such as private companies such as the Metals Company (TMC, a Canada-based company, which have considerable stakes in the space. International Seabed Authority: China and influence politics Under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), the International Seabed Authority (ISA) was constituted with the mandate to ‘organise and control all mineral resources-related activities’ and guarantee ‘effective protection of the marine environment’ on the seabed of international waters, which are a global commons. ISA is constituted by the Assembly, Council, and Secretariat. ISA’s key advisory body, the Legal and Technical Commission (LTC), should help the authority frame the rules, regulations and procedures (RRPs) to govern mining activities on the international seabed. While the conversation on setting a legal framework for undersea mining has been in process since 2016, ISA has garnered increasing international attention due to the triggering of the ‘two-year rule’ by the island nation of Nauru back in 2021. As per UNCLOS, if the Council of ISA fails to adopt the relevant RRPs within two years of receiving the application for approval of a plan of work for exploitation, the council will have to consider and approve such plan ‘based on the provisions of the Convention and any rules, regulations and procedures that the Council may have adopted provisionally, or based on the norms contained in the Convention and the terms and principles contained in this Annex as well as the principle of non-discrimination among contractors.’ Since this incident, negotiations have naturally picked up, with China playing the leading role in shaping the deep sea mining code, as it wants to influence and is eager to push forward the negotiations in its infancy phase. In the 2023 ISA Council’s July meeting, China blocked the motion introduced by France, Chile, and Costa Rica to discuss a moratorium on deep sea mining. The absence of the United States (US) from the ISA elevates Beijing's role to a prominent position. This discussion will likely have severe implications for the future of the high seas, which cover 60 percent of the world’s oceans. At the ISA’s Council meeting in July 2023, China and other states like Nauru, Japan, Australia, India, Norway, and Russia supported deep-sea mining against a group of 20 countries that opposed it due to lack of scientific evidence and are pushing to put a moratorium in place. France was the exception, calling for a total ban on deep-sea mining. Apart from nation states, many international Multinational Corporations (MNCs) like Google, Samsung, BMW, Volvo Group, and Tesla have also joined the call for a moratorium on deep-sea mining. This call includes 804 marine science and policy experts from 44 countries recommending a ‘pause until sufficient and robust scientific information’ is obtained. The call for a moratorium has increased since the discovery of “dark oxygen” on the seafloor. Even the European Union has adopted a resolution to support a moratorium in response to Norway’s decision to initiate deep-sea mining in the Arctic . Stuck in a limbo As commercial deep-sea mining comes closer than ever to being a reality, it is critical to analyse and take stock of the complex interplay of geopolitical, environmental, and legal challenges that will define the future of international relations and environmental stewardship. As nations such as China, Norway, South Korea, and even India accelerate their efforts to exploit these untapped resources, the world faces a crucial decision: To prioritise immediate economic and technological gains or the fragile ecosystems of the deep ocean. China's geopolitical and strategic goals and its growing influence on international organisations, including the ISA, must be kept in mind while taking a call when the stakes are undeniably high, not just for the Indo-Pacific but for the entire planet. The moratorium is also being proposed as per the established precautionary approach. This approach is a broad legal and philosophical principle that suggests a pause and reassessment in case of a human innovation/activity that could potentially result in harm given the lack of scientific knowledge. In light of the pressing concerns raised by scientists, environmentalists, and several nations, a global moratorium on deep-sea mining should be the natural course of action. While some have argued that such a precautionary pause would not be in accordance with UNCLOS, including the current Secretary General of ISA, it would be an obligation under the constitution of the oceans. In an advisory opinion, the International Tribunal on Law of Sea (ITLOS) has confirmed a trend of precautionary approach becoming a part of customary international law and stated that it is a ‘binding obligation’ on both states and the ISA. This approach is enshrined in Principle 15 of the Rio Declaration. An example of such a moratorium under international law is the International Whaling Convention, which was adopted based on the precautionary approach and has been largely followed for the past 35 years. As the global community navigates this uncharted territory, it must ensure that the pursuit of critical minerals does not come at the expense of the environment that sustains us all. The choices made today will have far-reaching consequences, shaping the geopolitical landscape and determining whether the international community can unite in the face of shared challenges or whether the race for resources will lead to further fragmentation and conflict.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Ushering in a multipolar order requires a streamlined and coherent political agenda – not unfocused expansion.  The 16th BRICS Summit in Kazan, Russia, concluded last week with the usual grand declaration of the group’s commitments, concerns and aspirations.  