In response to the dollar’s dominance, BRICS nations have been actively increasing their gold reserves, marking a deliberate shift towards reducing their reliance on the US currency. This trend reflects a broader desire among countries to explore alternative financial systems
The BRICS annual summit, took place in Kazan, Russia, from October 22 to 24, 2024, was set to be a significant event in the realm of international finance and geopolitics. This year, the spotlight is on a bold initiative proposed by Russia and China aimed at reshaping global trade dynamics. The BRICS bloc is advocating for the development of alternative systems for monetary transactions that would utilize their national currencies, thereby reducing reliance on the US dollar. This proposal emerges in the context of growing concerns about the dollar’s role as a political weapon, particularly as the United States has increasingly employed sanctions and asset freezes against nations that challenge its policies.
Experts suggest that such tactics may have contributed to a decline in global trust in the dollar, fueling a broader movement towards de-dollarization. For nearly eight decades, since the establishment of the Bretton Woods system in 1944, the supremacy of the US dollar has granted the United States considerable influence over the policies of developing countries, especially in the Middle East. This dominance has not only been bolstered by economic might but also by military power, technological superiority, and control over critical natural resources. As BRICS members explore alternatives to the dollar, the implications for global financial stability and international relations could be profound.
Despite its challenges, the US dollar’s position as the foremost global reserve currency remains a cornerstone of American power, particularly over emerging markets. This fact has been starkly illustrated over the past year, as the international community has grappled with an inability—or unwillingness—to confront US policies and intervene effectively in the ongoing crisis in Gaza. The influence of the United States extends deeply into the Arab world, where it has strategically utilized foreign and military aid to reinforce relationships with economically vulnerable nations like Egypt, Jordan, and Iraq. Meanwhile, wealthier states such as Saudi Arabia and the UAE have opted to safeguard their strategic partnerships with the US, resulting in minimal efforts to address the humanitarian crises unfolding in Palestine and Lebanon.
In response to the dollar’s dominance, BRICS nations have been actively increasing their gold reserves, marking a deliberate shift towards reducing their reliance on the US currency. This trend reflects a broader desire among countries to explore alternative financial systems. Moreover, some members of the European Union, including voices from Germany’s foreign ministry, have emphasized the need to establish an EU-centric payment framework that functions independently of both the dollar and US influence. While the dollar still accounts for approximately 90 percent of currency trading globally, its share of international foreign exchange reserves hit a two-decade low in 2022, signaling a potential shift in the landscape of global finance. As countries seek to navigate this evolving economic terrain, the implications for US influence and the future of international monetary policy could be profound.
Since its establishment in 2009, BRICS has championed the principles of a multipolar world and advocated for a fair global financial and trade framework that resonates with the ambitions of the Global South. Presently, the member nations are engaged in discussions about developing a new reserve currency, a move intended to bolster their economic independence. In light of ongoing US-supported conflicts in the Middle East, there is an increasing expectation that a significant decline in the dollar’s supremacy as the principal global reserve and trade currency could diminish its detrimental influence worldwide. This situation raises a critical question: is it possible for the aspirations of the Global South to successfully challenge and ultimately displace the US dollar from its dominant position? The outcomes of these deliberations may well redefine the balance of power in global economics and politics.
The BRICS coalition is on the verge of mounting a substantial challenge to the US dollar’s long-standing dominance in global finance. This initiative is fueled by a concerted effort to increase their reserves of gold and other significant currencies, such as the Chinese yuan, alongside forging trade agreements that bypass the dollar entirely. The founding nations of BRICS, particularly Russia and China, have demonstrated a clear aversion to US policies, a sentiment that is driving their strategic push towards greater economic autonomy.
In the wake of the US government’s freezing of $300 billion in Russian liquid foreign exchange reserves following Russia’s invasion of Ukraine in 2022, President Vladimir Putin has publicly advocated for a shift towards investments in tangible assets like gold and oil. By 2024, it is projected that the central bank gold reserves of BRICS nations, along with Egypt, will account for more than 20 percent of the global total. Among these countries, Russia, India, and China are notable leaders, ranking within the top ten for central bank gold holdings.
Although the US dollar has maintained its supremacy for over eighty years, its proportion of global monetary reserves has steadily declined from about 73 percent in the early 2000s to approximately 58 percent today. This downward trend indicates a growing preference among countries for gold and alternative currencies, suggesting a potential shift in the global financial landscape.
Several nations have drastically cut their holdings of US Treasury bonds, with Russia and Turkey even eliminating theirs entirely. In the last decade, traditional major holders—including Japan, China, Russia, Saudi Arabia, and the UAE—have collectively slashed their investments by $2 trillion. This decline is occurring alongside a dramatic increase in US public debt, which has more than doubled from $17.8 trillion to over $35 trillion. However, the value of Treasury securities owned by foreign investors has stagnated at around $8 trillion, reflecting a significant decrease in the share of US bonds held by non-Americans, which has plummeted from 45 percent to 23 percent.
