3 Takeaways from BRICS Bank Launch and Summit

Caught up in sanctions from the U.S. and EU, Russia’s in a tough spot, particularly since President Vladimir Putin isn’t backing away from his stance on Crimea. But one thing that clearly emerged from the summit was Putin’s pivot toward the East. Not only has he thrown Russia’s hat into the ring encompassed by the BRICS bank, at the summit he hosted a joint session of the BRICS countries and the Shanghai Cooperation Organization, the latter composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan for the purpose of defense.

“Russia currently holds the rotating presidency of not just the BRICS,” according to the Council of Councils, an initiative of the Council on Foreign Relations, in a global memo, “but also the Shanghai Cooperation Organization (SCO), which comprises Eurasian countries that cooperate on military, political, and economic matters…. Russia is at least as enthusiastic about advancing its priorities at the SCO summit as it is at the BRICS meetings.”

In addition, at the summit, Russia’s finance minister announced that China had bought around $1 billion worth of Russian domestic bonds this year.

But Russia’s position in the NDB provides even broader opportunities to look away from the West for business potential. Later in the month, the BRICS bank also met with the Asian Investment Infrastructure Bank (AIIB) in Beijing (Russia is the third largest contributor to AIIB, after China itself—which leads the institution—and India). After that meeting, the Buenos Aires Herald reported that NDB decided to set up a “hotline” with the AIIB to discuss the issues both new institutions face, and also to work on creating closer ties with its counterpart, since both were “new institutions coming together with a completely different approach.”

In addition, the Asian Development Bank, led by Japan, has said in a statement quoting Takehiko Nakao, its president, which it is looking forward to exploring opportunities to work with the NDB in co-financing projects.

With Russia’s fingers in all these Eastern pies, sanctions may prove to be less of a deterrent to existing behavior, or incentive to change, than the West hopes.

3. Russia’s economy could boom again.

It’s no secret that Russia is looking at the new BRICS bank as a potential source for loans to finance both infrastructure and business projects. Big firms like Rosneft could benefit from having another place to go to look for financing, since sanctions have cut off access to Western funds.

But Russian infrastructure projects could get a boost too, and Russia’s finance minister, Anton Siluanov, was quoted in reports before the summit saying that his country had to compile a list of projects for the BRICS bank to consider, as well as economic justification for their consideration.

Although of course each member country has its own priorities, and the other countries still have access to financing that Russia’s cut off from, the combined BRICS economies in 2014 totaled $17 trillion in GDP—nearly equal to that of the U.S. The five countries represent 42% of the world’s population, and approximately 20% of the world’s economy based on GDP. Total trade among the five is $6.14 trillion, or nearly 17% of the world’s total. If Russia has sufficient access to member countries’ prosperity for both trade and loans—something that may or may not happen—it could substantially reduce its concern about EU and U.S. sanctions and their effects on its economy.