Russia, China and the BRICs: How should the West respond to the new challenges?

On the hydrocarbons front, China is rapidly shaping up as Russia’s dynamic new customer. Gazprom, which is forever encountering hurdles in the European Union, looks to be headed towards signing a deal by year’s end to supply China with 38 bcma piped gas from 2018 onwards. Rosneft is planning to triple its exports to China to about 50 million tonnes by 2018: China will pay up front for those supplies in the form of loans of up to US $30bn on favourable terms. This is just what the cash-strapped Russian oil corporation needs to complete its takeover of TNK-BP, which has made it the world’s biggest oil company. But the two countries are only just beginning to draw on what one analyst has described as the "best synergy on the planet”. 

The deepening of the Russo-Chinese partnership, however, is not confined to trade. There are signs that the two countries are drawing closer politically, having long seen eye-to-eye on major international issues, including, most recently, Syria. In China, Xi’s visit to Moscow – his first foreign trip as new head of state – has been hailed as a "well-deserved riposte to Washington for America's military 'pivot' to Asia.” As if to underscore that assertion, the two sides signed a deal under which Russia will supply China with 24 Su-35 fighters along with four Lada-class submarines. 

Further underpinning their deepening relations in defense, Xi became the first foreign leader to set foot in the Russian Armed Forces' Operational Command Center. With both powers opposed to US plans for the deployment of a missile shield beyond America’s borders, that event carried an implicit warning to the White House: by ignoring our vital security interests, you risk encountering a Russo-Chinese alliance capable of scuppering your plans.

Arguably, the steady rise of the BRICS is an even more significant game-changer. The scale of the impact of the BRICS on the global economy is still not fully appreciated. China’s GDP is now about half of that of the US (although in terms of purchasing power parity it may already exceed that of the US), while the combined GDP of the BRICS is forecast to equal that of the G7 countries by the mid-2020s at the latest. 

 

So far, the significance of the grouping has been played down, not least owing to the member countries’ disparate make-ups and often conflicting geopolitical interests. However, the BRICS have developed – and continue to develop – new means of economic and political cooperation. At the Durban summit, progress was made towards establishing a development bank, a business council and a ratings agency. The overriding strategy is to reform the globe’s financial architecture so that it reflects changes in the relative economic weight of the leading global players and hence becomes more robust. It is the strong belief of the BRICS that such reforms are also in the best interests of the West.

Editor, Expert Discussion Panel 

Professor, New York University, Prague  

 

 

 

 

 

 

The West should respond positively to closer ties between Russia and China –  that is, the same way it responds to the expansion of ties between the US and countries such as Pakistan, Israel and Japan, including in the defense sector.

The answer is both "yes" and "no". Yes, it is an exaggeration because the BRICS have no intention of changing the world to their liking. And, no, it is not an exaggeration because the BRICS are developing very quickly in political, financial and commercial-economic terms and the West must take such positive developments into account and expand ties with these countries. The BRICS are aware of their role and responsibility as global growth leaders. As has already been noted, they now account for more than 27 percent of world gross domestic product – a total of US$15.4 trillion.

It is significant that the BRICS are putting emphasis on not just the pace but also the quality of economic growth. This necessitates the introduction of the most stringent environmental and nature protection standards. In this context,  the signing of the multilateral agreement on financing "green economy projects", including the use of energy-saving technology and the recycling of raw materials, is noteworthy.

The Thekwini Declaration approved at the recent BRICS summit reflects in full the group’s common positions on a wide range of global political and economic issues. The BRICS Action Plan for the coming year, which was adopted at the same time,  includes new areas of cooperation such as information security, combating drugs trafficking and terrorism, and promoting youth and educational exchanges. 

Moscow supports the establishment of the BRICS Development Bank and Business Council, which will promote initiatives among the member countries’ business communities. Russia will continue developing close cooperation with its BRICS partners and will do everything in its power to facilitate the Group’s development. It has reaffirmed its commitment to continue to expand trade and investment flows, strengthen technical and industrial cooperation, stimulate the growth of the member countries’ huge domestic markets, and carry out mutually advantageous business projects in third countries. Moscow has also proposed drafting a long-term economic cooperation strategy that would take into account the national development plans of the BRICS economies and help to consolidate growth in all those countries.

