foreign policy

Modi in Asia: Staring down the dragon while embracing it

With the conclusion of his three-nation tour of China, Mongolia and South Korea last month, Prime Minister Narendra Modi capped a frenetic first year of diplomacy. It is becoming apparent that the emphasis on the Asian region will continue to be an imperative for the rest of his term. In this past year alone, the Indian Prime Minister has invested about twice as many days visiting the ‘east’ — Asia, the Indian Ocean Region and the Pacific — as against his ‘westward’ travels.

Is this a reinvigoration of India’s Look East policy? Does it mean relatively less importance to the West? And, what are the drivers of this policy? Barring the notable absence of West Asia from his travel schedule, it is clear that ‘Engage Asia’ has been the predominant mantra of Modi’s early days in office.

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This Asian focus is decidedly different from previous efforts by Indian leaders to integrate with the neighbourhood. Those efforts were driven by the idea of demonstrating Indian leadership in a particular geography, or they were manifestations of south-south solidarity, or they were necessitated by security concerns emanating from across the border.

The current effort is something more. It is primarily aimed at completing two specific national projects, while at the same time positioning India at the helm of global affairs.

The first national project is to complete ’20th century India’: future-proofing Indian infrastructure; installing enough energy to power the nation; connecting the country with its periphery and beyond via roads, rail, ports and airports; developing manufacturing bases to employ the millions entering the job market each year; and investing in housing, agrarian and other social infrastructure that most developed economies take for granted.

Modi’s Asian thrust is designed to find partnerships, technology and funds to complete this 20th century project. The Atlantic countries do not have the financial capacity to invest in large infrastructure and energy projects. They do not have the political room to commit to carbon-intensive industrialisation. And they no longer have the wherewithal to offer 20th century inputs (equipment, energy and technology) for an insatiable India.

All of these are readily available to the east of India. Consider this: China, Japan and Korea between them have close to US$5.5 trillion in foreign exchange reserves, funds desperately needed for this 20th century project.

There is a coincidence of needs as well. Each of these economies needs to invest in new geographies. They need to generate wealth out of what are now stagnant reserves. These are countries that have successfully completed their industrialisation projects and need to find outlets for investment in the industrialisation of others. That’s why China has become the biggest provider of energy-generation equipment to India and wants to build high-speed trains here. It is why South Korea wants to build nuclear reactors and ports in India. And it is why the Japanese want to set up industrial corridors in India. Asia is also the source of most of the energy needs that are indispensable to this national project. Be it gas, uranium, coal variously sourced from Australia, Mongolia, Central Asia and the Middle East, this region offers India plenty of energy opportunities.

When Modi travels to these countries, it is tacit recognition that the response to Indian requirements carried forward from the last century reside there.

Then there is India’s ’21st century project’, driven by innovation, based on new technologies, located within digital economies and fueled by enhanced human capacity. This is the service-sector paradigm that India is already experiencing, and for which India needs high end solutions at rock bottom prices. For example, most of the 6 million new internet users India adds each month operate on handheld devices priced around the US$50-100 range on connections priced at a fraction of a dollar. Here too it is Asian countries — China, Taiwan and South Korea — that dominate the market. The expansion of this market, which will happen in tandem with the Digital India, Make in India, Skilling India and Smart Cities initiatives, will only see the market dominance of these Asian countries increase.

However, here is the poser: can India manage this Asian engagement while balancing an increasingly expansive China? This is the second element of the ‘Engage Asia’ mantra that Prime Minister Modi seeks to address.

Most Asian economies have their largest partnership with China and will always be looking over their shoulder as they define new partnerships with others. China’s soft expansionism is being driven by its economic weight and through its pursuit of creating new political and economic governance institutions, like the AIIB, that will offer it a new dimension of power. Its One Belt, One Road project seeks to redefine and recreate Asia’s geography.

In India’s sense of its own role and position in global affairs, such Chinese dominance is unacceptable. New Delhi’s running dispute over the 4000km border with China also complicates the bilateral relationship. India’s existential dilemma for the 21st century, then, is to ‘stare down the dragon while embracing it’.

This is where the US, a predominant Asian power, comes into play. It offers India two playing cards. First, it encourages others in Asia, such as South Korea and Japan, to participate in the India story in all sectors without the fear of China. In fact, this US gambit of midwifing Asian middle-power cooperation from arm’s length is a seminal arrangement for the ‘congagement‘ of China. Second, the unassailable US lead in security, defence and other high technology segments gives India a qualitative edge in its bilateral negotiations with China.

When Prime Minister Modi landed in Mongolia and South Korea on his way back from China, he was signaling that he intends to challenge the narrative of the Asian century as being a Chinese century. He was signaling that he intends to break the Chinese stranglehold in the Asian imagination of its future. He was signaling that here is an India willing to live up to expectations and take its rightful place as a major Asian power. Put simply, he was embracing the dragon while staring it down at the same time.

Photo by Flickr user Narendra Modi.

“THE BABU IS BACK:” SAMEER SARAN’S LECTURE ON MODI’S FOREIGN POLICY

Munk School of Global Affairs, University of Toronto, November 4, 2014

Original link is here 

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Nehruvian strong handed centralization coupled with bureaucratic despotism will be the future of India under the newly elected Indian Prime Minister, Narendra Modi. Despite being, what many would say, the antithesis of a secular Jawaharlal Nehru, Modi has demonstrated several tendencies of Nehru-like micromanagement during his first hundred days in office. These thoughts were expressed by Sameer Saran, Vice President and Senior Research fellow at the Observer Research Foundation, while delivering an emphatic talk on ‘Narendra Modi and his Foreign Policy Objectives’, hosted by the Centre of South Asian Studies at the Munk School of Global Affairs onOctober 2, 2014.

Restoration of a strong executive space and empowering of the bureaucracy, characteristic of Nehru’s India, will mark the return of the Babu – a metaphor for technocrats that historically constituted India’s bureaucratic steel framework. Saran holds the belief that Modi’s superstar persona (as seen in his recent drawing of several thousand members of the Indian Diaspora at the Madison Square Gardens), will suffice to press the ‘reset button’ on the prevailing negative investor confidence surrounding India. This can be largely accredited to Modi’s approach towards ensuring neo-liberal economic space, creating market access and ensuring a creation of jobs – a far cry from the garland of communal Hindu nationalism he adorned during his time as the Chief Minister of the Indian State of Gujarat.

A larger section of Mr. Saran’s lecture centred around India’s Foreign Policy aspirations given its role as an emerging regional and global power. Modi’s drift towards realpolitikin internal governance is also manifested in his external relations strategy. The policy of ‘India First’ – implying a clean up the internal mess first – however has not curtailed India’s global ambitions. A recent visit by the Chinese premier opened several new avenues of cooperation. Moreover, India has begun to see its neighbourhood in an extended sense. Enhancing investment in the ASEAN region; conceding to Bangladesh in an old water dispute; recent visits to Nepal and Bhutan; and newfound enthusiasm in interacting with Japan and Australia, are all parts of Modi’s efforts to have India assert itself regionally. India, under Modi, has also demonstrated flexibility in dealing with the BRICS, by understanding the value of accepting Shanghai as the economic headquarters. Modi’s Pakistan policy however remained ill-defined, with a seemingly unchanged plan to maintain the status quo. Some of the greatest anti-Pakistan vitriol emanates from his own party, and if Modi is to challenge the bilateral stalemate with Pakistan, a shift in opinion within his own ranks is necessitated.

