BRICS Summit in Ufa: Yoga for Putin, Finance for Crimea, Stability for the World?

The summit meeting of the BRICS countries in Ufa (the capital of the autonomous republic of Bashkortostan in the Russian Federation) is significant for Moscow.

Just a few months after US President Barack Obama declared Russia “isolated” with its economy “in tatters,” President Vladimir Putin is welcoming the heads of state of China, Brazil and South Africa, India – as fellow BRICS members – and Pakistan.

Ufa will also play host to a summit meeting of the prime ministers of India and Pakistan; both of these South Asian giants and arch-rivals will formally be passing the admission procedures for the Shanghai Cooperation Organization.

India’s Prime Minister Narendra Modi and Pakistan’s Nawaz Sharif are also meeting on the sidelines of the BRICS summit. So much for Russia’s “isolation” by Mr. Obama.

On the eve of the summit. the central banks of the BRICS’ member countries signed an agreement on mutual assistance, creating a common pool of hard currency reserves (in US dollars).

If a BRICS member has problems with financial liquidity, it can benefit from the pool’s reserves, fulfilling an established procedure.

The pool’s capital was established with an amount of $100 billion, with China contributing $41 billion, Russia, Brazil and India will provide $18 billion each, and South Africa will come up with $5 billion. So much for Russia’s economy being in Mr. Obama’s “tatters.”

Economic yoga, not ego

Putin was clearly happy to host his guests, promising Modi to experiment with yoga and saying he was “especially pleased” to see China’s Xi Jinping. But the summit was not just about pleasure and symbolism – it was about money, too.

Money-wise, the most important event was the opening for business of the New Development Bank (NDB), established by BRICS. The institution is set up to finance infrastructure projects, with a charter capital of $50 billion. In future the bank plans to switch from the US dollar to a basket of currencies and to increase the amount of charter capital to $100 billion. The NDB is expected to become fully operative in the year 2016.

“Russia and other BRICS members, we are all unhappy about a certain monopolization of the world’s mega-finances by the International Monetary Fund (the IMF),” explained Alexei Mukhin, the head of the Moscow-based Center for Political Information.

“Initially, there were hopes to resolve the problem by a reform inside the IMF. But this reform was put on hold by the US Congress a year ago, and BRICS decided to act on its own.”

It is critically important for the BRICS members not to create an impression that their organization is pursuing purely egotistic goals. Instead, at the summit, the accent is made on showing that the “peaceful rise” of China, Russia and other BRICS’ members can be beneficial for other countries.

Russian Finance Minister Anton Siluanov, who is also the NBD’s first Chairman of the Board of Governors, said the Bank will be fully operational by the end of the year and focus on infrastructure development [Xinhua]

It can also offset the imbalances in international relations, where the United States and Washington’s G7 partners often try to assume a domineering posture.

For example, Russia’s Deputy Finance Minister Sergei Storchak said it would be enough for the indebted and embattled Greece to buy a few NDB shares to be eligible for funding.

However, Russia’s Finance Minister Anton Siluanov explained that BRICS’ financial institutions were not yet prepared to help non-members resolve their budget problems.

“The main emphasis will be made on infrastructure development,” Siluanov explained.

Other Russian, Chinese and Indian officials before the summit were at pains to persuade the public that BRICS does not force its solutions on other countries, as the US and the EU often do. Greece itself has shown interest in NDB, after the Athens government recently had an unpleasant confrontation with their creditors in the EU.

Vadim Lukov, Russia’s ambassador-at-large and one of the “sherpas” at the summit in Ufa, warns against viewing BRICS as a tool for gaining short-term economic profits.

“BRICS is not based on volatile economic conjuncture,” Lukov said at a briefing in the office of Rossija Segodnya, a Moscow-based media holding busying itself with disseminating information about Russia worldwide.

There are four strategic goals, which make BRICS a team.

“First, each BRICS member wants to pursue an independent policy line on the world stage; second, we all want a reform of the global financial system, reforming IMF in the first place. Third, we want to strengthen the role of the UN and the primacy of law in international relations. Fourth, we want to use the factor of complementarity of our economies to speed up these economies’ development,” Lukov said.

Non-confrontational resolutions

BRICS representatives are expected to come up with a resolution on recent armed conflicts, including the tragic civil war in Ukraine.

Unlike the resolutions of the US and the EU, which Washington and Brussels also forced on some members of the EU’s Eastern Partnership (all of them former Soviet republics), the resolution from Ufa will not be confrontational and it will not put the blame on just one side of the conflict.

None of the BRICS’ members joined the anti-Russia sanctions designed by the US, the EU and their Anglo-Saxon allies in Canada and Australia.

“Crimea, just like any other Russian region, can be a platform for certain projects of the BRICS and its bank, but all applications will be reviewed according to the same procedure, and decisions will be taken depending on the economic effectiveness of the proposed projects,” Russia’s Finance Minister Siluanov explained.

Even if the NDB is not yet giving loans (it is expected to start doing so in April 2016), it is becoming clear that BRICS is indeed not driven by short-term economic interest.

BRICS is getting political – in the good sense. The world can view it as a new sensible force – complementing the formerly great Eurocentric “teachers of humanity” with some cautious Asian/Latin American wisdom.

The summit in Russia’s Eurasian city of Ufa, home to a mixed Muslim-Christian population and European lifestyle, is therefore symbolic in that sense.