BRIC & SCO Summits: Reinventing
by Eric Walberg
Yekaterinburg, famous tragically as the
spot Lenin chose to have the Tsar and his family executed in 1918,
and ironically as the fiefdom of Boris Yeltsin, who finished off
the Russian revolution itself in 1991, witnessed something no
less remarkable last week when leaders of the so-called BRIC nations
(Brazil, Russia, India and China) held their first summit, following
the yearly meeting of the Shanghai Cooperation Organization (SCO).
The BRIC countries comprise 15 percent of the world economy, 40
per cent of global currency reserves and half the world's population.
Brazil, India and China have also weathered the financial crisis
better than the world as a whole.
Holding the two meetings together meant
that Indian Prime Minister Manmohan Singh attended the SCO for
the first time. The SCO, Russian and China 's Eurasian security
organization, has become a key counterweight to US hegemony in
the world, and Russia and China are eager to have India upgrade
its position of observer to member. This summit appeared to have
coaxed India a step closer, as the SCO security agenda has shifted
its emphasis to the growing security threat from Afghanistan,
which satisfies the more pro-US India.
But the headline-stealer was the BRIC
summit. While the US plays its tiresome geopolitical games on
Russia 's eastern borders, Russian President Dmitri Medvedev was
busy charting a new economic and political reality in the heart
of Eurasia. "The artificially maintained unipolar system,"
he lectured, is based on "one big center of consumption,
financed by a growing deficit and . . . one formerly strong reserve
currency." At the root of the global financial crisis, he
concluded, is that the US makes too little and spends too much.
Especially upsetting for Russia is its continued military largesse
to Georgia , the missile shield in Eastern Europe and its invasions
of Iraq and Afghanistan. "The summit must create the conditions
for a fairer world order," he read out, as Presidents Hu
Jintao of China, Luiz Inacio Lula da Silva of Brazil and the Indian
prime minister looked on approvingly.
China backs Russia's two big gripes with
the US: "The security of some states cannot be ensured at
the expense of others, including the expansion of military-political
alliances or the creation of global or regional missile defense
systems," the joint Chinese-Russian statement says. Chinese
leader Hu Jintao also joined Medvedev in denouncing US plans to
militarize outer space: "Russia and China advocate peaceful
uses of outer space and oppose the prospect of it being turned
into a new area for deploying weapons . . . The sides will actively
facilitate practical work on a draft treaty on the prevention
of the deployment of weapons in outer space, and of the use of
force or threats to use force against space facilities."
Iranian President Ahmadinejad, fresh from
trouncing his pro-Western rival in presidential elections, dotted
the "I's at the SCO meeting, taking a leaf from Venezuela
's Hugo Chavez: "The international capitalist order is retreating.
It is absolutely obvious that the age of empires has ended and
its revival will not take place."
But there was more than colorful rhetoric
in all this, despite the pooh-poohing of Western pundits, who
deride the SCO and BRIC as a collection of misfits and wannabes.
The BRICs have put the US dollar on notice, and are already finding
alternatives as a means of clearing accounts. Medvedev called
for the IMF to include the Russian ruble and the Chinese yuan
in the basket of currencies used to value its financial products.
But that is just for starters. Chinese Central Bank governor Zhou
Xiaochuan says the goal is now to create a reserve currency "that
is disconnected from individual nations."
Even more ominous for the threadbare dollar,
though perfectly sensible in the computer age, is the revival
of stone-age barter on a big scale, which bypasses the need for
any reserve currency at all. Brazil 's biggest trading partner,
once the US, is now (surprise) China , and they are using barter
deals to settler their accounts, bypassing the dollar altogether.
Two weeks ago China reached an agreement with Malaysia to denominate
trade between the two countries in yuan.
