YEKATERINBURG, Russia (Reuters) - Despite advance bluster about challenging the financial status quo, the first summit of emerging “BRIC” powers was a muted performance, underscoring the hurdles they face in forging a cohesive bloc.
Gathering leaders from Brazil, Russia, India and China in the Russian city of Yekaterinburg for a few hours on Tuesday was never likely to produce a blueprint for international reform.
But the meeting’s final communique was scant on specifics. It did not mention the creation of a supranational reserve currency to dilute the dominance of the U.S. dollar, an idea Russia had promoted heavily.
“Presidents not taken in by reserve currency,” Russia’s Kommersant daily headlined in a report on the meeting.
Instead, the four disparate emerging market powers presented a broad common front to try to get more say in negotiations with rich powers, said Gregory Chin of York University in Toronto.
“This was to make sure the developing countries’ interests continue receiving attention at the G8 and G20 meetings,” said Chin, who is studying the international roles of the BRIC and other emerging economies.
The next Group of Eight summit for developed powers takes place in Italy in July, and the United States will host the next Group of 20 summit later in the year.
To win real sway, however, BRIC governments need to agree on a shared agenda that goes beyond simply asking for more places at the global top tables.
Sharp differences between them make this difficult.
China, by far the most powerful BRIC nation, was largely silent in Yekaterinburg. It did not echo Russian and Brazilian calls for the BRIC powers to try to loosen the grip of the dollar on the world financial system.
Beijing’s huge holdings of U.S. bonds make it nervous about any tough talk that can drive down the value of those holdings.
The differing agendas were clearly shown when early comments by Russian President Dmitry Medvedev questioning the dollar’s role pushed down the U.S. currency by 0.9 percent against other key units, thereby hurting the value of China’s investments.
Chinese President Hu Jintao’s speech at the summit took only oblique aim at the failings exposed by the international financial crisis and did not directly address the question of alternative reserve currencies.
“Promote diversification of the international monetary system in a steady way and maintain the relative stability of the exchange rates of the main reserve currencies,” Hu said, according to a text of his speech issued by Xinhua news agency.
The differences between China and Russia reflect style as well as substance, said Zhao Huasheng, an expert on the two countries’ ties at Fudan University in Shanghai.
“Russia likes to take a high-profile, assertive stance at events such as this. That’s long been a part of its foreign policy make-up,” said Zhao.
“China prefers a more mild, low-key style ... But that difference in style also reflects different strategic interests.”
China is the world’s largest holder of U.S. Treasuries with $767.9 billion, according to recent U.S. Treasury Department data, while Japan has $686.7 billion.
“Much more reason for Beijing to be cautious, even hesitant, in pushing international reforms,” said Chin. “I think it is safe to say that it would be in everyone’s interests to have China operating as a cautious reformer.”
Potential differences between Russia and China were also visible in policy toward Central Asia, a key source of energy and metals for Europe and Asia.
China announced plans at the Shanghai Cooperation Organization (SCO) summit to give $10 billion of loans to Central Asia, upstaging traditional power Russia whose promises of aid have not been fully delivered amid the financial crisis.
“That raises the stakes for Russia,” said Chris Weafer, chief strategist at Moscow brokerage Uralsib, in a note.
“For while both China and Russia are keen to keep the U.S. and Europe out of the region, Moscow is none too keen to be displaced as the political power in the region by its eastern neighbor.”
The BRIC powers have agreed to continue their four-way courtship next year in Brazil. But how cohesive the nascent bloc is by then will depend on how far it can agree a common agenda.
“Coordination between the BRIC four is still limited to symbolism,” wrote Pang Zhongying, an international relations expert at Renmin University in Beijing in a Chinese magazine this week.
“In many respects, their level of mutual closeness is far lower than their closeness to the West ... The West could easily use conflicts between these forces to weaken their embryonic international coordination.”
Or, as Russian political analyst Mikhail Vinagradov put it in a comment to the Nezavisimaya Gazeta daily: “If with India we have at least some cooperation in the military-technical sphere, it is difficult to imagine what we might want from Brazil.”
Editing by Michael Stott
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