The 15th annual BRICS Summit in Johannesburg ended on August 24, 2023 with a significant announcement: six new members would be joining Brazil, Russia, India, China, and South Africa in the economic and geopolitical bloc.
The United Arab Emirates (UAE) was among those invited in the first expansion of BRICS in 13 years, along with Argentina, Egypt, Ethiopia, Iran, and Saudi Arabia. Collectively, BRICS countries represent 46 percent of the world’s population and more than a third of global GDP.
Accepting membership into BRICS was a complex decision for the UAE. The alliance is expected to strengthen economic ties with China and India, the Emirates’ two largest trading partners. It could also lead to a larger role on the world stage for the relatively small country of 9.5 million people. However, if BRICS expands from its foundation as an informal economic cooperation group to include geopolitics, it will face challenges. Member countries are not all traditional allies, and the bloc will likely arouse opposition from the West. The UAE will have to balance its allegiance to BRICS with its established security and investment partnership with the U.S.
The UAE’s economic goal is to double its GDP to over $800 billion by the end of 2023. To achieve such lofty aspirations, the country aims to prioritize bilateral trade deals and partnerships, according to Abdullah Bin Touq Al Marri, the UAE’s Economy Minister. By aligning with BRICS, the UAE believes it can further solidify its economic relationships with China and India and gain access to other markets such as Russia, which has the world’s 8th largest GDP, Brazil (11th), and Argentina (22nd).
Bilateral trade between the UAE and China increased 28 percent in 2022, equivalent to $64 billion. Similarly, the UAE and India had $84.5 billion in bilateral trade between April 2022 and March 2023. In July 2023, the UAE and India signed an agreement to establish a mechanism that would further develop bilateral trade in their respective currencies, instead of the U.S. dollar. One month later, the Indian Oil Corp. paid for its first transaction with the Abu Dhabi National Oil Company in Indian rupees.
The agreement between the UAE and India could embolden other bloc members to follow suit and conduct cross-border trade in local currencies. Momentum toward this trend increased after Russia invaded Ukraine in February 2022 and the West implemented economic sanctions, including removing Russia from the SWIFT global banking messaging system. The U.S. has levied similar sanctions against Iran as leverage in negotiations over the Islamic Republic’s nuclear program. In both cases, the penalties have hindered the countries’ ability to sell oil and disrupted their economies. Substituting local currencies or even a new BRICS currency could be a workaround against such economic hardball.Â
Brazil’s President Luiz Inácio Lula da Silva has proposed the idea of developing a common BRICS currency to increase payment options and protect member states from vulnerabilities due to dollar exchange rate fluctuations. But the complex initiative seems unlikely as all members would need to agree unanimously on a common exchange rate and a central bank, while jointly establishing a comprehensive set of financial regulations. De-dollarization was discussed at the BRICS summit but no agreement on a substitute currency was announced.
Current BRICS members contribute to 32.1 percent of global GDP, surpassing the G7’s 29.2 percent, but growth is uneven. While China and India have experienced remarkable advances over the past three decades, the same cannot be said for Russia and Brazil. Likewise, BRICS’s New Development Bank (NDB) faces difficulties due to Western sanctions against Russia. Established in 2014 by the original five BRICS nations, the multilateral development institution is supposed to mobilize resources for infrastructure and sustainable development projects within the BRICS nations as well as other emerging and developing countries. Following Russia’s invasion of Ukraine in 2022, however, the NDB halted lending to Moscow. This past July, the bank’s President, Dilma Rousseff stated that the NDB is “not considering new projects in Russia as it operates in line with restrictions imposed in financial and capital markets,’’ underscoring the effectiveness and breadth of U.S. sanctions.
The UAE could inject much-needed liquidity into the NDB. The UAE possesses substantial financial resources, including its sovereign wealth fund, which could be leveraged to provide direct capital contributions. Moreover, the UAE’s expertise in finance and infrastructure development could be valuable in structuring and managing NDB projects efficiently, attracting more funding from both within and outside the BRICS alliance.
The recent expansion of membership demonstrates the ambition of BRICS to challenge what it perceives as an outdated system dominated by Western powers. By joining the bloc, the UAE signaled that it wants to move away from overreliance on Western partnerships and play a more prominent role in shaping the global order.
