BRICS and the end of dollar dominance: A new economic order or a global gamble?

The power of a currency lies not just in its intrinsic value, but in the trust and systems that nations build around it. (David King Boison)

In the years following World War II, the United States emerged as a superpower in both military and economic terms, ushering in an era that would establish the US Dollar as the world’s reserve currency. This monumental shift didn’t happen overnight; it was the result of strategic moves and economic agreements that rooted the Dollar deeply into the global financial system. The Bretton Woods Agreement of 1944 stands as the cornerstone of this dominance, marking a pivotal moment when the Dollar was pegged to gold, and other major currencies were pegged to the Dollar. This arrangement positioned the US Dollar as a pillar of global stability, fostering a system that promised economic growth and financial security for participating countries. By backing the Dollar with gold, the United States created a currency that was both stable and widely trusted. Countries around the world held Dollar reserves as a hedge against currency fluctuations and to facilitate trade, creating a symbiotic relationship between the US and its allies. However, this also meant that the Dollar was now more than just a national currency—it was a global one. When the US abandoned the gold standard in 1971 under President Richard Nixon, the Dollar’s position did not diminish but rather adapted. The “petrodollar” system took shape as OPEC nations agreed to price oil exclusively in US Dollars. This arrangement gave the Dollar an almost universal role in global trade and solidified its place as the primary reserve currency. Consequently, countries needed Dollar reserves to purchase oil, which created ongoing demand for the currency. This unique position has provided the United States with substantial benefits. It allowed the US to borrow and lend at more favorable rates and to exercise financial influence worldwide. Moreover, it strengthened America’s political leverage, as the Dollar’s centrality gave the US unprecedented control over global financial flows, sanctions, and the international monetary system. This “exorbitant privilege” also allowed the US to run substantial trade deficits without experiencing the same level of economic instability that other nations might face under similar conditions.

Dr. David King Boison: CEO of Knowledge Web Center, Senior Research Fellow CIMAG and Lead Consultant for Vanuatu Trade Commission –Ghana on AiAfrica and AKL Project

However, as BRICS nations and their allies emerge as economic forces, the long-standing Dollar hegemony is now under scrutiny. The BRICS bloc views the Dollar-dominated system as outdated, unfair, and detrimental to their economic sovereignty. BRICS aims to establish a multipolar world that reflects more equitable economic participation and less dependency on a single currency—particularly one that carries the political and economic weight of the United States. Shifts are already visible. China and Russia, for instance, have begun trading in their local currencies, circumventing the Dollar in bilateral trade agreements. This step is emblematic of the BRICS initiative to reduce Dollar reliance and build a financial system that more accurately represents their collective economic clout.

The Rise of BRICS as a Global Economic Force

BRICS, initially formed as a coalition of emerging economies seeking a voice outside Western-dominated institutions, has transformed into a critical player in the international economic landscape. Today, the bloc’s expansion to 24 members signals a shift toward establishing an alternative economic alliance with significant global influence. The bloc’s trajectory from an acronym representing four distinct economies to an expansive coalition encapsulates a shared dissatisfaction with the current global economic structure, specifically its inherent dependence on the US Dollar and Western financial systems. These new members bring diverse economic strengths and ambitions, each contributing unique perspectives and resources, which collectively amplify BRICS’ ability to address global economic disparities. At the heart of BRICS’ growth is its distinct model for development and cooperation, which diverges from the rigid frameworks of Western-led financial institutions like the IMF and World Bank. The New Development Bank (NDB), established by BRICS in 2015, aims to offer financial assistance without the austerity conditions traditionally attached to Western aid. This model has attracted countries like Egypt and Ethiopia, which now see BRICS as a partner for development that respects their sovereignty and economic policies. Furthermore, oil-rich nations like Saudi Arabia and Iran, newly admitted into the bloc, bring the potential for reshaping global energy markets, particularly if BRICS members shift towards trading energy in local currencies or digital currency alternatives. Such a move could disrupt the long-standing petrodollar system and reduce the Dollar’s influence in energy transactions.

BRICS members also share a vision for South-South cooperation, where emerging economies collaborate directly rather than through Western intermediaries. Countries in Africa, Latin America, and Southeast Asia view BRICS as a platform for equitable partnerships that bypass Western control, offering them a more significant stake in their development trajectories. Brazil, for example, has long championed South American inclusion within BRICS, aligning its regional ambitions with the bloc’s overarching goal of reducing dependency on Western economic models. Similarly, India’s promotion of economic inclusivity within the bloc reflects its pursuit of balanced partnerships across Asia and the Indian Ocean, underscoring BRICS’ appeal for countries seeking multipolar cooperation. However, the expansion also brings challenges. As BRICS grows more heterogeneous, its decision-making processes become more complex. While the bloc’s diversity provides strength in terms of resources and global reach, it also increases the likelihood of internal disagreements. For instance, China’s and India’s longstanding border disputes introduce geopolitical tensions that could hinder unified policies within BRICS. Moreover, as BRICS attempts to present itself as an alternative to the G7 and G20, it faces the challenge of maintaining cohesion among member states with divergent political systems and economic priorities. This issue became apparent during discussions around Saudi Arabia’s and Iran’s inclusion, as their ideological differences could create rifts within the bloc.

