[Salon] Afghanistan And The Potential For BRICS Membership: Capacity, Possibilities, Obstacles, and Prospects

[Chas Freeman <cwfresidence@gmail.com>]

https://www.silkroadbriefing.com/news/2023/06/12/afghanistan-and-the-potential-for-brics-membership-capacity-possibilities-obstacles-and-prospects/

Afghanistan And The Potential For BRICS Membership: Capacity, Possibilities, Obstacles, and Prospects

By Farzad Ramezani Bonesh with additional commentary by Chris Devonshire-Ellis   June 12, 2023

Afghanistan has been under the control of the Taliban since September 2021. The Taliban has announced the Islamic Emirate of Afghanistan, but it has not been officially recognized, although both China and Russia along with other regional players retain dialogue channels. With a population of 40 million, the country is one of the largest in Central Asia, but decades of war have left Afghanistan as one of the poorest and least developed countries in the world.

The Development of BRICS

Meanwhile, the efforts of BRICS to be a key actor in changing global geopolitics, which India’s Foreign Minister Subrahmanyam Jaishankar recently described as “an established feature of the global landscape”, is encouraging a move towards a multipolar system and a platform for mutual respect and understanding, equality, solidarity, cooperation in international forums, maintaining the rules of international law and non-interference in the affairs of other countries.

Consequently, the BRICS’ focus on developing alternative trade and financial channels, promoting economic recovery, diversifying the economy, and minimizing costs is making it increasingly attractive to other nation states. In total, the BRICS grouping as it currently stands accounts for over 40% of the global population and nearly a quarter of the world’s GDP. The GDP figure is expected to double to 50% of global GDP by 2030. Expanding BRICS will immediately accelerate that process.

A recent overview of countries that have lobbied to join an expanded BRICS involves multiple countries – including Afghanistan. An overview of the prospective BRICS Plus member demographics can be seen here and includes Algeria, Argentina, Bahrain, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Saudi Arabia, Senegal, Sudan, Syria, United Arab Emirates, Thailand, Tunisia, Turkiye, Uruguay, Venezuela, and Zimbabwe.

The potential of BRICS, its increasing role in the world economy, the ongoing restructuring of global geopolitics, and the strengthening of economic and financial cooperation have been welcomed by many in Afghanistan.

Although BRICS is not an official alliance, it has shared extensive interests in strengthening economic cooperation. Closer economic relations between BRICS members and essential players in the region, the expansion of Afghanistan’s ties with BRICS members, and the increase in joint projects and investments between the two sides have increased Kabul’s desire to join BRICS.

According to Taliban officials, Afghanistan’s membership in BRICS will provide more legitimacy and security. In fact, strengthening the role of the BRICS New Development Bank (NDB) as an alternative to the overall Western foreign policies, including their roles in directing the International Monetary Fund, and the World Bank are seen as important for most of the membership candidates such as Afghanistan.

The New Development Bank for example has approved more than 90 projects worth US$32 billion to support infrastructure in member countries. In contrast, the United States meanwhile has frozen Afghani assets held overseas and is selling them off to raise money for ‘victims of terrorism’ – mainly Americans killed or who suffered losses in the 9-11 attacks, despite that money actually belonging to the Afghan people. These differences in foreign policy towards Afghanistan (and other countries, including Afghanistan’s neighbour, Iran) are pushing them away from Western involvement and more towards Moscow, Beijing and to some extent New Delhi.

Bolted Onto CPEC

In this regard, Afghanistan’s participation in the BRICS New Development Bank (NDB) allows the bank to be considered one of the basic sources of infrastructure reconstruction and development of Afghanistan’s future infrastructure. That is further supported by China, who along with Pakistan have recently accepted Afghanistan’s proposals to join the China-Pakistan Economic Corridor (CPEC), China’s largest single Belt & Road Initiative project. CPEC is designed to accelerate Pakistan’s move to industrialisation. It is now earmarked for expansion into Afghanistan.

Financing

The formation of alternative payment systems, the gradual development of a non-dollar financial system, the increase of trade with domestic currencies or the creation of a common currency, the weakening of the hegemony of the dollar, and plans to create a new BRICS reserve currency are all motivations for cash-strapped Afghanistan to pay more attention to BRICS and circumventing sanctions.

