Global reaction to the Russian war in Ukraine, the rise of China on the global stage, superpower confrontations, inflation, spiking energy prices, and fears of disruption — all have created a sense of Déjà vu. If you listen to the rhetoric and ignore the calendar, you might think that you’ve traveled through time to the days of the Cold War. The aftermath of the Ukraine war, as a protracted complex conflict, has revealed how the East-West geopolitical rivalry has entered uncharted territories with an asymmetrical war and unparallel weaponry: hard power versus sanctions and other tools of political economy, or sticky power. It seems to be a misguided venture of power dynamics: bullets and rockets versus economic and financial warfare, perpetuating a long hurting stalemate for all stakeholders.
In the meantime, before the heads of the world’s most “advanced” economies meet last weekend in Germany for the annual G7 summit, the leaders of the top five “emerging” ones — Brazil, Russia, India, China, and South Africa, aka BRICS did hold their own (virtual) summit in Beijing. The successful BRICS Summit with China holding the rotating presidency has sparked some twisted interpretations in the US and Western public opinion. It’s worth noting that their main attention has been paid to driving a wedge among BRICS countries. In particular, they did a lot of work trying to stir India up. It is very likely that the outbreak of the Russia-Ukraine conflict and the pandemic has made them think they could have a chance to sow discord among BRICS countries.
Coincidentally or not, Western countries convened in three important summits in succession, namely the EU Summit, the G7 Summit, and the NATO Summit. The latter two attended and led by the US stand particularly in stark contrast to the BRICS Summit. We can see two distinct global governance propositions. The US and the West are forming small circles, building walls, and establishing hierarchical camps, while emerging and developing countries are actively advocating the practice of genuine multilateralism, openness, and inclusiveness, as well as cooperation and win-win results. An old-fashioned proposition is in a tug-of-war with a new suggestion, and the future destiny of mankind depends to a large extent on the outcome of this historic race.
BRICS vs. the West
Emerging versus developed; the future versus the present, or even the past. BRICS and the G7 are traditionally viewed as the newcomers and the established order. As the clout of the BRICS nations grows, this dynamic is steadily shifting. They are increasingly becoming the same but at the same time different. Neither group has a permanent secretariat. Both hold annual summits at the leadership level, and a host of ministerial meetings each year.
The “developing” and “emerging” groupings of each bloc are seen by some analysts as promoting collective decision-making, though the G7 currently has a large flaw in this regard, critics say both lack follow-through. Detractors of the G7 say to not having emerging powers at the table weakens it. The G7 is squarely focused on global security and trade issues; BRICS initially concentrated on an increased role in global governance, but now also incorporates an array of having its own financial institutions.
BRICS became a thing 21 years ago when a Goldman Sachs economist coined the term — initially with a small “s” — to predict the emerging market economies that would lead to global growth in the future. The BRIC acronym was famously coined to highlight the promise of emerging markets Brazil, Russia, India, and China. It was not until 2009, in the wake of the global financial crisis, that the first BRIC summit was held with an initial emphasis on creating a “greater voice and representation” on global governance issues. South Africa signed up in 2011, and BRICs became BRICS. It is evident that the rapid growth of the BRICS is supported by the integration of the domestic markets into the globalizing world economy. External factors, such as the global economic environment and the performance of foreign markets are also determinants of the sustainability of their growth.
Now they’ve established a formal presence, set up their own development bank, and claim to represent the entire Global South. Still, the group’s meetings rarely get much buzz. But this year is different.
Well, for one thing, it’s the first time Vladimir Putin will attend a major multilateral get-together since Russia invaded Ukraine. Although the Russian president has met and talked on the phone with mostly non-Western leaders, and a few European ones — the optics of him being on the BRICS call with heavyweights like China’s Xi Jinping or India’s Narendra Modi are a big win for Putin. It’s also the latest sign that his standing in the Global South is not as diminished as the US and its allies hoped. Moreover, BRICS may expand to become SABRICS in the near future, as Saudi Arabia and Argentina have recently been invited to membership in the BRICS alliance by Russia. Argentina was already invited to join its development bank as a first step toward full membership. Other potential candidates include Indonesia, Kazakhstan, Nigeria, Egypt, the UAE, Ethiopia, Senegal, and Thailand — all of which took part in the BRICS foreign ministers’ video chat last month.
