BRICS’ 2024 Expansion and its Search for Leadership

In our previous article, we discussed why BRICS, the loose coalition of Brazil, Russia, India, China and South Africa, is currently hobbled with two larger members, Russia and China, with failing economies, and two other members, Brazil and South Africa, whose economies don’t measure up to the standards Russia and China are attempting to set.

That leaves only India as a stable, near-Western peer in terms of both an expanding economy and a government that can be trusted to lead BRICS. But why is a trustable government necessary for a leadership role?

Consider China. Its banks are wholly controlled by the Chinese Communist Party. The Bank of China, for example, is a state-owned Chinese corporation. There are strict regulations that investors must follow in order to withdraw funds, or to divest themselves of stakes in Chinese companies. It's not like an investor could simply call up a bank in Beijing and ask to have their millions in gold transferred to, say, Switzerland. China would forbid it, or at least, hamstring it with hundreds of regulations that any transfer would have to jump through. Currently, anyone considered a “domestic entity” (including foreigners who’ve lived in China for more than a year) are prohibited from removing funds more than $50,000. Even with that limit, these groups are still limited to using those funds for very specific applications, including training, study, travel or family support.

Despite these severe restrictions against withdrawing investments, many Western companies are doing just that. Many U.S. pension funds are already divesting themselves from Chinese companies over worries that such funds could become frozen if tensions between the two countries increase, which seems increasingly likely as the new administration comes onboard.

Then there’s the problem of Russia. It’s currently hammered by Western sanctions, and any country, even one as large and influential as China, risks being sanctioned themselves if they work with them. So despite Russia desperately wanting to be the leader of BRICS, or anything else for that matter, they’re out, too.

So, how does India look as the financial leader of BRICS? 

First of all, India is well aware that they’re walking a diplomatic tight rope between its Western allies and its desire to keep all options open by still dealing with Russia. China and Russia have both become leading buyers of Russian crude oil, as Russia has provided incentives to keep its price low and affordable. But India has angered Putin’s plans by demanding that all oil purchases have to be done in Indian rupees, rather than the Kremlin’s preference of the ruble. 

India has also angered the West by never condemning Russia’s invasion of Ukraine, and is still importing weapons made by Russia, despite being a member of QUAD, the Quadrilateral Security Dialogue made up of the U.S., Australia, and Japan. But the dismal showing of Russian weapons in Ukraine is making India rethink its weapons purchases. India is taking steps to pivot to the West, specifically the U.S., in its future weapons purchases. India’s percentage of its weapons purchases from Russia has fallen from 76% in 2009 to only 39% in 2023.

These competing alliances have made India’s rise to the top of BRICS problematic. And it hasn’t gotten easier with its opposition to five new members just recently added. 

As of October of 2024, four new nations have been brought under the loose BRICS umbrella:  Egypt, Ethiopia, Iran, and the United Arab Emirates. This expansion was criticized by India, who specifically did not want to see Iran included, as they’re one of the greatest proponents of chaos in the Middle East, and whose backing of Houthi rebels has sparked a volatile situation off the Indian coast. Iran’s inclusion was also one of the reasons Saudi Arabia, who was invited to join in 2023, declined to come onboard. 

Then there’s China’s desire to pull BRICS into a more anti-U.S. position, while India wants to remain a neutral block with options open to counter what it sees as a Western-dominated economic system, including the World Bank, the E.U. and the United Nations.

Then there’s the half-century of direct conflict between India and China. Dating back to the Sino-Indian War of 1962, and continuing up to 2020, when dozens of deaths were reported over a brawl near their joint border high in the Himalayas, both countries have hurled insults and claims of aggression at each other. The 1962 conflict saw 7,000 casualties on the Indian side and a chastening rebuke they have never forgotten. China, on the other hand, feels like an occasional demonstration of their military superiority will cow its neighbors. 

There’s also fierce competition between the two countries in the South China Sea and the bottleneck that is the Strait of Malacca, which is threatened by China’s expansion into the Indian Ocean. India’s 2023 offer to provide helicopters to the Philippines, itself threatened by China’s attempts to expand its influence into Philippine territorial waters, has China wondering if India could be designated as a new “troublemaker” in the area, a term Beijing normally reserves specifically for the U.S. 

These tensions between BRICS’ two largest economies means that there will be no easy path forward for the aligned countries, especially as Both China and India are wary of falling afoul of Western sanctions currently in place against Russia. There is no clear middle ground between China’s desire to make BRICS more anti-U.S., while India has yet to persuade Xi Jinping to accept a more moderate road to economic neutrality.

Assuming for a moment that a miracle does happen, and that India and China do manage to forge a joint destiny for BRICS. What would be their most immediate goal? That point is very clear: they want an official currency to rival the U.S. dollar in international holdings. 

We’ll explore that element in the next installment on this subject.