The United States has employed a dual strategy—often characterized as a carrot-and-stick approach—to enforce its policies in the Arab world. Regimes that align closely with US interests have been rewarded with substantial aid, essentially functioning as a form of bribery. For instance, Egypt has received $1.3 billion annually in military assistance since the 1979 peace treaty with Israel, which has helped to maintain its alignment with US objectives in the region. Conversely, the US has not hesitated to impose punitive measures on countries that pursue independent policies. A clear example of this is the exclusion of nations like Iran from the SWIFT payment system, severely limiting their ability to conduct international banking transactions and constituting a significant blow to their national sovereignty.
Washington has also weaponized direct sanctions against regimes that resist its policies, targeting their investments in the US and allied markets. Nations such as Iran, Syria, and Iraq have borne the brunt of these tactics. The efficacy of these measures is largely attributed to the dollar’s dominance in the global financial system. Meanwhile, the last BRICS summit, which included participation from 32 countries, reflected a growing interest in exploring alternatives to US-led financial frameworks, as more than 30 nations had expressed a desire to join or collaborate with the bloc.
The agenda at the BRICS summit includes a strong emphasis on promoting the use of local currencies for intra-group trade, even extending this approach to non-member nations. To further this objective, the bloc has put forth a proposal for a Cross-Border Payment Initiative (Bcbpi) designed to diminish reliance on existing cross-border payment systems and to facilitate the use of national currencies in international transactions.
In a notable development, BRICS has announced plans to create an alternative to the US-controlled SWIFT system, which would allow member countries to conduct payments between their central banks without obstruction. This initiative aims to incorporate blockchain technology and central bank digital currencies (CBDCs) to enhance efficiency and security in these transactions. While it remains uncertain whether the establishment of a unified currency among BRICS nations is being considered, such a move would significantly weaken the US dollar’s dominance in global finance. Optimistic analysts contend that BRICS could become a key player in challenging the dollar’s supremacy.
During the August 2023 summit in Johannesburg, BRICS made a significant move by inviting six new countries to join, ultimately welcoming four new members: Egypt, Iran, Ethiopia, and the UAE. Argentina chose to decline the invitation, while Saudi Arabia remains undecided about its potential membership. With this expansion, BRICS Plus now encompasses around 46 percent of the global population and accounts for 28 percent of the world’s economy. When assessed on a purchasing power parity (PPP) basis, the bloc’s GDP reaches 35 percent, surpassing that of the G7, which stands at 30 percent. Furthermore, BRICS nations collectively control 47 percent of the world’s oil reserves and 50 percent of natural gas reserves, highlighting their significant influence in global energy markets.
In this context, BRICS members are actively working to strengthen inter-trade relationships by utilizing local currencies in place of the US dollar, particularly for energy transactions. The current petrodollar system relies solely on the dollar for such trade; however, BRICS countries are key players in this market, and their influence may grow further if Saudi Arabia decides to join the bloc. Additionally, BRICS has launched the New Development Bank, aiming to serve as a counterweight to the World Bank and the International Monetary Fund (IMF), further demonstrating its ambitions to reshape global financial architecture and reduce dependency on Western-dominated institutions. Through these strategic initiatives, BRICS seeks to enhance its economic autonomy and assert its role as a significant force in the international arena.
While BRICS nations may have differing opinions on the establishment of a unified currency, there is a shared understanding of the necessity to diminish their reliance on the US dollar. As the United States grapples with growing international isolation due to its steadfast support of Israel, many Arab nations perceive the weakening dollar as a potential harbinger of the decline of US global supremacy. A decreased dollar value could compel the US to reconsider its extensive financial support for military operations in Palestine and Lebanon.
Nevertheless, BRICS alone cannot dictate changes to US policies in the Middle East. It is essential for Arab nations to implement strategic measures aimed at reducing their economic dependence on the US, particularly those nations that peg their currencies to the dollar, such as Kuwait. Additionally, enhancing gold reserves, in line with the approaches taken by China, India, and Turkey, would be a prudent step. Forming alliances with major economic blocs like BRICS is another crucial avenue, as demonstrated by Iran, the UAE, and Egypt.
Achieving these objectives necessitates a fundamental shift in the mindset of Arab governments, a daunting task given the current geopolitical climate. Such transformation may require a resurgence of grassroots movements akin to a new Arab Spring, highlighting the urgency for strategic reevaluation and action to facilitate this change.
Mohammad Waliu... |
