In our previous article, we discussed why BRICS, the loose coalition of Brazil, Russia, India, China and South Africa, is currently hobbled with two larger members, Russia and China, with failing economies, and two other members, Brazil and South Africa, whose economies don’t measure up to the standards Russia and China are attempting to set.

That leaves only India as a stable, near-Western peer in terms of both an expanding economy and a government that can be trusted to lead BRICS. But why is a trustable government necessary for a leadership role?

Consider China. Its banks are wholly controlled by the Chinese Communist Party. The Bank of China, for example, is a state-owned Chinese corporation. There are strict regulations that investors must follow in order to withdraw funds, or to divest themselves of stakes in Chinese companies. It's not like an investor could simply call up a bank in Beijing and ask to have their millions in gold transferred to, say, Switzerland. China would forbid it, or at least, hamstring it with hundreds of regulations that any transfer would have to jump through. Currently, anyone considered a “domestic entity” (including foreigners who’ve lived in China for more than a year) are prohibited from removing funds more than $50,000. Even with that limit, these groups are still limited to using those funds for very specific applications, including training, study, travel or family support.

Despite these severe restrictions against withdrawing investments, many Western companies are doing just that. Many U.S. pension funds are already divesting themselves from Chinese companies over worries that such funds could become frozen if tensions between the two countries increase, which seems increasingly likely as the new administration comes onboard.

Then there’s the problem of Russia. It’s currently hammered by Western sanctions, and any country, even one as large and influential as China, risks being sanctioned themselves if they work with them. So despite Russia desperately wanting to be the leader of BRICS, or anything else for that matter, they’re out, too.

So, how does India look as the financial leader of BRICS? 

First of all, India is well aware that they’re walking a diplomatic tight rope between its Western allies and its desire to keep all options open by still dealing with Russia. China and Russia have both become leading buyers of Russian crude oil, as Russia has provided incentives to keep its price low and affordable. But India has angered Putin’s plans by demanding that all oil purchases have to be done in Indian rupees, rather than the Kremlin’s preference of the ruble. 

India has also angered the West by never condemning Russia’s invasion of Ukraine, and is still importing weapons made by Russia, despite being a member of QUAD, the Quadrilateral Security Dialogue made up of the U.S., Australia, and Japan. But the dismal showing of Russian weapons in Ukraine is making India rethink its weapons purchases. India is taking steps to pivot to the West, specifically the U.S., in its future weapons purchases. India’s percentage of its weapons purchases from Russia has fallen from 76% in 2009 to only 39% in 2023.

These competing alliances have made India’s rise to the top of BRICS problematic. And it hasn’t gotten easier with its opposition to five new members just recently added. 

As of October of 2024, four new nations have been brought under the loose BRICS umbrella:  Egypt, Ethiopia, Iran, and the United Arab Emirates. This expansion was criticized by India, who specifically did not want to see Iran included, as they’re one of the greatest proponents of chaos in the Middle East, and whose backing of Houthi rebels has sparked a volatile situation off the Indian coast. Iran’s inclusion was also one of the reasons Saudi Arabia, who was invited to join in 2023, declined to come onboard. 

Then there’s China’s desire to pull BRICS into a more anti-U.S. position, while India wants to remain a neutral block with options open to counter what it sees as a Western-dominated economic system, including the World Bank, the E.U. and the United Nations.

Then there’s the half-century of direct conflict between India and China. Dating back to the Sino-Indian War of 1962, and continuing up to 2020, when dozens of deaths were reported over a brawl near their joint border high in the Himalayas, both countries have hurled insults and claims of aggression at each other. The 1962 conflict saw 7,000 casualties on the Indian side and a chastening rebuke they have never forgotten. China, on the other hand, feels like an occasional demonstration of their military superiority will cow its neighbors. 

There’s also fierce competition between the two countries in the South China Sea and the bottleneck that is the Strait of Malacca, which is threatened by China’s expansion into the Indian Ocean. India’s 2023 offer to provide helicopters to the Philippines, itself threatened by China’s attempts to expand its influence into Philippine territorial waters, has China wondering if India could be designated as a new “troublemaker” in the area, a term Beijing normally reserves specifically for the U.S. 

These tensions between BRICS’ two largest economies means that there will be no easy path forward for the aligned countries, especially as Both China and India are wary of falling afoul of Western sanctions currently in place against Russia. There is no clear middle ground between China’s desire to make BRICS more anti-U.S., while India has yet to persuade Xi Jinping to accept a more moderate road to economic neutrality.

Assuming for a moment that a miracle does happen, and that India and China do manage to forge a joint destiny for BRICS. What would be their most immediate goal? That point is very clear: they want an official currency to rival the U.S. dollar in international holdings. 

We’ll explore that element in the next installment on this subject. 

