BRICS and Blocs - how can the expansion of BRICS affect global energy trade in the future?
05 January 2025 - Written by Amriza B. Batubara
Introduction
On the 20th of May 2014, Russia and China met at a summit in Shanghai. It was Putin’s first meeting with Xi after taking office in 2012. For two big powers part of an ambitious yet monumental and novel trade commitment such as BRICS, a typical follower of rational-choice theory would anticipate that these interactions were or could have happened sooner - so why the two-year late arrival? After all, 2014 was an eventful year for the former; just two to three months before their meeting, Russia annexed the Crimean Peninsula as a response to quell the Euromaidan protests.
This invasion turned Russia into an international pariah, as its use of sham elections, mobilisations and ‘military operatives’ against a UN member state abhorred much of the continent. Leading up to the summit, state-owned gas enterprises of Gazprom and the CNPC (of Russia and China, respectively) agreed to a long-term gas supply contract deal after ten years of negotiation - arranged quickly so that such an arrangement seemed to be rushed out of necessity. Simultaneously, senior Russian diplomats and foreign policy officers praised China as its “friend and leading foreign trading partner”. This sudden wave of praise could be interpreted as Russia’s call for new proactive allies in the face of adversity and that China is responding knowing that Russia needs a friend in the East (whilst also benefiting from its rich natural gas resources).
Already described as a “political marriage of convenience”, such an arrangement is already a unique one in that it betwixt two energy-rich and equally energy-dependent countries and is, as a mutually influential relationship, one that helps South-South cooperation due to their respective states’ centrality in global trade. Particularly for China, as its appeal as a postcolonial state resonates with much of the Global South, and it has robust trade relations with Russia given their proximity. Understanding the context behind global power shifts, this analysis would therefore take on the direction of overseeing how the Russo-Chinese relations develop relative to the context of South-South cooperation, with the BRICS alliance as a benchmark and their growth so far as a litmus test at the same time.
And where does energy come in?
While BRICS was founded in 2009, the New Development Bank (NDB) was founded in 2014 as the monetary arm of BRICS and is unofficially the closest BRICS has to a trade policy regime manifest. Home of the Contingent Reserve Arrangement (CRA), the framework dictates how trade is to be done and is known for its staunchly non-interference, egalitarian and mutual benefit standing to crucial infrastructure trade such as energy resources. With energy trade between the BRICS nations being predominantly of oil and gas nature such as the Power of Siberia pipeline and Nord Stream 2.0, a huge portion of natural resources that get traded between the bloc of developing nations and their support for industrialisation are on oil and gas (particularly liquefied natural gas and hydrocarbons). Crude oil accounted for 77% of China’s total fossil fuel imports from Russia alone last year.
With BRICS nations still unable to afford the expensive development and maintenance of renewables as the sole energy provider, NDB struggles to keep up with SDGs as it feeds into the (dirty) energy dollar for the time being, despite the growth and development of green tech that transform into renewable energy, such as China’s e-vehicle modality.
Contextual analysis
There have been shifting attitudes toward the Western world order, which has seemingly grown in a neoliberal direction in tandem with Russia and China’s gradually intricate relations after decades of hostility over the Cold War. Most literature on BRICS’ CRA itself acknowledges the main working timeframe as between 1979 & 2008. The following years represent the rise of neoliberal policies via Thatcherism & Reaganomics (both greatly instrumental in IMF investment policy toward developing countries for decades) in the 1980s to the global economic crisis in 2008, in itself touted as the primary incentive to form BRICS that the following year.
To date, BRICS has always had five founding states and a dozen of observer states. That was until the Johannesburg, South Africa summit in 2023, in which the first expansion of BRICS was announced, heralding in over 12 new members. A second expansion was observed next at the 2024 summit in Kazan, Russia, whereby the inclusion of five new countries marked a new stage in the bloc’s emergence as a united front to uplift Global South economies beyond rapidly emerging regional powers.
Key players & stakeholders
Russia: The first to highlight investment opportunities. A gas giant in its own right (third largest in the world and largest in BRICS), Russia has been instrumental in platforming energy discourses, having exported over $55.5 billion worth of natural gas in 2021.
China: A pioneer in the energy transition narrative. While itself an energy-deficit country), China is known for its developmental foreign policy with the “Belt and Road Initiative” incentive as its magnum opus - building infrastructure projects worldwide to establish its presence.
Economic, Military & Social dimensions
Economic: Energy management comes with green finances, which with BRICS’ mutual benefit spirit, means a more nonchalant approach to “dirty” deals. In 2021, for instance, China made a 25-year agreement with Iran emphasising modernising the Iranian petrochemical sectors in exchange of heavily discounted oil - a deal often seen as promoting cronyism in partnering with a conventionally “adversarial” force. Making “deals with the devil” meant profit for opportunistic China (it received over USD1.053 billion in revenue from BRI alone in 2023), something that it will likely not back away from given its renewables research being seen as a “redeeming face card” besotted as a card to play in the face of illicit energy trades.
