A few weeks ago we covered the then-upcoming summit of BRICS nations in South Africa. This was a history-making event because the five founding countries – Brazil, Russia, India, China, and South Africa – voted to expand the organization. Six additional nations would be admitted to the club: Saudi Arabia, Egypt, the UAE, Iran, Ethiopia, and Argentina. This development changed BRICS but more important it changed the world.
Overnight, BRICS became the single largest economic and political bloc in the world. This is worrisome because many of its members hate the US and are pursuing an agenda that can harm it.
Powerful From Birth
From its start, BRICS was a force to be reckoned with - and it’s been gaining strength steadily. The GDP of the expanded BRICS is already larger than that of the G7 nations (Canada, France, Germany, Italy, Japan, the UK, and the US). Nearly half of the world’s population lives in BRICS member nations. And three of its most recent members – Saudi Arabia, Iran, and the UAE – are promoting major political and economic changes to the global economy.
Last March, the world got a glimpse of that when Iran and Saudi Arabia announced they would bury the hatchet and reestablish diplomatic relations, which had been broken for decades. Incidentally, the US was not the peace-maker in this deal…Beijing was!
Even more important, this deal overnight made BRICS an oil and gas superpower. Six of the world’s top 10 oil producers are now BRICS nations.
Other statistics that were compiled by Infotech are even more sobering.
BRICS now controls:
*39% of the world’s oil exports;
*46% of its proven oil reserves; and
*48% of all the oil produced globally.
Russia and Saudi Arabia together now produce one fourth of the world’s oil. In addition, Russia and Iran have the world’s largest and second largest gas reserves in the world. This means a huge percentage of the world’s energy reserves are controlled by anti-American countries.
Political commentator and analyst Dr. Steve Turley summed up these developments this way: “This is an economic and commodity dominance that was not even imaginable just months ago.”
Some analysts use three “Fs” to explain the unfolding political and economic developments: food, fuel, and finance.
The western G7 nations bet that finance was the most important, their idea being that whoever controls money controls the world. The G7 offshored much of their manufacturing and industry, which is why today China accounts for 30% of the world’s manufacturing.
Russia, on the other hand, believed the way to control the world is by controlling food and fuel. Their logic is very simple: As important as cash is, no one can eat currency, but whoever controls food and fuel will neither starve or freeze.
Russia is both the number one grain exporter in the world and the number one fertilizer exporter; moreover, it is second only to Saudi Arabia in oil exports. “Russia is a commodities giant that all the economic sanctions in the world couldn’t starve,” says Turley.
And now they’ve teamed up with the number one manufacturing giant, China, to produce a commodity powerhouse unmatched in the world. With them as an economic partner, countries like Saudi Arabia and the UAE no longer fear western sanctions.
According to Turley, Russia proved to the world that commodity-based economies like theirs can withstand cash-based sanctions, and that has further encouraged commodities-rich nations to join BRICS. Having cornered the market on food and fuel, now they have turned to finance.
Probably the most important development of the summit was the agreement for members to trade in their own currency and bypass the dollar. Back in July, India and the UAE signed an agreement to trade in rupees (the Indian currency) instead of dollars.” according to the online news magazine The Cradle. And the Washington-based news publication The Hill reports that the Saudis are negotiating with China “to accept yuan (the Chinese currency) instead of dollars or euros for their oil sales.”
On Second Thought
While the US continues supporting Ukraine and sanctioning Russia, Putin’s response has been to urge all BRICS nations to accept a single currency that could challenge the dollar with their huge reserves of gold and other commodities. Although there have been rumors about this for months, some experts are nevertheless surprised by how quickly the petrodollar is losing its clout.
The petrodollar is a form of currency that has helped control inflation and has strengthened America’s economic and political power around the world. It was introduced in the 1970s and has helped the dollar serve as the world’s reserve currency.
The BRICS nations want to destroy the petrodollar by wrenching nations away from it and toward a new commodity-backed currency. That’s why they were so eager for Saudi Arabia, Iran and the UAE to become members of BRICS.
But weakening the petrodollar is only a part of their plan. They also want to challenge the G7-controlled IMF (International Monetary Fund) with their own banking system called NDB (New Development Bank). They hope this will lead to de-dollarizing the world economy and make it impossible for the West to ever again impose the kind of crushing sanctions they did on Russia.
“We cannot overemphasize how significant this BRICS summit really was,” says Turley.
Meanwhile, BRICS’ emphasis on commodities appears to be paying off. In late June, oil was trading at $67, in late July at $81, and in early September at $87. Prices reflected production cutbacks by the Saudis and Russians. This helped create a two million barrel/day shortfall.
In early September, Zero Hedge wrote that the shortfall had increased to nearly three million barrels/day. And with Russia and Saudi Arabia agreeing to extend their supply cuts till at least the end of the year, the oil market will remain tight and vulnerable to the whims of major producers.
Expect higher food prices as rising transportation and farming costs are passed along to consumers. There will be another uptick in inflation. And tough questions will be asked about America’s role in the Ukraine war and what, if any, it should play going forward.
It would be fascinating to know what G7 and BRICS nations are planning behind closed doors. On second thought, with so much money, resources, and political power at stake, it could also be alarming. We live in interesting times - and they could become even more interesting at any moment.