Group of Seven
The G7 is made up of seven of the most advanced economies the United States, the United Kingdom, Canada, France, Germany, Italy, and Japan. The G7, originally G8, was set up in 1975 as an informal forum bringing together the leaders of the world’s leading industrial nations. France, Italy, Japan, the UK, the US, and West Germany first formed the G6 in 1975 as a forum for the non-Communist powers to address economic issues. Canada signed up in 1976, and the EU has participated since 1981 as a “non-enumerated” member. Russia became the eighth member in 1998 until was expelled in 2014. Every year, the country holding the G7 Presidency invites partner countries to attend parts of the Summit. This year, Germany invited Senegal, which holds the rotating chair of the African Union (AU), Argentina, India, Indonesia, and South Africa.
According to its declaration, the European Union is a unique supranational organization – not a sovereign Member State – hence the name G7 “Group of Seven”. The EU is therefore a ‘non-enumerated’ member and does not assume the rotating G7 presidency. However, its role has expanded over time, with the EU gradually included in all political discussions on the summit agenda and, from the Ottawa summit (1981) onwards, has taken part in all working sessions. The annual G7 summits have over the years developed into a platform for determining the course of global discourse and shaping political responses to global challenges. It complements the role of the G20, which is widely regarded as the framework for ongoing global economic coordination.
Comparing the Two Blocs
The BRICS countries cover over one-quarter of the world’s land (or over 68.5 million square kilometers) and are home to over 3.2 billion people – about 40% of the world’s total population. China and India have the largest populations among the BRICS countries, with approximately 1.4 billion inhabitants each. In contrast, the other three countries have a combined population of just over 0.42 billion people. Additionally, Russia, China, Brazil, and India rank among the seven largest countries in the world by area. Meanwhile, the G7 countries cover over one-quarter of the world’s land (or over 19.72 million square kilometers) and are home to over 777 million people – about 10% of the world’s total population. The United States and Japan have the largest populations among the G7 countries with populations of 335 million, and 126 million respectively holding almost half of the bloc, while the other five members have a combined 442 million people.
According to the World Bank, G7 and the original BRICS countries make up 11 of the 12 largest economies in the world (with the other being South Korea). Before we go any further let ee the difference between Gross domestic product GDP (nominal) and GDP (PPP). While GDP (nominal) is the market value of all final goods and services from a nation in a given year, GDP (PPP) means gross domestic product based on purchasing power parity. GDP comparisons using PPP are arguably more useful than those using nominal GDP when assessing the domestic market of a state because PPP takes into account the relative cost of local goods, services, and inflation rates of the country, rather than using international market exchange rates, which may distort the real differences in per capita income.
According to International Monetary Fund estimates, as of 2022, the five BRICS states have a combined GDP (PPP) of around US$50.9 trillion (38% of the world’s GDP PPP) and an estimated US$4.89 trillion in combined foreign reserves. Meanwhile, the G7 nations have a combined GDP (PPP) of around US$49.3 trillion (37% of the world’s GDP PPP) and an estimated US$2.61 trillion in combined foreign reserves according to the same estimates. In contrast, the G7 members have a combined nominal GDP of US$38.6 trillion, representing over 46% of the gross domestic product globally based on nominal values. Meanwhile, BRICS countries have a combined nominal GDP of US$20.8 trillion, about 23.2% of the gross world product.
