Changing order

Published : Jul 17, 2009 00:00 IST

in Moscow

IF there is a bright side to the global financial and economic crisis, it is that the devastating meltdown has spurred the rise of a multipolar world. This reality was fully in evidence in Yekaterinburg on June 15-16, where Russia hosted the overlapping summits of the Brazil-Russia-India-China (BRIC) and the six-member Shanghai Cooperation Organisation (SCO) led by Russia and China.

The resolve to reform the United States-dominated world shaped the agenda of both summits. A declaration released at the SCO summit said that global multipolarity is irreversible. Likewise, the BRIC summit stated its support for a more democratic and just multipolar world order based on the rule of international law, equality, mutual respect, cooperation, coordinated action and collective decision-making of all states.

Both the SCO and BRIC have made great strides in recent years, but while the Shanghai group has been a formally structured regional security organisation since 2000, BRIC, until recently, was just an acronym coined in 2001 to explore the impact of the four fastest growing emerging economies on the global power balance. In the past couple of years, BRIC has undergone a fascinating transformation from an academic concept to a full-blooded global forum.

Exploratory get-togethers of the four nations Foreign Ministers on the sidelines of the United Nations led to their first stand alone meeting in Yekaterinburg in May 2007, followed by meetings of their Finance Ministers and regular consultations among their central banks. The 2007 summit institutionalised the group as a global political and economic forum and the Second Worlds alternative to the G8.

Much has been said about the four nations having too many differences and precious little in common. Sceptics have pointed out that Chinas gross domestic product (GDP) outstrips that of the other three countries combined; that Russia is the worlds biggest exporter of hydrocarbons and Brazil is a major source of farm products and other commodities for the world, and that India is strong in services and China is the worlds manufacturing hub. Russia competes with China for influence in Central Asia and is uneasy about Chinese demographic expansion into depopulated Siberia. India has an unsettled border dispute with China and is nervous about Chinas military rise and support for Pakistan.

However, the recent summit showed that the four do have a common agenda a revamp of the global economic and financial order. A joint statement signed by Brazilian President Luiz Inacio Lula da Silva, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh and Chinese President Hu Jintao called for an overhaul of global financial institutions and sweeping changes to the U.N. to give a bigger role to India and Brazil.

The BRIC states pledged to promote energy and food security, to expand cooperation in fundamental research and the development of advanced technologies, and to step up efforts for humanitarian assistance. The statement stressed the central role played by the G20 summits in dealing with the financial crisis but made no mention of the G8, sending a clear signal that the era when the worlds richest nations set the global agenda was over. Interestingly, BRIC Foreign Ministers had expressed desire for continued cooperation with the G8 a year ago.

The BRIC nations defined their immediate goal as increasing their representation in the International Monetary Fund (IMF), the World Bank and other financial bodies. The emerging and developing economies must have a greater voice and representation in international financial institutions, the joint statement said. BRICs demand for a greater voice is well grounded. The four nations account for 40 per cent of the worlds population, nearly 20 per cent of global GDP, and almost half of the global currency reserves. Jim ONeill, chief economist of Goldman Sachs, who coined the term BRIC, said recently that the BRIC nations would overtake the G7 developed economies in terms of GDP in less than 20 years.

Despite their growing economic clout, BRIC nations hold barely 10 per cent of the votes in the IMF, against almost 17 per cent of the U.S. BRIC leaders called for reforming the global finances to diversify away from the dollar. We also believe that there is a strong need for a stable, predictable and more diversified international monetary system, the summit declaration said.

Medvedev stated that the U.S. dollar has failed to perform its function as the main reserve currency, and predicted the inevitable emergence of new reserve currencies even if the process would take time. He said that BRIC leaders had instructed their Finance Ministers and central bank Governors to meet and draw up the parameters of a new financial architecture.

Member-states of BRIC are already taking practical steps to reduce their dependence on the dollar. In the run-up to the summit in Yekaterinburg, China and Brazil decided to settle mutual trade in their own currencies without using the dollar, and a day after the summit, the leaders of Russia and China said at a meeting in Moscow that the two countries would work to switch part of their trade from the dollar to the rouble and the yuan.

The decision of China, Brazil and Russia to purchase $70 billion worth of new multicurrency IMF bonds serves the same purpose. India is also expected to join them. Russia further said that it could consider investing its reserves in the financial instruments traded by BRIC states on a reciprocal basis.

The summit in Yekaterinburg was not a one-time affair as the four countries agreed to institute interaction mechanisms. We have agreed to have close and regular contacts at the level of ministries, Medvedev said, mentioning the Finance, Agriculture, Trade and Economic Ministries and the central banks. This work will be coordinated by the Foreign Ministries, he added. The BRIC leaders agreed to hold their next summit in Brazil in 2010.

