Growing BRICS Economic Bloc Takes Steps Towards Global De-Dollarization
By Doug Young – 14 September 2023
Introduction
The annual BRICS Summit 2023, which brings together Brazil, Russia, India, China, and South Africa, recently concluded with a clear focus on reducing reliance on the U.S. dollar and promoting the use of national currencies in international trade.
As the economic power of the BRICS nations continues to rise, their efforts towards de-dollarization are gaining momentum, potentially challenging the long-standing dominance of the dollar in global transactions.
BRICS Summit and De-Dollarization Initiatives
During the Summit, the leaders of the BRICS bloc emphasized their commitment to de-dollarization initiatives. The primary objective was to discuss strategies to decrease dependence on the U.S. dollar, which is seen as a symbol of Western economic dominance.
By promoting the use of national currencies, the BRICS countries aim to establish themselves as an economic counterweight to the West and enhance their economic sovereignty.
Expanding BRICS Membership and Collective Economic Power
In a significant move, the BRICS bloc decided to expand its membership for the first time in 13 years. More than 40 nations expressed interest in joining, with 22 formal applications received. Invitations were extended to six countries, including Iran, Egypt, Ethiopia, Argentina, Saudi Arabia, and the United Arab Emirates.
This expansion strengthens the collective economic power of the BRICS nations, potentially making de-dollarization efforts more effective.
Implications of BRICS’ Control Over Oil and Gas
One of the key factors behind the BRICS bloc’s push for de-dollarization is its control over global oil and gas supply. With China and India being the largest and third-largest importers of crude oil, respectively, the recent inclusion of oil-producing nations such as Saudi Arabia, the UAE, and Iran within the BRICS bloc further solidifies its control.
The larger bloc now commands more than 40% of global oil supply, over 50% of gas reserves, and more than 70% of the world’s Rare Earth minerals. This enhanced control over vital resources reduces the BRICS countries’ reliance on the U.S. dollar in energy trade.
Embracing National Currencies for International Trade
While the possibility of a common BRICS currency remains uncertain, the bloc is actively moving towards trading in national currencies. For instance, India and the United Arab Emirates recently struck a deal allowing India to pay for its oil imports from the UAE in rupees.
This move not only reduces their reliance on the petrodollar arrangement but also signifies a broader trend of major commodity exporters and importers seeking to reduce dependence on the U.S. dollar.
Analyzing the Potential for a Common BRICS Currency
Experts suggest that the hype surrounding a common BRICS currency may be premature and impractical. However, trading in national currencies is becoming a reality, as BRICS countries seek to enhance economic cooperation and reduce exposure to Western financial systems.
While a unified currency may be a long-term ambition, the immediate focus is on strengthening bilateral trade relationships and increasing the use of national currencies in cross-border transactions.
BRICS Expansion as a Geopolitical Coalition
The expansion of the BRICS bloc after more than a decade is seen as a significant development with potential geopolitical implications. According to the Atlantic Council, this expansion could transform the BRICS bloc into a more powerful coalition, accelerating the process of de-dollarization.
The shift towards a multi-polar world order is gaining momentum, challenging the existing global economic hierarchy.
Conclusion and Future Outlook
The BRICs bloc’s efforts towards global de-dollarization mark a significant shift in the international economic landscape. As the BRICS nations continue to strengthen their economic ties, their collective power and influence grow.
While the journey towards a common currency may be long, the increasing use of national currencies in trade and the expansion of the bloc signal an evolving world order.
The global community must keep a close eye on these developments, as they have the potential to reshape the global financial system and impact the future of international trade.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any government or financial institution.