Aurelia Butler

The Brics emerging market bloc has launched the biggest expansion in its history as Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates were invited to join, in a coup for China’s drive to remake the group into a counterweight to the G7.The countries were offered membership alongside Brazil, Russia, India, China and South Africa from the start of next year in a “new chapter” for the club of developing nations, South Africa’s president Cyril Ramaphosa said at the end of the summit of Brics leaders in Johannesburg.“We have consensus on the first phase of this expansion process, and further phases will follow,” Ramaphosa said, adding that the Brics would also develop a “partnership model” for other countries.The first expansion of the Brics since South Africa joined in 2010 represents a victory for China, which pushed for rapid expansion of the grouping before the summit as part of its ambitions to lead the developing world.The inclusion of Iran and Saudi Arabia, the world’s biggest oil producer outside the US, among the first Middle Eastern Brics members also follows Beijing’s brokering of the normalisation of relations between Riyadh and Tehran this year.“China is playing an agenda-setting role within the Brics grouping” as it competes with the US, said Priyal Singh, senior researcher at South Africa’s Institute for Security Studies. Beijing was “investing more diplomatically, economically and politically in the Brics to serve as a counterweight”. India was more reluctant about expanding Brics, but prime minister Narendra Modi this week signalled his backing for accepting new members. The new nations include some of New Delhi’s own strategic defence partners, such as the UAE and Egypt. “Adding new members will further strengthen Brics and give it a new impetus,” Modi said.However, not every country on the invitation list rushed to join up. Indonesia, the largest south-east Asian economy, declined to submit its interest in joining the Brics, saying it was discussing the possibility of membership internally.Russia’s Vladimir Putin welcomed the new members and called on the bloc to deepen its economic ties, including creating a common currency. “I want to assure all my colleagues that we will continue what we started — expanding Brics’ influence in the world,” Putin said, appearing via video link from the Kremlin.The new members will increase the Brics’ share of global gross domestic product from 32 per cent to 37 per cent on a purchasing power parity basis, Brazil’s president Luiz Inácio Lula da Silva said.Sheikh Mohammed bin Zayed al-Nahyan, the UAE president, said: “We respect the vision of the Brics leadership and appreciate the inclusion of the UAE as a member to this important group.” Abdel Fattah al-Sisi, Egypt’s president, said he looked forward to working with the Brics to “achieve its goals towards strengthening economic co-operation among us and raise the voice of the global south”.Saudi foreign minister Prince Faisal bin Farhan told Saudi television that the kingdom was awaiting details on “the nature of membership and its components, and based on that and on our internal procedures, we’ll take the appropriate decision”.Abiy Ahmed, prime minister of Ethiopia, hailed the invitation as a “great moment” for the east African nation, while Argentina’s President Alberto Fernández said joining would “strengthen” his country.But Patricia Bullrich, the centre-right coalition’s candidate in Argentina’s upcoming presidential election, said she opposed the move because of Russia’s war in Ukraine. “We believe in an international order based on rules to preserve peace,” she said.

Brics leaders also charged their finance ministers and central bank governors with developing measures to reduce their reliance on the US dollar in trade among their economies, reporting back next year, Ramaphosa said.“There is a global momentum for the use of local currencies, alternative financial arrangements and alternative payments systems,” he said.The commitment to greater use of local currencies fell short of the anti-dollar rhetoric heard before the summit, such as Brazil’s Lula floating the idea of a Brics common currency as a unit of trade.Additional reporting by Max Seddon in Riga, Heba Saleh in Cairo, Andres Schipani in Lima, Ciara Nugent in Buenos Aires, Samer Al-Atrush in Dubai and Mercedes Ruehl in Singapore More