Many media headlines, particularly in Western countries, focused on how the summit and BRICS generally, symbolised Moscow’s ability to circumvent the fallout of sanctions by turning to the global south. In this way, BRICS is indirectly viewed as a threat to Western efforts to isolate Russia, weaken its power projection capabilities, and end its invasion of Ukraine.  Western governments and analysts often struggle to frame BRICS’s evolution beyond a binary, zero-sum narrative in which the group is a key geopolitical challenge to the Western-dominated international order. This interpretation places the forces of democracy and liberal political values in one camp and authoritarian governments in another, with certain developing countries caught in the middle, trying to play one side off the other for their own benefit.  There is some merit to these kinds of headlines. Russia and China are primarily major status-quo powers. Both have been permanent United Nations Security Council (UNSC) members since its establishment. Moscow was the ‘other pole’ in the international order for most of the 20th century, a position Beijing is working towards. And the foreign policy goals of both place them in confrontation with the United States and its Western allies.  BRICS may be on a path towards unnecessary substantive bloat, and away from its core business.  So, are these two countries in a position to champion the global south’s cause, and why haven’t more representative bodies like the Non-Aligned Movement played a more prominent role?  The preoccupation with Russia and China detracts from BRICS’s broader, underlying geopolitical project – the need for global south countries to reform and shape the international order’s future direction on their own terms.  These include greater representation and agency in global policy- and decision-making bodies and facilitating greater freedom to trade, invest and borrow money outside the Western-dominated financial system. They also include a more just and equitable global power balance that reflects modern realities.  In pursuing these aims, BRICS countries have made steady progress on developing a shared strategic agenda for increased cooperation across various policy domains.  The Kazan summit’s 32-page outcomes declaration covers almost everything from reforming the UNSC and Bretton Woods institutions to climate change, biodiversity and conservation. It also covers challenges from global crises, conflicts and terrorism and a suite of economic development, health, education, science and cultural exchange-related issues.  A group of democracies, autocracies and theocracies speaking with one voice on human rights and democracy is absurd.  The group’s ballooning cooperation agenda may indicate progress. But it could also signify the limits of its diverse members’ ability to agree on ‘hard’ political and security matters central to the core business of reforming the international order.  The expansion of BRICS’ substantive agenda and its membership dilutes its primary purpose and reinforces the binary, zero-sum Western narrative its members constantly try to shed.  Tangible, albeit gradual, progress on establishing intra-BRICS institutions and processes such as the Interbank Cooperation Mechanism, the cross-border payment system and its independent reinsurance capacity suggest that BRICS’ clout and credibility are growing.  These initiatives could enable members to pursue their international economic objectives without the constraints and transactional costs associated with traditional financial bodies like the World Bank and International Monetary Fund. Ideally, this would improve their relative positions of global power and influence, and help deliver a more multipolar international order.  In contrast, deepening cooperation on big cat conservation, while important, doesn’t serve that purpose. Nor does facilitating youth exchanges on sports and healthy lifestyles or championing a BRICS alliance for folk dance. Including these kinds of initiatives in BRICS’ growing agenda detracts from its core objectives.  A streamlined agenda would divert attention from the contradictions and geopolitical manoeuvring of BRICS’ members.  More worryingly, this suggests that BRICS’ diverse constellation of member states is pursuing the path of least resistance – expanding their cooperation in every direction, hoping something eventually sticks.  Instead of doubling down on hard strategic questions about a shared conception of multipolarity, and the steps necessary to reform global governance and security institutions, BRICS seems to be heading for greater expansion and formalisation. And with that come the risks, challenges and institutional dependencies that have led to the stagnation and ineffectiveness plaguing more established international organisations in recent years.  Perhaps the group’s core members recognise that they have very different ideas of what constitutes multipolarity. Russia (and China to an extent) envisage much more than global institutional reforms, focusing instead on reimagining international norms and core principles.  These differences are also reflected in BRICS’ expanding membership. It seems Russian and Chinese enthusiasm has been curbed by other founding members, who prefer a ‘partner country’ model for future growth. This contrasts with the full membership offers to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and UAE in 2023. (Argentina’s new political administration declined, and the Saudis have remained non-committal.)    Most worrying, however, is BRICS’ preoccupation with promoting democracy, human rights and fundamental freedoms. There is no doubt that these terms are increasingly politicised and rife with double standards – among developing nations with mixed political systems and traditionally liberal, Western democracies. However, for BRICS to meaningfully champion normative values, its members must at least attempt to commit to common political governance systems in their own countries.  