Chronicle of the Middle East and North Africa

BRICS and MENA Countries’ Prospects for Joining

The shared objective among all BRICS and MENA countries seeking membership is to foster a multipolar global financial system.

BRICS and MENA Countries

Ali Noureddine

This article was translated from Arabic.

The BRICS group of countries, consisting of Brazil, Russia, India, China and South Africa, has attracted interest from 19 additional nations seeking membership. Notable nominees from the Middle East and North Africa region include Saudi Arabia, the United Arab Emirates, Egypt, Bahrain and Iran.

This development raises intriguing questions about the motivations behind each country’s desire to join the group and the potential benefits they could derive from such a step.

At present, the activities of the BRICS group are closely intertwined with its efforts to challenge the prevailing Western dominance, particularly the hegemony of the United States within the global financial system.

To this end, the group aims to establish an alternative means of conducting commercial transactions through the introduction of a new currency distinct from the U.S. dollar.

The proposal is expected to be presented at the upcoming BRICS summit in South Africa, scheduled for July 2023. If successful, this initiative would mark a significant milestone for the group, as it would create a novel trading instrument that circumvents U.S. restrictions and sanctions. Furthermore, it would eliminate the need to rely on American correspondent banks, which is currently the case with the U.S. dollar.

Simultaneously, the BRICS group is placing significant emphasis on the establishment of the New Development Bank. This multilateral financial institution was set up with the objective of funding public and private projects through loans and direct contributions.

Notably, in 2021, the bank agreed to extend membership to both Egypt and the United Arab Emirates in a decision that serves as a stepping stone toward the eventual inclusion of these two countries into the BRICS group. The group seeks to enhance the role of this bank as an alternative to other international financial institutions, such as the International Monetary Fund and the World Bank, where decisions are dominated by the United States.

Moreover, the BRICS countries have long sought to establish a new financial system for managing interbank transfers as an alternative to the Swift system, which currently connects international banks. This measure seeks to prevent Western nations from isolating specific banks from the global financial trading system, as exemplified by the restrictions imposed on certain Russian banks during the early stages of the Ukraine conflict.

In short, the BRICS countries are actively pursuing the creation of an auxiliary international economic system by providing alternatives to what they perceive as instruments of Western financial hegemony. This objective aligns with the aspirations of various Middle Eastern and North African countries seeking to join the BRICS group, driven by a confluence of reasons.

Egypt: Diversification of financing and borrowing sources

Egypt is presently grappling with significant economic challenges stemming from its high level of public debt relative to the size of its economy.

Moreover, the limited availability of foreign currency reserves poses difficulties in financing the repayment of upcoming foreign debts, including interest payments. Compounding these issues are mounting pressures on Egypt’s balance of payments, triggered by rising interest rates in Western countries and escalating global inflation, resulting in an increased import bill.

This has forced the Egyptian government to once again seek funding from the International Monetary Fund in 2023. This assistance comes with stringent conditions, including the devaluation of the Egyptian pound against the U.S. dollar and the privatization of select state-owned enterprises and military assets.

Concurrently, Egypt is actively seeking to attract additional foreign capital and investments, particularly from Gulf nations, to infuse much-needed liquidity in foreign currencies into the Egyptian market.

Egypt’s prospective membership in the BRICS group offers a crucial opportunity to diversify its sources of much-needed loans, thereby reducing its reliance solely on the terms and approvals of the IMF.

By joining the BRICS group, Egypt can tap into the benefits provided by the New Development Bank, which it had expressed keen interest in even before pursuing BRICS membership. The availability of alternative financing options would empower Egypt to assert its conditions and negotiate from a position of greater strength when seeking financial packages from the IMF or the World Bank in the future.

With regard to foreign investments, Egypt stands to benefit from increased capital inflows from BRICS countries, particularly if new payment mechanisms are established to streamline financial transfers between Egypt and the member nations.

Notably, Egypt has made concerted efforts in various instances to create favorable conditions for attracting Chinese capital, specifically for investment in infrastructure projects.

Iran: Circumventing Western sanctions

Iran is confronted with significant economic challenges primarily due to the imposition of Western sanctions, which severely impede its ability to establish regular financial connections with the global financial system.

These sanctions also hinder Iran’s access to essential foreign investments, particularly in the energy sector. To navigate around these sanctions, Iran resorts to selling its oil and gas on the black market, incurring losses as it must offer these resources at prices below prevailing market rates.

It is important to highlight that when sanctions were imposed on Russia, Russian companies faced similar circumstances and were compelled to provide discounts to sell their oil on the black market. Consequently, Iranian authorities were forced to offer even greater discounts to compete with Russian oil, further exacerbating the economic impact of the sanctions on Iran.

The projects undertaken by the BRICS group present a significant and valuable opportunity for Iran, particularly if these initiatives succeed in establishing credible alternatives for conducting oil sales, free from reliance on Western banks and the U.S. dollar. Such projects would offer Iran the potential for diversified and legitimate payment channels.

Importantly, they would also facilitate much-needed foreign investment in Iran’s energy sector. By creating alternative payment systems, members of the BRICS group would enable their respective companies to engage in operations within Iran without being hindered by the current limitations imposed by Western financial systems.

Currently, in light of the sanctions imposed on Iran, the main obstacle preventing these companies from entering the country lies in the lack of an international currency and a global payment system that allows conducting transactions with the Islamic Republic.

The potential inclusion of Saudi Arabia and UAE into the BRICS group presents an opportunity for Iran to leverage the capital of these nations, which are actively seeking attractive markets for investment.

Despite facing Western sanctions, Iran will strive to attract investments from Gulf businessmen by utilizing alternative means of payment and currencies that are not subject to Western oversight, unlike the current reliance on the U.S. dollar.

Furthermore, this strategic move aligns with the ongoing process of normalizing relations between Iran and Saudi Arabia, a development facilitated under significant Chinese sponsorship.

Saudi Arabia, the UAE and Bahrain: Diversifying economic ties

Gulf countries, especially Saudi Arabia and the UAE, have recently demonstrated an inclination to diversify their economic and political relationships.

One particular focus has been the pursuit of investment partnerships, especially with China.

Saudi Arabia has also sought to establish close cooperation and alliances with Russia within the energy market, coordinating efforts through the OPEC+ group.

These strategic moves signify the determined efforts of Saudi Arabia, the UAE and Bahrain to lessen their financial, economic and even political reliance on Western nations, particularly the United States, which has long been viewed as a historical ally of Saudi Arabia.

This current scenario aligns with the collective aspiration of these three countries to join the BRICS group, in which they are likely to find attractive investment opportunities. This comes at a time when they find themselves in a favorable position with financial surpluses due to the recent increase in oil prices.

Undoubtedly, all the aforementioned factors are currently speculative and contingent upon the forthcoming BRICS summit in July 2023. It is at this summit that the group’s stance on accepting the membership of these countries is expected to become apparent.

Moreover, the realization of these expectations relies on the success of the BRICS group in introducing its own currency and establishing a new remittance system, developments that have yet to be accomplished.

However, what remains certain is the shared objective among all BRICS countries, as well as the countries from the Middle East and North Africa seeking membership, to foster a multipolar global financial system, in place of what these countries perceive as the unipolarity that is dominant today.

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