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BRICS Becoming Economic Powerhouse: Petrodollar Under Threat

In its summit in Johannesburg, South Africa this August, BRICS invited six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.

The bloc now represents 37% of global GDP (measured at purchasing power parity, or PPP), as well as 40% of global oil production and roughly 1/3rd of global gas production.

The inclusion of top oil producers like Saudi Arabia and the UAE, which have long priced their crude in dollars, is a direct challenge to the US petrodollar system.

All of the invited nations have indicated that they will officially join the extended BRICS+ bloc on 1 January 2024.

Four of Earth’s top 10 gas producers are now de facto BRICS+ members, making up 32% of global production.

Seven of the world’s 10 largest oil producers are now de facto BRICS+ members. According to 2022 data from the US Energy Information Administration, these include the:

  • second-largest producer (Saudi Arabia)
  • third-largest producer (Russia)
  • fifth-largest producer (China)
  • seventh-largest producer (UAE)
  • eighth-largest producer (Brazil)
  • ninth-largest producer (Iran)

De-Dollarization At The BRICS Summit

A key topic at the Johannesburg BRICS summit from 22 to 24 August was de-dollarization – the international movement of countries seeking alternatives to the hegemonic US currency.

The Russian government has confirmed that some BRICS members are slowly making plans for a new global currency for international trade, to settle balance of payments, and to hold in central bank foreign-exchange reserves.

Brazil’s President Lula da Silva, an original co-founder of the BRICS, used the meeting in South Africa as a platform to call for creating a new international reserve currency, to challenge the dollar.

BRICS has a working group dedicated to developing concrete proposals for this new reserve currency.

Lula emphasized that it would be “a unit of account for trade, which will not replace our national currencies”.

These comments made it clear that BRICS model is not the euro; it is rather something like the bancor, the international unit of account proposed by economist John Maynard Keynes at the 1944 Bretton Woods Conference (which ended up adopting the dollar as the global reserve currency, under US pressure).

Discussions of a new international unit of account are still in the early stages, however, and the currency is only on the horizon in the medium-to-long term.

In the short term, BRICS members voted to increase their use of national currencies in bilateral trade.

The BRICS New Development Bank (NDB), now under the leadership of Brazil’s former President Dilma Rousseff, has promised to gradually de-dollarize the bank’s lending, instead providing financing for projects in the national currencies of members.

BRICS: An Economic Powerhouse

In an August article published before the BRICS bloc announced its expansion, economic geographer Mick Dunford explained:

In 2022, the combined economic output of the five BRICS members, measured in purchasing power parity, exceeded for the first time that of the US-led G7.

At market exchange rates in 2021, the BRICS accounted for 26.1 percent of global GDP and 53.1 percent of world population, compared with 43.5 percent and 9.8 percent for the G7. However, GDP is misleading.

If one examines the production of manufactures, energy and raw materials and food, the BRICS countries account for 36.6 percent, 28.3 percent and 53.1 percent of world output, respectively (compared with 35.5 percent, 28.1 percent and 14.1 percent in the case of the G7).

This contribution to the production of real goods vital for human survival significantly exceeds the BRICS’ share of GDP (without correcting for purchasing power differences which significantly raise its shares) while those of the G7 are much smaller than its GDP share.

The bloc has become a massive economic powerhouse – and is only growing in influence.

China’s President Xi Condemns Us ‘Hegemonic And Bullying Acts’

President Xi Jinping stressed in his speech at the BRICS summit that China does not want a “new cold war”.

Xi called for “win-win cooperation”, guided by the goal of “common prosperity” for all.

At the same time, the Chinese leader warned of the “hegemonic and bullying acts” of “some country” – obviously a reference to the United States.

Xi stated:

We need to promote development and prosperity for all. Many emerging markets and developing countries (EMDCs) have come to what they are today after shaking off the yoke of colonialism. With perseverance, hard work and huge sacrifices, we succeeded in gaining independence and have been exploring development paths suited to our national conditions.

Everything we do is to deliver better lives to our people. But some country, obsessed with maintaining its hegemony, has gone out of its way to cripple the EMDCs. Whoever is developing fast becomes its target of containment; whoever is catching up becomes its target of obstruction.

But this is futile, as I have said more than once that blowing out others’ lamp will not bring light to oneself.

On the sidelines of the summit, Xi also met with Cuba’s President Díaz-Canel. State media reported that Xi pledged that “China will continue to firmly support Cuba in defending national sovereignty and opposing external interference and blockade”.

In a similar vein, Brazil’s President Lula condemned the unjust, Western-dominated international financial system and insisted that countries need “a fairer, more predictable, and equitable global trade”.

“We cannot accept a green neocolonialism that imposes trade barriers and discriminatory measures under the pretext of protecting the environment”, he added.

South Africa Likens Brics To The Bandung Conference

In his speech at the BRICS summit, South Africa’s President Cyril Ramaphosa compared the bloc to the 1955 Bandung Conference, which was organized to oppose colonialism.

“When reflecting on the purpose and role of BRICS in the world today, we recall the Bandung Conference of 1955, where Asian and African nations demanded a greater voice for developing countries in world affairs”, he said.

“We still share that common vision”, Ramaphosa added. “Through the 15th BRICS Summit and this Dialogue we should strive to advance the Bandung spirit of unity, friendship and cooperation”.

Will Argentina Join Brics?

Among the six countries invited to join BRICS+, a question mark is hanging over the head of one.

Argentina’s current, centrist government, led by President Alberto Fernández, has vowed to join BRICS+. However, whether or not the South American country actually does depends on the results of the elections approaching in October.

Two of the three main presidential candidates have publicly stated that they will not join BRICS+: the right-wing candidate Patricia Bullrich and the far-right extremist candidate Javier Milei.

Milei wants to abolish Argentina’s central bank, abandon monetary sovereignty, and adopt the US dollar as the official national currency (while also implementing mass privatizations of state institutions, building private for-profit prisons, and heavily militarizing the country).

When asked if he would consider joining BRICS+ if he won the election, the far-right extremist Milei declared: “Our geopolitical alignment is with the U.S. and Israel. We are not going to align with communists”.

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