The UAE has long deployed a multi-alignment strategy. At the same time, the UAE recognizes the importance of maintaining its relationship with the U.S., which remains a key partner in areas such as security, trade, and investment. In response to the recent expansion, White House national security advisor Jake Sullivan stated that the U.S. does not see BRICS “as evolving into some kind of geopolitical rival to the United States.”
The UAE wants to maintain its strong ties with the U.S. while simultaneously exploring new avenues for collaboration and engagement with BRICS nations. This approach allows the UAE to navigate a complex geopolitical landscape and pursue its national interests more effectively. The UAE remains a vital U.S. security partner in the Middle East. However, the Emirates appears to be recalibrating its economic diplomacy to expand its political and economic leverage in the Global South.
Membership in BRICS might lead to opportunities for the UAE to host more international summits, one of the country’s preferred means of enhancing its global presence and fostering diplomatic alliances. A key example is the UAE’s planned hosting of COP28 in November 2023.
The BRICS bloc is more informal than long-established organizations such as the United Nations and the Association of Southeast Asian Nations. Member countries engage in unofficial discussions and consultations, allowing more flexibility in decision-making. However, because the coalition lacks the treaty-based framework of older bodies, any policies it prescribes lack teeth.
BRICS is a diverse group with varying economic, political, and strategic interests, so disagreements among member countries could hinder effective governance, potentially slowing down the organization’s progress. The proposed expansion gathers former adversaries such as Iran and Saudi Arabia. Any relapse to regional conflict could jeopardize BRICS’ ability to engage in meaningful, cohesive decision-making. Balancing these diverse interests while pursuing the UAE’s own objectives may prove challenging, particularly if conflicts of interest arise.
Kristian Alexander is a senior fellow and director of the International Security & Terrorism Program at Trends Research & Advisory in Dubai.
Gina Bou Serhal is a researcher at Trends Research & Advisory in Dubai.
UAE Entry into BRICS Increases its Diplomatic and Economic Options
By Kristian Alexander • Gina Bou Serhal
Middle East & North Africa
The 15th annual BRICS Summit in Johannesburg ended on August 24, 2023 with a significant announcement: six new members would be joining Brazil, Russia, India, China, and South Africa in the economic and geopolitical bloc.
The United Arab Emirates (UAE) was among those invited in the first expansion of BRICS in 13 years, along with Argentina, Egypt, Ethiopia, Iran, and Saudi Arabia. Collectively, BRICS countries represent 46 percent of the world’s population and more than a third of global GDP.
Accepting membership into BRICS was a complex decision for the UAE. The alliance is expected to strengthen economic ties with China and India, the Emirates’ two largest trading partners. It could also lead to a larger role on the world stage for the relatively small country of 9.5 million people. However, if BRICS expands from its foundation as an informal economic cooperation group to include geopolitics, it will face challenges. Member countries are not all traditional allies, and the bloc will likely arouse opposition from the West. The UAE will have to balance its allegiance to BRICS with its established security and investment partnership with the U.S.
The UAE’s economic goal is to double its GDP to over $800 billion by the end of 2023. To achieve such lofty aspirations, the country aims to prioritize bilateral trade deals and partnerships, according to Abdullah Bin Touq Al Marri, the UAE’s Economy Minister. By aligning with BRICS, the UAE believes it can further solidify its economic relationships with China and India and gain access to other markets such as Russia, which has the world’s 8th largest GDP, Brazil (11th), and Argentina (22nd).
Bilateral trade between the UAE and China increased 28 percent in 2022, equivalent to $64 billion. Similarly, the UAE and India had $84.5 billion in bilateral trade between April 2022 and March 2023. In July 2023, the UAE and India signed an agreement to establish a mechanism that would further develop bilateral trade in their respective currencies, instead of the U.S. dollar. One month later, the Indian Oil Corp. paid for its first transaction with the Abu Dhabi National Oil Company in Indian rupees.
