The potential disruption to trade and the global economy if Trump were to implement his policies could undermine the growth and stability required to keep that build-up of public debt from destabilising economies and financial systems. It could be the trigger for a global recession, or worse.
Russia and China would like to help Trump disrupt the established order.
Vladimir Putin will be playing host this week.Credit: AP
Russia has been heavily sanctioned by the G7 group of Western countries, its central bank reserves held offshore have been frozen, and it has been shut out of the global financial system. China is engaged in a contest for geopolitical and economic superiority with the US and resents the West’s dominance of key global institutions.
It’s that resentment that binds the BRICS+ group.
Between them, the existing and aspiring members and those watching from the sidelines of the summit this week represent about 45 per cent of the world’s population and as much as 35 per cent of global GDP. The G7 represents only about 10 per cent of the world’s population and about 30 per cent of global GDP. Not surprisingly, those outside the G7 want a greater voice within the multilateral institutions.
China is engaged in a contest for geopolitical and economic superiority with the US and resents the West’s dominance of key global institutions.
The challenge for BRICS+ is its heterogeneity. It is an extraordinary disparate group, with wildly different ambitions and economic circumstances. While China and Russia might like to see it as a bloc that could rival the West, a number of its members and prospective members are allied to the West or trade-dependent on it.
The confused and conflicting agendas have made it difficult for the group to find a consensus on any significant issue, and the more the group expands the more difficult it will be.
Efforts, led by Russia, to de-dollarise, or develop a common currency to undermine the primacy of the US dollar in global trade and finance, have fizzled. Apart from the closer economic relationship between China and Russia after Russia invaded Ukraine, intra-group trade hasn’t significantly expanded.
BRICS+ established their versions of the IMF and World Bank a decade ago – the New Development Bank and Contingency Reserve Fund – to provide infrastructure funding, but they are undercapitalised and have had limited impact.
At this week’s meeting, Russia will seek to encourage BRICS+ to trade more in their own currencies and try to seek a commitment to building an alternative platform for international payments to the US and G7 dominated SWIFT platform from which it was ejected at the onset of the war in Ukraine.
IMF chief Kristalina Georgieva. The IMF and the World Bank are holding their annual meeting in Washington.Credit: Bloomberg
With a number of the key members resource-rich, it may also seek to create a new commodities trading platform, perhaps starting with grains, to compete with largely US-dominated commodity markets.
Russia and China, which has experienced more limited and more targeted sanctions than Russia, have a common interest in creating financial infrastructure that is independent of the West, and it is in both their interests to co-opt as many other countries as they can to help build something competitive enough, and substantial enough, to compete with the West’s financial architecture and also insulate them from any further sanctions from the West.
The complex nature of the BRICS+ grouping and the reality that some key members, such as India and Brazil, want to have feet in both camps, however, complicates any decision-making.
There are those within and just outside the group that might resent some aspects of the West and its dominance of the multilateral institutions, but that’s a dispute over their governance – the extremely disproportionate influence and voting power of the European Union and US in bodies like the IMF and World Bank – rather than a desire to create competitors to those institutions or tear them down.
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The IMF and World Bank know that they face existential threats and, as they have done over the past 80 years, will need to evolve to meet the demands of a complex and changing 21st-century environment. The spectre of a return of Trump will help sharpen their focus.
The BRICS+ summit is likely to produce, as it has in the past, more talk than action from a group that has little in common. If it were to do more than that, then the prospect of a fragmentation of the world into competing blocs, one led by the US (if Trump doesn’t blow it up) and the other by China, might loom a little larger.