The recently concluded summit in Russia underscores BRICS’ commitment to evolving as a counterweight to the traditional Western-led order. Russian President Vladimir Putin emphasized the need for BRICS to build a “fairer global financial system,” while Chinese President Xi Jinping highlighted the importance of strengthening ties among developing nations. These leaders’ statements reflect a common BRICS objective to challenge the existing order by creating a parallel network of economic alliances, trade agreements, and financial institutions that bypass Western influence. However, the long-term effectiveness of this coalition will depend on its ability to reconcile internal differences and present a coherent strategy for global economic reform. In essence, BRICS has evolved from a mere economic bloc into a geopolitical alliance that advocates for a multipolar world order. With an expanded membership that includes major oil producers, critical emerging economies, and regional influencers, BRICS is better positioned than ever to push for systemic changes in the global financial landscape. Yet, this expanded influence comes with the responsibility of navigating complex political dynamics and balancing the interests of its diverse members. As BRICS embarks on this path, its impact on global economics will be determined by its capacity to act as a unified force amid the growing demands for a more equitable and inclusive international economic system.

Emerging Currencies and Financial Alternatives

One of BRICS’ most ambitious goals is to reduce global dependency on the US Dollar by exploring alternative currencies for international trade and transactions. This strategy, often referred to as “de-dollarization,” seeks to mitigate the vulnerabilities associated with Dollar reliance, particularly the risks of US sanctions and economic fluctuations tied to the Dollar’s global value. As BRICS expands, the coalition has taken concrete steps to promote financial autonomy by exploring alternative payment systems and currencies, with a growing emphasis on using local currencies in trade agreements and developing digital currency systems. For instance, China has led the charge in developing a viable alternative to Dollar-dominated transactions with its Digital Yuan, an innovation under the banner of Central Bank Digital Currencies (CBDCs). The Digital Yuan allows China to facilitate cross-border transactions outside of Dollar-based systems, enhancing transaction security and efficiency, especially with countries under Western sanctions. Other BRICS members, including India and Russia, are developing similar CBDCs to improve control over domestic monetary systems and secure their financial infrastructure from external pressures. As CBDCs gain traction, BRICS could establish a digital ecosystem that bypasses traditional banking systems, paving the way for a robust and independent financial network within the bloc.

In addition to CBDCs, the concept of using national currencies for trade within the bloc has also gained momentum. China and Russia have already taken steps to settle bilateral transactions in Rubles and Yuan, bypassing the need for Dollars in their trade agreements. Saudi Arabia, a recent BRICS inductee, is reportedly considering options for trading oil in non-Dollar currencies, an action that could destabilize the petrodollar system if adopted on a larger scale. Such a shift would represent a major economic pivot, impacting global currency reserves and potentially weakening the Dollar’s position as the dominant currency in commodity markets. The New Development Bank (NDB), established by BRICS in 2015, is another financial alternative to Western institutions like the IMF and World Bank. Its mandate allows it to provide financial assistance without imposing the strict austerity measures often required by Western lenders, appealing to emerging economies that seek greater flexibility in managing their growth. With new members like Saudi Arabia and the UAE, both with significant financial resources, the NDB could potentially expand its lending capacity and provide a viable option for countries seeking infrastructure and development funding outside of traditional Western sources. By expanding its capital base, the NDB aims to support infrastructure projects, renewable energy initiatives, and sustainable development across the Global South, further reducing dependency on Western-dominated financial systems. However, establishing a BRICS-backed global currency presents challenges. For one, significant infrastructure investment is required to create a seamless, interoperable financial system among countries with diverse economic structures and monetary policies. Moreover, while China’s Renminbi has been suggested as a potential BRICS-wide currency, concerns about China’s economic dominance and political influence have prevented full consensus. Many BRICS members, such as India, are wary of a system where China holds disproportionate control, advocating instead for a multi-currency framework that allows for balanced representation.

The introduction of digital currencies like the AKL Lumi, which is gaining traction within the African continent, represents another avenue for reducing Dollar reliance. Backed by the African Diaspora Central Bank, the AKL Lumi provides a regional currency option for African nations, promoting intra-African trade without the need for US Dollar conversions. By utilizing the AKL Lumi for trade within Africa, member countries can build more resilient, localized economies, which aligns with BRICS’ goal of creating a more decentralized global financial system. Despite the promise of financial alternatives, significant hurdles remain. Cross-border digital currency transactions require stringent cyber-security measures, particularly as BRICS members navigate sanctions, economic pressures, and political tensions from the West. Moreover, interoperability between CBDCs from different BRICS nations is essential to creating a seamless network for trade within the bloc. Without such coordination, individual digital currency initiatives risk becoming isolated, limiting their impact on global financial dynamics. The adoption of these financial alternatives reflects a shared determination among BRICS nations to assert economic independence and challenge the existing Dollar-centric financial order. While the Dollar remains deeply entrenched in global markets, BRICS’ initiatives in developing CBDCs, promoting the use of local currencies, and supporting the AKL Lumi reveal a deliberate, strategic approach to creating a financial ecosystem less vulnerable to external influence. This strategy not only advances BRICS’ economic goals but also offers a potential model for other emerging economies exploring paths toward financial sovereignty in a multipolar world.

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