The agreement between the UAE and India could embolden other bloc members to follow suit and conduct cross-border trade in local currencies. Momentum toward this trend increased after Russia invaded Ukraine in February 2022 and the West implemented economic sanctions, including removing Russia from the SWIFT global banking messaging system. The U.S. has levied similar sanctions against Iran as leverage in negotiations over the Islamic Republic’s nuclear program. In both cases, the penalties have hindered the countries’ ability to sell oil and disrupted their economies. Substituting local currencies or even a new BRICS currency could be a workaround against such economic hardball.Â
Brazil’s President Luiz Inácio Lula da Silva has proposed the idea of developing a common BRICS currency to increase payment options and protect member states from vulnerabilities due to dollar exchange rate fluctuations. But the complex initiative seems unlikely as all members would need to agree unanimously on a common exchange rate and a central bank, while jointly establishing a comprehensive set of financial regulations. De-dollarization was discussed at the BRICS summit but no agreement on a substitute currency was announced.
Current BRICS members contribute to 32.1 percent of global GDP, surpassing the G7’s 29.2 percent, but growth is uneven. While China and India have experienced remarkable advances over the past three decades, the same cannot be said for Russia and Brazil. Likewise, BRICS’s New Development Bank (NDB) faces difficulties due to Western sanctions against Russia. Established in 2014 by the original five BRICS nations, the multilateral development institution is supposed to mobilize resources for infrastructure and sustainable development projects within the BRICS nations as well as other emerging and developing countries. Following Russia’s invasion of Ukraine in 2022, however, the NDB halted lending to Moscow. This past July, the bank’s President, Dilma Rousseff stated that the NDB is “not considering new projects in Russia as it operates in line with restrictions imposed in financial and capital markets,’’ underscoring the effectiveness and breadth of U.S. sanctions.
The UAE could inject much-needed liquidity into the NDB. The UAE possesses substantial financial resources, including its sovereign wealth fund, which could be leveraged to provide direct capital contributions. Moreover, the UAE’s expertise in finance and infrastructure development could be valuable in structuring and managing NDB projects efficiently, attracting more funding from both within and outside the BRICS alliance.
The recent expansion of membership demonstrates the ambition of BRICS to challenge what it perceives as an outdated system dominated by Western powers. By joining the bloc, the UAE signaled that it wants to move away from overreliance on Western partnerships and play a more prominent role in shaping the global order.
The UAE has long deployed a multi-alignment strategy. At the same time, the UAE recognizes the importance of maintaining its relationship with the U.S., which remains a key partner in areas such as security, trade, and investment. In response to the recent expansion, White House national security advisor Jake Sullivan stated that the U.S. does not see BRICS “as evolving into some kind of geopolitical rival to the United States.”
The UAE wants to maintain its strong ties with the U.S. while simultaneously exploring new avenues for collaboration and engagement with BRICS nations. This approach allows the UAE to navigate a complex geopolitical landscape and pursue its national interests more effectively. The UAE remains a vital U.S. security partner in the Middle East. However, the Emirates appears to be recalibrating its economic diplomacy to expand its political and economic leverage in the Global South.
Membership in BRICS might lead to opportunities for the UAE to host more international summits, one of the country’s preferred means of enhancing its global presence and fostering diplomatic alliances. A key example is the UAE’s planned hosting of COP28 in November 2023.
The BRICS bloc is more informal than long-established organizations such as the United Nations and the Association of Southeast Asian Nations. Member countries engage in unofficial discussions and consultations, allowing more flexibility in decision-making. However, because the coalition lacks the treaty-based framework of older bodies, any policies it prescribes lack teeth.
BRICS is a diverse group with varying economic, political, and strategic interests, so disagreements among member countries could hinder effective governance, potentially slowing down the organization’s progress. The proposed expansion gathers former adversaries such as Iran and Saudi Arabia. Any relapse to regional conflict could jeopardize BRICS’ ability to engage in meaningful, cohesive decision-making. Balancing these diverse interests while pursuing the UAE’s own objectives may prove challenging, particularly if conflicts of interest arise.
Kristian Alexander is a senior fellow and director of the International Security & Terrorism Program at Trends Research & Advisory in Dubai.
Gina Bou Serhal is a researcher at Trends Research & Advisory in Dubai.
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