BRICS Summit in Delhi: Why it's important

New Delhi:  The BRICS group of emerging world powerhouses - Brazil, Russia, India, China and South Africa - is expected to launch plans this week for a joint development bank and measures to bring their stock exchanges closer together.

Officials say the initiatives will take time as they need to sort out details. But they herald a new level of ambition for a bloc that brings together about half the world's people. The Middle East and energy security will also be discussed, officials say.

The BRIC acronym was coined in 2001 by Goldman Sachs economist Jim O'Neill, who was searching for a catchy way to encapsulate the broader shift in global economic growth towards emerging markets. South Africa joined the grouping in 2010 so that it became BRICS.

The countries held their first summit in 2009 and have been criticised since as nothing more than an empty acronym as they struggle to find common cause from four different continents with radically different economies, systems of government and competing priorities.

The most relevant announcement from this week's meeting in India of the countries' leaders is likely to be plans for a joint development bank in the mold of the World Bank.

The initiative would allow the countries to pool resources for infrastructure improvements, and could also be used in the longer term as a vehicle for lending during global financial crises such as the one in Europe, officials say.

Brazilian Trade Minister Fernando Pimentel told reporters in Brasilia last week that the countries would sign a deal at the summit to study the creation of the bank.

Sudhir Vyas, a senior Indian foreign ministry official, told reporters on Monday that the BRICS would have to determine how the bank would be structured and capitalised. Such an ambitious project would take time, he said.

"We don't set up a bank every ordinary day," he said.

A benchmark equity index derivative shared by the stock exchanges of the five BRICS nations will be launched on Friday, the exchanges involved said earlier this month. They would be cross-listed, so can be bought in local currencies.

The leaders are also expected to sign agreements allowing their individual development banks to extend credit to other members in local currency, a step towards replacing the dollar as the main unit of trade between them.

A senior Indian government source said the Middle East and energy security will be high on the agenda, including Iran. The Russian ambassador in New Delhi said this week that a discussion on Syria would be among his country's top priorities.

While the plenary session on Thursday is likely to focus on common ground, bilateral meetings could touch on more sensitive issues.

The exchange rate of China's currency has sparked protests from countries, including Brazilian manufacturers, for being undervalued. Most member countries also face a slowdown in their economies.

"For different reasons, each of the (countries) has got some serious policy issues to deal with here that will determine whether they continue down the path we got everybody so excited about," O'Neill said.

Despite the problems, the growth outlook is still better than in most of the developed world, meaning the BRICS' clout will likely keep growing. O'Neill predicts the bloc's total GDP will be larger than the United States within three years and China's economy alone will overtake the United States by 2027.

Copyright@ Thomson Reuters 2012

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BRICS summit in Delhi: Your 10-fact cheatsheet

The BRICS group of emerging world powerhouses - Brazil, Russia, India, China and South Africa - is meeting Delhi for their fourth summit. The BRIC acronym was coined in 2001 by Goldman Sachs economist Jim O'Neill, who was searching for a catchy way to encapsulate the broader shift in global economic growth towards emerging markets. South Africa joined the grouping in 2010 so that it became BRICS.

 1)     The most relevant announcement at the summit is likely to be a plan for joint development bank modelled on the World Bank.  This would allow the five countries to pool resources for infrastructure improvements, and could also be used in the longer term as a vehicle for lending during global financial crises such as the one in Europe, officials say. Most member countries are facing a slowdown in their economies.

2)    BRICS accounts for 26 per cent of the world's landmass and 42 per cent of the global population and 40 percent of the global GDP ($18.486 trillion). Goldman Sachs predicts that "BRIC can become collectively bigger than the G-7 (the top industrial powers) by 2035".

3)    BRICS countries have accounted for over 50 per cent global economic growth in the last decade.

4)     Intra-BRICS trade is growing at an average of 28 percent annually and currently stands at about $230 billion.

5)    The countries are also expected to sign agreements allowing their individual development banks to extend credit to other members in local currency, a step towards replacing the dollar as the main unit of trade between them.