Friendship between China and Russia is so obviously in their own interest that it would surely be happening even without the US. The economic self interest of the two countries requires it. What the US has done is change the political dynamic of this friendship.

This is an alliance in all but name. The single most extraordinary event of Xi Jinping’s Moscow trip was his visit to the Command Centre of the Russian Armed Forces. Imagine Washington inviting Putin or Xi Jinping to the War Room in the Pentagon. Putin and Xi Jinping gave precedence to visiting each other’s capitals over meeting with the US President (Putin snubbing a G8 summit in the process). The two sides coordinate their policies on a host of international questions, Syria being one example. Behind the scenes the sharing of intelligence surely goes on.

The reason Russian Chinese friendship is an alliance in all but name is because of the pressure exerted on both countries by the US. In the intoxication of its Cold War "victory” the US forgot the indispensable factor that made that victory possible: the Sino Soviet rift and the ability of the US to exploit it. The result was that instead of building a stable relationship with both countries (which was what they wanted) the US ended up in confrontation with both. Not surprisingly, now that the ideological causes of their quarrel have become meaningless, the result has been to push the two countries together.

It is important to say that we are talking about a Beijing-Moscow axis, not a BRICS axis. Xi Jinping chose to visit Moscow, not another BRICS capital, say New Delhi.  China’s relationship with India remains problematic. Russia has a strong historical relationship at the political and military level with India that is highly prized but is insignificant in economic terms. Brazil and South Africa are important powers but peripheral to the international system. Among the BRICS states Russia and China are the only two where the relationship covers the entire spectrum of political, economic and military ties. In fact, a case can be made that the main purpose of the BRICS group is precisely to cloak the existence of the Russian-Chinese alliance at its core.

How should the US and the West respond? A simple answer would be by reversing the confrontational and hegemonic policies the US has followed and which have caused this alliance to emerge in the first place. Neither Russia nor China has any interest in a confrontation with the US (which is why they prefer to keep their alliance informal and unannounced) and though there is probably nothing the US can do to spoil their friendship there is no reason why they should be enemies of the US. This would, however, require a rethink in Washington – something of which its political class seems incapable.  On the contrary the US’s deteriorating relationship with Russia and its "pivot” against China suggest that its response will instead be to intensify its policies of confrontation.

In the absence of such a rethink the influence of the Russian and Chinese alliance will grow. The Chinese economy is the most dynamic in the world. Russia, owing to its vast size, its immense natural resources and its strategic position at the heart of Eurasia, perfectly compliments it. Though China is the stronger power, we are not talking about a grossly unequal and dependent relationship such as that between the US and Britain. As the alternative to US policies that are increasingly seen as aggressive it will attract more and more supporters, bringing the brief and unnatural period of uni-polarity to an end.     

 

Back in 2007, after listening to one of my Russian colleagues’ enthusiastic talk about the bright future he foresaw for the nascent BRICS union, I replied: "It cannot happen. These countries have only one feature in common: they all resent being excluded from the collective West. Since their elites crave to join the West, the US can easily exploit tensions through asymmetric preferences granted to different BRICS countries. Therefore, any union they may form is going to be ephemeral.” 

 

Well, a BRICS union has come to pass. Pondering over the reasons why I was wrong and observing incidentally the current round of finger pointing in Washington, I concede I overestimated the US reserve of soft power. Theoretically, the slogan "join the US to be on the winning side” remains appealing, but non-Western outsiders have grown bolder in testing America’s power at the fringes.

 

While the BRICS members show no inclination to challenge US global dominance directly, their behavior is consistent with developing contingency plans in case the global economic environment, currently dominated by the West, spins completely out of control. If that happens, the key issue for the BRICS will be to have an alternative system of global financial management that is independent from the existing post-Bretton Wood structure. A plan to create a BRICS analogue of the World Bank is the first step in this direction, one that will be certainly be followed with an alternative to the International Monetary Fund (IMF). But let’s step back and discuss why the BRICS may be unhappy with the role played by these two institutions.

