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From 22 to 24 October, 36 countries met in Kazan (Russia) as part of the BRICS+ meeting to discuss economic cooperation and a new multipolar world order. It was the 16th consecutive meeting. In Kazan, it became clear that Russia is not as isolated as the West would like. The war in Ukraine was and is a kind of catalyst for the further development of the BRICS. The BRICS are striving for their own payment system and their own ‘BRICS currency’, which is partially gold-backed. Next year, a new wave of accessions is expected, with Turkey also applying for membership, which is not without controversy.

‘BRIC’, i.e. Brazil, Russia, India, China, was originally an investment idea of Goldman Sachs in 2001, which could now be revived. Many of the BRICS countries could soon also gain new importance in the investment world. This topic is particularly relevant for gold and commodity supporters, but also for geopolitics. This new investment theme is now becoming more and more interesting and is therefore also discussed in detail at www.eaststock.de, along with current developments and investment proposals. Contact ESI GmbH at info@eaststock.de if you would like to learn more about this. Order the new YouTube channel ‘BRICS-TV’ now.

The chronology and economic significance of the BRICS

The ‘BRIC’ countries, then still without South Africa, were founded in 2006 with Brazil, Russia, India and China. In 2009, South Africa was added and since then the alliance has been called ‘BRICS’. The BRICS countries have a total population of 3.3 billion, cover an area of 38.3 million square kilometres (= 26% of the earth’s surface), have an economic power of 25.6 trillion GNP (= 36% of the world’s GNP) and account for about 20% of the world’s trade volume with 4.8 trillion USD exports and 3.9 trillion USD imports. GDP per capita is very low at an average of USD 7,861, but there is potential for growth. In demographic terms, the countries are favourable due to their young population, which literally still has its future ahead of it. The proportion of people over 65 is only 10%. However, most of the BRICS countries are not climate-friendly. The BRICS account for more than half of global CO2 emissions.

A glance at the GNP growth rates shows that, while the BRICS are no longer growing quite as dynamically as Goldman Sachs assumed in 2001, they are still growing much faster than the G7 countries.

GNP growth in 2024 in %

World average: 3.2

Sources: IWF, ESI GmbH

Expansion of the BRICS has already been decided

At the beginning of 2024, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates were added as new members, which have now been renamed BRICS Plus. This year, Belarus, Turkey and even Palestine have applied for membership, although no membership has yet been officially announced at the Kazan summit. Thirty other countries have expressed an interest in joining BRICS, including many Asian, South American and African countries, as well as countries from the CIS republics. The following countries were named as official new BRICS accession candidates or new ‘partner countries’ in Kazan on 24 October: Kazakhstan, Uzbekistan, Belarus, Bolivia, Cuba, Indonesia, Malaysia, Thailand, Vietnam, Uganda, Nigeria and, last but not least, Turkey. Turkey’s membership as a NATO member and EU accession candidate is particularly controversial. But Serbia is also interested in BRICS membership and was present in Kazan.

An old investment theme from Goldman Sachs is being reactivated

For Goldman Sachs, the BRICS countries were the most promising growth markets with enormous potential. Later in 2009, South Africa was added, although many African countries now tend to prefer cooperation with China and Russia to cooperation with the West. South Africa is, so to speak, only a figurehead for Africa, which is now being courted by both the West and the BRICS as a region rich in raw materials.

Will BRICS go from underperformer to outperformer?

The performance of the stock market indices and the economic development of the ‘BRIC(S)’ countries was not what Goldman Sachs had imagined and predicted in 2001, and there were various reasons for this. But if these countries can in future not only assert their own interests among themselves, but also better on the world market, these countries will also become more interesting from an investment point of view, especially since most stocks are relatively inexpensive, with the exception of Indian stocks, which have been performing very well for years.

Western media discredit the BRICS as an ‘autocrats’ meeting”

On the other hand, many other countries would also like to work with the ‘Western world’ alongside the 7 largest industrial nations. Albania, for example, wants to join the EU and only work with the EU. The Albanian Prime Minister Edi Rama considers the BRICS to be a ‘joke’. Western media describe the countries gathered in the BRICS as rogue states or autocrats. Former US President George W. Bush called countries that worked with Iran the ‘axis of evil’. Some Western media outlets have taken the same line, speaking of ‘Western values’ that must be defended. Similar language is used when it comes to the war in Ukraine, where the BRICS countries take a different stance than the G7 countries.

BRICS is far from being a homogeneous group

As already mentioned, the BRICS group is not a homogeneous group despite its common struggle against Western US hegemony. China and India have significant differences and completely different interests, and they have already openly fought out their conflicts. However, it is surprising and remarkable that China also managed to take Saudi Arabia and Iran with it into the ‘BRICS boat’, both of which were very dissatisfied with US foreign policy but also have significant conflicts with each other.

When will there be a new BRICS currency?

The BRICS countries are now working on establishing their own trading currency or unit of account called ‘Unit’, which is expected to come onto the market as early as next year. They are to be 60 per cent gold-backed. 40% of them will consist of currencies, with no currency in the basket representing more than 30%. The dominant currency in the basket will be the renminbi. The new currency ‘unit’ is also a symbol of mistrust towards the USA and its arbitrary policy of sanctions. Many countries are already trying to contract bilaterally with their own currencies without the US dollar, but this is not that easy if they are not convertible. In any case, the US dollar dominance in international payment transactions is to be reduced.

When will the new payment processing system be used in practice?