All five BRICS countries have diversified economies, but China is largely centered around its manufacturing industries, while Russia is more dependent on its energy sector, and Brazil’s on commodities. With a combined GDP of $20 trillion, the nations of BRICS could one day become the largest entity in the world. China and India are the two emerging economies in the world. As of 2021, China and India are the 2nd and 5th largest economies in the world, respectively, on a nominal basis. On a PPP basis, China is at 1st, and India is at 3rd place. Both countries share 21% and 10% of the total global wealth in nominal and PPP terms, respectively. Among Asian countries, China and India together contribute more than half of Asia’s GDP.
Despite the various world problems, whether man-made or natural disasters, the world economy is still policed largely by the key industrialized countries. Other than the possession of clear economic indicators, such as capital, technology, productivity, and markets, the G7 countries still collectively can play the world leadership role if they play their card right. The United States obviously plays the largest international role. However, the Ukraine crisis has exposed important fault-lines in the so-called rules-based international order. The US has been able to persuade its European and Anglo-Saxon allies to impose unprecedented sanctions on Russia – at significant cost to ordinary people in developing countries, who now face a cost of living crisis that threatens to drive millions into poverty. These sanctions, and the provision of heavy weaponry to Kyiv, are aimed not at resolving the conflict but at prolonging it.
Are the Developing Nations becoming a Competing Ground once again?
In the time since the world began recovering from the pandemic, two major developments have shaken it to the core – the conscious American decision to decouple its economy with that of China, and the Ukraine conflict, which promises to set in motion forces that threaten to divide the world and push it closer to a Second Cold War or the Third World War. US-China relations that had been characterized by a pattern of ups and downs over the past quarter-century took a clear and possibly irreversible turn for the worse. This change has provoked debate about whether China and the US have already become rivals, perhaps adversaries, in a new cold war. To make things worse, the aftermath of the Ukraine war, as a protracted complex conflict, has revealed how the Russia-West geopolitical rivalry has entered uncharted territories with an asymmetrical war and unparallel weaponry: hard power versus sanctions and other tools of political economy, or sticky power. It seems to be a misguided venture of power dynamics of bullets and rockets versus economic and financial warfare, perpetuating a long hurting stalemate for all stakeholders.
The Belt and Road Initiative
In 2013, Chinese President Xi Jinping proposed the Belt and Road Initiative. To date, 149 countries and 32 international organizations have joined the initiative, which is now becoming “a belt of prosperity” and “a road to happiness” benefiting people across the globe. Western media often takes aim at China’s Belt and Road Initiative, which has to be one of the inaccurately reported of all China’s State Initiatives. Readers themselves will be familiar with discussions of ‘slowdowns’, ‘disruptions’, ‘debt traps’, and all manner of problems.
As stated by China, the focus on connectivity within the BRI is both about facilitating trade and investment, thereby developing neighboring countries, as well as strategically shoring up its own security of energy, resources, and food by taking a regional leadership role with its most important neighbors. It has a very broad scope encompassing economic, strategic, and cultural connectivity. The objectives have been stated in the speeches referenced earlier; they are also set out clearly in Chapter 51 and other parts of the 13th Five-Year Plan (see People’s Republic of China, 2016).
- To increase trade and investment in the BRI: “We will improve the bilateral and multilateral co-operation mechanisms of the Belt and Road Initiative focusing on policy communication, infrastructure connectivity, trade facilitation, capital flow, and people-to-people exchanges.”
- Free trade zones along the Silk Road: “We will speed up efforts to implement the free trade area strategy, gradually establishing a network of high-standard free trade areas. We will actively engage in negotiations with countries and regions along the routes of the Belt and Road Initiative on the building of free trade areas.”
- To enhance financial co-operation in the region to fund infrastructure: “We will strengthen co-operation with international organizations including international financial organizations and institutions, work actively to promote the development of the Asian Infrastructure Investment Bank and the New Development Bank, put the Silk Road Fund to effective use, and attract international capital for the creation of a financial co-operation platform that is open, pluralistic, and mutually beneficial.”
