The BRICS bloc of countries led by China and Russia want to upend the U.S. dollar. Indeed, South Africa’s ambassador to the group could not have been clearer last month when she said, “The days of a dollar-centric world is over. That’s a reality. We have a multipolar global trading system today.”
BRICS is an acronym coined in 2001 by Jim O’Neill, former managing director of Goldman Sachs’ Global Investment Management division, in his seminal paper in which he predicted that the budding economies of Brazil, Russia, India and China (and now includes South Africa) would surpass the world’s top economic superpowers of the G-7 in the years ahead.
Formed in June 2009 at their its summit held in Yekaterinburg, Russia, the group accepted South Africa as a full member in September 2010. Its officially stated mandate is “restructuring the global, political, economic and financial architecture to be more equitable, balanced and representative.”
The leaders of the five nations seeking to upend the West’s dominance in global affairs will gather on Aug. 22-24 for their 15th summit, minus Russian President Vladimir Putin, who will be represented by Foreign Minister Sergei Lavrov due to Putin facing an arrest warrant from the International Criminal Court for war crimes in Ukraine.
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A top item, which undoubtedly will underpin all the discussions – while officially not on the agenda, according to South Africa’s ambassador – will be the creation of a new international currency. It is the bloc’s strategic ambition to stand up a joint BRICS monetary unit, akin to the Euro, which eventually would replace the U.S. dollar as the premier currency of international reserves and medium of exchange.
How else can one possibly achieve the goal of remaking the world’s existing geopolitical and economic structure? Why would anyone embark on such an ambitious project? And should the United States and its Western allies be worried?
The major move among non-Western countries towards de-dollarization has gained much momentum in the past year and a half. It is a direct result of what many analysts call the “weaponization” of the U.S. dollar by the U.S. government that levies economic sanctions on countries that Washington doesn’t agree with politically.
Economic sanctions have been employed by the U.S. for decades. Cuba, for instance, has been sanctioned for more than 60 years and Iran for more than 40. This practice has reached unprecedented levels, however, in the aftermath of Putin’s invasion of Ukraine to punish Russia as the White House seized $600 billion of its central bank’s assets in U.S. dollars, a move that even Treasury Secretary Janet Yellen called illegal in 2022. In addition, the Russian economy was cut off from SWIFT, the international money transfer system.
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Washington’s policy of using the U.S. dollar as the non-kinetic, economic warfare tool to change Putin’s behavior – although it hasn’t worked since 2014 – prompted many non-Western countries to seek ways to reduce their dependence on the dollar. Many are eager to join BRICS for that reason, a trend that is highly welcome by China – the key driving force within BRICS – whose grand plan is to replace the United States as the military and economic superpower by 2049.
More than 40 countries have recently expressed interest in joining the block in an effort to reduce the currency risk and bypass U.S. sanctions, if necessary. These aspirants include both foes as well as Iran, Saudi Arabia, Egypt, Indonesia and Argentina. The message is clear: The non-Western world wants to keep business and economics separate from politics and ideology. It is ready to challenge the Western international norms that have governed global trade and finance since 1944 when 44 nations, including the Soviet Union, founded the Bretton Woods system that includes the International Monetary Fund and the World Bank.
Is this threat to U.S. economic hegemony as real as Moscow and Beijing, who have been pushing the “multipolar world” narrative for years, want you to believe? The two authoritarian regimes have joined forces to challenge U.S. policy at every corner, eager to dethrone the dollar.
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Here are the facts. Global trade still runs on dollars, with 88% of international transactions conducted in greenbacks with the dollar accounting for 58% of global foreign exchange reserves. To end the dominance of the premier fiat currency that is the almighty dollar, one needs much more than big ideas, highfalutin talk and pompous gatherings.
First and foremost, you need the rule of law, and you need credibility – both in extremely short supply with the two key members of BRICS, Russia and China, both ruled by dictatorships that appear unaccountable to any law. Who in their right mind would trust their hard-earned assets to be held in a currency over which Xi or Putin preside?
According to Morgan Stanley’s recent report, “The U.S. dollar remains the world’s primary way to buy, sell and estimate the value of goods and services.” It continued, “While the fears of de-dollarization may help bolster the status of other currencies,” supplanting the dollar as the dominant global reserve currency “would likely take decades.”
This doesn’t mean that Washington decision-makers should discount de-dollarization as a ridiculous idea and continue their business as usual of using and abusing the dollar for non-economic purposes.
BRICS, which accounts for a quarter of the global economy and 42% of the global population, is the most significant economic and geopolitical bloc today, and it’s a de facto rival to the G-7. It’s fears, concerns and ambitions are real. BRICS’s rapid expansion is a direct result of Washington’s misguided policies.
The next time the White House decides to seize a yacht of another Russian billionaire in a futile attempt to compel Putin to halt his atrocities in Ukraine, it must remember Yellen’s warning. She said, “It’s not something that is legally permissible in the United States,” referring to Washington lacking legal authority to seize Russian frozen central bank assets. After all, trust and the rule of law is what attracted global market participants to the American greenback in the first place.