Solving its liquidity problem, and better dealing with crises through the economy of the BRICS countries is a better help to the Afghan economy amongst the formation of a multipolar economic strategy. The Taliban authorities in Kabul have also tried to reduce dependence and increase domestic production and move dependency away from Western aid, which is often tied to specific conditions. In order to ensure the counties survival, and to offset its economic challenges, the Taliban needs the help of BRICS in both trade and investment. This is especially pertinent as China will not want to absorb all the risk. Yet with Iran, Saudi Arabia and the UAE all potential BRICS members, new supplies of finance could come from the Persian Gulf. India is also a player in this field and an original BRICS member.

Joining the BRICS – and especially an expanded BRICS Plus – would give the Taliban access to new financial resources. By joining BRICS, a country can show itself as independent and rational and prove that the government is economically efficient.

In this regard, the Taliban have been working through Afghanistan’s economic challenges, understand what its assets are, and have stabilized finances and increased food security. That has lead to a host of development meetings and discussions of numerous economic opportunities with all of the BRICS countries – and the potential BRICS plus members – and especially those with Islamic roots.

There is a dawning realisation that an Afghani presence in the BRICS+ framework could create opportunities for closer cooperation with various regional development banks, the BRICS New Development Bank and both help integrate Afghanistan back into the Central Asian landscape. Crucially, doing so would alleviate Chinese and Russian concerns over a resurgence of Islamic fundamentalism.

The BRICS Approach To Afghanistan

Apart from the establishment of “BRICS Plus” in 2017, China previously supported the process of expanding the membership and expanding the cooperation of BRICS.  In early December 2022, Moscow paid attention to the expansion of BRICS members to an organization consisting of 15 members and raised the possibility of integrating itwith the Eurasian Economic Union, Commonwealth of Independent States and the Shanghai Cooperation Organisation.

Prospects for the addition of new members and broader discussions on how to expand membership, pursuing the establishment of principles, standards, criteria, and procedures for the admission process of new BRICS members are now underway.

The inclusion of new BRICS members is seen by Beijing and Moscow as beneficial for a multipolar world and de-dollarization, stabilizing cooperation and even in trade competition with the G20. Both however may see BRICS as more anti-Western, but India is reluctant to follow this perspective. Brazil and South Africa would like to maintain the BRICS brand and property and not as yet have the same tensions with the West over sanctioned countries, although neither have condemned Russia either, despite attempts to have them follow the West’s lead on Ukraine.

Meanwhile, over the past two years, BRICS has expressed concern about the developments in Afghanistan and called for a “trans-Afghan dialogue”, and the need to prevent the use of Afghan soil as a launching pad for terrorist groups and avoid violence.

Last year, the BRICS countries spoke about the importance of the relevant resolutions of the UN Security Council, the fight against terrorism, the fight against drug-related crimes, and the need to provide humanitarian aid to the people of Afghanistan and protect the fundamental rights of all Afghans. In this regard, the BRICS can also call upon cooperation with the Shanghai Cooperation Organisation (SCO) which also includes BRICS members Russia, China, and India, new BRICS Plus members Egypt, and the UAE, and regional SCO participants Iran, Pakistan, Saudi Arabia, Turkiye and Uzbekistan along with Afghanistan, who participates in the SCO as an observer nation.

Challenges

Afghanistan’s nearly US$3 trillion mineral resources are a huge potential economic opportunity for BRICS, although recent estimates suggest just a third of this is immediately accessible, and then only after access construction and bargaining with local Taliban officials.

But despite the economic issues and security threats in Afghanistan, China has established extensive contact with the Taliban in potential investments, Afghanistan’s joining BRI, and other measures. The Taliban signed its first China contract in January this year with Xinjiang Central Asia Petroleum and Gas Company (CAPEIC), a subsidiary of China National Petroleum (CNPC). Worth US$541 million, the agreement is a 25-year contract to extract oil from more than 1,700 square miles of the Amu Darya basin in Afghanistan and provides the Taliban with a 20% stake for no investment, involvement or risk.

