On the last day of the BRICS summit in Johannesburg, South Africa, the five founding states (Brazil, Russia, India, China, and South Africa) welcomed six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). The BRICS partnership now encompasses 47.3 percent of the world’s population, with a combined global Gross Domestic Product (by purchasing power parity, or PPP,) of 36.4 percent. In comparison, though the G7 states (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) account for merely 10 percent of the world’s population, their share of the global GDP (by PPP) is 30.4 percent.
The first day of the BRICS summit in Johannesburg saw calls for a more democratic global economic order with greater participation of countries from the Global South. South African President Cyril Ramaphosa set the tone by underlining that BRICS stands for inclusiveness and transparency in its development agenda and must continue to do so. Speaking on the second day, Indian Prime Minister Narendra Modi also said that India fully supports the expansion of the bloc, adding that it welcomed “moving forward with consensus on this.” India also reiterated its proposal for the African Union’s membership in the G20.
The United States is negotiating behind the scenes with Saudi Arabia, pressuring the country to keep selling its oil in dollars. Washington is concerned that Riyadh may price its crude in other currencies, particularly China’s renminbi. Saudi Arabia is one of the world’s top three oil producers. Since the 1970s, Riyadh has agreed to sell its crude in dollars, helping maintain the greenback’s hegemonic status as the global reserve currency. The Wall Street Journal reported that the US is working on a diplomatic deal in which Saudi Arabia would agree to normalize relations with Israel’s apartheid regime.
The second Russia-Africa Summit For Peace, Security, and Development concluded in the Russian city of St. Petersburg on July 28. The two-day meet was attended by official delegations from 49 African countries and included 17 heads of state. The summit yielded various agreements and a joint declaration for cooperation on issues including security, trade, energy, and climate change. “All our states confirmed their commitment to the formation of a fair and democratic multipolar world order based on the universally recognized principles of international law and the UN Charter,” Russian President Vladimir Putin said in a press statement after the conclusion of the summit.
In September 2006, at the UN General Assembly, the foreign ministers of Brazil, China, Russia and India began to outline what would become a major trade and monetary support agreement. In 2010, during a meeting of the presidents of these countries in Brasilia and a year later in China, what is now known as the BRICS was ratified and began to take shape, with South Africa joining the group. Initially the BRICS countries showed their willingness to engage in closer dialogue with each other, but over the years the agenda began to include broader international cooperation and, above all, economic and financial partnerships in strategic sectors such as energy, agriculture, and scientific and technological development.
Last week, we embarked on a journey along the de-dollarization process that was characterized as inevitable. Today we will continue the analysis, trying to reach some conclusions while considering that it is still unclear which currency will be the alternative to the US dollar as the main exchange currency. Several options are being considered. One of the options will come from the decision taken by the BRICS (Brazil, Russia, India, China and South Africa) at their summit meeting to be held in South Africa in August. The governor of the South African Reserve Bank, Lesetja Kganyago, said that any discussion aimed at establishing a common currency will inevitably lead to another debate around the creation and location of a central bank.
The BRICS bloc of Brazil, Russia, India, China, and South Africa is expanding, and building a new economic architecture to challenge the dominance of the US dollar. One of the most important institutions created by the BRICS is the New Development Bank (NDB). This is a Global South-oriented alternative to the World Bank, which is located in and essentially controlled by the United States. In March 2023, the NDB inaugurated its new chief: Dilma Rousseff, the former president of Brazil, from the South American nation’s leftist Workers’ Party. Rousseff has stressed that the NDB’s goals are financing “infrastructure investments” and “helping our members combat poverty, create jobs, and promote environmentally sustainable development”.
The BRICS bloc of Brazil, Russia, India, China, and South Africa is expanding, as its members grow in economic and political influence. Together, the five BRICS members represent more than 40% of the global population, and their share of the world economy (when measured in purchasing power parity) is larger than that of the G7. The foreign ministers of the BRICS states met in South Africa on June 1 and 2. There, they discussed a series of issues, including plans to create a new global reserve currency to challenge the dominance of the US dollar. Also present at the meeting in South Africa was a group of top diplomats from countries described as “friends of BRICS”, including Egypt, Iran, Kazakhstan, Saudi Arabia, and the United Arab Emirates.