 

The IMF and World Bank were created after the World War II as a part of the US program designed to help countries ravaged by the war. Over time the role of the IMF in particular has gone way beyond the monitoring of the financial situation in member countries. Now it is a common practice for sovereign creditors to condition the resolution of financial affairs of states in distress on their acceptance of IMF demands. The demands are not based on a uniform set of principles but are specific to each case. When creditors differ in their preference of conditions, the inevitable conflicts are settled through voting. Each country’s vote is in accordance with the stake it holds. Since the US has the largest quota, it usually has the decisive voice.

 

The BRICS countries have been increasingly unhappy with this state of affairs. On the one hand, they have noticed that their power to influence IMF lending decisions is grossly below their global financial weight. Effectively, it is now the indebted Western countries that decide how creditors’ money – often coming from the BRICS – should be used to manage debts of insolvent countries. The discrepancy between exercising control and passively possessing the funds may be costly for creditors. For example, the current bailout of Cyprus is designed on terms that impose disproportionately large losses on the Russian stakeholders. Despite the rumors that Russia has found a backdoor to take the bulk of money out, the possibility of losing money in bailouts unnerves the BRICS.

 

What can Washington do in this situation? The optimal approach would require applying the old principle "divide and rule”, as I mentioned at the beginning. Apparently, this is not an option as the BRICS are allowed to grow in influence relatively unimpeded.  Then, the next maxim comes to mind: "If you can't beat the BRICS, join them.”

 

When in 1992 Francis Fukuyama declared the "End of History", he meant to say that there was no alternative anymore to laissez-faire capitalism and America-led globalization. In 2001 the "BRIC” acronym was coined in order to define a group of countries that were rapidly developing more or less on the prescriptions of the Washington Consensus.[1] 

Initially, for Western experts the acronym BRIC signified no more than the emergence of new markets. However, after twelve years of the rapid economic growth of the BRICS countries (including South Africa) and after five years of a crisis that has affected primarily the West, some analysts have begun to talk about the potential emergence of a new global order in which the BRICS might play an important economic, political and ideological role. With 40% of the total population of the planet, 20% of global GDP (compared with the US’s share of 19%) and 44% of global foreign exchange reserves,[2] the economic power of the BRICS is obvious. Here I would like to focus on the potential ideological influence of this informal alliance.  

We have to stop for a moment to consider the developmental success of the group leader. China’s transformation from a poor, backward country into a modern developed country is staggering in terms of both speed and depth. Today China is not just the manufacturing "workshop of the world.” It is creating science and technology development parks and innovation centers – entire clusters of high-tech companies.[3] From a consumer and imitator of Western technologies and goods China is turning into the  new technological hub of the world. But the greatest achievement of China from 1980 to 2012 has been the reduction in the number of the poor by about 500 million people. India reduced the number of its poor by 200 million (according to World Bank estimates). This unprecedented success of China (and the BRICS in general) draws attention to the emerging new political economy, which is taking shape mainly on the basis of China’s experience.

This political economy has not yet been fully defined. I will try to sketch its contours and contrast it with the US neoliberal model. Here I borrow the wisdom of the latest research and use its terminology for the two models –  the "Beijing Consensus” and the "Washington Consensus.”[4]

  

The Western neoliberal formula of civilization and progress is rooted in Social Darwinism with its rugged individualism, self-centeredness, cut-throat competition, and survival of the strongest  -- that is, the "natural” or "divinely ordained” right to dominate the lesser people and nations. American neoliberal capitalism rests on the belief that the state should play a minimal role in the economy, that unlimited inequality in wealth and power is natural and good, and that prosperity of the "masses” is achieved by the trickle-down effects.

The Beijing Consensus is rooted in neo-Confucianism with its emphasis on harmony and communitarianism. According to this model, developing countries need a strong state that can pursue a more decisive and purposeful policy of economic and political reforms. The central government should pursue a long-term policy of elimination of illiteracy and poverty through major investments in infrastructure and education and foster strategically important sectors of the economy. Instead of the trickle-down principle of laissez-faire capitalism, the Beijing Consensus favors the more equitable distribution of wealth and a more generous welfare system.