Mr. Saran’s lecture portrayed Narendra Modi as the provider of much needed salvation for India. While Modi’s dynamism and pro-business and anti-corruption attitude may provide India some impetus after nearly half a decade of stagnation, transforming a country of 1.3 billion people may not be a task as easy as making populist electoral promises. With just over a hundred days in office, whether Narendra Modi can make a Nehru out of himself is yet to be seen.

-written by  S. Taha H. Shah, a third year student in the Contemporary Asian Studies Program

This article is part of  a series of articles written by undergraduate students affiliated with the Asian Institute about events hosted by the Asian Institute.  

A LONG-TERM VISION FOR BRICS

Original link is here 

The objective of this document is to formulate a long-term vision for BRICS. This in turn flows from substantive questions such as what BRICS will look like in a decade and what the key priorities and  achievements will be. It is true  that  BRICS is a nascent, informal grouping   and   its   agenda   is  evolving   and   flexible.   Therein  lays  the uniqueness of BRICS. The BRICS leaders have reiterated that  BRICS will work  in  a gradual,  practical and  incremental manner. Nonetheless, the grouping  needs  a long-term vision  to  achieve  its  true  potential for two reasons: (1) to dove-tail  the tactical and individual activities into  a larger framework and direction; and (2) to help in monitoring the progress of the various sectoral initiatives in a quantifiable manner.

The  Track  II BRICS dialogue,  under  the  chairmanship of India  in 2012, has been robust. On March  4th  – 6th,  2012,  academics and experts  from the five BRICS nations—Brazil, Russia,  India,  China and South  Africa— assembled  in  New  Delhi   for  the   4th   BRICS  Academic   Forum. The overarching theme was “Stability, Security  and  Growth.” This  theme is useful for understanding the motivation and ethos of BRICS as a platform for dialogue and cooperation on issues of collective interest.

The  dialogue  led to the drafting of a comprehensive set of recommendations for BRICS leaders  (Annexure 1). The  17  paragraphs that  capture the  recommendations to  the  BRICS leaders  were  reached through a consensual process between  60 academics and experts from the five countries. Forum  delegates  contributed a number of research and policy papers  that  formed  the basis for the enriching discussions. Each of these  papers  highlighted key  areas  for  cooperation, within the  overall construct of the BRICS agenda.  This  research led to a significant build-up of knowledge on BRICS. This  long-term vision document is an attempt to aggregate the dialogue and research that  has fed the Track II process so far and to build upon it.

Broadly speaking, the document is divided into four sections. The first, on ‘Common Domestic Challenges’, aims to pinpoint multiple areas in which sharing experiences and best practices within the BRICS Forum  will help to respond to common problems. For example, BRICS nations have vastly differing levels of educational attainment and healthcare policies. As large developing   countries with  significant  governance challenges,  but  also ‘demographic dividends’ and  other  drivers  of growth  to reap,  BRICS can greatly benefit from innovative ideas emanating from similarly positioned nations.

The  second  the  matic section focuses  on  ‘Growing  Economies, Sharing Prosperity’. Given  the  huge distance that  the  BRICS nations have yet to cover   in   tackling  poverty   and   providing   livelihoods  to   their   rising populations, there  is no option other  than maintaining and  accelerating economic growth.  This  section outlines the necessity of deepening intra- BRICS  and  worldwide   trade   and  economic synergies.   Additionally,  it documents growing energy needs and discusses how the economic growth imperative affects the BRICS discourse on climate change.

The third section, titled ‘Geopolitics, Security and Reform of International Institutions’, outlines an enhanced role for BRICS within an increasingly polycentric world  order.  Within the  United  Nations  (particularly the Security  Council), enhanced BRICS representation can institutionalise a greater  respect  for  state   sovereignty and  non-intervention. In  Bretton Woods Institutions, like the IMF and World Bank, BRICS seeks to reform voting  shares   to  reflect  the  evolved  global  system, different  from  that forged in the immediate aftermath of World War II. Finally,  as leaders  in the   developing   world,   BRICS  nations  seek  to  create   a  development discourse that better represent their aspirations.

The  fourth thematic section, on the  ‘Other Possible  Options for Cooperation’, outlines possible  developments to further collective engagement once the necessary prerequisites are achieved. At the present juncture, it  may  be  too  early  to  think of  BRICS  becoming a  formal, institutionalised alliance. However,  it  is important for the  grouping  to envision a commonality of purpose, continuity of operation and dialogue beyond annual summit meetings.

There are five prominent agendas  of cooperation and  collaboration that emerge from this  vision document. These themes are integral to the very idea of long-term engagement between  the  BRICS nations and provide  a framework for accelerating momentum and  increasing significance over the long term:

1.         Reform of Global Political  and Economic Governance Institutions: This  is the centrepiece of the BRICS agenda,  which  in many  ways resulted in the  genesis  of the  grouping. With  the  move  towards a polycentric world order,  BRICS nations must assume a leadership role in the global political  and economic governance paradigm and seek greater equity for the developing world. Over the coming years, they  must continue to  exert  pressure for  instituting  significant reforms within institutions—such as the United Nations Security Council (UNSC),  the World Bank, and the International Monetary Fund  (IMF). Various  suggestions outlined in this  report  provide  a constructive framework for enabling substantive reforms.

2.         Multilateral Leverage: There are multiple formats for engagement and cooperation in order to leverage the BRICS identity at the global high  table.  The  outcome of the  BRICS officials  meeting on  the sidelines of the  November 2012  G20  in  Mexico,  where  it  was decided  to  create  and  pool  a currency reserve  of up  to  USD  240 billion   is  one   instance  of  enhanced  intra-BRICS cooperation. Similarly, the  Conference of Parties, the  United Nations, and  the World  Trade   Organisation are  existing   cooperative frameworks,

within which BRICS countries can collectively position themselves by fostering  intra-BRICS consensus on issues  of significance. The United Nations is central to a multilateral framework, and there  is significant potential for BRICS to collaborate and  assume a more prominent  role   in   global   political   and   economic  governance, conflict  resolution etc.,  through institutions such  as the  Security Council.

3.         Furthering Market Integration: Global  economic growth  has  been seriously  compromised in the years following the Global Financial Crisis. Each percentage point  reduction in global growth  leads to a significant  slowdown  of  economic development within  BRICS which hinges  upon  a necessary component of economic growth.  In this   regard,   market  integration within  BRICS,  whether in  the context of trade, foreign investments or capital markets, is a crucial step  to  ensure that  the  five countries become  less  dependent on cyclical trends in the global economy.

4.         Intra-BRICS  Development   Platform:  Each   BRICS  nation  has followed a unique development trajectory. In the post-Washington Consensus era, developing  economies within BRICS must set the new development agenda, which in turn must incorporate elements of inclusive growth,  sustainable and  equitable development, and perhaps most   importantly,  uplifting those  at  the  bottom of the pyramid. The  institution of BRICS-specific  benchmarks and standards, as  well  as  more  calibrated collaboration on  issues  of common concern including the rapid pace of urbanisation and the healthcare needs of almost half the world’s population represented by BRICS, must be prioritised.

