BRICS comprises Brazil, Russia, India, China and South Africa. Recently, BRICS announced a plan for expansion or basically an opening spot in their organisation, henceforth, several countries like Iran, Turkey, Argentina, Egypt along with Saudi Arabia have shown interest. President Cyril Ramposa of South Africa during his visit to Riyadh announced that Crown Prince Mohammed bin Salman expressed the kingdom’s desire to join the BRICS.[1] BRICS is a multilateral organisation of non-western major emerging economies, comprising 42 percent of the world population, 27 percent of the land area, and 32 percent of global GDP (PPP).[2] This along with their growing political influence and significant military capabilities put them in a notable position globally. BRICS was formed and is functioning primarily as a spokesperson or representative for developing nations. It offers a contrast to the policies made by the developed nations of the West that are unfair towards other nations. For example, let us understand the problem of climate change. The major cause of it was the onset of industrial revolution in Europe and their incessant development without any regard towards the environment. Nevertheless, the West completely ignores the past and chooses to tax developing nations for carbon emissions. BRICS defends emerging economies from these prejudiced policies.
Saudi Arabia is one of the major economies in the world. Moreover, China is the biggest trading partner for over 60% nations in the world.[3] It is only advantageous for both to come into an alliance that is also backed by Russia and India. This collaboration has invited a lot of conspiracies and speculations regarding the relationship between Saudi Arabia and the United States of America. They are known to be close allies since years and Riyadh siding with one of USA’s major rivals sends a poor message. Although, Riyadh has specifically mentioned that this proposal of joining BRICS does not hamper USA relations, but one cannot help but analyse the consequences of this collaboration.
The West i.e. USA and other developed European nations have always had monopoly in global relations. Developing nations are heavily reliant on them for several International aspects like trade and economics. BRICS was formed to have a political autonomy, to do away with Western dominance. These group of countries wish to have complete sovereignty, form fully independent policies. However, earlier it was very important for every country to have close ties with the US, so the desire for autonomy could not be achieved. Even in the West, fully developed economies constrain from exploiting their sovereignty to the maximum potential in lieu of staying in alliances. Now, things are changing, especially with Riyadh’s interest in joining BRICS, these countries can claim a role in the world of their own. For example, the Russia-Ukraine war brought a lot of sanctions by USA on Moscow as punishment for disobedience. Generally, all countries would have complied due to fear of repercussions from USA, however, BRICS nations not only ignored but outrightly rejected these sanctions. The message is not to justify Russia’s actions but to retaliate to USA’s pressure. The world dynamics is shifting where nations are done with blindly obeying USA because their hands are tied from diplomacy. Furthermore, Russia plans to release new currency known as BRICS currency which is very beneficial for India and China. It is going to be a basket holding value of five currencies: China’s renminbi, Russia’s Ruble, India’s Rupee, the Brazilian Real and South African rand.[4] The intention is to give it more stability than the US dollar. The dollar fluctuates a lot and makes other nations dependent on it for determining its own worth. There are speculations of the currency being backed by gold, making it the most valuable money on the planet. If Saudi Arabia joins the alliance, gold and oil will be the cornerstone of this new currency, giving BRICS all the economic and political capital sustain on its own. Moreover, China has mastered the prototype of an alternate international payment Network known as the M Bridge prototype.[5] This is an alternate to SWIFT (Society for Worldwide Interbank Financial Telecommunications) for international transactions. Whenever something happens that goes against the wishes of the west, their go to measure is to stop access to SWIFT. With an alternate mechanism, any sanctions that are termed as repercussions for disobedience, will prove to be ineffective. A great way to reduce interactions with West is by building parallel ways of conducting financial, economic, and trade relations without relying on any West controlled instruments. The so called external pressure that US took advantage of for decades seems to get thinner by the day. Hence, Saudi Arabia joining BRICS will reduce the Western dominance on developing nations and shift the global power dynamics to make it more balanced.
Now, Saudi Arabia and USA have been close allies for years, but this relationship seems to have taken a dip recently. Jamal Khashoggi, a US based journalist was murdered in the Istanbul consulate. He was very close with the Saudi Royal Family and even advised them on issues. However, he was forced into an exile in USA and wrote for the Washington Post, criticising the Crown Prince Mohammed bin Salman. Consequently, after investigations of his disappearance in the consulate, an inference was drawn towards Riyadh’s involvement.[6] Joe Biden, during his elections, majorly campaigned justice for Khashoggi. Now that he is the President, people expect some kind of action from him that they haven’t received yet. On the contrary, an image of him fist bumping the Prince went viral. Apparently, rather than asserting a rightful claim for justice and consequences, Biden went and smoothed out all present and future relations. This brought him under a lot of fire and criticism, especially from democrats.