A separate payment processing system has already been developed, which is a prerequisite for making a separate ‘BRICS’ currency manageable. It is partly based on blockchains, but still needs to be tested in practice, which will take some time. 159 countries are interested in participating in the new payment processing system. The new payment processing system is called ‘Bridge.’ Since Iran and now Russia have been excluded from SWIFT, the BRICS countries have been seeking their own payment processing options, also to protect themselves from US and EU sanctions.

It remains to be seen to what extent these measures will be effective and efficient. Cryptocurrencies will also play a greater role as a payment option in these countries in the future. Alternative financing mechanisms are being developed that free themselves from dependence on the US. According to Putin, however, the member states will not initially have their own payment processing system. They will initially use the available payment processing systems. No details of a planned BRICS currency were revealed in Kazan either.

New Development Bank to facilitate financing of ‘BRICS’ projects

The New Development Bank was founded to finance its own projects, as a counterweight to the World Bank and the IMF. For the first time, a Russian has now been elected to the bank’s board. Many emerging markets are heavily indebted to the World Bank and the IMF. They only receive new loans under strict Western conditions. However, the New Development Bank does not have as much funding as the IMF or the World Bank. Nevertheless, some projects have already been financed with it. For China, the most important project is the Silk Road project, which is a trillion-dollar infrastructure project to better connect various countries with China logistically with ports, airports, rail connections and roads. It is already very advanced, but has been delayed and partly stopped by the war in Ukraine.

BRICS has a lot of raw materials – but especially oil/gas

In August 2023, the BRICS group decided to accept six new nations: Egypt, Iran, Saudi Arabia, Ethiopia and the United Arab Emirates. The simultaneous accession of Iran and Saudi Arabia, as major oil and gas-producing countries, is particularly noteworthy. However, Saudi Arabia has only been invited so far and has not yet joined.

After joining, the economic importance of the so-called BRICS Plus countries grew ever greater. The BRICS Plus countries now account for 35% of the BSP, 42% of the population, over 20% of oil production and over 20% of goods exports. Cooperation on energy projects and in agriculture plays a major role here. Russia is the world’s largest wheat exporter, which plays an important role for Africa. The agricultural economy has developed very positively in Russia in recent years. Russia is now very self-sufficient in most agricultural products and no longer depends on foreign countries.

De-dollarisation remains an issue for the BRICS

159 countries are interested in de-dollarisation so as not to be dependent on SWIFT. Cryptocurrencies and digital technologies are also to be integrated. However, it is mainly China and Russia that are interested in de-dollarisation. It will be interesting to see whether the BRICS currency is introduced next year and how it is accepted and used in practice.

This year, Turkey and Palestine have applied for membership of the BRICS, which is not without controversy, as Turkey is a NATO member and Palestine has long wanted its own sovereignty. However, this also means that they can expect support from the BRICS for their own projects at a later date, especially from China and Russia. But many Asian countries such as Indonesia, Thailand and Malaysia want to join the BRICS. Belarus also wants to join the BRICS, which is already on Russia’s side.

What can we expect from the BRICS in the future?

What can we expect from the BRICS + countries in the future? It is to be expected that more and more countries will join the BRICS + group, which will increase their economic importance. Whether this will be accompanied by a rapid decline of the West, especially the US, is unlikely, but the West is facing new, major challenges. It will be interesting to see whether BRICS Plus is a ‘toothless tiger’ or whether it will actually challenge the G7 to rethink and enter into cooperation, or even to possibly fight the power struggle with weapons at a later date, whereby the core issue is a power struggle between the US and China. Regardless of who becomes the next US president on 5 November, there will be a tougher trade policy next year with increased tariffs on products that are heavily subsidised by the Chinese state. What would be desirable is fair competition between the G7 and the BRICS, but this could also end in conflict if one is not careful and willing to compromise.

New investment opportunities for investors, too

In any case, new investment opportunities will also arise. In the case of a gold-backed BRICS currency, this would continue to support the prices of gold and silver. But BRICS always also means interesting commodities topics, which we want to examine and analyse more closely in the future. If you are also interested in this, please contact ESI GmbH (wwweaststock.de) at www.eaststock.de, where you can also find interesting information about the investment opportunities in Eastern Europe in the EAST STOCK TRENDS market letter.

Inform yourself before investing

Find out more about the background and development of the Ukraine/Russia crisis, but also the future recovery potential of undervalued Eastern European equities. There are also new opportunities in the Baltic states, Southeastern Europe and the CIS republics (Kazakhstan, Georgia), with the respective stock indices all up in 2023. In 2023, 12 stock markets from Eastern Europe were among the 30 best-performing stock markets in the world, with 5 clearly outperforming the DAX. In 2024, 9 stock markets in Eastern Europe outperformed again with a strong plus. So it’s still worth taking a look beyond your own backyard to Eastern Europe.

So order a trial subscription now (3 issues by email for just €15) of the monthly market letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special, as well as a lot of background information and new investment suggestions such as the ‘share of the month’ and lucrative certificates at www.eaststock.de, there under Börsenbrief. The last EST appeared on 18 October 2024.

TV/radio references: On 5 February 2024, Andreas Männicke was interviewed by Carola Ferstl in Money Talk about gold, commodities and the new opportunities in Eastern Europe. All radio and TV interviews can be downloaded from the video archive at www.eaststock.de, including the latest video in EastStockTV, episode 238. By the way: have you already subscribed to the YouTube channel EastStockTV and the new channel BRICS-TV ?

If you are interested in the new Eastern Exchange seminars ‘Go East’ or a ‘BRICS Seminar in Frankfurt/M or other cities, then please contact the EST editorial team (www.eaststock.de )

You can now also order the free newsletter from Andreas Männicke with the latest news on the world and emerging markets at www.eaststock.de.