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On Sunday November 30th, President-elect Donald Trump said on his social media platform that he was going to slap a 100% tariff on any of the BRICS countries that tried to move away from the U.S. dollar as the World’s standard currency. But what is BRICS, and what chance do they have of creating a rival currency to the dollar? Let’s look deeper into that group, and whether they’d be able to overtake the mighty dollar.

BRICS is an acronym for a group of five countries: Brazil, Russia, India, China and South Africa. Together, these five countries make up more than 40% of the World’s population, and more than 25% of the World’s economy. At first, the term BRIC was just an idea formulated in 2001 by Jim O’Neill, the chief economist at Goldman Sachs, in a study titled "Building Better Global Economic BRICs." It became a useful term to categorize the combined economic, financial, business and media influence of the four major countries of Brazil, Russia, China and India. In 2006, the concept began to be incorporated into the foreign policy of those four nations, and in 2011, on the occasion of the Third Summit, South Africa was installed as its fifth member, which completed the acronym as the current BRICS.

In the past few years, at the urging of both Russia and China, the BRICS countries have pushed to have a greater influence in world markets. Many other nations have expressed interest in joining the current group, including Iran, Saudi Arabia, Argentina, Ethiopia and Bolivia, among others. But there are problems within the founding five nations that need to be ironed out before any new members could be considered.

What are those problems? Well, first off, they’re significant. At the top of the list are the struggling economies of both Russia and China. 

Russia’s economy, after dealing with the sanctions resulting from its invasion of Ukraine, combined with the loss of upwards of 750,000 young men in the war and the emigration of more than a million young people after conscription was introduced, has brought on a labor shortage that has the economy teetering on the brink of collapse. The average Russian today is dealing with a staggering one-two punch of 19% inflation and a 21% prime lending rate, one of the two highest pairings in the world, after the near-freefall economies of Argentina and Turkey. 

There are reports that prices are so high on butter in Russia that they've had to place individual packages in plastic anti-theft boxes. Butter’s price has soared almost 26% in the past year, with prices on other staples like potatoes increasing even faster. And it gets worse. The value of the ruble has fallen so low that the Russian Central bank decided to stop purchasing foreign currency on the internal market until 2025, in an attempt to support the ruble. This move followed a slide in the ruble’s value of 113 to the U.S. dollar, down nearly a quarter since August of this year. 

As bad as Russia’s economy is, China’s is not doing much better. Where Russia can’t find enough workers for its jobs, causing higher wages and driving inflation skyward, China can’t find enough jobs for its workforce. Unemployment reached a sixth-month high in August at 5.3%, while the urban youth unemployment numbers rose to a staggering 17.1%, an increase of thirty percent since June’s 13% figure. 

But China’s economic woes don’t end there. They’re facing a massive problem in their real estate market, which has been propped up for years by investment from the Chinese Central Bank, but which is now either unwilling or unable to staunch the flow of massive real estate failures. Led by the catastrophic demise of the massive Evergrande corporation, China saw an evaporation of more than $300 billion in value in that company alone, much of it invested by the Chinese government, along with the life's savings of millions of average Chinese workers. 

Evergrande, however, was only the tip of the iceberg, as more large real estate corporations began to tumble, causing Goldman Sachs to ask publicly, “Has China’s Property Market Reached the Bottom?” The problem with that question is that no, the Chinese real estate market hasn't hit bottom yet, and seems to be sinking even further. This has driven down many other sectors of China’s economy, as there are more vacant homes in China than could be filled by the country’s 1.4 billion people. 

The problem is that China’s construction and housing markets are a staple of its economy. The real estate sector alone until 2021 accounted for 25 percent of China’s GDP, 20 percent of fiscal revenue, stored 70 percent of household wealth, and took in 25 percent of bank loans. As these sectors stagnate or even vanish almost overnight, as with Evergrande, so too does China’s once-vaunted economy begin to shrink. These reductions lead to the unemployment numbers mentioned above, and China so far has no answer to this growing problem.

Meanwhile, both China and Russia have upside down population pyramids, meaning a larger number of older pensioners being supported by a smaller number of younger wage-earners. In China, the economy is seeing an unprecedented era of ‘growing old before getting rich,’ while its falling birthrate and pension crisis, combined with its ongoing housing crisis, has many older workers and retirees clamoring for the government to rescue them from ever worsening conditions. 

If neither China nor Russia can be the economic leader of BRICS, who will step forward? Not Brazil, nor South Africa. Brazil’s economy is too small, and is based on the extraction of raw materials, not the strength of its economic production. And South Africa is itself dealing with numerous problems, from soaring crime rates to its extreme level of economic inequality. 

That leaves only one country: India. And in our next article, we’ll explore why India will not rise to the leadership that BRICS so desperately needs.