With this hovering above Biden’s head, a recent conflict between US and Saudi over oil production has invited a lot of scrutiny and pressure, especially with mid-term elections on the horizon. This is one of the consequences from the Russia-Ukraine war. USA decided to punish Russia for its distasteful attack on Ukraine by refusing to accept any oil imports from Russia. This was supported by its western allies. This move increased the burden and dependency on Saudi Arabia for oil production and exports. Riyadh had a couple of choices, support USA and keep the production constant or even increase it, or support Russia, its OPEC partner and decrease the production for high revenue. Saudi Arabia decided to reduce the production by 2 million barrels a day which shot up its price from 91 dollars to 94 dollars a barrel, tremendously profiting OPEC and proving advantageous for Russia as well. The member nations concur to coordinate their oil production in order to affect pricing. 90% of proven reserves and 50% of all crude oil are controlled by Opec+ members; as a result, when they reduce production, as they did, the price rises. USA blames Saudi for wrecking its intention to isolate Russia from the global economy. Biden cannot afford to lose his mid term elections based on high oil prices, so he decides to use the country’s own reserves to maintain the price. Strategic Petroleum Reserves is a safety backup for oil supply and Biden has consumed over a third of the total, about 165 million barrels ever since his office term began.[7] However, the Saudi government has the right to make high oil revenue a priority, in order to fund its expensive reform plans. It is again interesting to watch a country’s reduction in dependence on the west. USA threatened with unspecified repercussions but did offer to pass the NOPEC (No Oil Producing and Exporting Cartels) bill. Heavily lobbied against by Riyadh, this bill is a way to counter the oil producing cartel. The bipartisan NOPEC bill would tweak U.S. antitrust law to revoke the sovereign immunity that has protected OPEC+ members and their national oil companies from lawsuits.[8] This has risen due to anger against the high oil prices. One blowback can be that other countries can take action against United States for similarly withholding agricultural output to support domestic farming. Another consequence can be the shift in country’s preference in buying defence goods. The kingdom might also elect to purchase at least some weapons from nations other than the United States, which would hurt the rich defence contracting industry in the United States. This has already started to happen as Saudi has already begun to purchase heavy defence goods from Russia and China. USA is reputed for supplying defence material and Riyadh’s decision to side with BRICS nations is again a move towards independence from western reliance.
The major disastrous consequence is of course that in 2019 Saudi threatened to violate the Petrodollar recycling agreement and sell oil in other currencies rather than the dollar. USA purchases large amounts of oil in dollars and that the Saudis use these dollars to buy US Treasury bonds and weaponry and invest in US banks as a way to recycle vast Saudi oil profits. Riyadh exclusively sold its oil in dollars in exchange of security as part of an agreement made during the Nixon administration. Now, Saudi is considering shifting towards Chinese yuan to sell crude oil. The withdrawal from this agreement will seriously challenge the monetary privilege afforded to the US. China has now become the largest crude oil importer in the world, surpassing USA and with this action China and India would not have to pay in dollars, subsequently leading to a collapse in the American economy. Since, it doesn’t have to be paid in dollars anymore, China can sell/withdraw the $1 trillion worth of bonds in USA, denting the American economy. China, Brazil and India are the biggest consumers of oil in the world. Transacting in dollars is proving to be difficult for China and Russia due to multiple economic sanctions imposed on them in context of Iran nuclear deal and Ukraine war respectively. Therefore, Saudi’s independence from USA to sell oil will prove extremely beneficial to the BRICS countries.
Let us now understand in brief the reason behind all the animosity between USA and Riyadh that has led to devastating consequences. Now, the petrodollar agreement specified US’s consideration of providing security to Saudi Arabia. Riyadh unfortunately is unhappy regarding the deals between US and Iran over its nuclear programme. USA plans to go lenient and revoke all sanctions imposed on Iran, demanding that no nuclear weapons shall be created. Saudi is threatened by its enemy’s nuclear power and expects more from Washington than what they are offering. Apparently, the States is impervious to Riyadh’s demands and only concerned about their own domestic needs and global image. This resentment blew up to the problem we face today. Saudi Arabia has gone as far as considering to join BRICS, only to do away with Western dependency.
In conclusion, it can be summed up that Saudi Arabia is offended with the West irresponsibly handling their security and being indifferent towards the kingdom’s concerns related to Iran. This made them realise about their dependency on USA and now wishes to rectify that. Certain measures have been taken in that direction to shift Riyadh’s focus towards the BRICS community. Russia, China are gaining power and already working towards a new currency and financial system to dispose the western institutions. With oil, population, wealth and other natural resources, BRICS will not be a force to be reckoned with. It will provide a much deserved adequate representation of developing countries that have been suppressed under the garb of western superiority. USA can easily mend all of this by listening to others’ concerns and consider everyone’s grievances. Unilaterally making decisions that affect others will not help in the future, it needs to become a part of the global society and start participating in the global decision making process.
[1]Siddiqui, H. (October 27, 2022). BRICS to expand soon, Saudi Arabia keen to join, The Financial Express. Available at: https://www.financialexpress.com/defence/brics-to-expand-soon-saudi-arabia-keen-to-join/2737102/
[2]Abhishek G Bhaya, C.G.T.N. (December 11, 2022) Saudi Arabia’s overtures to China, BRICS not against a third country, CGTN. Available at: https://news.cgtn.com/news/2022-12-11/Saudi-Arabia-s-overtures-to-China-BRICS-not-against-a-third-country-1fEClZ1gB56/index.html.
[3] supra note 1
[4]Rangdal , R. (December 1, 2022). Saudi Arabia: The Foundation of BRICS currency, Times of India Blog. Times Of India. Available at: https://timesofindia.indiatimes.com/readersblog/blogthoughts/saudi-arabia-the-foundation-of-brics-currency-47508/
[5] supra note 4
[6]Jamal Khashoggi: All you need to know about Saudi journalist’s death (2021) BBC News. BBC. Available at: https://www.bbc.com/news/world-europe-45812399
[7] House, K.E. (2022) Opinion | both sides lose in the U.S.-Saudi feud, The Wall Street Journal. Dow Jones & Company. Available at: https://www.wsj.com/articles/us-saudi-feud-crown-prince-mbs-biden-oil-embargo-imports-opec-russia-reserve-diplomacy-pariah-price-europe-energy-crisis-iran-11667313986
[8] Gardner, T. (2022) Explainer: What is NOPEC, the U.S. bill to pressure the OPEC+ Oil Group?, Reuters. Thomson Reuters. Available at: https://www.reuters.com/world/us/what-is-nopec-us-bill-pressure-opec-oil-group-2022-10-05/
Author: Koonjal Hatewar
Juris Centre 