Like BRIC, the SCO nations drew inspiration from the global crisis to strengthen their cooperation. At the Yekaterinburg summit, they agreed to enhance trade and investment among member-states and with observer countries. Apart from Russia and China, the SCO unites four Central Asian states Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. It also has four observers India, Iran, Mongolia and Pakistan. An SCO declaration adopted in Yekaterinburg calls for speeding up large-scale projects in transport, communications, logistics, trade and tourism, and innovation and energy-saving and renewable-energy technologies.

The SCO leaders said their goal was to turn Central Asia into a transcontinental bridge between Europe and Asia by building new transport corridors and modernising existing rail and motor roads. They agreed to strengthen the security agenda of their alliance, adopting a Statute on Politico-Diplomatic Mechanisms of Responding to Situations Threatening Peace, Security and Stability in the Region. The document has not been published, but it probably addresses the simmering disputes between Central Asian states over energy and water resources.

The SCO also approved a range of anti-terrorist documents: a convention against terrorism; a programme of cooperation in combating terrorism, separatism and extremism for 2010-2012, and an agreement on training anti-terrorist personnel for the member-states. None of these documents has been released so far.

Afghanistan was high on the agenda of the SCO summit in Yekaterinburg, as it was in all previous summits. The SCO expressed grave concern over the worsening situation in Afghanistan and decided to intensify cooperation with the observer-states and other countries and organisations in combating the growing threats of terrorism, drug trafficking and cross-border crime. Russia moved to further enhance its role in settling the Afghanistan problem. In March, Moscow hosted an SCO conference on Afghanistan and opened transit routes on land to non-military traffic for the benefit of U.S.-led NATO forces in Afghanistan.

Medvedev announced the establishment of a trilateral group with Afghanistan and Pakistan to help resolve the problem of terrorism in the tribal zone. The problem of Afghanistan cannot be resolved without normalising the situation in several Pakistani provinces and without destroying the terrorist dens there, Medvedev said after meeting with the leaders of Pakistan and Afghanistan separately and in a trilateral format. Russias demonstrative pressure on Pakistan to curb terrorism was sweet music to Manmohan Singh, who attended the SCO summit for the first time. His presence at the SCO table was a big victory for Russian diplomacy. Indian diplomats acknowledged that the Prime Minister had accepted the invitation in recognition of Russias special efforts.

At the previous SCO summit in Dushanbe in August 2008, Russia pushed through a proposal to invite the heads of state and government of the observer nations to closed-door summit meetings in order to allow their views to weigh in. Russia has long favoured granting full SCO membership to India, which received observer status in 2005 along with Iran and Pakistan. China has so far opposed Indias membership, but Russia has been patiently working to lift a China-lobbied SCO moratorium on admission of new members. At the Dushanbe summit, the SCO leaders set up a commission to work out admission rules. It has since met three times and is reported to have circulated draft rules to the member-states.

In Yekaterinburg, Medvedev called for speeding up the drafting of admission rules. The work is going on; instructions have been issued, but we need to get this job done and come up with norms and procedures so that we can set the ball rolling, the Russian leader said. Hu signalled Chinas continued opposition to SCO expansion by failing to mention the subject either in his speech in the plenary session or in post-summit interviews.

However, other SCO members concerned over Chinas overbearing presence in Central Asia openly backed the Russian stand. Emomali Rakhmon, the President of Tajikistan, called for completing all formalities for the admission of new members by the 10th anniversary of the SCO in 2010. Even more important was the support from Uzbekistan, which took over the SCO rotating presidency from Russia in Yekaterinburg. We consider it advisable to expedite the drafting of documents for the admission of observer states as full members, President Islam Karimov said in his speech. We are all aware this question is not simple, but it must be solved step-by-step.

Outgoing SCO Secretary-General Bolat Nurgaliyev of Kazakhstan said expansion of the alliance was inevitable given the interest of outside countries towards the group. In Yekaterinburg, Sri Lanka and Belarus were granted the newly established status of SCO dialogue partner. On the way home from Yekaterinburg, Manmohan Singh said that India was not only looking forward to increased functional cooperation with the SCO, but would welcome an invitation to join it as a member. But I am not lobbying for it, he added. Probably he should if India is not to lose Central Asia to China.

Yekaterinburg marked a new phase in Chinas economic expansion in Central Asia. Hu announced Chinas decision to give $10 billion in credits to Central Asian states to help them cope with the global economic downturn. Earlier this year, China extended $10 billion in credits to oil- and gas-rich Kazakhstan and a $3 billion credit to Turkmenistan to help it develop new gas fields, and agreed to make a $1-billion investment in Tajikistan to build electricity generation projects. China has thus overtaken Russia as the biggest donor for and investor in Central Asia.

Moscow earlier this year promised over $1 billion in economic aid and credits to Kyrgyzstan and set up a $10-billion anti-crisis fund for Central Asia. But it cannot compete with Chinas financial might and this is one reason it wants India to become a full SCO member.

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