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The writer is professor of energy and climate change and deputy director at the UCL Institute for Sustainable Resources The unprecedented heatwaves ravaging the US, Mediterranean and China demonstrate some of the fallout of what seems set to be the hottest year on record. It is also likely to be the year with the highest greenhouse gas emissions of all time. These grim statistics are a testament to humanity’s continuing inability to tackle climate change — some 36 years after the seminal UN report by then Norwegian prime minister Gro Harlem Brundtland highlighted the imperative for sustainable development.This year, Norway has the opportunity to spearhead, more directly, a massive step towards an effective global response — using some of its windfall profits from the energy crisis to leverage international capital markets into turning the trend of rising global emissions.Russia’s invasion of Ukraine resulted in vast revenue flows to fossil fuel producers. This has been primarily a gas crisis, centred in Europe, with the fallout reverberating most strongly across European energy markets.The profits for oil-producing countries have been huge. For the previous two decades, Norway’s net cash flow from oil and gas exports typically reached about $30bn annually. In 2022, it rocketed to $130bn. Extending into this year, Norway will have reaped about $150bn of profits — the net cash flow allocated to its sovereign oil wealth fund — above normal, supplemented by billions more from surging prices for its electricity exports.At the same time, the global political effort to tackle climate is being stymied by stuttering north-south disputes, most of all over finance. It is not just that the poorest countries, which have contributed least to the problem and are suffering most, are receiving inadequate help. It is also a struggle over funding the global low-carbon energy transition.Emissions growth is now predominantly from the developing world and changing this requires huge investment in clean technologies. The IPCC estimated a range of $1.5tn-$3tn a year capital investment in non-OECD countries over this decade to meet Paris goals. Meanwhile, the Independent High-Level Expert Group on Climate Finance pinpoints the needs of developing countries outside of China at $2tn-$2.8tn annually, of which at least $1tn a year would need to be in international investment.The paradox is that clean energy technologies are now potentially cheaper than fossil fuels — but only where capital is cheap and plentiful. In most of the developing world, it is neither. The transition is further being stifled by post-Covid debt, higher interest rates and the huge subsidies of the US Inflation Reduction Act legislation sucking clean energy investors away from developing countries.In real terms, Norway’s current energy windfall is roughly on the same scale in today’s prices as the entire Marshall Plan of 1948-51. That visionary US investment of $13.3bn helped stabilise the world and laid foundations for a rapid, sustained postwar recovery. If Norway were to entertain something similar, but use its finance smartly to leverage private clean energy investment at scale through risk underwriting, it could completely change the game. The recent Paris climate finance summit inched forward on a proposal to underwrite currency risk, but again illustrated the power of recalcitrant countries to stymie real progress. The key is indeed underwriting risk — specifically for low-carbon investment in developing countries. The experience of a few pilot programmes — as well as academic research covered by the IPCC — indicates that public risk guarantees can be expected to leverage up to 15 times as much private capital investment. Just one-third of Norway’s indirect profits from the Ukrainian war amount to $50bn. If the country committed this to underwriting capital market low-carbon investments in the developing world, it could plausibly leverage half the foreign annual investment that these countries desperately need. At home, Norway is a clean energy champion, but its enormous revenues during the energy crisis came mainly from exporting carbon. The profits made from fossil fuels are now unambiguously tainted by the cost and suffering inflicted globally by climate change. Tackling such inequity is the greatest international moral imperative since the second world war. Norway has been given the chance to demonstrate the spectacular potential of risk guarantees for international clean energy investment, at scale. To boost an international clean energy finance complex to the scale required to finally eclipse that of fossil fuels. And to offer a beacon of hope in an increasingly desperate global situation. Brundtland would be proud. More

U.S. new vehicle sales, including retail and non-retail transactions, are estimated to reach 1,354,600 units in August, a 15.4% jump from a year earlier, according to the joint report by J.D. Power and GlobalData.”Retailers continue to sell vehicles before they physically arrive at the dealership. However, with increased inventory levels, more shoppers are now able to purchase vehicles from dealer lots,” Thomas King, president of the data and analytics division at J.D. Power, said in a statement.Retail inventories could see a 48.4% jump in August over the year earlier. Inventory pile-up, however, might lead to a decline in dealers’ profit, which also faces pressure from elevated interest rates.Consumers are estimated to spend $47.8 billion on new vehicles, the highest on record for the month of August, and 10.5% higher than last year, the report said.New-vehicle transaction prices, however, would likely see a 1.2% decline from the year earlier, as sales of smaller vehicle segments increased, which inherently have lower transaction prices.Global sales for 2023 are expected to reach 86.8 million units compared with previous estimate of 86.4 million units, amid an ongoing improvement in supply chains, the report said.”In September, the main focus will be on any potential work stoppages (at automakers) that could hinder production. A disruption in production could create more asymmetry in the market and potentially extend the overall tight supply situation currently in place,” King added.For 2024, global light-vehicles sales are expected at 90.2 million units. More

