The Shanghai-based New Development Bank (NDB), often referred to as the “BRICS bank,” is in substantive dialogue with Saudi Arabia about potential membership.
If successful, Saudi Arabia would become the ninth member of the influential financial institution. This critical move could solidify the bank’s funding capabilities, particularly as Russia, a founding member, grapples with the impact of global sanctions.
Deepening economic ties in the global south
This development comes at a moment when the Saudi Kingdom seeks to reinforce its relations with some of the world’s largest developing economies.
The NDB was established as an alternative to Western-led Bretton Woods institutions and has already made significant strides in asserting its influence in the global financial system.
If Saudi Arabia joins the ranks, it would deepen ties with the world’s second-largest oil producer, a strategic economic ally in the global south.
Saudi Arabia’s potential membership in the NDB arrives as the financial institution undergoes a critical review of its funding sources. This introspection has been triggered by the effects of Russia’s invasion of Ukraine.
The timing of Saudi Arabia’s potential membership is also noteworthy, as the country, a top global crude oil exporter, has been cultivating closer relations with China.
The mutual admiration between Riyadh and Beijing was palpable during Chinese president Xi Jinping’s recent visit to Saudi Arabia. In March, China successfully mediated an agreement between Saudi Arabia and Iran to resume diplomatic relations, signaling a “new era” in their bilateral ties.
Financial fortification and geopolitical realignment
In its short history since 2015, the NDB, set up by the BRICS countries – Brazil, Russia, India, China, and South Africa – has extended loans worth $33bn to over 96 projects in its five founding member nations.
It has also broadened its member base to include the United Arab Emirates, Egypt, and Bangladesh. If Saudi Arabia were to join this club, it would become yet another deep-pocketed shareholder that would help buffer the NDB’s finances at a time when resource mobilization has become a prominent challenge.
The NDB has had to pause its exposure to Russia, amounting to $1.7bn or about 6.7% of its total assets. In the wake of the geopolitical conflict in Ukraine, Saudi Arabia’s membership would represent a much-needed reinforcement of the bank’s economic base.
Moreover, the inclusion of Saudi Arabia, a titan in the global energy markets, could redefine the dynamics of energy collaboration among BRICS countries.
It could potentially lead to an increase in trade and investment opportunities within the group, and potentially enable BRICS nations to exert a more significant influence over global energy policies.
In a broader context, Saudi Arabia’s potential membership in the NDB could set in motion a shift in global power alignments. Traditionally, Saudi Arabia has maintained strong alliances with Western powers like the United States and the European Union.
But its participation in the BRICS bank might tilt the balance, fostering stronger partnerships within the global south.
The union of Saudi Arabia and BRICS might also trigger a change in the international currency exchange systems, leading to a possible reduction in the dependence on the U.S. dollar for oil and gas trade settlements.
This significant move could mark the dawn of a new financial order, shifting global influence from the West to the East.
