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Wednesday, July 8

The Ufa Summit and two new development banks

Takeaway quotes from second report (Bruce Jones, Brookings):
What we can expect to see out of the Ufa Summit of the BRICS [July 9] are two things. First, the members will do the exact opposite of isolating Russia; they’ll be on stage with Putin and they’ll refrain from any public criticism of his strategy in Ukraine. They aren’t particularly happy with his strategy there -- but their view is: This is not our problem.
[...] 
China, frustrated by the slow pace and lack of weighted voting in the BRICS Development Bank—now the New Development Bank (NDB), which emerged from several years of negotiations—has moved out on its own, very successfully, with the Asian Infrastructure Investment Bank. (Dealing the United States a humiliating diplomatic blow in the process.)
Still, the BRICS’ slowing collective growth lends all the more urgency to their concern to increase their voice and decision-making role in the global economy.
So, despite what lies beneath, look for BRICS unity, not division, coming out of Moscow.  [Pundita note: He  means the summit in Ufa, not Moscow].
 Greece Can Easily Get Funding From BRICS Bank: Russia
By Sounak Mukhopadhyay
July 07 2015 - 6:48 PM EDT
International Business Times
Russia said Greece could get financing from the New Development Bank operated by Brazil, Russia, India, China and South Africa (BRICS) if it buys a few shares of the institution to become a member. The bank, which is set to begin operations next April, is seen an alternative to Western financing.
Deputy Russian Finance Minister Sergey Storchak said becoming a part of the bank would require Greek officials to make a political decision.
"We do not have any co-relation between a contribution and an amount of funding,” Russian news agency Tass quoted Storchak as saying. “There is general agreement that the system of the countries’ assets will be balanced." [Pundita note:  Um, I think that need for balancing would leave Greece out but it's the thought that counts.]
Russian Finance Minister Anton Siluanov said Tuesday it is necessary for the new bank to "carve out a niche" since competition among international banks is intense. He is scheduled to attend a meeting in Ufa, Russia, with other BRICS representatives.
[...]
Storchak said gaining BRICS membership should not be a problem for Greece.

The BRICS bank is expected to be capitalized initially at $50 billion, with likely growth to $100 billion.
The BRICS Summit: A shadow of the former self it never was
Bruce Jones
 July 7, 2015 - 1:45pm EDT
Brookings Institution

The BRICS are gathering in Ufa, Russia on July 9 for their seventh annual Summit. When this group came into being, in the turbulent days of the global financial crisis, it was heralded both as the future of economic growth and as a new grouping that was set to challenge the West for the leadership of the international order. How things have changed.

First, the BRICS’ supposed growth engines have slowed to a crawl. Russia is contracting, partially because of sanctions, but mostly because of the collapse of the global oil price. Brazil is in negative growth this year, and its commodity-fueled boom looks to be over, at least for the short term. India is doing somewhat better and has a dynamic new prime minister, but Delhi has a hard road ahead if it intends to generate the kind of serious economic reforms necessary to stimulate a new round of growth. China is officially still growing, but at a much slower rate than in its heyday. 

And there isn’t an economist or markets analyst around who believes Beijing’s official statistics; Chinese growth has probably slowed to somewhere around 4 percent or lower. It’s recent stock market plunge—even sharper than the Dow’s plunge in the first days of the Great Depression, with the Shanghai stock exchange having lost 24 percent of its value since June 12 -- is a harbinger of some of the challenges China faces going forward. Alone of these actors South Africa -- not actually a major economy, but part of the BRICS club for political reasons—had some good news recently. Its unemployment rate eased: to 24 percent.

Second, the strategic tensions between the BRICS are now more visible. In the period immediately after the global financial crisis these were overshadowed both by their aim of recovering from the crisis, one shared with the West, and their common ambition to gain a greater voice in the management of the global economy. But China’s growing assertiveness has shaken this dynamic.

Not for nothing did India’s Prime Minister Narendra Modi, as part of his global “India has arrived tour” in fall 2014, describe the United States and India as “natural allies,” and invite President Obama for a historic visit to India on its Republic Day (January 26, 2015). After a major hiccup in U.S.-Brazil relations over the Snowden revelations in 2013, a weakened Brazilian President Dilma Rousseff just completed a visit to Washington which culminated in new agreements to work together on climate change and on defense production. Far from cozying up to China, several of the BRICS are nervous about China’s direction, and keen to restore and refresh their ties with Washington.
Harsh words for Putin?

So if the BRICS are slumping and tensions are rising, this should be a tough meeting for President Putin, right? After all, over the last year Putin has taken a stick to international order, and these are countries that routinely and repeatedly openly commit themselves to the international rule of law and the multilateral system. Russia’s moves in the Ukraine are as grave a threat to that order as any since the U.S. invasion of Iraq (and by most accounts more so), which they strongly condemned. So we should expect them to be full-throated in pushing back on Russia, right?

Wrong.

What we can expect to see out of the Ufa Summit of the BRICS are two things. First, the members will do the exact opposite of isolating Russia; they’ll be on stage with Putin and they’ll refrain from any public criticism of his strategy in Ukraine. They aren’t particularly happy with his strategy there—but their view is: This is not our problem.

Many of the members have long-standing ties to Russia. This is particularly important for India. Moscow stood by Delhi during several phases of their so-called “non-aligned” strategy, and Russia was a good friend to India when the United States was deepening its alliance with India’s arch-nemesis of the time, Pakistan. So India has no intention of hopping onto the U.S.-led bandwagon that seeks to isolate Russia over Ukraine. Nor do the others.

Interestingly, of all the BRICS members the only one that has pushed back on Russia slightly is China. When the United States brought a vote about Ukraine to the U.N. Security Council, China broke from its pattern and very noticeably chose not to veto the resolution alongside Russia, abstaining instead.

Second, the BRICS will double down on their pitch for a greater role in global economic governance. China, frustrated by the slow pace and lack of weighted voting in the BRICS Development Bank—now the New Development Bank (NDB), which emerged from several years of negotiations—has moved out on its own, very successfully, with the Asian Infrastructure Investment Bank. (Dealing the United States a humiliating diplomatic blow in the process.) Still, the BRICS’ slowing collective growth lends all the more urgency to their concern to increase their voice and decision-making role in the global economy.

So, despite what lies beneath, look for BRICS unity, not division, coming out of Moscow.

[END REPORT]

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