Tyranny of numbers

There has been much official excitement since Iran was invited (along with Egypt, Ethiopia, Saudi Arabia, South Africa, and UAE) to join the BRICS in its annual summit in Johannesburg. BRICS is not yet a proper organization (with headquarters and staff, for example). It has a website, which is still in development (an article on the site, published Sept 25, mentions Iran as having expressed interest, along with 40 other countries, but not the invitation).

BRICS membership does not offer any economic privileges yet, but it is politically valuable for Iranian leaders who have been trying to convince the world that they are not isolated. It does open a space alongside the so-called “international community” that the West uses to exclude unfriendly countries. No one is sure why these six countries were chosen from a longer list of applicants. Was there any evaluation of economic potential that would cast a positive light on Iran’s economic future? Or is it, as BRICS detractors emphasize, the Chinese-Russian most-anti-Western award? Iran was certainly high on that list.

Economics has been a defining characteristics of the BRICS, mainly as a club of upper-middle income countries looking to escape the middle income trap, but so far there is little in terms of specific trade or investment policies that would help members overcome the trap’s obstacles.

One can gain some sense of the direction in which the BRICS is heading by looking at the economic characteristics of the newly admitted countries. Certainly, the group is now well-endowed in terms of hydrocarbon resources, but in the age of global warming these resources can become a political if not an economic liability. With the West more and more determined to adopt policies to limit the use of fossil fuels, are Saudi Arabia and the UAE looking to the BRICS as a less hostile place for fossil fuel exporters?

The most obvious logic for inclusion in the BRICS is economic potential. The new additions fit the bill, growing above the world average though not all known for economic dynamism. Russia and Iran are under sanctions, so their potential must lie in a more distant and conditional future. Iran’s inclusion in the list of six invitees may seem especially odd considering its reputation as an economic basket case under crippling US sanctions. But a closer look at the data suggests that the worst may be over for Iran and its economy has been growing since 2020. Still, its inclusion in the list of invitees seems more on political than economic grounds.

The graph below shows two simple facts: First, the newly admitted countries are growing at a robust pace, especially since 2020. Even Iran’s GDP growth compares well with the global average. Second, Egypt, Iran, and Saudi Arabia, the three largest MENA economies invited, are larger economies than South Africa, already a member. Ethiopia is the smallest BRICS country in the new lineup.

Note: GDP is in 2017 USD PPP. Source: World Bank, WDI.