BRICS Bank Invite to Greece Has Jim O’Neill Thinking It’s a Joke

Economist Jim O'Neill

Economist Jim O'Neill

Daniel Acker/Bloomberg

Having scratched together the 750 million euros ($845 million) it owes the International Monetary Fund and with a few weeks of cash left in its accounts, Greece is now being invited to join a club with a membership fee running into the billions.

The disclosure this week from Athens that Russia wants to make Greece the sixth member of the BRICS bank sounded like nothing more than a late April Fool’s joke to Jim O’Neill. He’s the former Goldman Sachs Group Inc. economist who in 2001 coined the term BRIC -- Brazil, Russia, India and China. South Africa was subsequently invited to join by the others.

Last year they set up a development bank to rival the IMF. It will have authorized capital of $100 billion with each founding member contributing $10 billion.

So what gives? Certainly Greece, whose economy has shrunk by about a quarter as it became of ward of the euro zone, doesn’t exactly meet the vision laid out by O’Neill to highlight the growing economic weight of developing nations.

A prediction in 2011 his book, “The Growth Map,” was that the BRIC economies would overtake the U.S. in size this year although he has since delayed that until 2017. The group will be as big as the Group of Seven by 2035 in his outlook.

Greek Leverage

The invitation is therefore almost certainly geopolitical. Firming up eastern ties is one of Greek Premier Alexis Tsipras’s few points of leverage with his creditors. Panagiotis Roumeliotis, Greece’s former representative to IMF, has been appointed to explore the possibility of joining the BRICS bank.

Tsipras and Russian President Vladimir Putin met in Moscow last month and Russia later guaranteed to deliver gas for the European market through Greece in five years with a possible advance for transit fees. In return, Putin gets an ally already in NATO and weakens the front opposed to Ukraine policies.

In Moscow, the Finance Ministry didn’t respond to repeated requests for comment by phone. In Athens, a finance ministry spokesman declined to comment.

Greece’s possible entry into the BRICS bank won’t be discussed before a summit of the the five member countries in July, RIA Novosti reported Thursday, citing Russian Deputy Finance Minister Sergei Storchak. The bank is open to any sovereign member of the United Nations, he said, according to the newswire.

For O’Neill, the question is what’s in it for the other members.

“Is it April Fool’s Day?” he said in an e-mail. “I can see why Russia can have the strange motive, but I can’t imagine why the others would agree.”

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