How did the BRICS group evolve from a quirky idea in an economist's mind to a formidable alliance of nations in just 23 years?

From October 22 to 24, 2024, the BRICS group will hold its first expanded summit in the Russian city of Kazan. Unlike the South African summit a year ago, which was deliberately belittled by Western media, the upcoming Kazan summit has attracted unusual attention from Western media. Some Western media even view the BRICS group as a potential alliance of "Global South" countries that could rival the G7 or the entire West.

Interestingly, 23 years ago, the BRICS group was merely an investment concept devised by economist O'Neill at the American investment bank Goldman Sachs. The four countries initially included in this concept were not very enthusiastic about it, and it took eight years for them to form a loose informal alliance.

When the BRICS group was established in 2009, its member countries were indeed the four that O'Neill had envisioned: Brazil, Russia, India, and China. A year later, South Africa joined, becoming the BRICS quintet. In 2024, the number of BRICS member countries doubled: Iran, Egypt, Ethiopia, the United Arab Emirates, and Saudi Arabia became new member countries. Now, it is said that more than 40 countries have expressed their desire to join the BRICS group, with more than 20 countries formally submitting applications, including Malaysia, Thailand, Azerbaijan, and NATO member Turkey.

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The expanded BRICS group is commonly referred to as BRICS Plus, while Chinese Foreign Minister Wang Yi calls it the "Big BRICS," but for the sake of narrative convenience, I will still refer to it as the BRICS group.

So, how did the BRICS group evolve from a quirky idea in an economist's mind to a formidable alliance of nations in just 23 years?

BRICS vs. G7

Shortly before the Kazan summit, the American magazine Foreign Affairs published an article titled "The Battle of the BRICS—Why the Future of the BRICS Will Affect Global Order?" which included the following passage: "Since the establishment of the BRICS group 15 years ago, many Western analysts have been predicting its demise. The member countries of the BRICS group are very different, often arguing over various issues, and are scattered around the world, making it difficult to form a meaningful partnership. Yet, it has persisted and survived."

But it's more than just "persisted and survived."Indeed, although the BRICS group is often referred to as a "Global South" bloc that corresponds to the "Global North" in economic terms, it is actually scattered across the globe, distributed in the geographical North (Russia, China, and India) and the geographical South (Brazil and South Africa) of the Earth. Currently, Western public opinion generally holds two views on the BRICS group: one view believes that the countries within the BRICS group are too diverse, lacking common goals and aligned interests, essentially forming a talk shop that poses no substantial challenge to the West; the other view holds that the BRICS group poses a serious challenge to the West, especially to the G7 led by the United States.

Westerners particularly enjoy comparing the BRICS group with the G7, because unlike military organizations like NATO and regional organizations such as the EU and ASEAN, these two groups are primarily state alliances organized around economic issues.

The G7 consists of seven major developed countries, with the United States, Germany, the United Kingdom, France, Japan, Italy, and Canada as formal members, and the EU as a non-formal member.

Due to the vast differences in geopolitical interests and objectives among the BRICS member states, neither the group as a whole nor individual members such as India, Brazil, and South Africa, which maintain good relations with the West, have explicitly stated their intention to directly compete with the G7, let alone counterbalance the West. They hope to construct a multipolar global economic landscape by strengthening internal cooperation and multilateral exchanges. However, the very existence of the BRICS group has, in effect, already posed a challenge to the G7 or the West. This challenge is primarily economic but not limited to the economic sphere.

Let's first look at the economic aspect. One of the Big Four accounting firms, EY, published an article on September 26, 2024, stating that in 2024, if calculated by nominal exchange rates, the G7's GDP (Gross Domestic Product) accounts for 44.4% of the global economy, surpassing the BRICS group. However, if calculated by purchasing power parity, the G7's share has decreased from 42.1% in 2002 to 29.6% in 2024, a drop of 12.5 percentage points; the BRICS group's share of the global GDP has risen from 24.1% in 2002 to 36.7% in 2024, an increase of 12.6 percentage points; it is projected that by 2029, the G7's share will further decrease to 27.5%, while the BRICS group's share will rise to 38.3%. According to this article, the BRICS group's share of the global GDP had already surpassed that of the G7 as early as 2012.

Now let's consider population size and land area: the expanded BRICS group has a total population of about 3.5 billion, accounting for 45% of the world's population, while the G7 has a total population of about 780 million, less than 10% of the global population. It is worth mentioning that the BRICS group includes the two most populous countries in the world: India and China. The total land area of the BRICS countries accounts for about 30% of the global landmass, while the G7 countries' land area accounts for about 14% of the globe, less than half of the BRICS group.

