A man walks through the meeting hall where the yearly Future Investment Initiative (FII) conference is held in the Saudi capital Riyadh 2023. more than 6,000 delegates are registered for the three-day event that will feature appearances by global banking chiefs and the presidents of South Korea, Kenya and Rwanda, organisers say. Picture: AFP
Image: AFP
The expansion of BRICS+ into the MENA region, with the inclusion of the UAE, Saudi Arabia, and Iran, is reshaping global economic dynamics and investment flows.
The expansion of BRICS+ into the MENA region through the inclusion of the UAE, Saudi Arabia, and Iran marks a significant shift in global economic and financial dynamics. This move is not just symbolic; it has tangible implications for trade, investment, and financial markets, particularly in the context of foreign investor interest in Gulf stocks. Recent reports suggest that foreign investors remain underweight on Gulf equities, despite the region’s economic resilience and diversification efforts. This trend, juxtaposed with BRICS+ ambitions, presents both challenges and opportunities.
The Gulf region has seen impressive economic growth over the past decade, with Saudi Arabia and the UAE leading the charge in diversifying their economies beyond oil. Saudi Arabia’s Vision 2030 and the UAE’s focus on fintech, renewable energy, and logistics are clear indicators of this transition. In 2023, the Saudi stock market (Tadawul) witnessed a 20% increase in foreign ownership, yet international investors still account for only about 14% of market capitalisation. Similarly, the UAE’s Abu Dhabi and Dubai exchanges have been pushing for greater foreign participation, but global funds remain cautious due to geopolitical risks and regulatory uncertainties.
With BRICS+ now incorporating these Gulf powerhouses, the bloc stands to gain significantly by tapping into the region’s vast financial markets. The inclusion of Saudi Arabia and the UAE adds nearly $2 trillion in combined GDP to BRICS+, enhancing the bloc’s economic clout. Additionally, these countries bring deep capital markets, with Saudi Arabia’s Public Investment Fund (PIF) holding assets exceeding $700 billion and the UAE’s sovereign wealth funds managing over $1.5 trillion. If BRICS+ can facilitate greater intra-bloc investment flows, it could create a new financial ecosystem that reduces reliance on Western-led capital markets.
While Iran has long been sidelined by Western financial systems due to sanctions, its integration into a BRICS+ framework provides new opportunities for trade and financial collaboration. Iran’s stock market, which is one of the largest in the Middle East with a market capitalisation of over $200 billion, could benefit from increased liquidity and foreign participation through BRICS+ mechanisms.
The shift also aligns with BRICS+ efforts to de-dollarise global trade. The UAE and Saudi Arabia have already initiated oil transactions in yuan, signaling a move away from the petrodollar system. This trend could extend to stock market investments, where BRICS+ nations may prioritise transactions in local currencies or a BRICS+ financial instrument, further reducing dependence on Western financial institutions.
For MENA economies, deeper integration with BRICS+ offers alternative sources of capital and trade partners, reducing their exposure to Western economic pressures. The Gulf’s capital markets could benefit from increased liquidity, with BRICS+ member states channeling investments into infrastructure, energy, and technology sectors. This could accelerate projects like Saudi Arabia’s NEOM, the UAE’s AI-driven economic initiatives, and Iran’s industrial expansion plans.
However, challenges remain. The Gulf’s financial markets have long been structured to attract Western institutional investors, with regulations and governance models aligned with international standards. BRICS+ financial integration will require aligning these structures with the preferences of new member states, which may have different regulatory approaches.
The potential for BRICS+ to reshape global investment flows is substantial. By leveraging the financial strength of the Gulf while integrating it with the broader economic ambitions of BRICS+, the bloc can create a more multipolar financial system. If foreign investors continue to underweight Gulf equities, BRICS+ nations may step in as alternative investors, driving liquidity and stability in these markets.
The expansion of BRICS+ into MENA represents more than just an economic alliance; it signifies a fundamental shift in how global finance operates. The question is no longer whether BRICS+ can influence global markets—it is already doing so. The real question is how effectively it can integrate its new members into a cohesive financial strategy that benefits all stakeholders involved. If successful, BRICS+ could redefine global capital markets, positioning itself as a serious counterbalance to Western-dominated financial systems.
Written by:
*Dr Iqbal Survé
Past chairman of the BRICS Business Council and co-chairman of the BRICS Media Forum and the BRNN
*Chloe Maluleke
Associate at BRICS+ Consulting Group
Russian & Middle Eastern Specialist
**The Views expressed do not necessarily reflect the views of Independent Media or IOL.
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