6)    The BRICS meet comes amid Western pressure to cut crude imports as part of sanctions designed to halt Tehran's suspected pursuit of nuclear weapons.  China and India are the biggest buyers of Iran's crude.  The BRICS group of countries has broadly agreed they are not bound by "unilateral" sanctions on Iran, measures that threaten higher global oil prices and could result in supply shortages.

7)    While the plenary session on Thursday is likely to focus on common ground, bilateral meetings could touch on more sensitive issues.

8)    Political developments will also be discussed, like the situation in Syria.  At the UN recently, India took a very different position from China and Russia and supported a Western resolution that demanded the departure of Syrian President Bashar al-Assad.

9)    BRICS held its first summit in 2009 and has been criticised as nothing more than an empty acronym as it struggles to find common cause from four different continents with radically different economies, systems of government and competing priorities.

10)    Tibetan activists have been protesting the presence of Chinese President Hu Jintao in Delhi.  Many Tibetans have been detained by the Delhi Police, provoking sharp criticism.

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Not bound by 'unilateral' sanctions on Iran: BRICS

New Delhi:  The BRICS group of countries have broadly agreed they are not bound by "unilateral" sanctions on Iran, measures that threaten higher global oil prices and could result in supply shortages, South Africa's trade minister said on Wednesday.

The BRICS group of emerging world powerhouses -Brazil, Russia, India, China and South Africa -are meeting in New Delhi amid Western pressure to cut crude imports as part of sanctions designed to halt Tehran's suspected pursuit of nuclear weapons.

China and India are the biggest buyers of Iran's crude, which they need to help sustain economic growth in two of the world's fastest-growing major economies. Trade ministers of both nations on Wednesday said they would maintain economic ties with Tehran, despite pressure from Washington.

China disapproves of tougher Western sanctions on Tehran but its refiners have cut purchases of Iranian crude, albeit because of a pricing dispute. India too, publicly, has said it will not abide by unilateral measures while privately telling oil companies to cut purchases by at least 15 per cent -- which they have done.

For its part, South Africa has cut its dependence on buying oil from Iran, the world's fifth-biggest oil exporter, and is "proactively" trying to diversify its purchases, Rob Davies told Reuters on the sidelines of the BRICS summit.

"I think that we all broadly agree with the proposal, the terminology that was made, that if there are U.N. Security Council sanctions then we are all bound by that, but if there are sanctions that are imposed by other countries unilaterally, they shouldn't have to apply to us," Mr Davies said, after a meeting of BRICS trade ministers.

"But I think the problem is that we've also got the power relations to contend with, and that whether we like it or not the decision will impact on us in the form of higher oil prices and possibly even shortages of supply. So those are all going to be big challenges that we're going to face," he added.

CANNOT CUT TIES

China and India have so far publicly resisted U.S. calls to cut imports of Iranian oil. The U.S. has exempted Japan and 10 EU nations from financial sanctions because they have slashed purchases, but China and India remain at risk of such steps.

At this week's BRICS summit, during which countries are expected to launch plans for a joint development bank, Indian Trade Minister Anand Sharma said his country could not "just rupture" ties with Iran. His Chinese counterpart, Chen Deming, said China was "not obliged to follow any domestic laws and rules of any particular countries."

"If the oil price continues to rise it will definitely not be good news for BRICS countries as well as countries in the rest of the world," he told reporters at the summit, adding that high oil prices were hurting the global economic recovery.

South Africa imported no oil from Iran in January, according to government trade and customs data, suggesting Africa's biggest economy has heeded U.S. calls.

Trade figures showed marked increases in January imports from Qatar, Bahrain, Saudi Arabia and Kuwait, indicating they have replaced Iran, usually South Africa's biggest supplier of crude accounting for a quarter of its oil imports.

South Africa's deputy foreign minister, Ebrahim Ebrahim, told a news conference that almost all Iranian oil imports had been suspended, although officials later retracted his comments.

The country's energy minister said last week it would take until May to come up with a plan to replace Iranian supplies.

"We're having to make steps of that sort, because I think we realise the power relations," Davies told Reuters, when asked whether South Africa had cut its dependence on Iranian oil.

"It's not what we think ought to happen but the power relations and the decisions that oil companies may take are going to force us to diversify," he added. "So I think that's something which we're doing proactively."

Copyright@ Thomson Reuters 2012

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