In a thought-provoking article written by Ambassador Neelam Deo and Akshay Mathur for the Gateway House, a Mumbai-based think tank, the authors argue that the BRICS should set up a host of new structures which would allow them to resist Western pressure and maintain economic ties with Iran. Specifically they propose creating an alternative global payment regime, a pricing framework and commodities exchange denominated in a currency other than the dollar, a global insurance agency and an alternative to the SWIFT network - all of which are crucial in the West’s attempts to isolate Iran economically.
Deo and Mathur argue that “although none of the BRICS are in confrontation with Iran, they are nonetheless hostage to the western sanctions imposed on that country because the conduits of international finance, trade and transportation used for crude oil trade are controlled by the West.” As a consequence, they call for “a multilateral BRICS bank, a clearing union and insurance club to facilitate international trade, finance and transportation.”
Since international sanctions against the regime in Tehran have intensified, several BRICS members have attempted to work around them, using banks outside of the global system, engaging barter trade, etc. – strategies the authors regard as unsustainable. China and India are the biggest buyers of Iran's crude, which they need to help sustain economic growth in two of the world's fastest-growing major economies. Recently, India has reduced oil imports from Iran somewhat, but the United States has accepted India’s exceptional energy needs and unwillingness to stop importing Iranian oil.
Yet rather than focusing on Iran, the article makes a much larger argument about a global system that functions according to the whims of the United States, and the necessity to create a level playing field. The authors argue that this high concentration of power creates uncertainty among the rest: “Iran today”, the authors argue, “could be Russia or Brazil tomorrow.”
Some ideas articulated in the article seem quite realistic. There is a significant likelihood that the BRICS Development Bank will come into being until 2014. The BRICS members are, especially since this year, intent on increasing intra-BRICS trade in their own currencies. Yet as I argued in a recent conversation with China Daily, the yuan is still far from being a reserve currency, and there are formidable obstacles that make the implementation of the ideas cited above – such as the an alternative to the SWIFT network- difficult. The United States’ acceptance of India’s continued trade with Iran is likely to reduce New Delhi’s willingness to contemplate any radical steps at this point.
Yet if the BRICS were to implement the recommendations listed above, the consequences would be significant both for the global economy and for geopolitics. The global dominance of the dollar remains, along with the structural control it implies, one of the pillars of U.S. American global leadership. More importantly, the West would lose its unique capacity to pressure those it deems international misfits through economic sanctions, a loss with potentially profound consequences for the distribution of power in today's system.
While the proposals made in the article are unlikely to be implemented in their entirety any time soon, they nonetheless form part of an inevitable and important debate of how emerging powers will integrate in, modify and adjust a global system that they will eventually dominate.