The move by the Brics group to expand the bloc to include six other nations, including the UAE and Saudi Arabia, has the potential to herald a "different world order", according to analysts.
Other nations that have received an invite to join the bloc include Egypt, Iran, Ethiopia and Argentina, South African President Cyril Ramaphosa said on Thursday.
He said the new members would be formally admitted on January 1.
The expansion of the bloc, comprising Brazil, Russia, India, China and South Africa, has topped the agenda at a three-day summit in Johannesburg ending on Thursday.
The bloc already accounts for about 43 per cent of the world's population, an estimated 14 to 16 per cent of international trade transactions, and between a quarter and a third of global gross domestic product.
"Expanding the Brics to include six new members, including the UAE and Saudi Arabia from the GCC, underscores the potential for the expanded bloc to become the architect of a different world order - one that reflects the shift in global economic and financial geography towards the East," president of Nasser Saidi and Associates, Nasser Saidi, and its director of macroeconomics, Aathira Prasad, said.
"Joining the group will allow these GCC nations to diversify strategic alliances and also help set a global policy agenda.
"There are many economic challenges that are common to this set of nations including impact from climate change, energy transition, infrastructure for development, poverty as well as growing inequality across and within nations - being part of the bloc will enable these nations to tailor solutions according to their needs and interests."
The inclusion of key energy exporters such as the UAE and Saudi Arabia into Brics "increases the size and the economic clout of the group as it looks to expand and grow in influence", said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
"It is positive that the UAE will be part of an expanding group that includes the largest emerging market economies, especially given its position as a global trading and services hub. The UAE will be able to be part of the discussions and development of the group. The UAE’s position as an net capital exporter will also be important," she said.
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Sheikh Abdullah bin Zayed, Minister of Foreign Affairs, meets India's External Affairs Minister Subramanyam Jaishankar on the sidelines of the 'Friends of Brics' meeting in Cape Town, South Africa. All photos: Wam -
Sheikh Abdullah with Russian Foreign Minister Sergey Lavrov -
Sheikh Abdullah represented the Emirates during talks with foreign ministers from the Brics group of nations -
Sheikh Abdullah with Mr Lavrov and other ministers -
Sheikh Abdullah speaks with Hossein Amirabdollahian, Iran's Minister of Foreign Affairs, on the sidelines of the Brics meeting
Edward Bell, head of market economics at Emirates NBD, said one closely-watched development will be whether member countries take steps to enhance bilateral payments that would help to facilitate trade.
"China and India are among the largest trade partners of both the UAE and Saudi Arabia and measures to improve trade systems would be a long term positive for the economies involved," he said.
Saudi Arabia and the UAE are already among the largest trading partners of the Brics in the Middle East and joining the group facilitates further expansion in trade and supports their economic diversification strategies, added Mr Saidi and Ms Prasad.
"The newly expanded bloc can follow the precedent set by the UAE and India and use local currencies for trade financing and settlement," they said.
Last week, India and the UAE began settling bilateral deals using local currencies as part of an agreement signed earlier this year.
The first crude oil transaction under the local currency settlement system took place between Adnoc and the Indian Oil Corporation, according to the Indian embassy in the UAE.
The transaction involved the sale of about a million barrels of crude oil, with Indian rupees and dirhams used.
"The implication we are watching closely ... is the potential for more bilateral trade in local currencies, particularly following the UAE and India's agreement reached in July and Egypt being in similar discussions with India already," said Carla Slim, an economist at Standard Chartered Bank.
The enlargement of the Brics is driven by the desire to build an "alternative to an international system centred on US hegemony", said Hasnain Malik, head of equity research at Tellimer Research.
"A distinction should be drawn between the use of the US dollar as a trading currency, which may erode as many seek an alternative, and as a reserve currency," he said.
ADCB’s Ms Malik added: "we do not expect to see a formation of a new Brics currency in the foreseeable future, though greater integration could help with some reduction in the USD as a trading currency."
Alia Moubayed, managing director at Jefferies, said the expansion of Brics, "is a reflection of the continuing changes in the geoeconomic landscape".
"Saudi Arabia, UAE and Egypt want to benefit from and embrace those changes, and their inclusion in the Brics will consolidate the group’s effort at reforming the global financial architecture down the line, given their geopolitical and geoeconomic clout,” she said.