But there are many uncertainties, before Afghanistan’s membership is possible, various internal crises must be resolved. Even a framework in the form of BRICS+ is not practically possible at this stage, due to the continuing US sanctions on Afghanistan, making China’s SOEs wary of being caught in secondary measures.

Most BRICS members give priority to economic interests in their foreign policy, and are not keen in undertaking unilateral and extensive economic investments into Afghanistan without maximum negation of risk.

However, there is some trade recovery. The World Bank announced a 90% increase in Afghanistan’s exports of US$1.7 billion in the first nine months of 2022, and from January to June 2022, Afghanistan imported US$2.9 billion worth of goods.

The Taliban called the exports an “unprecedented step” in the history of Afghanistan’s trade, but improvement and increase in exports, an increase in domestic financial income in 2022; the stability of the exchange rate, and the reduction of inflation are all influenced by significant billion-dollar international aid in 2022.

In fact, the downward trend of the economy continues. After 30-35 percent of GDP decreases in 2021, Afghanistan’s GDP may continue to decrease. Afghanistan is one of the countries with the lowest per capita income in the world, and the number of Afghans in poverty may climb to 28-34 million. The sanctions are impacting ordinary men, women and children.

Meanwhile, any reduction in international aid would worsen Afghanistan’s economic outlook, gross domestic product and extreme poverty, and growth for 2023 and 2024. In addition to the banking and currency sanctions placed on Afghanistan, some of the key economic challenges in the financial system are low demand, the chronic shortage of capital and labor, a disorderly banking system, and an excessive reliance on natural resources. This wide variety of economic challenges and risk reduces the motivation of the BRICS members to accept Afghanistan as a partner at even a minimal level.

Despite the steps taken by the Afghan Taliban towards self-sufficiency, the willingness and ability of donors and aid may further decrease and worsen the economy. In addition, the economic future of Afghanistan depends on the recognition of the Taliban. The Taliban is still sanctioned by the United Nations, the resolutions of the United Nations Security Council and is blacklisted by the European Union. This is because it is suspected of being capable of hosting other Islamic militants such as Al Qaeda (who bombed the Twin Towers) in addition to ISIL.

From the point of view of many in BRICS, the Taliban government has no legal capacity due to the lack of international legitimacy, a lack of formation of a comprehensive government, (the Taliban have not yet progressed beyond an ‘interim government’ phase) and an overall lack of international attention, especially as the West is now caught up in a new conflict. This will create additional stresses.

The Afghan-BRICS Vision

By the end of 2023, another twelve countries may officially join the BRICS Plus (which may require renaming the bloc). This requires the determining of membership criteria and can be expected to slow down the membership process, while possibly ushering in alternative formats such as the “Friends Of BRICS” – a phrase already used by the Russian Foreign Minister, Sergey Lavrov this year.

Afghanistan meanwhile is a member of the SAARC Free Trade Bloc, which although somewhat dysfunctional does offer some trade advantages. SAARC includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, with members benefiting from several bilateral and multilateral free trade agreements (FTAs). These also include the India-Afghanistan Preferential Trade Agreement (PTA).

Trade between these countries stood at US$31 billion in 2020. Regional multilateral agreements include the South Asian Free Trade Area (SAFTA), SAARC Preferential Trading Arrangement (SAPTA), and the Asia Pacific Trade Agreement (APTA). India especially is likely to push Kabul to utilise the SAARC mechanisms to increase trade. Pakistan however will do what it can to minimise New Delhi’s clout with Kabul while promoting its own trade agenda. Kabul gets caught in the middle of the India-Pakistan rivalry with both sides cancelling each other out.

Although minimal acceptance as a “partner”, “observer” or “friend” can have various economic consequences for Afghanistan, by following up the determination of principles, standards, criteria, and procedures, the process of accepting Afghanistan may not be realized in the short and medium term. It is more likely to require significant economic reforms and more and longer negotiations for any form of realistic participation.

This means that the complete acceptance of Afghanistan in the core of BRICS in the short term seems highly unlikely, but there are still hopes for Afghanistan’s presence in BRICS+ or BRICS friends in the coming years. Tell-tale signs will be the success – or not – of China’s new BRI adventures in Afghanistan as part of CPEC. If Beijing can pull that off, BRICS Plus for Afghanistan may become a more realistic goal.