Military: Routes associated with the trade of global energy bypass some of the world’s most strategic chokepoints such as the Gulf of Aden. China’s decision to build a military base in Djibouti may come across as a gesture of good samaritanism, though it doubles as a base to safeguard the flow of oil and gas through the Red Sea for safe passage to the East. Such “menacing” material manifestations are also observed in Russia, whose divestments from Europe toward China in the wake of the Russo-Ukrainian War signals a determination to strengthen South-South cooperation away from the “Global North”, mainly out of spite. With Europe restricting pipeline utilisation down from 55 billion cubic metres to 27.5 billion as Gazprom avoids routes passing EU territorial waters, this goes to show how powerful energy is in geopolitical rhetoric and could be just as weaponised as conventional weaponry is in the eyes of defence.
Social: Energy trade amid a demand for energy regime transitions requires a shift in social habits. In China, there is an ongoing drive to convert the car market to being dominated by electric vehicles, and in new members such as the UAE and Saudi Arabia, smart cities are being built in otherwise inhospitable deserts. Nonetheless, this proliferation of innovation in motion is also producing a less desirable side effect - the increase of intrusive data surveillance and governance under the guise of “people-oriented projects” for data farming. With energy trade on a tight, regulatory leash, the monitoring of energy intake, stock and inflow may snowball to surveillance that ultimately erodes social liberties of privacy and freedom.
Opportunities & Risks
Opportunities:
Wider development of smart city networks.
With the dissemination of crucial infrastructure, there will be a proliferation of smart city networks.
Research working groups and consortiums are made easier by lowered tariffs within the expanded bloc, making an easier environment for R&D on crucial neo-tech in the commercial market.
Though data sensitivity poses issues on national security, innovation can be streamlined through more frequent conferences given the room for joint ventures now. Tech invites trade, and ideas will proliferate if governing systems liberalise trade conditions.
Risks:
Successful de-pegging can cause fragmentation of the global market into regionalised markets.
Replicating the EU on different sides of the world, only with different ideologies and systems, regionalised markets complicate global integration processes, but enrich internal economies, especially within the developing Global South.
An impetus to a Cold War-esque divided world.
Discussions were in place already in 2022 Europe, when much of the anti-Russian gas sanctions response in the EU backfired and caused gas shortages. Should this attitude be continued with a stronger BRICS, smaller nations may have no other choice but to work closely with the BRICS bloc - something several EU states such as Croatia and Germany already had as a policy posture as reflected on their Indo-Pacific strategic white papers.
Recommendations - Policy Considerations
Invest more in upcycling old(er) energy technology into new, green technologies to give tech junk a second lease on life:
Contrary to popular policy choices in the West as of late, developing new nickel mines or publishing new oil drilling contracts in the North Sea is not a way to combat walled-up energy trade. If anything, this will only precipitate a new cycle of boom and bust should these amenities get used up without a strategic plan. Instead, waste and residue of energy such as excess water or solar power, can be reverted and recycled elsewhere in “smart” networks - a sense of upcycling that can come from reusing spare metal parts as well.
Securitise one, de-securitise the other:
Much of energy trade is subject to future tariffs as growing distrust between each “bloc” may lead to sanctioned firms and individuals, as was the case with Huawei. To prevent the “national security compromise” from going into excess, trade agreements must acknowledge trade-offs that balance an otherwise no-frill trade ban. In this case, securitising semiconductors can be offset by the de-securitisation of wind technology, for instance - or any tech assets that require less personal knowledge in an age of surveillance capitalism.
Frame trade agreements that not only promote free trade routes but also amplify the nation's reputation through investment credit and subsequent ease-of-access:
Many nations face visa policies that complicate business for trade. Laying out plans to foster investment in both a conventionally donour and recipient state may lead to less securitising narratives from occurring, and eventually liberalised visa policies. Through lowered barriers for trade in the primary sector and the backing of an informal coalition such as BRICS, the policy of reciprocity can be brought forward as a means to ensure a less distant BRICS and rapport that bridges the gap between the West and the “Rest” - reflecting at Brazil’s visa policy attitude as well as furthering the G20 cause beyond G7.
Conclusion
Taking the essence of Robert Cox’s constant stream of critical analysis of the international neoliberal system - much like the idea behind BRICS’ initial founding intentions -, there is an intersection of surface-level cooperations with more deeply woven, intricate structure-building in the way BRICS interacts with the energy trade. In this case, the seemingly casual affair of Russia and China’s energy relations within BRICS has seemingly driven a thin layer of institutionalisation that promotes novel practices that shift and gear the normative regime of the world order, including more recently the much-contested “de-peg” or decentralisation from the dollar as indicated by the founding of the NDB - one which has been especially accosted and disdained by soon-to-be President Trump.
The usage of energy becomes thinly veiled with the intent of being a ‘bargaining chip’ for especially China’s Belt and Road Initiative endeavours - an asset that has arguably driven China’s global presence into prominence alone. That said, the theoretical assumption going forward toward a more protectionist future for the global market is BRICS’ energy regimes may come to empower South-South collaboration with the unintended consequence of undermining a US-led international order, itself a strata the US is trying to further following its policies falling out of favour. Despite the “coalition of unwilling” that includes a disillusioned soon-to-be American government, Trump’s continually aggressive attitude to BRICS, Russia’s protraction from the Ukrainian war and most importantly the acceleration toward a green tech-dominated future on all parties are trends to watch out for with how BRICS may further institutionalise into the future.