The fragile compromises of the BRICS summit

Akshara (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about the fragile compromises of the BRICS summit, and then we'll talk about the UK recognizing India's carbon market.

Welcome back to The Daily Brief by Zero Da, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Thursday, 17th September.

Coming to the first story.

So last weekend, 11 heads of state gathered in Delhi for the 18th BRICS summit. And while they were gathered for extremely sober discussions, they certainly let loose. For instance, Malaysian Prime Minister Anwar Ibrahim broke into a Bollywood number. And there was an interesting moment of camaraderie between PM Modi and Xi Jinping, where Modi interrupted his speech to check on a visibly uncomfortable Xi. A selfie of all the heads of state went viral, but it was later discovered to be wholly AI-generated. Now, all these entertaining tidbits could potentially make you forget the stakes and compromises that BRICS stands on. In 2026, they only escalated. For one, leaders from Iran and the UAE, both of whom are at loggerheads with each other, sat in the same room and signed the same document. Then, while Modi, Xi and Putin were clicked candidly together, their stance on whether BRICS should have a currency of its own is more disjointed than ever. Meanwhile, BRICS continues to figure out what its strategy against America's weaponization of the dollar and tariffs is. By the end of it all, BRICS signed an 18,000-word, jointly signed document called the New Delhi Declaration, adopted unanimously after negotiations that reportedly ran past 4am. But words are just that, words. How much they represented real action is anybody's guess. And with that, we'll be doing a roundup of the landmark events and clashes that defined this year's BRICS Summit. The first major clash was around payment systems. In a past story, we've covered how BRICS members have long wanted to reduce their dependence on the US dollar, the world's reserve currency, for trade. So when, say, a Brazilian farmer sells soybeans to a Chinese buyer, the transaction typically gets converted from riyals to dollars, and then from dollars to yuan. But for Russia and Iran in particular, the problem is more existential. Western sanctions have cut them off from SWIFT, the global messaging system that underpins cross-border payments, and they need alternatives simply to keep trading. But BRICS members have never agreed on what that alternative should look like. And this summit only made those disagreements sharper.

So, this year, one of the key items on top of India's agenda was cross-border payments. So, the RBI have proposed linking the Central Bank Digital Currencies or CBDCs of BRICS members so that a payment initiated in India could settle directly in, say, the South African Rand without passing through a dollar-denominated correspondent bank. Trade within BRICS nations is already strengthening. So, why not also involve more local currencies in it instead of the dollar? But there was no binding action plan or CBDC linkage pilot. All that remained was a formal acknowledgement of India's proposal. Ajay Srivastava, founder of the Global Trade Research Initiative and a past guest on Subtext, noted that the summit was expected to announce concrete steps, like wider bilateral payment agreements, links among domestic instant payment networks, currency swap arrangements and so on. But execution remained limited. So, why did it stall?

Beyond the fact that no BRICS nation has fully launched its CBDC beyond the pilot phase, there are two key reasons. So, to begin with, India itself is reluctant to deepen financial connectivity with a geopolitical rival like China.

As per Reuters, India stayed away from M-Bridge, which is a cross-border CBDC platform, because it was anchored by Beijing. And we also stalled a proposal from Alibaba Plus to link with India's instant payment system over national security concerns.

But all of this is driven by rational fears. Payment networks can indeed have choke points which can cripple the rest of the network. And India has no intention of handing over such control to China that easily. Secondly, there's the trade imbalance problem, which we'll illustrate with a real life example between India and Russia. So since 2022, India has been buying lots of Russian oil, which became cheaper due to sanctions from Western countries in retaliation for the Ukraine invasion. Now, much of that trade was settled in rupees. Later, Russia acknowledged that because of this trade, they had more rupees than they needed, and they needed to be converted before they could use it. Now, you could solve this with a currency swap at an agreed upon rate. But the problem is India has a large trade deficit with Russia, so it's clear they have little incentive to buy Indian goods. At most, Russia can invest in Indian assets, but India has capital account restrictions that don't allow foreign investment easily. In fact, Russia began using the UAE, Dirham, and the Yuan, which are more widely used currencies than the rupee, as an intermediary to trade with us. And this need for an intermediary is, ironically, what India's proposal was meant to do away with. So far, we told you about a payment system's alternative that India pitched, but notice how none of this involved promoting a currency that would challenge the dollar.