- To gain access to natural resources: “We will strengthen international co-operation on energy and resources and production chains, and increase local processing and conversion.”
- To strengthen transport infrastructure in the BRI corridors: “We will advance the development of multi-modal transportation that integrates expressways, railways, waterways, and airways, build international logistics thoroughfares, and strengthen infrastructure development along major routes and at major ports of entry. We will work to develop Xinjiang as the core region for the Silk Road Economic Belt and Fujian as the core region for the 21st Century Maritime Silk Road.”
- To deepen cultural exchanges in the region: “We will conduct extensive international co-operation in the areas of education, science, technology, culture, sports, tourism, environmental protection, health care, and traditional Chinese medicine.”
The “high-standard free trade areas” noted above presumably refer to dealing with illicit activities in free trade zones. There are some 1 843 global free trade areas, with 802 in Asia. These zones are correlated with fake and pirated goods exports. Eliminating this in the BRI would enhance the environment for cooperative outcomes in the global economy.
Western media often takes aim at China’s Belt and Road Initiative, which has to be one of the inaccurately reported of all China’s State Initiatives. Readers themselves will be familiar with discussions of ‘slowdowns’, ‘disruptions’, ‘debt traps’ and all manner of problems.
The Partnership for Global Infrastructure and Investment (PGII)
US President Joe Biden and other G7 leaders relaunched the Partnership for Global Infrastructure and Investment (PGII), unveiled at last year’s G7 talks, at their annual gathering held this year at Schloss Elmau in southern Germany. PGII calls on G7 leaders to raise $600bn over five years to fund the launch of infrastructure projects in middle and low-income countries. While the explicit goal of PGII is not to counter China’s Belt and Road Initiative, PGII does seek to provide an alternative to China’s estimated $1 trillion in hard infrastructure investment around the world in the last decade. The US has promised to mobilize $200 billion of the total through grants, federal funds, and private investment. European Commission President Ursula von der Leyen also declared $317.28 billion in support for the initiative while speaking at the summit.
PGII is the repackaged version of the Build Back Better World (B3W) initiative that was announced at last year’s G7 summit. At first glance, PGII seems to be a scaling back of ambitions as B3W’s stated goal was to leverage $40 trillion in infrastructure investment by 2035. A lot has, however, changed in the last year—the war in Ukraine, higher energy prices, and overall global inflation will undoubtedly affect PGII’s priorities going forward. PGII’s four priority areas for investment (climate and energy security, digital connectivity, health systems and health security, and gender equality and equity) are essentially the same as B3W’s “pillars.” The clear differences are the inclusion of “energy security,” “health security,” and the change from digital technology to digital connectivity. The same principles that characterized B3W’s approach—values-driven, high standards, transparency, and private sector investment—also hold true for PGII’s approach.
It’s flattering to be fought over, and some situations are desperate. World Bank data suggests low- and middle-income countries will need $15 trillion between 2015 and 2030 for roads, hospitals, solar panels and so on. Regions facing skyrocketing energy and food prices also need short-term assistance. China, facing its own challenges, has slowed Belt and Road spending. Financial aid with better governance and less geopolitics would be preferable. During the Cold War, the West threw trillions of dollars into the southern hemisphere to wean states from the Soviet Union. Doing the same just to keep them from China could deliver similarly lackluster results.
The smear campaign
Emerging economies are cooperating through various regional programs. Among them is the Belt and Road Initiative (BRI), a long-term program launched in 2013 by China that aims for transcontinental integration and infrastructure development. However, as the number of countries joining the BRI rises, so is the negative reporting on it. The term “debt trap” has been used to describe the investments from China in Asia, Africa, Latin America, and the Caribbean on several major news outlets.
But is there any truth to that narrative?
Sweden-based researcher Hussein Askary found that this accusation is not only inaccurate but also deliberate to undermine the BRI.
