Will Greece Become The Sixth Member Of The BRICs Bank?

Photo courtesy of The Russian International Affairs Council (RIAC)

Russia has invited Greece to become the sixth member of the New Development Bank (NDB), also known as the BRICs bank, the $100 billion bank which will compete against the dominance of the Western-led World Bank and the IMF and become a key lending institution for emerging market nations.

On Monday, Russian Deputy Finance Minister Sergey Storchak invited Greek Prime Minister Alexis Tsipras to join the bank during a phone conversation, according to a statement that was published on Greece’s Syriza party website.

“The Prime Minister thanked Storchak and said he was pleasantly surprised by the invitation for Greece to be the sixth member of the BRICs Development Bank. Tsipras said Greece is interested in the offer, and promised to thoroughly examine it. He will have a chance to discuss the invitation with the other BRICs leaders during the 2015 International Economic Forum in St. Petersburg,” according to the statement.

The final agreement on the establishment of the BRICs Bank was signed in June 2014, in the Brazilian city of Fortaleza. The Bank will become a major multilateral development institution with announced capital of $100 billion. It is being created to finance infrastructure projects in the BRICs countries as well as other emerging market countries. In March, Russian President Vladimir Putin ratified the NDB.

The NDB is expected to start functioning by the end of 2015, although there has been chatter that the bank will begin operations as early as July.

Strengthening Ties

Russia and Greece have been strengthening economic cooperation, as Russia has been stuck in a ‘sanctions war’ with the EU and the U.S. and as Greece is struggling to repay its multibillion euro debt to the troika of international lenders – the IMF, the ECB and the European Commission.

Greece is trying to find a compromise with its international creditors to unlock a further €7.2 billion bailout. So far, Athens has been settling its IMF repayments on time. The nation made a loan repayment of around €750 million ($837 million) in debt interest on Monday, however Greek Finance Minister Yanis Varoufakis warned that Greece’s finances are “a terribly urgent issue,” and that the nation may default by next month, should no proper measures be taken.

The Greek government has agreed to a number of strategic deals with Russia during a recent visit to Moscow by Prime Minister Alexis Tsipras in April, including the participation in the Turkish Stream project which will deliver Russian gas to Europe via Greece.

It was rumored that Russia was ready to assist Athens with its debt, however Russian President Putin said that Greece hasn’t formally asked Moscow for help. Instead of direct financial assistance, Russia could help out by buying Greek state assets in privatization sales, or in other investment projects, the President said in April.

The BRICs grouping of emerging economies — which comprises of Brazil, Russia, India, China, and South Africa — was established in 2010, when South Africa joined Brazil, Russia, India and China in what was previously known as BRIC. The BRICs group represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.