5.   Sharing of Indigenous and Development Knowledge and Innovation Experiences  across   Key  Sectors:   Along   with   the   tremendous potential for resource and technology sharing and mutual research and development efforts, coordination across  key sectors—such as information technology, energy generation, and high-end manufacturing—would prove immensely beneficial for accelerating the BRICS development agenda. Moreover, the BRICS nations must share  indigenous practices and experiences to learn and respond to the immense socio-economic challenges from within and outside. This  vision document contains multiple suggestions for instituting such  sharing mechanisms through various  platforms and cooperation channels.

This   document  analyses  the   above   themes  in   detail.   Each   section concludes with  recommendations specific  to  the  chapter’s theme. The final  section contains synthesised suggestions which  serve as an outline/framework for enhancing intra-BRICS cooperation and collaboration. The  official declarations/statements of BRICS leaders  are available in Annexure (s) 2 to 5.

Why BRICS is important to Brazil

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Original article can be found here

Brazil has a prominent role to play in the global governance architecture. The country has sustained structural economic growth on the back of favourable demographic drivers, growing middle class consumption and broad scale socio-economic transformation. As a result, the business environment in the country has steadily improved; and the number of people living in extreme poverty have halved over the last decade. It is time for the country to place commensurate emphasis on consolidating its position as a regional leader; and as a key stakeholder on the global governance high table. BRICS provides the perfect platform to marry the dual imperatives.

                       

HOT TOPICS: BRICS

Brazil boasts of one of the world’s largest domestic markets and a sophisticated business environment. It ranks 53rd on the World Economic Forum’s Global Competitiveness Index (2001-12), and is ahead of the rest of the BRICS nations in the availability of financial services among other key indicators of financial market penetration. Brazil’s upwardly mobile middle class and its elite have inexorably embraced the liberal globalisation framework, promoted by the developed world. Consequently, since the 1990’s they have shown a greater willingness to engage with the international system, and accept transnational regulations and norms.

As a willing signatory to international norms, ranging from those around mitigation of climate change to preventing nuclear proliferation, Brazil has often broken its own historical typecast of being defensive. What superficially seems to represent a systemic re-prioritisation – requires deeper investigation. According to the Economist’s Economic Intelligence Unit, domestic savings rates in the country are below 20 percent. Mid-sized industries still largely rely on external markets for raising money and channelling investments. By default, international perception about the Brazilian economy is an important component of national strategy. Concomitantly, the Latin American identity is one that successive governments have strived to shed.

Being part of the BRICS grouping has helped Brazil to leverage its ‘emerging market’ identity and de-hyphenate from its Latin American identity (which had its own convoluted dynamics in any case). This is evident both in the global economic and political spheres. BRICS has provided Brazil with a platform to engage with the international system more progressively. It can now navigate the international rules based architecture, with greater bargaining power and seek greater representation in institutions of global economic and political governance. Using the BRICS identity, Brazil no longer has to drive a wedge between its development and growth imperatives. It can shield its poor from international regulations, without fear of its ‘investment worthiness’ being diluted. It can participate at the global high table, while simultaneously catering to nuanced regional imperatives.

The recent death of Hugo Chavez was termed “an irreparable loss” by Brazilian President Dilma Rousseff. This serves as an example of the ideological flexibility, which the country employs to engage with a neighbourhood that is strictly divided on the Venezuelan President’s legacy. Indeed fine balancing tactics are not new to Brazilian foreign policy, also termed ‘a study in ambivalence’. The pluralistic construct of BRICS fits perfectly with Brazil’s strategic outlook on its neighbourhood and the world. Brazil has taken on more regional commitments over the same twenty year period during which it has enhanced its engagements with the international system. This is evidenced from increased participation in regional working group meetings, official summits and informal gatherings by the government.

There are numerous accounts of Brazil’s deployment of regional priorities as a bargain chip. Through MERCOSUR (Southern Common Market), Brazil has been able to successfully negotiate trade agreements in favour of its national interests. It is a pivotal founder member of the five-member trading bloc, which recently included Venezuela within its fold. In the on-going negotiations for a Free Trade Agreement with the European Union (EU), Brazil has pulled out all the stops, shielding its local industries from cheaper foreign made imports; with support from other members including Argentina. Similarly, common interests rather than common ideologies dictate the BRICS agenda. Brazil’s membership of the grouping is in complete consonance with its regional and global strategic imperatives.

Aside from the adaptive flexibility that the informal BRICS grouping offers, it allows Brazil great latitude in bringing specific agendas around innovation, intellectual property rights and green growth at its core. Brazil is home to nearly half of the world’s biodiversity; the overarching sustainable development agenda is not surprisingly a national priority. Similarly, Brazil has the opportunity to use mechanisms such as the BRICS Exchange Alliance for attracting investments. While the current framework enables investors to trade in cross-listed futures indices, if there is political will, the mechanism could eventually encompass various products with different underlying assets including equities. Another relevant sector specific example is commercial aerospace cooperation, where Brazil has unmatched expertise within the grouping.

There are in fact multiple opportunities for Brazil within BRICS, not limited to the economic sphere. In many ways, the grouping brings Brazil from the left corner of the world map to the centre, where the geopolitical theatre is most active; in Asia and the Indo – Pacific. However there are two oddities in the Brazilian agenda which would require circumnavigation if Brazil is to be brought to the heart of the geopolitical discourse. The first is to moderate its insistence on pursuing ‘euro-styled’ agendas such as interventionist doctrine ‘responsibility to protect’ (R2P), with an ambiguously defined alternative ‘responsibility while protecting’. Sovereignty matters to other BRICS and there is some time before supra-national initiatives would pass muster. And the second is to shed its reluctance on the agenda for creation of a BRICS led Development Bank. In this instance Brazil, with its considerable Development Bank experience, can help shape a credible institute that will empower billions south of the equator.

Vivan Sharan is Associate Fellow and Samir Saran is Vice President at the Observer Research Foundation (ORF), New Delhi.

Generosity within BRICS offers China passport to power

The original article is available here

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George Orwell once remarked “Whoever is winning at the moment will always seem to be invincible.” China’s long-running growth juggernaut has resulted in a steady conversion of China skeptics into believers, so much so that a Pew Global Attitudes report released in July 2011 indicated a widespread perception that China has either replaced or will replace the US as the world’s sole superpower, with the Americans themselves just about equally divided on the subject.

For the Chinese establishment, even as being the preeminent global power remains their ultimate aspiration, China’s own outlook has been far more pragmatic.

There is a realization that the critical vectors that fuelled China’s impressive growth have either played out or are near to playing out their potential.

Exports are slowing, and the near double-digit growth in domestic consumption leaves little room for additional growth without triggering unbridled inflation.

Compounding this is fast depleting surplus labor in China’s rural backyard and steady increase in wage costs, which have grown at an annual rate of 15 percent over the past years.

This and stagnating Western demand for goods are impacting China’s growth algorithm built around the premise of inexpensive labor and competitive exports.

China’s redemption as the preeminent global power is hinged as much on its capacity to sustain its economic momentum as in its ability to influence the principles, values and rules that define global institutional mechanisms and frameworks.

