From changing the nature of global politics to being a force for human rights, the announcement of the new BRICS development bank has been met with feverish anticipation by the global economic community. Its supporters have written that it will free the world from the grip of the U.S. dollar as reserve currency, while its detractors say that China and Russia, in particular, are not to be trusted when handing out development loans.
The naked oil grab that China completed in Venezuela last week left the world in little doubt that the creation of the BRICS development bank will not see China defend much beyond its own financial, security and energy interests. Much was said about the early days of the Shanghai Cooperation Organization (SCO), which was touted by former Chinese President Jiang Zemin as aiming to create a balance of power in Asia. With its headquarters in Shanghai, the SCO may have seen some success in creating better trade conditions in Central Asia, but it is firmly controlled by China and often rubber-stamps its foreign policy priorities. The BRICS are often made up of tougher competitors, with Brazil and India certain to defend their interests more strongly than Tajikistan and Kyrgyzstan.
Domenico Lombardi from the Center for International Governance Innovation gave a glowing review of the development bank idea to Xinhua, saying that “a common frustration with the World Bank and the IMF led to the creation of the BRICS bank…(this) pushed the BRICS countries to come together to try to quash the political power, try to leverage on their rising economic power and provide a political leverage to their rising economic power."
However, a rallying cry to end the dollar as the global reserve currency must now be translated into action.
While the five players may not see eye-to-eye on defense, the environment, or even national borders, energy seems to be a terrain where they can collaborate much more easily. China and India are starved for hydrocarbons, while Brazil and Russia have them to spare. Mutual help to secure their energy future has long been a clarion call of the BRICS nations, but not much has happened on that front until now. The five countries used to be content with making sweeping declarations on joint documents, lamenting fluctuations in global energy prices as if they were largely blameless, and pledging to build up a reliance on nuclear power and renewable energy. This is now beginning to change.
Following a $400 billion deal signed in May that will see Russia provide China with a massive supply of natural gas for 30 years starting in 2018, Moscow is begging for more. At the mid-July BRICS Summit, Russian President Vladimir Putin and new Indian Prime Minister Narendra Modi discussed the possibility of a pipeline bringing natural gas from Russia to India over the Himalayas. Alongside this, India is negotiating with Russia for its help in building 22 nuclear plants nationwide. This deal was preceded in January by another coup for Russian nuclear power provider, Rosatom, in which it agreed to build six new reactors for South Africa over 15 years.
The major oil companies belonging to the BRICS have also been carving up some of the globe’s reserves, learning to do so from the existing Big Five. In November 2013, China National Petroleum Corporation (CNPC) bought up all of Petrobras’ assets in Peru for $2.6 billion, covering three oil and gas fields, producing about 800,000 metric tons of oil equivalent a year. Since then, CNPC has begun looking at a natural gas pipeline opportunity in the south of the country, worth an estimated $4 billion.
These are just a few of the many examples of energy horse-trading between the BRICS. However, the keen-eyed among you will have noticed a glaring omission: a lack of collaboration among the five. So far, these deals have been made purely one-on-one, with the BRICS having still not issued a comprehensive energy trading strategy. With the world set to use 40 percent more energy by 2040 compared to 2012, the BRICS account for much of that increase. But for all their collaborative good will, President Xi Jinping must first shore up an energy supply for the Chinese people while Brazilian President Dilma Rousseff must first find willing clients for her country’s hydrocarbon deposits. Although the BRICS development bank will help to bankroll projects for its members around the world, it is highly unlikely to unify their individual energy strategies. The amounts at stake would simply be too staggering for a fledgling institution to handle.
By Chris Dalby of Oilprice.com