Having a group of partner nations composed of progressive constitutional democracies and closed repressive autocracies and theocracies attempting to speak with one voice on promoting human rights, democracy and fundamental freedoms is absurd. It reeks of empty political rhetoric at best, and Orwellian double-speak at worst.  This again dilutes BRICS’ key messages, undermines its important core business, and detracts from the significant progress being made towards a common strategic agenda.  BRICS primary goal moving forward should be to trim the fat.  A streamlined annual working agenda would divert attention away from its individual member states' contradictions and geopolitical manoeuvring. With a focus on addressing the international system’s failures, institutional reform and greater representation for global south countries in policy- and decision-making bodies could be prioritised.  This seems unlikely though, if this year’s summit is anything to go by. By following the path of least resistance, BRICS may be setting itself on a course towards increasing and unnecessary substantive bloat, and away from its core business.  Only time will tell if certain members are willing to be more assertive and correct course before they are too far down a path impossible to pivot away from. 

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The world economy is underperforming as a result of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainty around the US election. An escalation of conflict in the Middle East could increase uncertainties, harming inflation reduction efforts and hurting growth. It has been over a year since the Hamas-led attack on Israel. Israel’s response in Gaza has resulted in widespread destruction and significant loss of life. The conflict has since expanded beyond Gaza, involving the Houthis in Yemen, Hezbollah in Lebanon and Iranian strikes targeting Israel. In addition to the awful humanitarian cost of the conflicts, the war and the possibility of its further expansion pose significant repercussions for the global economy. This article discusses three potential ways in which the current conflict and a wider conflict in the Middle East could affect the global economy. Increased geopolitical uncertainties First and foremost, an escalation of the Middle East conflict could lead to greater geopolitical uncertainties. Figure 1 shows the evolution of the geopolitical risk (GPR) and geopolitical acts (GPRA) indices (Caldara and Iacoviello, 2022) – these are text-based measures of heightened uncertainties due to adverse geopolitical events such as wars, terrorism and international tensions. (See this article for more discussion about these measures.) Following the Hamas-led attack on 7 October 2023, both the overall GPR index and its ‘war and terror acts’ component spiked strongly, to a level higher than that seen during the ISIS attack in Paris in November 2015. Both indices eased significantly in the months following October 2023 despite the continuation of the conflict. But they jumped again following Israel’s attack on southern Lebanon in September 2024. As of mid-October 2024, the GPR and GPRA remain, respectively, 21% and 35% higher than their historical averages.   What might be the consequences of such elevated levels of risk? Research tells us that higher geopolitical risk raises oil prices (Mignon and Saadaoui, 2024). It also reduces global investment and increases inflation (Caldara et al, 2022). Greater geopolitical risk has a significantly negative impact on business and consumer confidence in several advanced economies (de Wet, 2023). This is because consumers typically cut non-essential spending and businesses postpone investment decisions during turbulent times. This reduces firm-level investment, particularly for businesses with higher initial investment costs and greater market power (Wang et al, 2023). Higher geopolitical risks also reduce global trade and financial flows, causing greater volatility in capital flows in emerging markets (Kaya and Erden, 2023). Oil production cuts and higher energy prices The second way in which the Middle East conflict could affect the global economy is its impact on energy prices, both directly through production cuts and indirectly through greater uncertainties. In response to Israel’s actions against its neighbours, the Organization of the Petroleum Exporting Countries (OPEC) could reduce oil production to penalise countries supporting Israel. A similar action in the 1970s led to a significant jump in oil prices, which contributed to years of stagflation, with higher global inflation and recessions in major economies. Before Israel's attack on Lebanon at the end of September, oil prices had been declining due to falling demand, particularly from China. On the supply side, oil production had increased in Canada and the United States, countering the production cuts by OPEC, and Saudi Arabia was expected to increase oil production from December. But the situation quickly reversed following Israel’s attack on Lebanon. Oil prices jumped by nearly $10 per barrel within a week, before easing by around $5 per barrel. While the immediate oil price impact of Israel’s attack has mostly faded, the potential for higher oil (and other energy) prices still poses a risk to global inflation and economic activity (Liadze et al, 2022). To provide further context for the potential scale of this impact, we can show what would happen if oil and gas prices were to remain $10 higher for two years than the baseline levels projected in the Summer Global Economic Outlook from the National Institute of Economic and Social Research (NIESR), using NIESR’s Global Macroeconometric Model (NiGEM). The results demonstrate that the $10 rise in oil and gas prices increases inflation by around 0.7 percentage points in major economies in the first year (see Figure 2). The impact is higher in China, where the economy relies relatively more on oil imports for its strong manufacturing industries. The inflationary pressures persist for two years despite central banks’ efforts to curb inflation by increasing interest rates.   