However, China’s stellar economic engagement with the world has not resulted in commensurate political weight or perceptional dividends within global institutions.

To realize its aspirations, China urgently needs to find a way around this predicament, and BRICS offers it a plausible option and opportunity.

BRICS is today the most promising entente of high growth economies. BRICS’ national economic and political transformation agendas are fuelling huge domestic demand for newer types of products and services. China is uniquely positioned to gain enormously from this dispensation.

Standard Bank estimates China is party in over 85 percent of intra-BRICS trade flows, which have grown by about 1,000 percent over the last decade to over $300 billion, and are estimated to reach $500 billion by 2015.

While intra-BRICS trade accounted for close to 20 percent of BRICS’ total trade in 2012, it remains disproportionately weighed in China’s favor. Hence in any BRICS growth story, China will be the biggest net gainer.

While the BRICS nations have formed a close bond between themselves, they haven’t consummated any traditional model of interstate alliance.

The model affords sufficient space to accommodate intra-group differences and independent strains of national discourse.

It is still bilateral relationships rather than allegiance to group ethos that predominantly inform the intra-BRICS economic and political dynamic.

Group identity and collective consciousness will result from co-creating and co-managing institutions and instruments. A BRICS development bank, a stock exchange alliance and a BRICS fund are all vital next steps.

For China to unleash and benefit from the full potential of the group, it needs to work on such initiatives. These will offer it a new economic landscape and will also help take the edge out of bilateral relationships.

However, for China to command the moral weight to realize its power ambitions through BRICS, it needs to morph from a trading partner seeking profits to a strategic ally helping shape a common world.

As the partner that stands to benefit the most from any expanded BRICS play, China needs to be singularly more magnanimous and mindful in accommodating the legitimate interests and aspirations of other member states.

A disproportionate generosity, whether it is in resolving bilateral disputes or legacy issues, or, sharing of power at BRICS institutions, independent of economic contribution and effort, will reap very rich political and economic dividends, while also permanently insulating China from the politics of power imbalance within the group.

Samir Saran is vice president at Observer Research Foundation and Jaibal Naduvath is a communications professional in the Indian private sector. opinion@globaltimes.com.cn

 

Leaving the Hotel – The West has to get over its fruitless search for common values and instead negotiate global governance in a realist world

by Dr. John C. Hulsman and Samir Saran
3rd of December 2012
Please find hereFour-Seasons-Hotel the link to the original article

Though in theory they come from many places (particularly in the heretofore ruling West), the vast majority of the international foreign policy elite and its corresponding commentariat really only come from one place: Hegelian Land. Make no mistake about it; they form one quite homogenous group, with an unsurprisingly homogenous worldview. Spending weekends attending endless meetings in five-star hotels across the world (The Four Seasons is an especial favorite), their common views are so ingrained in discussions that they are rarely directly commented upon, let alone debated.

In fact, NGO (Non-Governmental Organization) Man has no need of self-reflection, since everyone they know shares their values, having attended the same prestigious universities, married into the same families, worked in the same think tanks, and spent their jet-set weekends together, talking about such weighty matters as ‘the centrality of the global commons,’ ‘the rise of the south,’ ‘the end of the nationstate’, ‘the multilateral global elite,’ and ‘the advance of the developing world toward universal norms,’ amongst other such self-aggrandizing pipedreams. Their basic analytical mistake (and it is seminal) is that as everyone they know shares these parochial Wilsonian values, such a point of view must be all that matters or really exists. Truly, they all hail from one indivisible Hegelian world. But as Woody Allen put it in Annie Hall, ‘Intellectuals have proven to the world that you can have all this brilliance and still have absolutely no idea of what’s going on.’ Like the possibly apocryphal story (later fiercely denied) about the New York Times film critic Pauline Kael, who was said to be sincerely baffled as to how President Nixon won re-election in 1972 (he carried 49 states) when everyone she knew had voted for the hapless George McGovern, there are distinct intellectual dangers to being so entirely cocooned in a comfortable, if wholly unrepresentative, bubble. Advanced-stage otherworldliness and an ingrained intellectual arrogance make true analysis almost an impossibility.

Sure, NGO Man (and Woman) would placidly reply, there are Neanderthal outliers (such as the two of us who were not properly vetted before being allowed in the inner sanctum) who still believe in the nation state, but the very transnational nature of today’s problems will soon make them appear to all to be the reactionaries that they are (never mind that the rising powers in today’s world such as the BRICS countries (Brazil, Russia, India, China, South Africa) share little in terms of common values except for a strongly nationalistic distrust of the West and the governance frameworks that have been designed for an Atlantic world). The fact that these rising powers are self-evidently nation-states–proving to all not basking in delusion that the new multipolar era demonstrates that the Westphalian state system is above all, alive and well-would never be brought up at The Four Seasons.

However, it is their last, common, wholly wrongheaded assumption that all states inherently share overwhelmingly binding universal values and norms, which is their self-evident truth that is most out of step with reality. Paradoxically, by believing the unbelievable (if the real multipolar world outside the hotel is to be finally taken into account), NGO Man dooms true initiatives at global governance to sure failure, making efforts to endeavor to make the planet a genuinely better place come to naught. Obliviousness in the end isn’t just about harmless self-delusion; intellectually NGO Man gets in the way of solving the very problems he spends so much time purporting to ‘care’ about.

The Common Values Chimera

Especially in Europe (though America is far from immune), one tired conversation dominates most European institutions and forums, threatening to become a fatal liability, distancing the EU from the new capitals that influence global decision making in Asia, Africa and Latin America. It is Europe’s obsession with “Common Values” and the Don Quixote-like quest for “Common Humanity.” Wasting time and intellectual capital looking for this faux Holy Grail is doing nothing less than preventing the global community discovering vital common ground on the key issues that the emerging multipolar world is confronted with. Be the issue of climate change, political intervention in unstable nations, or over broader geopolitical stability, spending time trying to find the fool’s gold of universal values gets in the way of cutting the interest-based deals that will actually make the new multipolar world work.

This European obsession also leads to an analytical failure at the geopolitical level, blurring Western understanding of the new ‘clubs’ such as the BRICS and explains their comforting dismissal of the reality that much has changed, due to the fact that the BRICS themselves seemingly share little in terms of ‘Common Values.’ From Brussels’ point of view how can such an organization (let alone its constituent members) matter if it doesn’t adhere to the Gospel of Monnet? But the BRICS do share common interests, with three among them being the most important. First, all BRICS countries stress there must be a stable external environment that cannot and must not be jeopardized by partisan interventions in Iran and other parts of the Middle East and Africa; in other words, contrary to NGO Man, state sovereignty still matters and non-intervention is also a viable political choice.

The Iranian nuclear crisis is a case in point. The usual, half-cocked Western intervention–in this case an ineffective bombing strike by either Israel or the US that would have to be repeated–would amount to a geostrategic calamity (immeasurably strengthening the mullahs, quite possibly destabilizing broadly pro-Western governments in places like Jordan, Egypt, and Saudi Arabia, and setting back any hopes of stability in the region for a generation). Average Iranians and the Arab street may well hate and distrust the current leadership in Tehran; this does not mean that their distaste translates into obvious support for the West to bomb Iran into a recognition of its errors in ignoring the universal Hegelian virtue of negotiating in good faith.

