RUSSIA/CIS RISKWATCH – ISSUE 7 - PART 2 – JULY 2015

A dragon in the room at the BRICS and SCO summits


By Andy Gilholm, Managing Director, Global Risk Analysis

SHANGHAI – Sitting in China, it’s easy to get too parochial in parsing global affairs, but in analysing the significance of the latest phase of BRICS and SCO developments, a Sino-centric perspective is a useful one.

The BRICS and to a lesser extent the SCO forums have long been symbols of declining advanced-economy dominance of international institutions and power, and a bigger say for a developing world powered by large young populations and rapid growth in a number of sizeable economies. This rebalancing continues, and the BRICS summits certainly remain of both practical and symbolic importance to the process. But this trend is well recognised now and hyperbole has faded about the decline of the West and ascendance of BRICS. These economies will continue to grow in importance but face problems of their own. This is certainly true of China, but the sheer magnitude of its economic power (with a GDP roughly double the size of the other four BRICS combined) makes Beijing’s own external agenda the big trend looming over ostensibly more multilateral summitry.

Friends with benefits

The forthcoming meetings in Ufa will bring some significant developments, but the accompanying rhetoric about a new era or realignment in world politics will not reflect realities. Neither the BRICS nor the SCO represent emerging blocs or alliances that could set geopolitics on a real ‘north-south’ or ‘developing world versus the West’ dynamic. A redistribution of power is taking place, but based on the respective interests and ‘comprehensive national power’ (as the Chinese put it) of each individual country. The BRICS summit and SCO are important forums for cooperation when their members’ interests coincide, and clash with those of ‘the West’. But, very often, members’ interests clash with each other. China-India tensions are an obvious example and will affect the SCO as well as BRICS if India gains SCO membership this month. Even the much-hyped China-Russia relationship remains a partnership of convenience. Despite intensified flirtation, Xi and Putin are just friends with benefits; their countries’ mistrust and threat perceptions preclude a more meaningful relationship.

Beneath Beijing’s tougher tone under Xi, his appetite for courting confrontation with the West is far from Putin proportions. China will happily engage in the rhetoric of fighting US hegemony to empower developing countries in a multipolar, egalitarian new order, but it gets the centrality of the US (and in economic terms the EU) to China’s future, and has no illusions of a developing-world axis being a substitute. For China, the BRICS and SCO are just two of many platforms for leverage and influence in promoting its interests abroad, and it is launching a much wider, intensified ‘going out’ strategy with more tangible impacts in the next few years than any single multilateral initiative.

DIY diplomacy

Viewed from Beijing, years of US and Japanese resistance in institutions such as the IMF and World Bank have denied China a role commensurate with the country’s economic status, so it has taken a ‘do it yourself’ approach instead. The creation and development of the SCO, and China’s generally enthusiastic participation in BRIC and BRICS groupings, were early examples of this. Increasingly, they fit into a bigger, bolder Chinese vision for its strategy in Central Asia and beyond. This will be led by other, newer initiatives, notably the ‘One Belt One Road’ (OBOR) strategy and the Asian Infrastructure Investment Bank (AIIB, of which China is the creator and largest shareholder).

The OBOR strategy is rapidly becoming the centrepiece of Xi’s foreign policy, and encompasses ambitious plans to develop infrastructure, trade and investment stretching across Asia, and reaching into parts of Africa, the Middle East and Europe via the overland ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Silk Road’. They are backed by huge Chinese financing commitments, including a dedicated Silk Road Fund, and will also receive support from the Shanghai-based New Development Bank (former BRICS Bank) and AIIB. Many key agenda points for China at the BRICS and SCO summits will involve efforts to facilitate its OBOR plans.

You ain’t seen nothing yet

Of course, implementation of such grand schemes is never smooth, and the increasingly large and high-profile Chinese presence in these regions will bring major challenges for China, not least in Central and Southeast Asia, where its growing clout has already stirred a backlash. Beijing will have to adapt its approach to prevent its strategy from backfiring with overtones of Chinese ‘economic imperialism’ and opacity. Still, one thing is for sure: these initiatives will take China’s zouchuqu policy of ‘going out’ into the world to a whole new level. Its overseas investment and influence have expanded massively in the past decade, already having major global implications. Looking back another decade from now, it will be clear that that was just the tip of the iceberg.