BRICS summit and China’s trip to Moscow marks a new era

File Photo of Flags of BRICS Nations and BRICS Logo from Past Summit

(Business New Europe – bne.eu – March 28, 2013)

Russian President Vladimir Putin was in South Africa on March 27 at the opening of the BRICS summit to highlight the growing importance of the emerging markets club that are increasingly taking the lead when it comes to global growth.

“Work in the BRICS group is one of Russia’s foreign policy priorities,” said Putin in his address to the conference. “The medium- and long-term strategy, as we see it, is to consolidate the BRICS group as a key part of the global governance system in the political, legal, financial and economic spheres.

Putin’s attendance comes on days after the new Chinese premier Xi Jinping was in Moscow, his first foreign trip abroad, to sign a dozen important deals, including several ground breaking agreements that will tie Russias energy complex to Chinas booming economy.

The two events the BRIC summit and Xi trip to Moscow can be seen as the start of a new era where the leading emerging start to actively cooperate to compliment each others development.

Talk of the potential of the emerging market has been about since before Jim ONeill, formerly of Goldman Sachs, coined the term BRIC in 2001. However, that potential is rapidly becoming a reality and Russia is not even classed as an emerging market any more by the United Nations Development Programme, but a developed country in the middle income bracket. (The other BRICS are still emerging according to UNDP.)

“The BRICS countries are aware of their role and responsibility as global growth leaders. As has already been noted today, our countries account for more than 27 percent of world gross domestic product a total of $15.4 trillion,” Putin highlighted in his comments at the BRICS summit on Wednesday March 27. “Russia put forward the initiative to draft a long-term economic cooperation strategy that would take into account national development plans and help to consolidate growth in all of the BRICS economies.”

Russia not only signed off on long-term oil and gas supply deals to China, but significantly also invited China into joint exploration and exploitation deals. In return China offered tens of billions of dollars in loans that Russia badly needs. China has also started importing sophisticated Russian arms again after a 10-year hiatus. The changing military situation in the Asia-Pacific regions is an important part of the forces thrusting Russia and China together.

“Perhaps the most important aspect of the Russian visit has been China’s recognition that it needs to maintain security along its northern and western borders. China faces potentially challenging situations with Myanmar and North Korea and is currently focusing its regional security attention on its maritime borders, where Beijing has disputes with Japan, the Philippines and Vietnam. Keeping Russian relations in check allows Beijing to keep its attention focused east and south and sends a signal that Beijing is secure along a large portion of its land borders. The land borders with Russia also represent an important pathway for Chinese energy needs — a pathway largely immune to any potential U.S. maritime interdiction,” Stratfor said in a recent note.