Instead a realist response-which allows that interests and not values must be paramount if effective agreements are to be arrived at in this new era-impels a different way forward. If states themselves (such as Iran) are threatening the regional balance of power, closer ties between threatened countries within a region as well as between its major players and offshore balancing allies (such as the U.S.) are the chess move needed, rather than violating the offending country’s sovereignty due its less than dogmatic devotion to universal values or its inability to join the conversation in a language that it just does not recognize. Rather, extended deterrence based above all on the truly universal interest of physical survival) is the way forward, an approach seemingly and inexplicably abandoned by the Obama administration.

The second common BRIC interest is that an accountable and stable global financial regime must evolve-with a far greater say for the rising economic powers– the promises for which remain unfulfilled since 2008/09. The unambiguous and ambitious Delhi Declaration by the BRICS Heads of State served as a timely reminder to the Atlantic powers of the strength of the impulses that have brought the BRICS member nations together in the first place.

The message that went out was that the BRICS members will gradually begin to institutionalise an alternative path in terms of financial and economic governance. Be it the BRICS Development Bank initiative, the trade settlement processes, or teaming up on resisting the ‘carbon tax’ unilaterally announced by the EU, these countries are beginning to realize the importance of reframing the rules and perhaps changing the game itself.

In parallel, as this possible transition occurs, they will continue to demand progressive reforms in the existing structures of global financial governance. Their meeting on the sidelines of each G-20 meeting may not have resulted in their putting up a common candidate for the IMF as of yet, but these interactions (this new pattern of standardised consultation) will continue to strength their common ambition to push for reforms of outmoded Bretton Woods Institutions which have failed to even uphold the fundamental tenants of equity and inclusiveness on which they were built (or achieve the still more lofty goal of absolute poverty reduction).

At the recent and much written about Delhi Summit, while Western media and critics were dismissing these interactions as insignificant and unsustainable, the BRICS nations were drawing up a blueprint for a common development bank for the LDCs (Less Developed Countries), local lines of credit for trade, and an alliance of national BRICS stock exchanges. While such developments may not necessarily lead to long-term cooperation on other issues of significance, they will certainly fortify and greatly extend common interests in the areas of trade and finance. Representing nearly half of the global population, and a similar proportion of global growth, BRICS economies are no longer willing to be rule-takers on issues which are inherently crucial to their development trajectories. For the wise, this can be read as a sign of the coming outright rejection of the Washington consensus. That the Atlantic powers will have to accommodate this paradigm shift is certain; how they will respond remains a seminal mystery of the new age.

Finally, the BRICS all agree on a far greater global emphasis (if not commitments) on the development and poverty reduction efforts in Asia, Africa and Latin America and the fact that “green capitalism” or “green values” are new hurdles that BRICS must stand up against. No developing power is likely to commit economic suicide to make over-privileged Western Greens happy. In many ways, the recently concluded Rio+20 Summit seemed to mark the end of climate multilateralism, with countries failing to agree on anything substantial, despite the hype and hoopla preceding it. In an increasingly uncommon world, it is irrational to expect global binding commitments on issues as complicated and contested as climate change or sustainable development. In fact-far from being a shared value–the definition of the term “Sustainable” is contested itself. What implies inclusive growth and poverty alleviation for one, means stifling ‘Green Capitalism’ for the other.

However, this basic schism has been obscured over the many rounds of negotiations and many conferences convened and attended by NGO Man. It should be understood that the emergence of the BRICS on the global economic and political stage does not necessarily signal a default willingness to shoulder responsibility for historical emissions. Moral arguments may get you fair round of applause at The Four Seasons, but if you want a deal, then Atlantic countries need to vacate carbon real estate or pay the rent for squatting on it to accommodate for their ‘lifestyle emissions’.

With the average per capita consumption of primary energy of the BRICS members is still only a fraction of OECD averages, the notion of universal responsibility for the fate of the planet is redundant from the outset. No nation-state can be pinned down by narratives of universal moral accountability and culpability, given the real context. A man barely surviving on a dollar or two a day has no obligation, motivation or reason to preserve this planet the way it is for the next generation. And yes, he disagrees with the President of the United States of America and the Green Evangelists of the EU on this; they simply sit in different structural positions. Giving him a better tomorrow may over time see us strike the deal that the annual climate circuses around the world have failed to achieve.

Acquainting NGO Man With the Realities of our Times

It is well past time for Europe and the West as a whole to wake up to the world they actually live in and now move towards the more workable paradigm of “Shared Interests and Shared Prosperity”, terms that flow from the vocabulary of the “realist” camp, acknowledging that beneath every façade, nations and societies share only one common value, that of self-preservation based on self-interest. Sure, some of these interests do become normative and can be classified as values, but that they remain ‘interests’ above all must be recognized and in an indulgent and modest moment, negotiated as well. ‘Values’ lead to deadlocks and rigidities, ‘interests’ are often tradable, and when primary interests clash, well, at least one knows the score. This approach offers a far greater global potential for great powers old and new to collaborate and cooperate than the parochial, annoyingly moralitic, valuesbased approach that is viewed by most outside of the EU as a not-so-subtle attempt to impose European interests by the back door, despite objectively lacking the power to do so. A man in the gutter and a man in a mansion will share only one common value – self-interest and self-preservation. While the former will seek ways to reach the mansion, the latter will undoubtedly discover rules to remain there. But this fetish with values and the lack of agreement on their universal existence and definition is not the only intellectual challenge that efficient global governance is confronted with today. The concept of sovereignty–and the very different individual experiences of nation-states that compel them to define this critical notion differently–is another potential stumbling block.

For example, the US certainly does not share the diluted notion of sovereignty so common within the EU; as former Defense Secretary Robert Gates made abundantly clear, if Europe continues to free ride on American defense spending in NATO soon it will not be seriously consulted on the strategic issues of the day, common values or no. For America, NATO has always been a means to an end, not Valhalla in itself, as Europeans complacently believe. Rather, the perilous state of the American economy and its increasingly fraught domestic politics are already altering its role as a global policeman and as things get ever harder, a more inward-looking America is inevitable, based on its overriding economic interest to right its fiscal ship.

Similarly, the BRICS and other emerging power centers view this transition period of their relative rise as precisely the time to consolidate their sense of nationhood and to reclaim sovereignty from the formerly Western-dominated world. Again, Europe is the global intellectual outlier. Global governance in the new world we actually live in must be founded on the notion that sovereignty actually matters far more than those in many European capitals so fatuously think. If the BRICS are to be made stakeholders in the new era, alongside the older, western powers, this is the first negotiation and accommodation that must take place.

The third reality of our times is that large economies in the Indo-Pacific region (India, China and some others) with low-income populations will now be the fulcrum for governing the most important regions of the world; if they succeed the new primary engine of global growth will be safeguarded, if not, we will live in a far more hostile planet. Due to their own troubles and relative economic decline, the US and EU will increasingly need to carve out partnerships with India, China and the ASEAN countries to secure the sea lanes, manage the rules of trade, secure property and property rights and ensure peace and stability at this hinge point of multipolarity. This dependence on large emerging economies–which for a long while will remain relatively poor–will change the very ethos of global governance.

