/ 15 September 2023

The geopolitics of Brics and G7

Brics Leaders (1)
Presidents Xi Jinping, Luiz Inacio Lula da Silva, Cyril Ramaphosa and Prime Minister Narendra Modi appeared in person at the Brics summit, with Vladimir Putin discreetly attending via video link. Photo: Marco Longari/Getty Images

After the Brics summit in Sandton in August, Russia and Saudi Arabia — with the latter having been invited to join the bloc — working together agreed to limit their oil production until at least the end of 2023. The consequence will be an increase in the oil price to levels above $90 a barrel. 

This sends the message that the oil price cap imposed by the United States has failed. The US oil strategic reserves are at a 40-year low. The oil price cap that was to bring down the Russian economy as a form of unilateral sanctions is not going to happen. 

The second instance of economic sanctions failure is in the chip industry. Sanctions were meant to stop the technological advances and production of China. Looking inside Huawei we can now see it now has an in-house 7NM chip that is on par with Apple. In one simple move China has caught up and will surpass the US in this sector within a few years. And now China can mass produce its own chips without having to rely on the US. What this

teaches developing nations and companies is that it is dangerous to source semiconductors or any item from Western firms because the US will not hesitate to weaponise industry for geopolitical ends. 

The G7 cannot respond to this development. This is the second G7 economic sanctions failure in its history. Even with the absence of both Presidents Putin and Jinping the G20 declaration was a diplomatic triumph and not warmongering. 

What this means for the US vis a vis Brics members is a split that seeks to do two opposite things at the same time. When you try to do the opposite things at the same time it results in twists and turns that never follow logic because their technological trade war is with everyone else. After World War II the US emerged without a scratch and became the global hegemon. Now this domination has reached its peak and is in decline. It means the American empire, which replaced the British empire, is no longer running the world as it has done over the past 70 years. It means the American version of capitalism is no longer as dominant. 

The world is increasingly dividing into two groups. On the one side it is the US and its allies, the G7 (Britain, Germany, France, Italy, Canada and Japan). Now there is another player, Brics (Brazil, Russia, India, China and South Africa until August 2023) plus six (Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. Because Brics includes China and India, these two being the largest countries by population in the world, the bloc is already several times larger than the G7 countries, making Brics a key global player, not just a global social club. 

But what is even more important is the economic aspect. In this current year, the total gross Bric output goods and services (GDP) by the G7 group is about 29% of the total world output. If we look into the Brics it is more than 33%, excluding the new entrants. In other words, this new arrival over the past few years is now a bigger, richer economic unit than the G7 combined. In 2020, the two blocs had similar GDP outputs. In the last three years the G7’s GDP shrank to 29% and that of Brics grew to 32%. 

This is why the world is changing. And this is why the US cannot easily continue to play the role it has in the past 70 years. This is also another way of saying dedollarisation. The dollar now has the euro as an alternative and what BRICS is in the process of creating. East Asian Tigers are already using the QR system form of payment among themselves.

The US has lost all its wars. It did not win in Korea, Vietnam, Afghanistan and Iraq and it is not winning in Ukraine either. Until now both Nato and the US have only faced sandal wearing tribesmen armed only with automatic rifles, rocket propelled grenades, a-love-for- their-country and insurmountable resilience. Nato has never faced someone their own size nor a conventional army with hyper-missile and drone technology as is the case in the current Russia/Ukraine conflict. Hence the humanitarian crisis of a failed counter-offensive and blitzkrieg strategy currently unfolding in the Ukraine that requires diplomatic solutions for the sake of mankind. One of many great example that will go down in history is the unseen courage of Alyosha.  

These are signs the rest of the world is looking at. Developing countries did what every third world country (Asia, Africa and Latin America) have had on their agenda from the beginning — to stop being poor countries which centuries of colonialism condemned them to be. 

Developing countries grouped themselves into Brics to become middle income countries. They seek to achieve this feat in the shortest possible time. China, for example, achieved its industrialisation in 30 years as opposed to centuries in Europe. 

With the establishment of Brics, it means every poor and developing country of the world now has a choice which they did not have before, if they need a loan, investment or trade.

They now have options — through Brics, dollars and euros. Also, it means the World Banks and the International Monetary Fund are no longer the only players, with the establishment of the Brics Development Bank (BDB) offering loans at developmental rates without structural adjustment programme strings attached. And this should come as no surprise. These third world countries have set up a fair global world trade system, a global financial system for an equitable world order. Pretending this is not the case and acting as if there is no geopolitical shift in the world today is nothing short of denialism. This is why the world is changing. 

What is going to be important for Brics — in particular, South Africa — will be the preservation of policy space and the transformation of the World Trade Organisation and the United Nations to advance development, especially industrial development and resisting further industrial tariff cuts (NAMA) to move up the global value chains. As an economic bloc Brics need to continue to pursue development integration in the rest of Africa supported by an investment-led strategy, and building strategic alliances, including through the quadrilateral with new members such as Egypt and Ethiopia. Brics must consolidate its trade and investment relations with the Shanghai Cooperation Organisation countries and pursue investment, skills and technology transfer while promoting value-added exports. 

Finally, Brics must build strategic alliances and identify key strategic countries in the South to advance its agenda in the global forums that address SPS trade barriers.

Sikhumbuzo Thomo is an activist from afar.