The effect of higher oil and gas prices on real GDP is shown in Figure 3. In the scenario described above, GDP would fall by 0.1-0.2% in major economies immediately. Partly due to higher interest rates, real GDP would continue to weaken for three years following the shock. After this, economic activity would start to return to base levels as oil and gas prices revert to their levels in the baseline forecast.   Increased shipping costs and supply chain disruptions A wider conflict in the Middle East could also affect the economy through higher shipping costs and supply chain disruptions. Houthi attacks on commercial ships in the Red Sea in late 2023 showed that such disruptions can have a huge impact on global trade through shipping, which comprises 80% of world trade volume. Following the rocket attacks by the Houthi rebels, some commercial shipping re-routed from the Red Sea to the Cape of Good Hope, leading to significant delays in travel times and increased freight costs. As a result, the Shanghai Containerized Freight Index – a measure of sea freight rates – rose by around 260% in the second quarter of 2024 with additional disruptions to supply chains. Our analysis shows that an increase of 10 percentage points in shipping cost inflation can lead to import prices rising by up to around 1% and consumer inflation increasing by around 0.5% in OECD countries. As Figure 4 shows, the impact of shipping costs on inflation shows its full effects over six quarters. This means that inflationary concerns could be with us for the next year and a half as a result of higher shipping costs that may emerge from any possible escalation of the Middle East conflict.   Wider economic implications and policy responses While rising geopolitical risk and increased oil and shipping costs can each individually exert upward pressure on inflation and may slow down economic activity in the global economy, the combined impacts are likely to be greater. Countries with stronger trade and financial ties to the Middle East and those that rely heavily on oil imports as an input for domestic production would be most affected. On the monetary policy front, central banks may have to take a more hawkish stance in response to rising inflationary pressures from the Middle East conflict. This could lead to higher interest rates, which would further dampen economic activity, particularly in an environment where there are already recessionary concerns in some major economies. Beyond its immediate economic implications, an escalation of the Middle East conflict could trigger large-scale displacement of people, which would increase economic and social pressures on neighbouring countries. Many countries may also have to increase their military spending in response to growing regional tensions. Given that public debt levels are already elevated in many countries due to successive shocks to the global economy over the past decade, any additional defence spending could come at the expense of public infrastructure investments that would otherwise boost productivity growth. Overall, the global economy is already underperforming as a result of the lagged effects of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainties surrounding the upcoming US election and possible changes to US trade policy. A potential escalation of conflict in the Middle East could exacerbate the situation by increasing uncertainties, harming efforts to bring down inflation and reducing global GDP growth. Over the medium and long term, it could further damage the global economy, with the possibility of refugee crises as well as increased defence spending, making the effects more complex and longer lasting. This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском In Rio de Janeiro, world leaders are gathering for a historic summit. The G20, the symbol of global governance, is at a crossroads. The planet is waiting. The climate, economic and geopolitical challenges are urgent.Since yesterday, at the G20 Summit in Rio de Janeiro, under the strategic engagement of Russia, Foreign MinisterSergey Lavrov, guided by the instructions of President Vladimir Putin, has been playing a key role in discussions on combating inequality, hunger and poverty, as well as reforming global institutions. Together with the BRICS Alliance, innovative initiatives are being put forward to strengthen economic cooperation and global stability, including sustainable development projects and strategic trade agreements. This Summit is proving to be a crucial platform for addressing pressing global challenges such as security and climate change, while potentially influencing global governance and international relations in the years to come.Geopolitical context of the summit, the madness of the Biden administrationAs the G20 group meets in Rio de Janeiro to reconcile the positions of the balance of power in the global chessboard, the recent antithetical decisions of the United States, held on the very eve of the summit and supported by France and Great Britain, are once again dispersing the positions to be reconciled. The Western minority, accustomed to living off the labor of the planetary majority, is lamentably trying to redefine the dynamics of the international community in its