 

According to the Anglo-Saxon model, the "clash of civilizations” is inevitable and will end only with the hegemony of the "fittest” one. In contrast, the BRICS countries represent all "races,” religions and cultures – Confucian, Buddhist, Hindu, Christian and potentially Islamic. Hence BRICS Consensus rests on acceptance, equality, mutual respect and partnership. Accordingly, the BRICS foreign policy is distinguished by the rejection of hegemony, power politics, military alliances and arms race. If the BRICS manage to work out cooperative consensual relationships among themselves and with others, they will prove that different civilizations are not doomed to fight for resources and dominance. 

The two models have diametrically different approaches to the key dilemma: What should come first – democratization or economic development? The Anglo-Saxon model presumes that democracy should come first and that all means and methods of establishing democracy are legitimate. We have seen coercive methods used in Afghanistan, Iraq, Libya and now in Syria, as well as democracy promotion through fomentation from the outside of colored revolutions. The logic is as follows: Once liberty, democracy and rule of law are established, the country can pursue economic development, which will almost automatically lead to peace, prosperity and happiness. The results of this policy of democracy promotion have been scant at best because predatory capitalism (spearheaded by oligarchs) is not an enthusiastic supporter of democracy. It creates flagrant inequality, corporate oligarchy and an ossified bureaucracy. 

 

The China model, in contrast, stands for economic and human development first and gradual democratization later. The logic: The early introduction of a fully-fledged democracy – that is, while population remains illiterate and poor –  is fraught with social strife and anarchy. Hence economic, institutional and human development should precede democratization. 

From the developing countries’ perspective, the experience of Taiwan, South Korea, India and most persuasively of all China proves that the gradual transition produces much better results in terms of economic growth and social stability. They perceive the BRICS model as an attractive alternative to the American hegemonic model of governance and development with its arrogance and disdain for non-Western cultures. To conclude, history has not ended; rather it has entered a new stage which, thanks to the BRICS Consensus, has a chance of being more successful and less bloody.

 

Russian-Chinese relations continue to unfold slowly, but mostly on the oil and gas fronts, where developing gas and oil fields, building pipelines, and settling on prices seem to have been taking forever.  From the Cold War UN Security Council days, Russia and China have a common interest in not seeing any Western military interventions.  Thus their policies converge over the most prominent current conflict and threat for intervention, Syria.  Russia has a tenuous long-term connection with Syria, but China has no real connection.  There is competition of sorts between them for both defensive depth and resources in Central Asia, though that is a separate issue.  But I remember a Russian saying to me once that Russia and China are not really natural partners, culturally or politically.  Their disparities in population, size, and geographic character reinforce that.  

The BRICS, though, are based on a even more artificial set of connections.  Right now, their gathering together seems more like Lucy in the Peanuts cartoon strip organizing a party for the sole purpose of not inviting Charlie Brown – that is,  "The West.” Vlad captures this by pointing out how they are growing dynamically and are thus not stagnant and declining like the tired West (which includes Japan).  But they are geographically far apart, have highly differing degrees of trade with one another (although China will go anywhere to get another country’s natural resources) and both India and Russia in the past, and India even now, have territorial tensions with China.  China may divert India’s water from the Himalayas (although the Himalayas are melting more slowly than other glacial ranges in the world, given their height).  

Globalization permits the BRICSs to expand trade with one another, but of course it is not the only globalized trade for any of them.  And they have no military relations (except Russia and China in the SCO, if that is a security organization at all), nor is here any need for them among the countries farthest apart geographically. So they will get together and have nice parties from time to time, declare how different they are from the West and make a few trade and financial agreements for their bureaucrats to execute; and all the while China continues to try to rip off all their resources, except in the case of India, which does not have many.  

