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BRICS summit decisions may change world economic climate

The decisions taken at the sixth BRICS summit are an important step on the path of transition from a unipolar to a multi-polar world and from the US diktat in financial sphere, Russian expert community believes. BRICS member states are taking measures for further rapprochement, while the decisions taken to create BRICS financial institutions may drastically change the world market landscape in the future.

At the summit the leaders of the BRICS states of Brazil, Russia, India, China and South Africa signed Tuesday the Fortaleza declaration, which assesses current world political and economic situation and reflects common BRICS approaches to topical issues of international co-operation.

Before the summit the BRICS states signed the documents to create the BRICS Pool of Conventional Currency Reserves, worth $100 billion, and to establish the New Development Bank of this assembly.

The BRICS leaders are dissatisfied with progress of the currency and financial system reform in the world. Therefore, the BRICS countries set up their own institutions at the Fortaleza summit in counterbalance to the World Bank and the International Monetary Fund (IMF). The New Development Bank will have $50 billion fixed capital, $100 billion authorized capital and will give credits to the countries, participating in the bank, for priority long-term projects. The Currency Reserve Pool, in which each member state should contribute around $20 billion, "should become some kind of insurance network designed for a joint response to financial challenges," Russian President Vladimir Putin believes.

In addition to the New Development Bank a BRICS infrastructure fund may be also created to make investments in projects in the grouping of five rapidly developing nations.

Russia also proposed to found a BRICS energy association. "It would be possible to create a fuel reserve bank and an institute of BRICS energy policy under its auspices. These steps would allow strengthening energy security of our countries," Putin noted.

"BRICS is not an organization yet, but a union of countries with close interests and positions, which voice their discontent with US hegemony in particular," Professor of the chair of trade politics at the Higher School of Economics, Aleksey Portansky, told ITAR-TASS. In his view, the BRICS summit in Brazil "is an attempt for further rapprochement and for becoming an organization." "The grouping of these countries is searching for spheres, where they can deepen co-operation," the expert believes.

"BRICS is a political club, but not an international organization," Director of the Centre of Situation Monitoring and Regional Studies at the Russian Presidential Academy of National Economy and Public Administration, Alexander Savchenko, belives. "This is a global agenda for the countries, which will outpace the G7 states no later than 2050, this is a conscious joint prospect," he told ITAR-TASS. The point is how to move in this direction in the near future and how to make this agenda broader and more concrete, he said. The summit is resolving this task.

Along with commonly coordinated actions the summiteers decided to create joint financial institutions. This step gave a response to the US Congress veto on an IMF reform in 2010. New BRICS bodies will have something to work on and Western countries will have something to lose, for such agencies always act for the interests of their main founders, the expert believes.

Summing up the summit results, the expert said, "We have set guidelines, quick results should not be expected. But the agenda is certainly content-intensive and expanded."

"The summit showed that the unipolar world system, that the Americans and Europeans cling to, is already not effective any longer," Professor of Russian foreign political activity department at the Russian Presidential Academy of National Economy and Public Administration, Alexander Mikhailenko, told ITAR-TASS, stressing that "The decisions taken at the summit are building up a trend to creation of a multi-polar world."

Neither Russia, nor China, nor Brazil, nor India can accept what is happening in international economic relations, trade and currency regulation, the expert said. Such organizations as the World Trade Organization (WTO) in trade, the IMF and the World Bank - in financial sphere, were established within an old unipolar system to ensure interests of highly developed countries to the detriment of developing states.

With the creation of the New Development Bank and the Currency Reserve Pool the BRICS states will implement a considerable part of their economic projects through their own structures instead of the international organizations, in which Western approach prevailed. "As a result, Western countries with major economic interests in the BRICS states will suffer significant losses," the expert said with confidence.

[Source: By Lyudmila Alexandrova, Itar Tass, Moscow, 16Jul14]

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