Global fossil fuel subsidies hit a record total of $7tn in 2022 as governments rushed to shield consumers from soaring energy prices sparked by Russia’s invasion of Ukraine, the IMF estimates.The IMF study said subsidies for coal, oil and natural gas in 2022 were equivalent to 7.1 per cent of global gross domestic product. This represented more than governments spent on education, and two-thirds of what was spent on healthcare. The elevated figure produced by the IMF includes so-called implicit subsidies, which are the result of governments undercharging for the environmental costs incurred by burning fossil fuels. These costs include air pollution and global warming, the IMF said. The bulk of the global subsidies accounted for in the study fall into this category, the authors said, with the value forecast expected to grow as developing countries increase their consumption of fossil fuels. The report from the IMF comes as the world experiences the hottest average monthly global temperatures ever recorded. The rise in global temperatures of at least 1.1C during the industrial era is caused predominantly by the burning of fossil fuels, scientists have concluded.“Explicit” subsidies — defined as consumers paying less than the supply costs of fossil fuels — have tripled since the previous IMF assessment in 2020, from $0.5tn to $1.5tn in 2022. This compares with the most recent estimates from the International Institute for Sustainable Development think-tank this week that said subsidies from G20 economies stood at $1.4tn, including investments by state-owned enterprises and loans from public finance institutions. An independent research report earlier this year put the figure at $1.8tn.However, the IMF report found that the increase in explicit subsidies was due to temporary support measures from governments and was expected to decline. East Asia and the Pacific region accounted for nearly half of the global total subsidy. China was the biggest subsidiser of fossil fuels, followed by the US, Russia, the European Union and India.

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G20 leaders agreed to phase out inefficient fossil fuel subsidies in 2009, before pledging to accelerate those efforts at the UN COP26 climate conference in Glasgow in 2021. But the sharp rise in living costs and an energy crisis has since prompted governments to step in with energy price caps and fuel subsidies. World leaders have disappointed climate experts and campaigners in the run-up to this year’s UN COP28 conference, to be held in Dubai, where negotiators will perform a “global stock take” of progress by countries pledging to cut emissions under the 2015 Paris Agreement.Emissions need to be cut by 43 per cent by 2030 to keep to the 1.5C warming threshold at which scientists expect irreversible changes to the planet to occur, but have continued to rise annually instead.In May, leaders of the G7 group of advanced economies failed to set a deadline to phase out the use of coal without the emissions being captured. In the context of the full-scale Russian invasion of Ukraine, the G7 said that it “publicly supported investment in the gas sector can be appropriate as a temporary response” to the resulting energy crisis.In the G20 climate negotiations last month, multiple negotiators told the Financial Times that China and Saudi Arabia had obstructed any progress in the talks, refusing to debate crucial issues such as greenhouse gas emissions targets.This year has been the third-warmest ever, and may go on to surpass 2016 as the hottest on record, according to the European earth observation agency.Simultaneous heatwaves and record flooding affected large parts of the US, Europe and Asia in July, and scientists have warned that such weather extremes will become more frequent and intense with every fraction of a degree of warming. More

Turkey’s central bank has sharply boosted interest rates in one of the clearest signs yet that its new economics team has decisively broken with years of unorthodox policy in an effort to stem runaway inflation. The bank’s monetary policy committee on Thursday lifted the one-week repo rate by 7.5 percentage points to 25 per cent, far exceeding the 20 per cent forecast by economists in a FactSet poll. The third rate rise in as many months underscores the dramatic shift in Turkey’s economic policies since President Recep Tayyip Erdoğan was re-elected in May. Central bank governor Hafize Gaye Erkan has nearly tripled interest rates since her appointment in June in an attempt to cool inflation. “The Turkish central bank’s much larger-than-expected [rate rise] will go a long way towards reassuring investors that the shift back to policy orthodoxy is on track,” said Liam Peach at Capital Economics in London. “As far as Turkey’s macroeconomic outlook is concerned this could be a game-changer.”Thursday’s decision was the first made since Erdoğan appointed three new deputy central bank governors. Like Erkan, the trio received a warm reception from investors because of their strong professional and academic credentials in finance.The sharp tightening marks a shift from Erdoğan’s long-running insistence on holding interest rates low, which analysts say caused Turkey’s economy to overheat and helped send the lira tumbling. The currency bounced about 2 per cent higher against the US dollar on Thursday to TL26.77, but still remains near historic lows. The central bank also warned that the weak lira, recent tax rises and minimum wage increases would contribute to a higher pace of price growth. It had forecast last month that inflation would reach nearly 60 per cent by year end from 48 per cent in July. Mehmet Şimşek, a former City of London bond strategist who was appointed Turkey’s finance minister in June, said on the social media service X, formerly Twitter, after the rate decision that “price stability is our top priority”, adding that “we are determined”.The rate increase followed a move by the government and central bank on Sunday to begin unwinding a $125bn scheme that compensates savers when the lira falls against foreign currencies such as the dollar and the euro. The decision was seen by many economists as a move both to shield Turkey’s public finances from fluctuations in the lira and a “back door” tightening in economic policy.