Due to this sea change, global priorities are bound to change as well. Growth and not human rights will dictate the agenda. Industrialization will trump environmentalism and poverty alleviation will define sustainable development. The implementation of governance will alter dramatically. Due to the core difference in the understanding of sovereignty, partnerships between the Atlantic countries and countries of the Indo-Pacific will be tested. On the other hand, partnerships could strengthen when instead of patronizing sermons, efforts are made to accommodate the views, interests and needs of all based on the fruitful search for shared interests. So how to make sense of this confusing new world? The primary rule of the road must be the unbreakable link between burden sharing and power (or responsibility) sharing. This basic principle (while easily applied in terms of the voting weights controversy in the IMF and World Bank) must become nothing less than the new mantra for the multipolar age. For it is the only hope for future global governance efforts, based as it is on the only durable political factor in the world….actual power realities.

Of course, this fundamental global change takes place on a continuum; it will take several decades for the transition from a Western-dominated world to a world with many powers (with the BRICS leading the economic way) to be completed. But as the global financial crisis made clear, change may be occurring far more rapidly than anyone could have imagined. Along the way, a fading west and a ‘not-yet-up-toit’ rest could well drop the ball over vital global governance issues, resulting in what Ian Bremmer (somewhat apocalyptically) has referred to as a G-0 world, where nothing much gets done.

It is time for Europe to get over it. Nations will not have common values, because nations themselves are a collection of diverse historical experiences and ambitions. However, there is no need to throw in the towel over global governance, for nations can have a vision for shared prosperity with different approaches to get there. To make all this work, there must be some common macro rules for the road for achieving this shared prosperity (the greatest common interest of all) and these must be negotiated on the realist terms of common interests and not through the fruitless semantics of ethics and morality. It’s time for NGO Man to leave the hotel and xperience the new world that has sprung up while he was inside; the multipolar era needs realism to work.

(Dr. John C. Hulsman is President and Co-Founder of John C. Hulsman Enterprises (www.john-hulsman.com), an international relations consulting fir, and a life member of the Council on Foreign Relations. He is also the author of all or part of 10 books, including Amazon bestsellers Ethical Realism, The Godfather Doctrine, and most recently an acclaimed intellectual biography of Lawrence of Arabia, To Begin the World Over Again. Samir Saran is Vice President at the Observer Research Foundation and Chairman and CEO of ‘g_trade’, the creators of the 3rd dynamic green index, ‘BSE Greenex’ at the Bombay Stock Exchange. He is author/co-author and editor of a number of publications including Re-imagining the Indus, Navigating the Near, Radical Islam and BRIC in the New World Order. This expanded essay flows from an earlier op-ed written for the Times of India, May 11, 2012.)

Obama 2.0: Who will crash the party?

by Samir Saran and Dr. John C. Hulsman
1st of December 2012
Please find here the link to the original article

Second term presidencies, like second marriages, can be seen as the triumph of hope over experience. George W. Bush met with calamity in Iraq, Bill Clinton was impeached over the Lewinsky scandal, Ronald Reagan suffered through Iran-Contra, Richard Nixon perpetrated Watergate and resigned, and LBJ was engulfed and then devoured by the Vietnam War. Given this doleful record, what can realistically be hoped for in a second Obama term? This time around, will chronically dysfunctional West Asia be a slow bleed that will drain the momentum of the new presidency?

Two major over-arching priorities immediately head the to-do list of President Obama; the first a great danger, while the second presents almost unparalleled political opportunity. The fiscal cliff–and insane joint suicide pact agreed to by the outgoing Congress-promises automatic tax increases and spending cuts totaling $600 billion coming to pass on January 1, 2013. The only way to avoid this contraction to the American economy, which it is estimated would amount to a full 4% of American GDP, thereby casting a feebly recovering American back into recession, would be for the Republican House and the President to reach a broader budget deal amounting to around $1.2 trillion in savings over the next 10 years. So, at least on paper, it is hard choices quickly arrived at or…Armageddon.

Given the stakes (and both parties desire to avoid the wrath of the American people at their persistent inability to behave as grown-ups) it is still more than even money that a patched-up compromise will be reached, a temporary deal which kicks the fiscal can down the road, without actually solving America’s long-term deficit and debt crisis. However, failure to reach such a deal (and it is important not to underestimate how politically divided Washington has become) would practically doom the president’s second term from the start.

Obama’s tremendous opportunity, also best done quickly while the Republican Party is still reeling from its electoral defeat, is to, in terms of policy, lock in the gains made by the creation of his new and seemingly enduring Democratic majority. The President’s winning political coalition for the past two presidential election cycles has led to nothing less than the rejuvenation of the Democratic Party itself. Women, African-Americans, the Professional Classes, the Young, and Hispanics are the basis of the evolving power of the Democrats, who have carried the popular vote in five of the last six presidential contests.

Locking in Hispanics, the fastest growing segment of the American electorate, is a particularly tempting prize. Now comprising a full 10% of the voting public, Hispanics gave the president 71% of their votes this November; the main reason for this is the administration’s efforts to offer amnesty and an ultimate path to citizenship for the roughly 11 million undocumented workers now living in America, and the Republicans’ suicidal desire to punish both them and their children.

In his immediate post-election remarks, the president gave the game away by stressing the need for immigration reform, truly a win-win proposition if ever there was one in politics. If Republicans balk at reaching a compromise over immigration, they will have lost the chance to win over the fastest growing segment of the American electorate for at least the next generation. If they go along with Obama’s proposals, there will be civil war in the GOP, and President Obama will get the lion’s share of the credit anyway. Look for moves to introduce such a policy very early in 2013.

If this is what the White House will do, the great White Whale of the next four years is a simple fiscal question: Can America arrest its trajectory of rather steep decline and enact a Bowles-Simpson style compromise that both raises taxes (as the Democrats dream about) while engaging in entitlement reform of Medicare, Medicaid and Social Security (the Republican’s fondest wish).

In the Bowles-Simpson plan–a bipartisan compromise reached by the president’s own appointed committee in the latter days of his first term-there is a durable blueprint to do this. There would be three dollars in spending cuts for every dollar in tax increases, entitlements would be means tested, and benefits would be cut and doled out slightly later in life, taxes would be simplified, with loopholes and deductions would be curtailed. Such a grand plan would stabilize the American debt rate at around 60% of GDP, thus preserving American economic power for the next generation.

There are two fundamental problems in reaching for the Bowles-Simpson Holy Grail. The first is that it presumes that people in both parties are less ideological than they currently are. It is not just the right-wing Tea Party that is the problem here; House Minority Leader Nancy Pelosi and her left-wing followers have also shown no sign of being able to make the significant compromises that would be necessary to make this whole process work. Without the left agreeing to entitlement reform and the right agreeing to tax rises, the deal will never be done. It is an open question as to whether this level of compromise is now possible in a Washington more ideologically divided than at any time in memory.

The final problem in nailing down this ambitious domestic agenda is that it assumes the world will simply not intrude while America tries to sort itself out. History simply does not work like this. While it is highly unlikely there will be simultaneous: War with Iran, tensions between China and Japan over the Senkakus, the euro-crisis going septic, and Syria’s civil war leading to regional instability or even regional war in the Middle East, there is a very good chance that some of this happens. Any foreign distractions could well doom the domestic-only focus the president is banking on.

