OPEC heavy-hitters Saudi Arabia, UAE and Iran as well as Argentina, Egypt and Ethiopia have received an invitation by the 5-nation BRICS organization to join the bloc at its ongoing summit in Johannesburg, South Africa.
BRICS is an acronym denoting the emerging national economies of Brazil, Russia, India, China and South Africa.
"We value the interest of other countries in building a partnership with Brics" South Africa president Cyril Ramaphosa has said, adding that other expansions will follow in the future after the core countries agree on criteria for membership.
The inclusion of Saudi Arabia and Iran, some of the world's biggest oil producers outside the U.S,. follows Beijing's brokering of the normalization of relations between Riyadh and Tehran this year. Initially, India was reluctant about expanding BRICS, before Prime Minister Narendra Modi later warmed up to the idea. It's worth noting that the UAE and Egypt are some of India's strategic defense partners.
"I want to assure all my colleagues that we will continue what we started--expanding BRICS' influence in the world," Putin said, appearing via video link from the Kremlin.
Putin called on the bloc to deepen its economic ties, including creating a common currency as well as create new economic settlement mechanisms. That appears like a strategic move on the part of Putin considering that Russia was cut off from the US dollar-dominated global payments systems following its war in Ukraine.
The term BRICS was originally coined in 2001 as "BRIC" by Goldman Sachs economist Jim O'Neill at a time when the economies of Brazil, Russia, India and China were experiencing significant growth thus raising concerns regarding their impact on the global economy.
The leaders of these countries went along with the concept of creating a trading bloc to counter the G7 and began meeting informally in 2006, before organizing more formal annual summits starting 2009. These meetings are generally held with a view to improving the economic conditions within BRICS countries by allowing them to collaborate on various issues. In December of 2010, South Africa joined the informal group and thus the acronym was changed to BRICS. According to the World Factbook, these emerging markets together represent 42% of the world population and account for over 31% of the world's GDP.
Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More
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Comments
By inviting Saudi Arabia, UAE, Iran, Egypt, Ethiopia and Argentina to join BRICS (Brazil Russia, India, China and South Africa), the BRICS’ share in the global economy rises from 32% currently to 37%.
The BRICS countries are working on creating a special currency for trade transactions and a system for financial settlements between them away from the dollar. Moreover, by inviting major oil powers like Saudi Arabia, UAE and Iran to join their organization, they accelerate the decline of the dollar as a reserve currency and also as an oil currency.
The major beneficiaries will be China's petro-yuam, India's rupee, the Saudi riyal, he UAE dirham and the Russian ruble.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert