BRICS, the political-economic counterweight to the global political institutions dominated by the US and the industrialised nations of Europe, was established by Brazil, Russia, India, and China in 2009, with South Africa joining in 2010.
BRICS established a multilateral development bank (MDB) called the New Development Bank (NDB), also referred to as the BRICS Bank, in July 2014, with the five founders holding 20 percent ownership each. The NDB became operational in 2015.
Last year, in 2023, under the South African Presidency, BRICS expanded to admit five new members, i.e., Egypt, Ethiopia, Iran, Saudi Arabia and the UAE. The first BRICS+ Summit took place last week in Kazan, Russia.
BRICS+ is on an expanding spree. Thirteen more countries have been accepted as partner countries. There was a separate summit for BRICS+ and the partner countries in Kazan on the last day of the event. Prime Minister Modi did not attend this meeting.
The selection of BRICS+ and other partners has China’s (aided by Russia) stamp all over. India could only deny Pakistan the partnership status using its veto, as new members can only be admitted with unanimous consent.
China promoted another MDB, the Asian Infrastructure Investment Bank (AIIB), which commenced business in 2016. The AIIB is fast expanding to become an alternative to the World Bank. China also promoted the Shanghai Corporation Organisation (SCO) in 2001 in an attempt to counter NATO. India is the second largest member of the AIIB and of the SCO. China completely controls the AIIB. Pakistan is in the SCO.
Is India at the centre stage in BRICS+ and the other aforementioned political and developmental organisations? Or is it increasingly becoming peripheral?
BRICS is Becoming a Chinese-Russian Enterprise
Politically, the world today is transforming into two principal blocks —predominantly capitalist and liberal democracies led by the US and the EU and predominantly ‘socialist’ but authoritarian regimes led by China and Russia.
The five countries (Egypt, Ethiopia, Iran, Saudi Arabia and the UAE) admitted in BRICS+ are effectively authoritarian regimes and close to China and Russia. Hardly any of the thirteen countries — Algeria, Belarus, Bolivia, Cuba, Malaysia, Indonesia, Kazakhstan, Nigeria, Thailand, Turkey, Uganda, Uzbekistan and Vietnam, barring Indonesia, are fully functional democracies.
All of these countries are also major supporters and beneficiaries of China’s Belt and Road Initiative (BRI) and have a strong political and business affinity with Beijing and Moscow. India could not have been very happy about their admission as a partner in BRICS. None of them are any significant export or investment destinations for India either.
New Delhi possibly spent all its political capital to keep Pakistan out of BRICS. How long will India be able to do it? Pakistan, a very close ally of China, recently hosted the SCO Summit, attended by India’s External Affairs Minister.
It is interesting that BRICS+ has not admitted any European or North American country. BRICS+ seems to be becoming a grouping of non-democratic countries. Does India fully belong to it, or India’s isolation will get more and more pronounced in the times to come?
Leadership Stakes in the AIIB and the NDB
Unable to break the hegemony of the US and the Europeans in the older MDBs, i.e., the World Bank, the ADB, the AfDB etc, the major developing and borrowing countries led by China and India, decided to set up two new MDBs, the AIIB and the NDB.
The AIIB is, for all practical purposes, fully owned and controlled by China, though India has the second largest shareholding. China had a voting power of 26.6 percent on 31 December 2023, empowering it to block any resolution.
Chinese national Jin Liqun, appointed as the AIIB’s President from its inception in 2016, has a vice-like grip on the AIIB. Headquartered in Beijing, it functions right under the nose of the Chinese Government. Jin Liqun assumed significant powers to sanction projects directly in 2018.
India has only one post within the senior management, that of "Vice President, Investment Operations (Region 1)."
The AIIB does not have any residential board of directors, unlike the World Bank or the ADB. Therefore, overworked Finance Ministry officials can hardly devote any time to governance and policy issues. India gets about 10 percent of the AIIB’s annual funding commitments.
India is effectively reduced to playing second fiddle to China in the AIIB.
The NDB's capital structure was differently established. India was an equal founder-member, contributing 20 percent initially. India should have staked everything to get the NDB's headquarters but, unfortunately, agreed that it be set up in Shanghai. India remained content as the NDB’s first President, which rotates every five years among the five founding members.
Discussions for the expansion of the NDB started much earlier in 2017 (BRICS in 2020). As the NDB promised to provide a good amount of hard financial resources, many developing countries were quite keen to join it. India had the opportunity to push the induction of new members.
For reasons difficult to fathom, India (particularly the Ministry of External Affairs) was quite reluctant to do so.
Not a single new member was inducted during India’s Presidency (until 2020). It is only under the Brazilian Presidency that three new members (Bangladesh and the UAE in 2021 and Egypt in 2023) joined the NDB as members. In contrast, the AIIB, which started with 57 foundational members in 2016, could, by the end of 2023, expand its membership to 109 (95 full and 14 prospective members).
The NDB has become a poor cousin of the AIIB.
China and Russia are Attempting to Build Alternative Financial Systems
US sanctions have targeted Russia for many years. After the Ukraine war, the US seized Russian foreign exchange reserves and imposed new sanctions restricting the use of American financial systems for payments and trade settlements.
China and Russia have been seriously attempting to develop alternative systems to avoid the use of US dollars and banks. They find BRICS and the NDB pivotal in this.
For developing an alternative to SDR (currency unit of IMF, Special Drawing Rights)/ US dollars, China and Russia want BRICS to create a currency with a weighting of the Chinese Yuan, the Russian Ruble and the Brazilian Lira, for trade settlements and payments amongst BRICS countries.
An alternative to SWIFT-CIPS (Society for Worldwide Interbank Financial Telecommunications--Cross-Border Inter-Bank Payments System) is sought to be popularised within BRICS. A BRICS reserves fund, based on swaps, has also been established as a lender of last resort.
None of these initiatives have so far made significant headway, except bilateral trade between China and Russia using CIPS. India, keen on promoting a rupee-based local currency trading system, has not shown much interest in any of these initiatives.
India Has a Choice
It seems quite clear that BRICS, the SCO, the AIIB and the NDB will increasingly become more and more Chinese-Russian controlled, making India feel isolated.
India, being a leading democracy in the world, does not really belong to this institution, controlled by authoritarian nations. India does, however, have significant economic and defence interests aligned with Russia and China.
There is a counter-movement in the older MDBs like the IMF, the World Bank and the ADB, controlled by the West, increasingly working to downsize and isolate China (Russia already has a much-reduced presence). India appears to be a more natural ally of this group of democratic countries and, perhaps, stands to gain much more.
It, therefore, makes good sense for India to increasingly pivot towards Western MDBs and other institutions like the Organisation for Economic Co-operation and Development (OECD). India must play a significant role in these institutions while securing its economic interests in the China-Russia-controlled institutions as a business case.
(The author is former Economic Affairs Secretary and former Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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