Development Diplomatic Relations Gabriel Mallows Global Governance International Law & Policy Investment Security, Trade and the Economy

The BRICS Bank – Funding a New World Order?

From July 14-16, Presidents Rousseff, Putin, Xi, Zuma and Prime Minister Modi gathered in Fortaleza for the Sixth BRICS Summit. What began as a Goldman Sachs neologism has developed into a real political bloc, and in Fortaleza, it gained its first permanent institution: the BRICS Development Bank.

imagesThe BRICS Development Bank, or New Development Bank (NDB) as it is now known, was created in no small part in response to the Bretton Woods institutions’ (the IMF and the World Bank) failure to accommodate their demands for the increased decision-making power their growing economic weight deserved. It will be headquartered in Shanghai, with an African headquarters in Johannesburg, an Indian President, a Brazilian Chairman of the Board of Governors, and a Russian Chairman of the Board of Governors. This emphasizes the five states’ shared commitment to this project underscored by the $10 billion each state is contributing.

The NDB is not the first initiative of its kind. Regional banks have existed for some time in Latin America and Asia to varying degrees of success. However, uniting the emerging powers behind one is a first and, furthermore, the BRICS member states announced this venture with a degree of implicit threat behind it. Paragraphs 18 and 19 of the Fortaleza Declaration make it clear that the failure to reform the IMF and the World Bank was part of the motivation behind the NDB, which suggests that further paralysis could provoke more assertive moves, such as an increase in size and ambition. Where previous initiatives, through their regional focus, have clearly not set out to rival or supplant the World Bank, the NDB could potentially do so.

 This is relevant to the debate about the future of the international politics because of further remarks in the declaration. In Paragraph 25, the BRICS call for reform of the UN, with China and Russia voicing their support for the other three countries’ aspirations to a “greater role.” In Paragraph 26, they “condemn unilateral military interventions and economic sanctions in violation of international law and universally recognized norms of international relations.” While these statements are fairly innocuous, when viewed in the light of the steps taken to correct shortcomings in international economic governance, they should be taken more seriously. They underline a frustration with the current state of affairs, and in the condemnation of unilateralism and sanctions, seem to align the BRICS with Russian and Chinese stances in recent years.

Indeed, the Fortaleza declaration could not have come at a better time for Russia and China. With Russia facing mounting hostility from the US and Europe over their involvement in Ukraine and China’s perceived belligerence in Asia making its neighbours uneasy, the legitimacy and diplomatic prestige of announcing this new initiative are likely welcome in Moscow and Beijing. Indeed, following Russia’s punitive sanctions on Western food exports, there are reports they have turned to China and Brazil to replace those foodstuffs, illustrating the benefits Putin can expect from fellow BRICS member states. Furthermore, with the promise of building on the close links between states of the Global South that Brazil and China have pioneered, the NDB will build support for the BRICS in parts of the world that share an antipathy to the Western-led order.

It is less clear what the other letters in the group stand to gain from this. The three states share a post-colonial commitment to the defence of sovereignty, which would seem to sit poorly with China’s bullying and Russia’s recent annexation of Crimea. It is, perhaps, a testament to how poorly the United States has managed relationships with its fellow democracies that things have arrived at this stage.

While Brazil has long had an ambiguous view of the US owing to their malignant role in Latin America during the Cold War, the largest source of tensions in recent years appears to be the revelation that the NSA conducted widespread espionage in Brazil that included spying on the President herself. Similarly, the USA and India have had a complicated relationship, which was aggravated when federal police arrested an Indian diplomat in New York. These faux-pas have given the impression that the US has little concern for the countries of the South, making it far harder to enlist their support in upholding the international order as it stands.

This has to change. As the indispensable nation, it falls to the US to make a greater effort to involve the emerging nations in international governance. Relations with Russia are likely to remain hostile for some time, while the nature of the Sino-American relationship is set to be the great question of the twenty-first century. However, Brazil, India, and South Africa are all democracies with an interest in a stable international order. As the Fortaleza declaration underlines, there have been long-standing proposals for the reform of international governance, at least one of which is dependent on ratification by the US government.

At the same time, these three nations must be more cautious in pushing towards fragmenting the international system. There are serious doubts over the long-term viability of the BRICS as an alliance, with China involved in border disputes with India, and some analysts predicting future Chinese designs on Russia’s vast hinterland. Though there is no doubt that international economic governance has not served countries of the Global South well, it is unclear that an economic bloc dominated by China would ultimately be a preferable alternative to one dominated by the US. Politically, the picture is worse. In light of the BRICS apparent aversion to military interventions and aggression, the continued silence on Russian actions in Ukraine is especially disappointing.

The Fortaleza Summit doesn’t have to be the beginning of the end of the international order as we know it. Indeed, between the BRICS’ commitment to funding risky infrastructure projects in developing nations, their poverty reduction experience, and their partnerships with developing countries, there is an enormous amount of potential for the development of the BRICS as an institution to enrich the international order, not fracture it.

Gabriel Mallows
Gabriel Mallows is a graduate of University College London, specializing in International Relations and Development. His research interests include security and defense policy in Europe and Brazil, the arms trade, and ‘humanitarian’ interventions. Contact: