Geopolitics and Markets Review – 21st August 2023

The BRICS Summit and China’s Economic Slowdown Explained

In the upcoming week, we have two of the biggest events of the year in geopolitics and financial markets. The BRICS Summit and the Jackson Hole Symposium. This piece will cover the BRICS Summit, and I hope to release something on Jackson Hole next week.

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The BRICS Summit

In Johannesburg from August 22nd – August 24th we have the BRICS summit where leaders of four of the five BRICS countries are expected to attend. Vladimir Putin will likely remain at home due to the International Criminal Court issuing him an arrest warrant in March for the unlawful deportation of children from Ukraine to Russia. Since South Africa are a party in the Rome Statute treaty that establishes four international crimes of genocide, crimes against humanity, war crimes, and crimes of aggression, a Putin visit to South Africa could trigger an arrest attempt from the ICC. Representing him will be someone who will have a large influence on the summit, foreign minister Sergei Lavrov.

Photo by Alireza Parpaei on Unsplash

The whisperings and murmurings of a BRICS currency for trade would heavily involve Sergei Lavrov. Creating an alternative to the dollar has been one of Lavrov’s key aims for over a decade. Now, South African Ambassador Anil Sooklal stated, “There’s never been talk of a BRICS currency, it's not on the agenda.”

Firstly, it's obvious that countries are seeking to diversify away from the dollar, especially after Russian foreign reserves held in dollars were confiscated and sanctions imposed for the invasion of Ukraine. If confiscation of reserves held in dollars can happen to one state, it can happen to any who is deemed an enemy of the United States and democracy. Treasury holdings of many countries have been decreasing for many years before this. Perhaps countries are learning from the many emerging market crises due to dollar interest rate hiking cycles in the past. In this current hiking cycle, we saw some emerging market countries hike very quickly to get ahead of the US hiking cycle, specifically Mexico and Brazil. This appears to have paid off. The trade diversity and monetary policy of these emerging market economies have supported a good year for emerging markets.

Other reasons that the BRICS currency could be mentioned include that even if it isn’t included on the agenda, it could be brought up anyway, especially with Sergei Lavrov in attendance who has pushed for an alternative to the dollar for over a decade. And the high levels of central bank gold buying, especially from countries involved or related to BRICS. One key advantage of a currency that is backed by a commodity such as gold is a lack of inflation. If the supply of whatever is backing your money fluctuates less, then inflation isn’t an issue.

Photo by Jingming Pan on Unsplash

The last day of the BRICS summit is expected to be the Friends of BRICS discussion. 67 leaders have been invited to take part. It makes sense that another likely topic of discussion will be BRICS expansion. China’s BRI benefits from BRICS having as many members as possible. China’s surveillance and network capabilities outside China would expand through Huawei, Hikvision, Dahua and many others. And information is power.