favor, by authorizing deep strikes on Russian territory. This approach, adopted by the Biden administration, reflects both madness and a vision of resistance in the face of the potential defeat of Ukraine and NATO allies against Russia, while seeking a reaction that could exacerbate global tensions. This audacious geopolitical calculation, perceived as a last-ditch attempt to consolidate Ukrainian positions before a potential change in American leadership, marks a turning point towards a dangerous escalation of hostilities. It can also be compared to a very big step taken towards the start of the Third World War.The 2024 G20 summit in Rio de Janeiro is therefore taking place in a complex geopolitical context, marked by key global issues. International conflicts, exacerbated in the Middle East, Ukraine, Sudan, and tensions over the role of the United States, France, Great Britain and the collective West are at the heart of discussions on global security. While António Guterres (UN Secretary-General) urges the G20 to adopt actions aligned with the UN Charter – although Western ambitions of domination are being challenged by the rise of the BRICS Alliance – the Western minority continues to pour oil on the embers precisely to satisfy its ambitions of eternal domination.The climate crisis, meanwhile, is forcing more ambitious policies, as the G20, responsible for 80% of global greenhouse gas emissions, must revise its commitment to limit global warming to 1.5°C. Also, growing economic inequality and the need for reforms to a perceived unfair international financial system underscore the urgency of changing the global financial architecture. Despite the political challenges, the summit embodies a push towards stronger multipolarism, with key players such as Sergei Lavrov, Xi Jinping, Recep Tayyip Erdoğan, etc., advocating for international cooperation. The political transition in the United States, with the imminent departure of Joe Biden and the possible return of Donald Trump to the White House, adds uncertainty, potentially impacting global cooperation and sustainability efforts. This nineteenth summit of the Group of Twenty powers (G20) is crucial to encouraging collective action in the face of complex challenges related to security, climate, the economy and international cooperation.Russia’s engagement in the world chessboardRussia’s participation in this Rio de Janeiro Summit is of major strategic importance. Led by Mr. Sergey Lavrov, Minister of Foreign Affairs of the Russian Federation, and mandated by the President of the Russian Federation, the Russian delegation demonstrates the country’s strong commitment to global discussions. Russia aims to take a leading position in addressing global challenges such as combating inequality, hunger and poverty, and reforming international institutions. Mr. Sergey Lavrov’s interventions at the plenary sessions are essential, while his bilateral talks with other world leaders could lead to decisive agreements, strengthening international relations. Capitalizing on its long history of global engagement, Russia is ideally placed to influence these crucial debates for the future of the planet.Positive initiatives of the BRICS Alliance in global dynamicsThe BRICS, originally composed of Brazil, Russia, India, China and South Africa – and expanded over time to BRICS+ – represent an undeniable emerging force in global economic cooperation, as demonstrated by their landmark initiatives at the Rio Summit yesterday. By establishing the New Development Bank, these nations are demonstrating their commitment to financing joint infrastructure projects, strengthening their synergy and displaying a clear desire for de-dollarization. The significant progress made in social security also demonstrates their determination to improve social protection on a large scale. Looking ahead, the BRICS countries are committed to driving reform of international financial institutions, placing their economic weight at the heart of global decisions, while working towards sustainable development and the fight against climate change. Speeches by representatives such as Mr. Sergei Lavrov at the summit captured attention, underscoring the BRICS’ determination to impact global governance and promote a more equitable and sustainable economic future.The impact of the summit on global governanceAs mentioned above, the G20 Summit in Rio de Janeiro, Brazil, represents a crucial opportunity to transform global governance and have a lasting impact on the future of the planet and international relations. Since yesterday, this strategic meeting has been addressing major issues such as the reform of international institutions, requested in particular by the member countries of the BRICS Alliance, the proactive fight against climate change to reduce greenhouse gas emissions, and international security requiring enhanced cooperation in the face of current geopolitical tensions. Through decisive decisions, the summit could establish a new multipolar world order and decide on the choice between cooperation and global confrontation. The challenge lies in reconciling national and global interests, strengthening trust between international partners, and finding innovative solutions to address the complex challenges of our era. The G20 Summit in Rio thus offers a unique platform for leaders to demonstrate their leadership and vision, thereby shaping a multipolar and sustainable future for future generations.It can be said that the 2024 edition of the G20 Summit in Rio de Janeiro marks a turning point where world leaders are called upon to choose: cooperation or confrontation, progress or stagnation. The future of the planet is now in their hands. Today’s decisions, contained in the Summit Declaration, will shape the world of tomorrow. History will judge.