“Not only China’s share of debt in those countries is small, but China’s loans are also qualitatively different. Because they help those countries cope with their problems, while the debt from Western Institutions, they worsen the situation.”
Take Sri Lanka as an example. Its debt from China is only 10 percent of the country’s total foreign debt, while international capital markets borrowing makes up 47 percent, and the Asian Development Bank 13 percent. Composition of Sri Lanka’s foreign debts./Sri Lanka’s Department of External Resources
Meanwhile, the loans from China have been invested into building infrastructures like roads, ports, railways, hospitals, and schools which boosts the productivity of the country and increases its ability to pay back its loans, whereas the loans from Western financial institutions are normally used to cover the trade deficit and fiscal deficit with high-interest rates. Askary said:
“And these countries become hostage to conditionalities, like in Sri Lanka now, there’s a huge investment by the United States, not in infrastructure, but in political groups to move them into the so-called Indo-Pacific Strategy.”
“The more bad things they say about Belt and Road Initiative, the more nations are joining it. If it’s so bad, why are so many countries joining it?”
After studying how building a land bridge through projects like BRI can benefit the whole world, not just China, economically, Askary believes it’s his mission to let more people see the truth and bring Europe and the U.S. into BRI too rather than seeing them working against it.
Economists also noted that the PGII and its promised funding volume by the US government are never likely to become reality, considering the US’ internal economic problems and unstable political situation, at the current time when the US government debt is at a critically high level and it has hardly any budget to invest in foreign-bound infrastructure. If the US government really intends to materialize the $200 billion funding, it is unlikely to come mostly from private capital, as infrastructure projects have long investment cycles and relatively low yield rates, making them unattractive to private investors.
In addition to that, the US does not have advantages in infrastructure construction, pointing out that it has hardly completed any large infrastructure projects in its own country in the past 10 years, not to mention abroad. For example, California’s high-speed rail, a flagship US infrastructure project, is “tens of billions of dollars over budget and years behind schedule,” according to a report by kqed.org in May.
The difficulties in raising funds for such a project were already shown in the PGII’s predecessor project B3W, which some media outlets and people regarded as a failure. An article by Foreign Affairs, for example, said that the B3W project has ” languished”, while a Guardian report noted that “little had been heard of” B3W since its launch. According to the Foreign Affairs article, the US’ commitments to global infrastructure renewal only came to about $6 million under the B3W project one year after its launch, which is “a far cry” from the billions Biden promised at the beginning. Judging from the B3W implementation, it has a high probability that the PGII will be another empty promise.
This growing divide between a small group of rich liberal democracies and the rest of the world was also evident at the Nato summit in Madrid, albeit in a different way. Already in his opening statement, Nato secretary-general, Jens Stoltenberg, made it clear that this summit would “take important decisions to strengthen Nato in a more dangerous and competitive world where authoritarian regimes like Russia and China are openly challenging the rules-based international order”.
These have included the adoption of a new strategic concept, the increase of high-readiness troops from currently 40,000 to 300,000 by next year, and an invitation to Finland and Sweden to join the alliance. Stoltenberg may have denied at a press conference that there were any discussions of creating a Nato equivalent in the Asia-Pacific. But the ambition towards a more global defense and deterrence posture of Nato members is clear from the list of invited partner countries, which included Australia, Japan, Korea, and New Zealand. According to the Madrid Summit Declaration, their participation “demonstrated the value of our cooperation in tackling shared security challenges”.
Taken together, the waning ability of the G7 to address critical economic issues at a global level and the retrenchment of Nato members into a cold war-like defense and deterrence posture signal a fundamental change in the international order. The post-cold war illusion of US-led unipolarity may be long gone, but it will not be replaced by a multi-polar world either.
As Russia’s last-ditch attempt to make the future tripolar is stalling on the battlefields of Ukraine, all the signs are that countries around the world will have to decide whether they will side with China or the US in a new bipolar future. The G7 and Nato summits may be the first signs that only a minority will opt for the latter.