Southeast Asia has its reasons for pivoting to BRICS

Yes, Southeast Asia has its reasons for pivoting to BRICS. ASEAN countries are lured by access to financing and a political movement independent of Washington’s influence, writes ‘The Asia Times’.

Thailand becomes the first Southeast Asian country to apply for BRICS, that shocks U.S.

In recent days, Malaysia detailed its ambitions to join Brazil, Russia, India, China and South Africa. Thailand and Vietnam are also among the Association of Southeast Asian Nations members expressing similar interest.

In Indonesia, there’s growing awareness that “Global South” nations have a point in vying to join this burgeoning intergovernmental organization.

During an interview with Chinese media ahead of Li Qiang’s visit to Malaysia, Prime Minister Anwar Ibrahim declared his intention to join the bloc after it doubled in size over the last year. That dynamic is luring Global South nations — partly by offering access to financing but also by offering a political movement independent of Washington’s influence.

The Southeast Asia wrinkle could prove particularly problematic for US President Joe Biden. A hallmark of the Biden era since 2021 has been creating a regional bulwark against China’s rising influence and efforts to replace the US dollar in trade and finance.

What we’re seeing is a clear rupture in relations between the US and many ASEAN members. This, at a time when Saudi Arabia is looking to phase out the “petrodollar.” Riyadh is intensifying de-dollarization efforts as China, Russia and Iran line up against old alliances.

“A gradual democratization of the global financial landscape may be underway, giving way to a world in which more local currencies can be used for international transactions,” says analyst Hung Tran at the Atlantic Council’s Geoeconomics Center. “In such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro and the Japanese yen in a way that’s commensurate with the international footprint of their economies.”

In late May, Thailand announced it’s applying for BRICS inclusion in part to boost its presence on the world stage. If approved, Bangkok would likely become the first ASEAN economy added.

“Thailand views that BRICS has an important role to play in strengthening the multilateral system and economic cooperation between countries in the Global South, which aligns with our national interests,” notes Foreign Ministry spokesperson Nikorndej Balankura. “As for economic and political benefits, joining BRICS would reinforce Thailand’s role on the global stage, and strengthen its international cooperation with emerging economies, especially in trade, investment and food and energy security.”

Soumya Bhowmick, an associate fellow at the Observer Research Foundation think tank, says Thailand’s bid supports Beijing’s broader strategic goals of expanding Chinese economic influence in Southeast Asia.

Today, BRICS+ nations account for half the world’s population and two-fifths of trade, including top energy producers and importers. BRICS+ nations also account for 38% of global petroleum imports, led by China and India.

“As more big emerging markets join the BRICS+ nations, the grouping could give the Global South a greater voice in world affairs and challenge the domination of existing institutions,” says Daniel Azevedo, an analyst at Boston Consulting Group.

BRICS+, Azevedo adds, “creates a forum that, at minimum, gives emerging markets the opportunity to align on global topics and new opportunities to promote mutual economic development and growth. And it’s evolving steadily.”

Azevedo notes that as the BRICS build political and financial institutions and a payment mechanism for executing transactions, “there are important potential implications for the future of energy trade, international finance, global supply chains, monetary policy and technological research.”

As a result, Azevedo says, “global companies will need to factor these new geopolitical and economic realities into their investment strategies. They should also strengthen their capacity to capture the opportunities and to mitigate risk that they engender.”

Vietnam sent a delegation to Russia to attend the BRICS summit. There, Deputy Minister of Foreign Affairs Nguyen Minh Hang said Hanoi is keen on collaborating with like-minded developing countries.

All this against the backdrop of deteriorating American finances – and at a moment of maximum political dysfunction. As the national debt approaches US$35 trillion – on the way to US$50 trillion – Biden’s Democrats and Donald Trump’s Republicans are barely on speaking terms.

The question now is how Moody’s Investors Service, which still grades Washington AAA, responds to election-year chaos as Trump angles for a return to power. And as Biden tries to out-Trump Trump with new trade sanctions.

This puts US Treasury securities at grave risk. Japan and China alone hold a combined US$2 trillion of US government debt. Any sudden run on the dollar could trigger a fire sale, sending US yields skyrocketing.

Such concerns are playing into the broader BRICS goal of pooling more than US$100 billion of foreign currency to act as a financial shock absorber. The funds can be tapped in emergencies, allowing members to avoid going to the International Monetary Fund. Since 2015, the bank that the BRICS created has approved tens of billions of dollars of loans for infrastructure, transportation and water.

The BRICS currency project has been gaining traction since mid-2022, when the 14th BRICS Summit was held in Beijing. There, Russian President Vladimir Putin said the BRICS were cooking up a “new global reserve currency” and were open to expanding its usage more widely. Brazil’s Lula also has thrown his support behind a BRICS monetary unit.

Analysts at Moody’s warn that the Americans going overboard on tariffs, concerns about default and weakening institutions are threatening the dollar’s reserve currency status.

“The greatest near-term danger to the dollar’s position stems from the risk of confidence-sapping policy mistakes by the US authorities themselves, like a US default on its debt for example,” Moody’s argues. “Weakening institutions and a political pivot to protectionism threaten the dollar’s global role.”

Now, as Southeast Asia leans toward the BRICS, it’s hard not to think that America risks losing far more than just the economic plot.

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