Economists are still broadly mixed on how much latitude policymakers have to unwind Erdoğan’s unconventional economic policies, especially with critical local elections looming next month. “Whether President Erdoğan was on board with this decision is another matter and we simply can’t rule out Governor Erkan being sacked as a result of this move,” Peach said, alluding to how former central bank chief Naci Ağbal was fired after a series of rate rises in 2021. Still, there are some signs that the new policies are beginning to pay off. The central bank’s gross foreign currency reserves, which dropped to unusually low levels ahead of the general election, have risen to $69bn from $48bn in May. Foreign investors have also pumped $1.7bn into Turkish stocks on a net basis since the start of June, central bank data show. More

JOHANNESBURG (Reuters) -The five BRICS developing nations will admit Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates, they said on Thursday, a move aimed at growing the clout of the bloc as it pushes to rebalance the prevailing world order. The expansion could also pave the way for dozens more countries to seek admission to the grouping, which has pledged to address their grievances over a world order many feel is rigged against them.BRICS – whose acronym was originally coined by an economist at Goldman Sachs, currently comprises Brazil, Russia, India, China and South Africa. Deepening geopolitical polarisation in the wake of Russia’s invasion of Ukraine and China’s declining relations with the United States are spurring efforts by Beijing and Moscow to forge BRICS into a viable counterweight to the West. “BRICS has embarked on a new chapter in its effort to build a world that is fair, a world that is just, a world that is also inclusive and prosperous,” said South African President Cyril Ramaphosa, who is hosting a summit of BRICS leaders.The six candidate countries will formally become members on Jan. 1, 2024. Ramaphosa and Brazilian President Luiz Inacio Lula da Silva left the door open to the possibility of admitting other countries in future. “We have consensus on the first phase of this expansion process and other phases will follow,” Ramaphosa said at a media briefing.Lula said globalisation’s promises had failed, adding that it was time to revitalise cooperation with developing countries as “there is a risk of nuclear war”, an apparent allusion to growing tensions between Russia and the West over the Ukraine conflict. United Arab Emirates’ President Mohammed bin Zayed, whose country is already a shareholder of the bloc’s New Development Bank, said he appreciated the inclusion of his country in the expansion. Ethiopian Prime Minister Abiy Ahmed called the BRICS leaders’ decision to invite Ethiopia to join “a great moment”.PLEDGE TO REBALANCE WORLD ORDERIn a reflection of the bloc’s growing influence, United Nations Secretary-General Antonio Guterres attended Thursday’s expansion announcement.He echoed a recurring plea by BRICS for reforms of institutions like the U.N. Security Council, the International Monetary Fund and World Bank, stating that global governance structures “reflect yesterday’s world”.”For multilateral institutions to remain truly universal, they must reform to reflect today’s power and economic realities. In the absence of such reform, fragmentation is inevitable,” he said.The debate over enlargement has topped the agenda at the three-day summit taking place in Johannesburg. And while all BRICS members publicly expressed support for growing the bloc, there were divisions among the leaders over how much and how quickly. Though home to about 40% of the world’s population and a quarter of global gross domestic product, BRICS members’ failure to settle on a coherent vision for the bloc has long left it punching below its weight as a global political and economic player.”This membership expansion is historic,” China’s President Xi Jinping said in remarks following the announcement on enlargement. “It shows the determination of BRICS countries for unity and cooperation with the broader developing countries.” More than 40 countries have expressed interest in joining BRICS, say South African officials, and 22 have formally asked to be admitted.They represent a disparate pool of potential candidates motivated largely by a desire to level a global playing field and attracted by BRICS’ promise to rebalance world bodies dominated by the United States and other wealthy Western states.Indian Prime Minister Narendra Modi said the bloc’s expansion should be an example to other global institutions. “The expansion and modernization of BRICS is a message that all institutions in the world need to mould themselves according to changing times,” he said. More