Given this highly ambitious domestic agenda, Obama the second time around is likely to disappoint both the Wilsonian liberals who seek American intervention in troubled regions around the world to promote liberty and protect human rights (think Libya) and the neoconservative hawks who seek greater U.S. commitment to lead the 21st century world through the preponderance and use of its military might (think Iraq). If the first term is any indication, U.S. foreign policy will to continue to develop in a cautious, limited, pragmatic, yet largely reactive manner. There will be few American efforts to order the new multipolar world, or respond proactively to much of anything.

And therein lies the danger. Reactive agendas may result in hasty interventions and unintended outcomes. For one thing, the hurriedly brokered ceasefire between the Hamas and Israel is one that will surely need a revisit sooner rather than later. And this time around who (if anyone) will script the agenda remains the million-dollar question.

Article in “Russia & India Report”: Putin 3.0: Creating hedges for the next decade?

Is Putin going to lessen the Russian dependence on stagnant European demand for oil and gas despite the favourable terms of trade and rely on the hard-bargaining China?

May 17th 2012, New Delhi
Please find here the link to the original publication

The Kremlin has recently announced that Vladimir Putin will be skipping the upcoming G8 meeting in the US sighting domestic concerns and will be visiting China on June 5-7 as his first foreign trip since being inaugurated as President. It is clear that Putin views Chinese demand for Russian oil and gas as a hedge against stagnant Western demand, particularly European demand for Russian exports which showed a huge 47% negative year on year variation in 2009 and is unlikely to grow at rates that will sustain the Russian economy for too long. However, China drives a hard bargain and its quest for energy security through import diversification and oil equity means that it will not accommodate for more than a minimum amount of dependence on Russian raw material linkages.

While his predecessor and protégé Dmitry Medvedev repeatedly emphasised the need for Russia to diversify away from its “primitive” focus on the oil and gas sector, Putin seems to be doggedly set on continuing his outlined profit maximisation doctrine by largely relying on the sector to fulfil social spending promises made during his election campaign. Russia recently surpassed Saudi Arabia as the largest producer of crude oil, and holds the world’s largest natural gas reserves.  Approximately 40 percent of the Russian Government’s tax comes from oil and gas related businesses. While Putin has been able to successfully leverage Russia’s natural resource endowments in the past, he is now faced with burgeoning structural problems including huge manufacturing sector inefficiencies, negative demographic trends, deepened socio-economic inequities and populist rebuttals to alleged systemic corruption under his oversight.

The European Union (EU) is Russia’s biggest market and the EU also accounts for around 75 percent of FDI into Russia. According to the European Commission, Russia accounted for 47 percent of overall trade turnover in 2010; a trend which has normalised after the brief disruptions caused by the global financial crisis. However Russia’s competitive advantage with the EU is largely restricted to the trade of fuels and minerals. Even with its massive oil reserves, Russia has lagged behind in the production of petrochemicals and refined oil. While the margins earned on refined oil based products in a globally integrated oil market may not justify expansion of production facilities and there is a distinct competitive advantage in favour of the “Global South” in terms of labour costs and environmental tariffs there are few explanations for the lack of emphasis on developing a profitable export oriented petrochemicals sector in the country. It doesn’t help that the recent socio-political turmoil adds to the disincentives created for any FDI investment flowing into the country.

Indeed Russia exhibits many of the symptoms of the “Dutch Disease”, a term that broadly refers to the deleterious effects of large asymmetric increases in a country’s income, most commonly associated with discovery of natural resources such as crude oil. While there is no consensus about whether the country suffers this affliction and indeed there have been significant per capita income gains as a result of exploitation of raw material wealth, there are real and palpable threats to sustained growth that need to be proactively mitigated by the establishment. A 2007 IMF Working Paper found that some of the exhibited symptoms included a slowdown in the manufacturing sector, an expansion of the services sector and high real wage growth in all sectors. Simultaneously, oil exports have increased by close to 70 percent over the last decade and the value of exports has gone up by around 620 percent during the same time span. Russian crude oil production recently hit an all time high, and Putin is determined to maintain production levels above 10 million barrels per day (about a third of OPEC’s total production) for a “fairly long time”.

In many ways, resource based linkages have guided and defined Russian foreign policy since the disintegration of the Soviet Union. Resources have also dictated Russia’s economic fortunes, which have traditionally fluctuated with the price of crude oil. Crude oil has quadrupled in value since the early 2000s, and at the same time, Russia has transitioned into becoming a Middle Income Economy with an incredible number of superrich. It is interesting to note however, that despite the asymmetric dependence on raw material exports, Russia’s currency has been depreciating. Due to the underinvestment in the manufacturing sector and the overall lack of competitiveness of the domestic goods, import growth has tended to outpace export growth. The current account balance as a percentage of GDP has declined substantially since the mid 2000s and with structural production ceilings being hit in the oil and gas industry, there is uncertainty about where the additional export growth is going to be generated. Putin seems certain that recently announced tax breaks for upstream oil and gas exploration projects and fiscal incentives for M&A activities will help fuel this production growth. Tax breaks have been provided for offshore energy projects with Western companies including Exxon Mobil Corp., Eni SpA and Statoil ASA.  Simultaneously he also plans to raise extra revenues from the resources sector to pacify some of the populist anger that is brewing through increased government spending, in particular by significantly increase extraction tax on gas suppliers.

Putin has an uphill task, to reassure foreign institutional investors of the legitimacy and stability of his political apparatus. In order to achieve competitive advantage in the export of petroleum related products, the Russian Government has ambitious goals to create six regional clusters of world class ethylene (the world’s most widely produced organic compound) production facilities and expects production capacity to reach 11.5 million tonnes per annum by 2030. This projection assumes a fundamental amount of investments and supporting infrastructure capacity building in the form of product pipelines, road and rail links. Distribution and feedstock concerns already plague the industry.

The seemingly irreversible economic meltdown in Europe must act as a trigger to stimulate new ideas and a break out of the traditional resource centric growth mindset in the Kremlin. Developing and emerging countries account for around 50 percent of global GDP in purchasing power parity terms and Russia must look to deepen integration through trade with these markets. China is but one of these and its sino-centric economic startegy may soon be an albatross around its neck. Moreover trade must be on the basis of a diversified basket of products on offer with emphasis on value addition.

The East Siberia-Pacific Ocean (ESPO) oil pipeline which is now operational has enabled Russia to bring oil to its remote eastern coast, from where it supplies to China, Japan and South Korea. The Chinese have been actively lobbying to get all of the oil transported through the ESPO, but Russian oil companies are naturally hesitant as they are unwilling to forgo the higher margins they receive by selling to Western countries. The Russian experience with the hard bargaining Chinese must not colour their prospective engagements with other emerging and developing countries. In the next few decades, global growth will be a function of how such economies in Asia and Africa perform, and in turn, so will Russia’s economic fortunes. Putin would do well to hedge away from dependence on European demand even though terms of trade may be favourable and fall in the comforting squeeze of the Chinese option.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at the Observer Research Foundation, New Delhi.

Discussion with Open Magazine on BRICS: “Not just a talk shop”

29th of March, 2012
Please find here the link to the original article.

