Much of the recent commentary on the sixth annual heads-of-state summit of the BRICS (Brazil, Russia, India, China and South Africa), which met in the Brazilian city of Fortaleza, focused on their decision to launch two new joint financial institutions. In addition to their long-discussed New Development Bank (NDB), which will finance major national sustainable development and infrastructure projects in emerging and developing economies, the BRICS leaders proposed establishing a Contingent Reserve Arrangement (CRA), which will provide a framework for currency swaps to help their countries manage short-term liquidity and balance-of-payments crises.
Richard Weitz
If approved by their national legislatures, the NDB will begin with a $50 billion pool of subscribed capital that would soon grow to $100 billion. This is the same amount as the funds that they propose to make available to the CRA, which members can draw on in financial emergencies. China would commit $41 billion, South Africa $5 billion, and the other three BRICS members $18 billion each to the CRA. While all the BRICS will initially contribute equally to the NDB, the Bank is likewise managed collectively. Its headquarters would be in Shanghai, an Indian would first occupy the five-year rotating presidency, a Brazilian would chair the Bank’s board of directors, a Russian would head its board of governors, and the NDB would establish its first regional center in South Africa
The summit was noteworthy for witnessing the first concrete collective initiatives of the BRICS, whose past meetings and products have consisted mostly of joint declarations. Yet, while entirely new institutions, these two bodies would resemble the well-established World Bank and International Monetary Fund (IMF), the two pillars of the Bretton Woods system created by the United States during World War II.
The BRICS still consider the World Bank and IMF, despite reforms in their voting procedures and lending priorities, as excessively under the control of Washington and its allies. The BRICS governments oppose some of the conditions imposed on borrowers, such as demands that their projects support gender equality, civil rights, and ecological standards. They also resent that the Bretton Woods institutions do not accord the BRICS influence commensurate with their rapidly developing economies. The BRICS already account for more than 40% of the world’s population and 21% of its aggregate GDP, a share that will likely increase given their expected rapid economic growth.
But even with $200 billion, the NDB and CRA would have considerably less readily available capital than the Bretton Woods Institutions. Furthermore, like China’s own development banks and funds, the new institutions would probably apply traditional commercial criteria to their projects. Although they might prove more willing to finance ambitious social development projects, they would likely still require that the funded activities be commercially viable.
More innovatively, and largely overlooked in the media coverage of the summit, Russian President Vladimir Putin proposed that the BRICS create a new “energy association” with a fuel reserve bank and an energy policy institute in order to “allow us to strengthen our nations’ energy security and prepare us for the creation of new instruments and new institutes to trade energy resources.”
Despite many differences among members, such as their aggregate economic size, income distributions, energy profiles, and political systems, the BRICS share a common pro-nuclear energy perspective. Russia has one of the world’s most advanced nuclear energy sectors, China plans to build more nuclear plants than the rest of the world combined, Brazil and India continue to develop their civilian nuclear capabilities, and South Africa is assessing a proposed $29-billion nuclear energy program. According to the World Nuclear News, of the 66 nuclear reactors currently under construction, 50 are located in a BRIC member. During their South American trips, both the Chinese and Russian presidential delegations discussed nuclear energy cooperation with Brazil and other countries.
The BRIC members oppose the proliferation of weapons of mass destruction, but they reject the common Western approach of favoring unilateral and multilateral sanctions to hold the line against perceived nuclear weapons aspirants. BRIC aversion to nonproliferation sanctions stems from both conceptual and pragmatic reasons. At the conceptual level, their officials and analysts argue – in line with their declared support for multilateralism, international law, and the primacy of the United Nations – that, as a general rule, the best way to discourage nuclear proliferation is through dialogue, negotiations, and reassurance rather than threats or sanctions, which they see as counterproductive in most cases. They also perceive Western sanctions, especially their unilateral measures adopted without the endorsement of the United Nations, as deliberately harming their economic interests given that the BRICS typically have more developed economic ties with the sanctioned states. Indeed, many U.S. sanctions have been applied to Russian or Chinese entities.
The BRICS’ collective statement adopted at the summit complained that, “international governance structures designed within a different power configuration show increasingly evident signs of losing legitimacy and effectiveness, as transitional and ad hoc arrangements become increasingly prevalent, often at the expense of multilateralism.” This alienation extends to the nonproliferation regime. In particular, Brazil, India, and South Africa consider existing international nonproliferation regimes as discriminatory and inflexible, even though their governments have followed China and Russia in conducting more responsible nonproliferation policies during the past decade.
With the G-8’s nonproliferation role constrained by Russian-Western differences over Ukraine, the BRICS, if they can contain their confrontational rhetoric, have an opportunity to pursue nonproliferation strategies that could complement those of Western countries and generate mutual synergies in support of nonproliferation regimes under heavy strains due to technological and geopolitical developments.
Richard Weitz is senior fellow and director of the Center for Political-Military Analysis at Hudson Institute. He would like to thank the John D. and Catherine T. MacArthur Foundation for supporting his nonproliferation research.
