Sunday, July 13, 2014

BRICS to Woo Arab States?

This new article in the BRICS Post allows us to expand on the previous post about how non aligned regions of the world may view the BRICS. The previous post covered an article written more from a Middle East perspective. This article is cleary more of a sales pitch to try and get the Arab States to align with the BRICS.

Below we select some quotes from the article and then add our comments in bold below the quote. 

"Arab nations should have taken a leaf from the book of South American states by seeking representation in the five-nation summit of BRICS nations on July 15 and 16 in Fortaleza, the North-Eastern coastal city of Brazil."

Right at the start of the article the pitch begins. The Arab nations should have sent representatives to the BRICS summit like South American nations are doing.

"The significance of the 6th BRICS Summit is the potential it could offer for Arab rentier economies, ranked amongst the richest in the world, to break free of the rent-petrodollar recycling ‘vicious circle’, which ties oil-rich states to a West-specific model of development. "

The US dollar has become the global reserve currency largely due to its adoption for global energy trading becoming what is known as the "petrodollar". A move by Arab nations away from the petrodollar is one the big signposts we watch for here that would lead to monetary system change. So it is no surprise this pro BRICS writer would like to see that happen.

"With their fiscal surplus reserves oil-rich states could book themselves not only a role within the BRICS group, but also as partners in the reconstruction of a new socio-political paradigm that shifts and distributes political and economic power from the traditional gatekeepers of the Western global economy (with its still dominant Bretton Woods instruments made up of the IMF and the World Bank) for the greater sake of even and sustainable development. To this end, the oil-rich states are not called upon to renounce partnership with the established economic and financial system dating from the post-war period, but to diversify membership and partnership in ways that widen their margin of existence in the global arena."

The pitch is subtle. Come on in and join the BRICS efforts to "distribute political and economic power from the traditional gatekeepers" (the IMF and World Bank). No need to drop out of those western institutions, just get yourself a place in the new BRICS system to go with your place in the old system ("widen your margin of existence").

"For the Arab World, there is an additional agenda with which BRICS presents all developing countries: reforming the United Nations as well the Bretton Woods system’s conditionality that renders development insensitive to issues of social justice, more often than not stressing market logic and ideological agendas — along the lines of ‘there is no free lunch."

Translation of this paragraph = The BRICS will not be power seeking lenders who put oppressive repayment burdens on those they lend to like the western institutions have.

"Arab partnership in BRICS could create openings for political dialogue, breaking political monopolies eventually. Arab-Israeli peace, defusing of the Iranian nuclear issue (as BRICS upholds Iran’s right to nuclear technology but within anti –disarmament guidelines), and helping cessation of violence in Syria and Iraq would benefit for wider discussion and new interlocutors (e.g. Brazil, India, South Africa) with fresh viewpoints.
The BRICS group offers fresh attempts at international solidarity away from ideological posturing. It has the potential of adding value to the enlivening of multilateralism with an eye on levelling the playing field and even distribution in the economic arena. The political bonus would be global pluralism with the potential of new visions and new hopes. In theory, BRICS and Arab contribution to it sound promising. In practice, the litmus test will come if re-doing development by BRICS plays the trump card of sustainable and even development."
Translation of these 2 paragraphs = Look what a mess the West has made in the Middle East. Why not give the BRICS a shot at doing better. Maybe a fresh approach will lead to peace and prosperity for all. But the last sentence offers a reality check. All this sounds good in theory but will the BRICS really be "good lenders" and treat borrowers fairly?
This is a great article to read and consider leading into the BRICS summit. It is clear that the new BRICS bank is going to get off the ground now and the competition with the IMF and World Bank could begin as early as next year. Efforts will be made to change existing alliances and draw broad global support for the BRICS bank. Those nations around the world who have mostly just been borrowers will now become coveted. Especially those like the Arab Nations with huge energy reserves. Will they move away from the West and towards the BRICS? We'll see. If they drop the petrodollar, the implications for the current UD dollar based monetary system are huge.

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