The global de-dollarisation trend is not totally a bed of roses, or at least there are thorns in the roses that have to be taken into account. While de-dollarisation seems to be an irreversible trend on the global scale, at regional levels it is running into bilateral or regional political tensions. In this regard, one of the most prominent cases is in Asia: the India-China border dispute. In April 2023, the Chinese national currency, yuan, ranked third in international trade settlements made through the US-dominated SWIFT system. According to data from the system itself, yuan’s share in April was “record high,” although that share was only 4.72%, after euro’s 6.54%.
The South American nation sometimes suffers from a current account deficit, and relies heavily on imports of oil, technology, and medical equipment. Low revenue from its mostly agricultural exports means that Argentina faces a chronic shortage of foreign currency – and most of the dollars it gets end up flowing out of the country to paying interest on the unsustainable external debt, draining the country’s foreign-exchange reserves and making it difficult to stabilize the national currency, the peso. National elections are approaching in October, and among the presidential hopefuls is far-right politician Javier Milei.
oday we’re going to be talking about de-dollarization. Michael and Radhika just did a series on the decline in the US dollar system and the move by countries around the world to seek alternatives to the dominance of the US dollar. Specifically, I wanted to bring on Michael today to respond to articles that were published in the New York Times by the economist Paul Krugman, arguing against de-dollarization, arguing in defense of the US dollar system. We’re going to look at two articles that Krugman wrote, one in April and the other in May. Michael, I’m going to start with the article that Paul Krugman published in April, called “International Money Madness Strikes Again“.
In his 1987 book The Rise and Fall of the Great Powers, historian Paul Kennedy reassured Americans that the decline the United States was facing after a century of international dominance was “relative and not absolute, and is therefore perfectly natural; and that the only serious threat to the real interests of the United States can come from a failure to adjust sensibly to the newer world order.” Since Kennedy wrote those words, we have seen the end of the Cold War, the peaceful emergence of China as a leading world power, and the rise of a formidable Global South. But the United States has indeed failed to “adjust sensibly to the newer world order,” using military force and coercion in flagrant violation of the UN Charter in a failed quest for longer lasting global hegemony.
The president of the European Central Bank, Christine Lagarde, gave a speech acknowledging that “the tectonic plates of geopolitics are shifting faster” and “we may see the world becoming more multipolar”, with the decline of US dollar hegemony, war in Ukraine, and rise of China. “We could see more multipolarity as geopolitical tensions continue to mount”, Lagarde added. Geopolitical Economy Report editor-in-chief Ben Norton analyzed Lagarde’s speech with Radhika Desai, professor in the Department of Political Studies at the University of Manitoba and director of the Geopolitical Economy Research Group.
The new president of the BRICS Bank has revealed that the Global South-led bloc is advancing toward de-dollarization, gradually moving away from use of the US dollar. The New Development Bank plans to give nearly one-third (30%) of its loans in the local currencies of the financial institution’s members. Dilma Rousseff, the left-wing former president of Brazil, took over the leadership of the Shanghai, China-based New Development Bank (NDB) this March. The NDB was created in 2014, by the BRICS bloc of Brazil, Russia, India, China, and South Africa, as a Global South-oriented alternative to the US-dominated World Bank, which is infamous for imposing neoliberal economic reforms on impoverished countries, which hinder their development.
The global de-dollarization campaign is gaining momentum, as countries around the world seek alternatives to the hegemony of the US dollar. China and Russia are trading in their own currencies. Beijing and Brazil have also dropped the dollar in bilateral trade. The UAE is selling China its gas in yuan, through a French company. Southeast Asian nations in ASEAN are de-dollarizing their trade, promoting local payment systems. Kenya is buying Persian Gulf oil with its own currency. Even the Financial Times newspaper has acknowledged that a “multipolar currency world” is emerging.