BRICS energy ministers to discuss cooperation in the wake of tariffs turmoil

BRICS energy ministers are scheduled to meet May 19 in the group's first energy-focused ministerial meeting since US President Donald Trump took office.

The meeting takes place at a time when Trump's trade policies have triggered global economic volatility and changed the dynamics between the US and its global trade partners. This could accelerate some BRICS member countries' efforts to turn away from Western financial institutions and the dollar, and increase energy trade within the group.

Following the expansion to include OPEC members Iran and the UAE at the beginning of 2024, BRICS' energy footprint has increased significantly. Saudi Arabia was also invited to join but has yet to confirm membership. If Saudi volumes are included, the group accounts for 40% of global crude production and a similar level of global liquids demand.

BRICS also includes Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia and Brazil, which is the BRICS chair for 2025.

In the lead-up to the meeting, Brazilian President Inacio Lula da Silva visited China and Russia, where he discussed BRICS and energy cooperation.

"At a time when geopolitical tensions and trade wars threaten international stability, Brazil's commitment to BRICS is driven by a focus on dialogue and the diversification of alliances, both as a political choice and a strategic necessity for multilateralism," the Brazilian government said in a statement May 14 following these visits.

Analysts see member countries' different economic situations and priorities as a barrier to groupwide cooperation agreements, although some areas of bilateral trade are growing significantly.

"Since 2022, BRICS countries have become the main consumers of Russian energy -- not so much out of geopolitical loyalty, but because of the generous discounts. This shift has been largely transactional rather than strategic," Tatiana Mitrova, a research fellow at Columbia University Center on Global Energy, said.

Sanctioned due to its full-scale invasion of Ukraine in 2022, Russian crude has traded at major discounts, leading non-sanctioning countries such as China and India to capitalize on cheap supplies.

Platts, part of S&P Global Energy, assessed Russia's key crude grade, Urals, at a discount of $13/b to Dated Brent on May 15. At times, this discount has been over $40/b.

Roukaya Ibrahim, commodity and energy strategist at BCA Research, said that the incentive to join BRICS is to strengthen economic and trade ties with its member states.

"BRICS countries contributed meaningfully to the UAE's export growth over the past few years," she said. "China and India are among the top buyers of its crude oil -- the UAE's top product export. Similarly, China and India are among the top destinations for Iran's exports."

De-dollarization

Some BRICS members have long sought to increase trade that avoids the dollar and Western financial platforms. In recent years, geopolitical factors, including sanctions and the rise in global trade tensions, have added further incentives to seek alternatives.

However, analysts see major barriers to these efforts, including which alternative currency to choose, issues relating to currency convertibility and exposure to currency exchange rate fluctuations.

"The bottom line is that oil is still quoted in dollars -- of course, countries may want to choose to receive or pay in a different currency, but that just means you are adding a FX layer on top of the transaction," Harry Tchiliguirian, group head of research at Onyx Capital Advisory, said.

Ideas tabled for energy cooperation within the group include joint infrastructure projects, a joint commodities trading platform, closer cooperation on carbon trading and investment via the BRICS investment bank.

Officials from BRICS countries have pushed for further expansion of the group, which could increase its global energy footprint. It added the option to become a partner country in 2024. Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Uganda and Uzbekistan have joined as partners.

The next BRICS leaders' summit is scheduled to take place in Rio de Janeiro on July 6-7, when trade cooperation and further expansion will be discussed.