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Wednesday, June 17, 2009

Sounds pretty important: but does it change anything?

June 17, 2009

Brazil, Russia, India and China form bloc to challenge US dominance

With public hugs and backslaps among its leaders, a new political bloc was formed yesterday to challenge the global dominance of the United States.

The first summit of heads of state of the BRIC countries — Brazil, Russia, India and China — ended with a declaration calling for a "multipolar world order", diplomatic code for a rejection of America's position as the sole global superpower.

President Medvedev of Russia went further in a statement with his fellow leaders after the summit, saying that the BRIC countries wanted to "create the conditions for a fairer world order". He described the meeting with President Lula da Silva of Brazil, the Indian Prime Minister, Manmohan Singh, and the Chinese President, Hu Jintao, as "an historic event".

The BRIC bloc brings together four of the world's largest emerging economies, representing 40 per cent of the world's population and 15 per cent of global GDP. The leaders set out plans to co-operate on policies for tackling the global economic crisis at the next G20 summit in the US in September.

"We are committed to advance the reform of international financial institutions so as to reflect changes in the world economy. The emerging and developing economies must have a greater voice," they said.

The BRIC states also pledged to work together on political and economic issues such as energy and food security. Co-operation in science and education would promote "fundamental research and the development of advanced techologies".

The declaration also satisfied a key Kremlin demand by calling for a "more diversified international monetary system". President Medvedev is seeking to break the dominance of the US dollar in financial markets as the world's leading reserve currency.

He favours the establishment of more regional reserve currencies, including the Russian rouble and the Chinese yuan, to prevent economic shocks. Mr Medvedev said: "The existing set of reserve currencies, including the US dollar, have failed to perform their functions."

The declaration made no specific mention of the dollar, an indication of China's reservations about the Russian idea. Beijing holds almost $2 trillion in foreign currency reserves and a large portion of US debt.

The BRIC summit coincided with a two-day meeting of the Shanghai Co-operation Organisation (SCO) in Yekaterinburg, which further underlined the determination of Moscow and Beijing to assert themselves against the West.

The SCO comprises Russia, China and the Central Asian states of Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan. Iran, Pakistan, India and Mongolia have observer status and President Karzai of Afghanistan attended the summit as a guest.

Iran's embattled President, Mahmoud Amadinejad, defied protests at home to attend the conference, where he hit out at the US and declared that the "international capitalist order is retreating". But he beat a swift retreat from the summit just hours after arriving, cancelling a planned press conference to return to the crisis in his country.

China pledged $10 billion in loans to Central Asian countries struggling in the economic crisis, adding financial muscle to its leading role in the SCO. Russia and China regard the organisation as a means to restrict US influence in their Central Asian "back yard".

Mr Medvedev held separate meetings about the situation in Afganistan with President Karzai and President Zardari of Pakistan, a clear signal to President Obama not to ignore Russian interests as he presses US policy in the region in the fight against the Taleban.

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