It may be an idiosyncratic club, but should it therefore be written off? As leaders of BRICS—Brazil, Russia, India, China and South Africa—gather in New Delhi for a summit to prove that their five-member group is something ‘solid’ (a word Indian PM Manmohan Singh has used in an Indo-Pak context), rather than just another talk shop, critics across the world have not been able to hide their derision. The interests of these countries are far too divergent, they mutter, to result in anything that could matter.

For exponents of the idea, however, the five represent not just a fifth of global output, but also a dynamic geo-economic bloc on the ascendant. It owes its name to a 2001 Goldman Sachs report that projected a world economy under BRIC domination (South Africa was admitted only in 2010) within half a century. Today, it is a club more than a clever acronym, and one with an agenda too. “[The group] seeks political dialogue towards a more democratic multipolar order,” says senior Indian bureaucrat Sudhir Vyas, adding that the global power shift currently underway calls for “corresponding transformations in global governance”.

The buzzword at the Delhi summit is cooperation. Says Bipul Chatterjee of Consumer Unity & Trust Society: “These leaders are likely to float the idea of a development bank to be capitalised by BRICS, or perhaps all developing nations, to fund the development aspirations of the poor world.” This aim has its origin in Manmohan Singh’s 2010 suggestion that the world’s surplus savings be funnelled into emerging economies short of capital for investment in infrastructure and other public utility projects. Says Samir Saran, a BRICS expert with the Observer Research Foundation: “The proposed bank could tap these savings by creating sovereign guaranteed debt instruments to leverage more money for these economies.”

The other area of mutual interest is trade. As a booster, of help would be an agreement among the five countries’ central banks to grant one another access to loans in local currencies. Saran says the BRICS platform would “offer the five ‘R’s: rupee, rouble, renminbi, rand and real” for trade payments as part of a test settlement mechanism, “before internationalising these currencies”. The goal here is to reduce dependence on the US dollar as an international means of exchange.

Sceptics do not see much coming of it. Yet, it is worth noting that the five have managed to get this far as a club without letting bilateral bickering get in the way. This in itself is commendable. Perhaps BRICS bashers should wait a while before writing it off.

BRICS, Steel, Mortar….and Money – Analysis of the 4th BRICS Summit in New Delhi

by Samir Saran and Vivan Sharan
4th of April 2012
Please find here the original link to the article.

With the Delhi Declaration, BRICS nations, which met recently in the Indian capital, have shown that they have the steel to stand up to traditional power structures, a cohesive vision to jointly respond to development challenges through institutionalisation of concrete mechanisms, and the determination to channel monetary power to strengthen markets, businesses and trade. The Declaration indeed gives insight into the gradual transformation of BRICS, from essentially a response mechanism crafted to address the various development challenges posed by the global financial crisis, to a forward looking entity seeking to enact and enable real global transformation.

The Delhi Declaration extends over 50 paragraphs which are all encompassing in some sense and address many relevant themes for BRICS countries and the developing world at large. The Declaration is significantly more impressive and comprehensive than the 16 paragraph Joint Statement of the BRICS Leaders at the first summit held at Yekaterinburg in 2009 and the sketchy and macro statement of purpose at Sanya last year. The Action Plan within the Delhi Declaration consists of 17 steps which will deepen intra-BRICS engagements. There are three prominent narratives that define the Delhi Declaration – reaffirmation of the UN framework for global governance, disappointment with financial regimes shaped in the mid 20th century and a confidence to tap into economic opportunities that exist within BRICS.

The Delhi Declaration has stamped the intent of BRICS nations to coordinate and collectively respond to global security challenges within appropriate frameworks that give precedence to fundamental principles such as international law, transparency and sovereignty. BRICS members have recognised and re-emphasised the centrality of the UN in dealing with regional tensions and they have explicitly outlined this for specific cases including the Arab-Israeli conflict, the Syrian imbroglio and the contentious Iranian nuclear programme.

The Declaration unambiguously states that “plurilateral initiatives” that go against the fundamental principles outlined earlier, will not be supported by BRICS. The Declaration is clearly against actions such as asymmetric trade protectionism, unilaterally imposed sanctions and taxes imposed on businesses. The EU’s Aviation Tax is one such example from contemporary policymaking. In terms of trade, there is strong emphasis on operating within legal instruments such as the WTO and institutions such as the UNCTAD for furthering the inclusive development efforts through consensus and technical cooperation.

The aftershocks from the financial crisis are still a cause of concern to the BRICS nations. The pre-occupation with Europe has distracted attention from the social transformation programmes and poverty alleviation efforts among BRICS members. The Delhi Declaration has spelt out the “immediate priority” of restoring market confidence and getting global growth back on track. The steps to address such concerns will include attempts to rebalance global savings and consumption, furthering of regulatory and supervisory oversight in the financial markets, increasing the voice of developing and emerging nations in global financial governance and the institutionalisation of financial mechanisms to redirect existing capital to tackle development imperatives.

The BRICS members have therefore announced a working group led by the Finance Ministers of the individual nations, in order to examine the “feasibility and viability” of a BRICS Development Bank. When formed, such an institution will likely be able to shift and contextualise the development discourse within and outside BRICS and therefore is one of the most significant actionable outcomes. It is evident that such a multilateral institution is not meant to compete with existing ones, but rather, to enhance lending and investment to create sustainable development trajectories. Contrary to expectations several high ranking Chinese policymakers, including the Assistant Foreign Minister, Ma Zhaoxu, have supported the idea.

The BRICS members have clearly outlined that the purpose and nature of Bretton Woods Institutions such as the World Bank, must shift from being essentially a mediation instrument to enable North-South cooperation, to one which can actually prioritise “development issues” and overcome the “donor-recipient dichotomy”. They have also called upon the World Bank to mobilize greater directed resources and enable development financing at reduced costs through financial innovations and improved lending practices. Indeed for BRICS, the focus on World Bank and IMF reforms has remained constant through the years, yet the Delhi Declaration articulates these concerns more lucidly than ever before.

Given that intra-BRICS trade has been consistently on the rise over the past decade, BRICS Leaders have endorsed the conclusion of the Master Agreement on Extending Credit Facility in Local Currency under the BRICS Interbank Cooperation Mechanism and the Multilateral Letter of Credit Confirmation Facility Agreement between their respective EXIM/Development Banks. Such steps to mitigate market risks and enable local currency transactions will only add to the existing momentum and build resilience in BRICS economies to global business cycle fluctuations and exchange rate volatilities. Notably, BRICS have also endorsed the market led efforts to set up a BRICS Exchange Alliance between the major stock exchanges of BRICS, which will enable investors to efficiently allocate capital across BRICS economies and invest in the BRICS growth story.

The unity and purpose of BRICS has been the target of speculation and scepticism from various quarters. With the Delhi Declaration, BRICS members have been able to assuage such doubts as they have begun to create a credible hedge against traditional global narratives of security and development. They have simultaneously been able to project that there is resolution within the group to deal with issues that are not only of immediate concern but even those that will need attention in the future. The Delhi Declaration paves the way for the institutionalisation of BRICS cooperation, making BRICS a significant transcontinental and politically united force. In Sanya BRICS spread wide to include South Africa; in Delhi they went deep to include substance.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at Observer Research Foundation. The Foundation hosted the BRICS Academic Forum in March this year.