As dollars are the world's default reserve
currency today, the US government can churn them out at will to
paper over its massive foreign debt and budget deficit, effectively
letting it steal other countries assets legally and forcing countries
everywhere to finance its military spending. China , Russia ,
Brazil and now India are well aware of this, have had enough,
and have the international heft to do something about it. For
them, the US is the ultimate rogue nation. How else to characterize
a country that insists other countries follow one set of laws
- on war, debt repayment and treatment of prisoners - but ignores
them itself? The US is now the world's largest debtor yet has
curiously avoided the pain of "structural adjustments"
that the IMF imposes on other debtor economies, refusing to cut
its bloated military budget or increase taxes meaningfully. "The
world economy should not remain entangled, so directly and unnecessarily,
in the vicissitudes of a single great world power," said
Roberto Mangabeira Unger, Brazil's minister for strategic affairs.
The US can never "repay" the
$4 trillion debt it owes foreign governments, their central banks
and the wealth funds set up precisely to dispose of the global
dollar glut. " America has become a deadbeat - and indeed,
a militarily aggressive one," notes Michael Hudson. The problem
is how to contain it. Rumblings are coming not only from fringe
peaceniks. Yu Yongding, a former Chinese central bank advisor
now with China 's Academy of Sciences, advises US Treasury Secretary
Tim Geithner that the US should save by cutting back on its military
spending. "US tax revenue is not likely to increase in the
short term because of low economic growth, inflexible expenditures
and the cost of 'fighting two wars'."
The BRICs are trying to organize their
affairs so that they are no longer the unwilling recipients of
dollars. No matter what they think of the US, they hasten to insist
they don't want to see the US dollar collapse, since they hold
most of their own reserves in dollars. But they are beginning
to withdraw the life-support system the US has been relying on
since Nixon completed the transition from a gold-based reserve
currency to a purely paper one in 1971.
Just to emphasize how serious the situation
is, according to the Financial Times, the top 5 financial institutions
by market capitalization in 1999 were, in order, Citigroup (US),
Bank of America (US), HSBC (UK), Lloyds TSB (UK), Fannie Mae (US).
The top 5 as of 2009 are Industrial & Commercial Bank of China,
China Construction Bank, Bank of China, HSBC (UK), and JPMorgan
Chase (US). From 0:3 to 3:1 for China, now officially the world's
second largest economy after the US - a rout.
Just as countries are beginning to rediscover
age-old barter, fixed, pegged and dual exchange rates are also
being considered, mechanisms once derided as passé. In
the face of continued US overspending, de-dollarization will force
countries to return to nationally determined fixed exchange rates
and dual exchange rates - one exchange rate for commodity trade,
another for capital movements and investments.
The world is discarding its sixty-year
old framework, though the historic meetings in Yekaterinburg elicited
only a collective yawn from most media. "Between the BRIC
countries, there is really little in common," said Yevgeni
Yasin, head of research at the Higher School of Economics in Moscow.
"Each of them has its own destiny, its own special character,
and it will be much more difficult for them to agree among themselves
than separately with Western countries." China depends on
manufactured exports to the US and Europe. Russia sells oil, natural
gas and other natural resources. Brazil relies on agricultural
exports, while India's growth has been largely based on its domestic
However, Jeng Fengin at the Chinese Institute
of Modern-Day International Relations is less blasé: "The
financial crisis has given a much-needed boost to the fledgling
partnership between Brazil, Russia, India and China and helped
our voice to be heard everywhere." President of the Brazil-Russia
Chamber of Commerce, Industry and Tourism Gilberto Ramos warned
skeptics that the BRIC countries are all powers of a truly continental
scope and have very much in common, both geographically and macro
In case Obama hasn't noticed, Eurasia
is coalescing, not around littler Georgia and big brother Poland,
with their pretensions as forward bases for the mighty US empire,
but around China, Russia and India. He would do well to remember
Yekaterinburg is not only famous for its Russian past, but for
Gary Powers, the US spy shot down in 1960, a fitting metaphor
for how Russia and China are taking aim at the US-dominated international
Eric Walberg is a journalist who worked
in Uzbekistan and is now writing for Al-Ahram Weekly in Cairo.
You can reach him at his site: www.geocities.com/walberg2002/
Read other articles by Eric, or visit Eric's website.