In terms of natural resources, apart from the United States and Canada, which are resource-rich, the other G7 countries are relatively resource-poor. In contrast, many BRICS countries are rich in natural resources. For example, Saudi Arabia, Russia, and Brazil are among the top in the world in terms of oil, natural gas, and mineral resources.

Specifically, Brazil has extremely rich mineral resources, including iron ore, bauxite, manganese ore, zinc, copper, gold, lead, petroleum, and natural gas; Russia is one of the world's largest oil and natural gas producers, and this country with the largest territorial area in the world also has abundant mineral resources such as iron ore, coal, copper, gold, bauxite, and lead; South Africa is one of the world's largest gold producers, with other resources including iron ore, coal, zinc, copper, lead, petroleum, etc.; Saudi Arabia is the country with the highest oil production and export volume in the world, and it also controls the second-largest hydrocarbon reserves globally; Iran is also a resource-rich country with oil, natural gas, iron ore, bauxite, zinc, copper, etc.; the United Arab Emirates has abundant resources in oil, natural gas, iron ore, bauxite, zinc, etc. Even Egypt, Ethiopia, India, and China, which are not known for their natural resources, are not without their merits: Egypt has oil, natural gas, coal, iron ore, zinc, and copper; Ethiopia has coal, zinc, copper, lead, gold, and rare earths; India has coal, oil, natural gas, iron ore, zinc, copper, manganese ore, and rare earths; China has coal, oil, natural gas, iron ore, copper, gold, bauxite, zinc, etc., and it is particularly worth mentioning that China's rare earth reserves and production are both the highest in the world.

In terms of cultural influence, apart from Japan, the G7 countries are predominantly white, Western Christian nations. The geographical distribution of BRICS member states is more extensive, spread across Asia, Europe, the Americas, and Africa, covering all continents inhabited by humans except Oceania; their cultures and religions are also diverse, such as Hinduism and Sikhism in India, Confucian culture in China, Eastern Orthodoxy in Russia, Catholicism in Brazil, and Islam represented by Saudi Arabia, Egypt, Iran, and the UAE, etc., offering a broader representation.

In terms of geopolitical aspects, although neither the G7 nor the BRICS group are political or military alliances, and their purposes for grouping together are not based on geopolitical confrontation but mainly on economic cooperation and development, the fact that the G7 initially invited Russia and later expelled it for geopolitical reasons has objectively given these two economic groups a certain geopolitical hue. In addition, the G7 countries are all wealthy nations, belonging to the Global North in economic terms, while BRICS member states are all emerging market countries, belonging to the Global South in economic terms, which also reflects the global North-South divide in a certain sense.Of course, compared to the G7, the original intention and current development of the BRICS group have a lighter geopolitical hue. The member countries do not have a common goal of confronting the West, nor do they have coordinated geopolitical interests. There are even border territorial disputes and contradictory geopolitical objectives between India and China, and various discords and disagreements between Saudi Arabia and Iran, as well as Egypt and Ethiopia. In this sense, the West's geopolitical concerns about the BRICS group are actually unnecessary, because the BRICS group is neither a military alliance like NATO, nor an economic community like the EU, nor a regional bond like ASEAN, nor a shared political system, economic system, values, and geopolitical interests like the G7.

Some people therefore believe that due to the lack of common geopolitical objectives, the BRICS group is nothing more than a talk club and cannot make a big impact. However, David Rubin, a senior fellow at the Royal Institute of International Affairs in the UK, believes that precisely because there are no common geopolitical objectives, the BRICS group has a strong appeal to many countries outside the group: it provides a way to express solidarity with other countries in the global south, without jeopardizing the alliances these countries have already participated in. For example, Turkey can join the BRICS group without violating any commitments to its NATO partners. The looseness of the BRICS group allows each member country to see what they want to see.

The G7 is a club of rich countries, while the BRICS group is a combination of emerging market countries. On many levels, such as per capita GDP, technology level, financial markets, and corporate innovation, the BRICS group is far behind the G7. Since this article mainly discusses the challenges the BRICS group poses to the West, these obvious backwardnesses are not elaborated in detail. However, since there are rich countries, poor countries, and emerging market countries at a medium level of development in this world, the world economic pattern must not only have a rich country club but also a poor country club or an emerging market club. Regardless of whether the subjective intentions and objective situations of the G7 and the BRICS group have political colors, at least on the economic level, the existence of the G7 and the BRICS group has already formed a new world order. The future world may also see new economic groups, or existing economic groups may also re-differentiate and recombine. All kinds of changes and combinations are unpredictable, which will add new colors to the future world order.

