Energy Policy & Regulation

Brazil, Russia, India, China, and South Africa have announced plans to invite six additional countries to join the BRICS grouping next year, marking a significant shift aimed at establishing a geopolitical counterweight to the G7 and reducing reliance on Western financial systems. This expansion brings together key mineral resource holders, major oil producers, and rapidly growing energy consumers, which could have profound implications for energy investment and trade on a global scale.

Initially formed in 2009 with four countries, BRICS welcomed South Africa a year later. Recently, Chinese President Xi Jinping proposed expanding the group to challenge the G7's influence. Following this initiative, 23 countries applied to join, and BRICS leaders selected six: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). This marks a significant change for the bloc, which had added only one member in the past 13 years, creating a more heterogeneous group with diverse economic outputs and trade relationships.

The expanded BRICS is expected to adopt strategies similar to the U.S.-led Minerals Security Partnership (MSP), which aims to enhance critical energy security among allies. Argentina's inclusion is particularly noteworthy, as it possesses the third-largest lithium reserves in the world, with projections suggesting it could become the second-largest lithium producer by 2027. This positions BRICS favorably in the global lithium market, alongside existing major producers like China and Brazil. Additionally, Saudi Arabia's investments in critical minerals in Brazil underscore the bloc's commitment to strengthening supply chains for essential resources.

With the inclusion of Saudi Arabia, the UAE, and Iran, the expanded BRICS will account for 42 percent of global oil supply, potentially reshaping energy markets. While oil market management will continue to be overseen by OPEC and allied producers, this enlarged grouping could influence future energy dynamics. As sanctions against countries like Iran and Venezuela have led to shifts in investment and export flows, the expanded BRICS presents a platform for oil and gas producers and consumers, including China and India, to explore alternatives to dollar-denominated trade. Although the full internationalization of non-dollar energy transactions remains a complex challenge, the expansion signals a growing inclination among nations to diversify away from the U.S. financial system.