As far as "The West” goes – if that is still a real concept in what has long been the post-Cold War world – obviously the United States, Europe, and Japan have to overcome the financial recessions caused by their financial establishments running away with trillions of their peoples’ wealth in order to gamble on the London derivatives market. They need to grow again.  Each one of those entities is imploding in its own way now, although the US is beginning to show signs of growth, which it may still stifle by the obsession of the rich over the national debt.  They are all still trading globally, including with the BRICSs; and the BRICSs need their markets and their exports.  

Let us remember that the BRICSs as a concept was invented by Goldman-Sachs merely as a way to direct their investors to promising growth economies.  That has not been as easy as it may have seemed – take, for example, the obstacles Russia puts up.

In his 1997 master work, The Grand Chessboard, Zbigniew Brzezinski was skeptical that a Russian-Chinese alliance could form and held that if it did come about, that would be due only to America’s failure to properly manage its relations with each of those countries.  As we now know, the United States has indeed mishandled its relationships with both Russia and China, and the improbable pairing has come to pass. With its policies of containment directed at both, with its aggressive denial of the sovereign rights of nation states across the globe that do not submit to its will or that pose the risk of becoming regional powerhouses, Washington has prodded China and Russia to steadily intensify their friendship into a strategic alliance. This alliance is based on shared economic interests and the vision of a multipolar world in which they occupy key places at the board of directors table.

 

Looking again at Chessboard, we see that Brzezinski also contributed two related insights. The first was the idea that any pairing would be driven by anti-hegemonic emotion, that it would be "essentially an alliance of a part of the Third World against the most advanced portions of the First World.” Out of this, said Brzezinski, neither member would gain much, since they would be isolated from the source of investments. The second point was that in such a coalition, Russia would be the "junior partner.”

Though both observations have been superseded by bigger changes in the world at large, they continue to hold sway over much US thinking on the Russian-Chinese match even today.

As recently as the autumn of 2008, in the wake of the Russian-Georgian war, then US Secretary of State Condoleeza Rice and Vice President Dick Cheney publicly threatened to cut Russia off from the world as punishment for its heinous "aggression”. By dint of a concerted effort of its diplomacy and its top political leadership, Russia through its alliance with China and through the international forums in which both countries play leading roles (BRICS, the Shanghai Treaty Organization and … the G-20) has made itself an inevitable, if not indispensable, member of the international community for problem-solving of every nature.

The synergies of the Russian-Chinese relationship in global diplomacy that work to prevent the isolation of either ensure that there is no "junior partner,” just as there is no "junior partner” between the two locomotives of the European Union, Germany and France, notwithstanding the greater bulk of the former in terms of population and GDP.  While the Chinese are constrained by their dependence on smooth relations with the United States to keep their export economy humming, the Russians, whose trade relations with the US are minimal, are freer to take the lead in international forums openly challenging US global hegemony.

Brzezinski’s mention of a Third World is politically incorrect in 2013. What we have instead is a pro-multilateralism movement championed by Russia and China that brings into play many of the same countries but in far better economic circumstances than in the times of the "non-aligned nations.” The swing of economic fortunes to the developing world in the past 15 years, partly from the rise of commodities to fuel China’s industrial growth, has put real muscle behind the part of the world that in the 1960 and 1970s was more talk than substance. Russia and China are feeling the wind in their sails from this economic dynamic, from the demands of fellow countries in the BRICS and farther afield for greater say in world economic and political governance.

For the United States and Western Europe to begin to deal with this political challenge will require decisive steps, as yet unseen, to co-opt the program of the Russian-Chinese alliance and to proactively restructure the IMF, the World Bank, and the United Nations – that is, the instruments of "liberal internationalism” – to better reflect current realities of the distribution of wealth and power. Apart from that, the United States must finally overcome its post-Cold War triumphalism and accept definitions of its own military security that are less than 150% secure, acknowledging and honoring the security rights for which Russia and others have been clamouring to no avail.

In short, the Russian-Chinese strategic alliance has sufficient justification in the geopolitical domain and need pose no military threat to the United States and its allies. It is couched in defensive terms. But for the United States to ignore it greatly raises the transactional cost of world governance.