BRICS currency and petro-yuan

If the BRICS group wants to pose a substantial challenge to the West, in addition to the aforementioned advantages in population size, natural resources, and economic total, it needs at least some coordinated actions.

If the member countries of the BRICS group lack common geopolitical objectives, then at least in one aspect, they can reach a consensus: they all hope to weaken the status of the US dollar in the international financial system.

In the international financial system, the US dollar still occupies a dominant position. What particularly annoys countries in the global south is that the United States is increasingly inclined to "weaponize" the dominant position of the US dollar, using financial sanctions to achieve its geopolitical objectives. This is most fully reflected in the fact that after the outbreak of the Russia-Ukraine conflict, the United States led Western countries to kick Russia out of the SWIFT system.

Some Western observers believe that compared to the 15th BRICS summit held in South Africa in 2023, the reason why this Kazan summit of the BRICS group has attracted more attention is that a series of recent developments may pose a real threat to the dominant position of the US dollar in international trade.

According to reports, at this Kazan summit, the leaders of the BRICS group member countries will further discuss the possibility and feasibility of the "BRICS currency" and the "petro-yuan."

Saudi Arabia, the world's largest oil supplier and a new member of the BRICS group, recently confirmed that it is "willing to accept new ideas" in oil trade, including using the yuan in crude oil trade settlement.Another energy superpower and a founding member of the BRICS group, Russia, is also considering using petroyuan instead of petrodollar to reduce its dependence on the United States and the SWIFT system.

However, India, also a founding member of the BRICS group, recently announced that the country has never had plans to actively promote the process of "de-dollarization", because "de-dollarization" is not a part of India's economic, political, and strategic policies, and India will still use the US dollar for the main trade settlements.

India's Foreign Minister Subrahmanyam Jaishankar said on October 1 this year that India will not "actively" promote the process of "de-dollarization", but he said that India will "passively" look for alternative currency options to trade with countries that do not accept the US dollar, such as India's trade with Russia, China and other BRICS countries, will use rubles, yuan and other local currencies, but when trading with other countries, the US dollar will be the preferred payment method.

However, Jaishankar also pointed out that some of the United States' policies make it difficult for India to trade in US dollars with some of its trade partners.

In addition, the BRICS countries have been committed to developing their own reserve currency to promote trade among themselves and reduce dependence on the US dollar. There are reports that the currency will be backed by gold.

If the BRICS countries launch their own reserve currency, it could lead to a decline in the world's demand for the US dollar and start the so-called "de-dollarization" process. The new BRICS reserve currency will also have a significant impact on the US economy and the global economy.

However, for a long time, the introduction of the BRICS reserve currency has been "only heard on the stairs, not seen people coming down." Some experts believe that the BRICS reserve currency is a concept full of flaws, because it is difficult to use a currency to unify the BRICS group's very different economies.

Professor Patrick Carmody of Trinity College Dublin in Dublin, Ireland, also admitted that the economies of the BRICS countries are so different that it is difficult to create a common currency like the EU's launch of the euro. However, he believes that the BRICS may consider creating a new currency for international trade payments or cryptocurrencies for international trade in the future.

Herbert Bonisch, a former senior economist at the Bank for International Settlements, believes that a mature currency needs to complete three functions: face value, means of payment, and store of value. Any lack of these three is not a currency, and the petroyuan is trying to meet these requirements.

Talking about the challenges of the petroyuan as a means of payment, Bonisch suggested that the mBridge project led by the Bank for International Settlements may be a solution. mBridge is a modern payment system that uses central bank digital currency to replace the outdated proxy account settlement system. It allows instant settlement among the cooperating central banks in China, the United Arab Emirates, Thailand, and Saudi Arabia. Transactions on this platform can avoid the review of outsiders such as the SWIFT system and the US government.Rubin from the Royal Institute of International Affairs in the UK also believes that a significant advantage of using the mBridge system is that banks can make overseas payments without the need to directly open accounts in numerous banks, nor do they have to worry about the risks of overseas peers defaulting or failing to process payments on time, because the system itself creates a one-stop international payment service.

Rubin said that the mBridge system connects the central banks of China, the United Arab Emirates, Thailand, and Saudi Arabia, and this system can also easily be interconnected with a similar central bank digital currency cross-border payment platform recently proposed by the Russian government, known as "BRICS Bridge."

Although in the short term, it is still difficult to break the hegemonic position of the US dollar in the international financial and trade systems, just as the BRICS group has been striving for and intends to continue striving for at this summit, the general trend of developing countries and emerging markets gradually de-dollarizing in the future global economic landscape is probably inevitable.