Prof. M. K. Bhat
BRICS is emerging as a potent geo economic/geo political forceever since its first summitin 2009 at Yekaterinburg, Russia.It has been expanding steadily over the years and established itself as a block akin to the G7.Originally founded with four members (Brazil,Russia, India and China),it added South Africa in 2010 and thereafter BRICS has expanded to comprise currently 11 members, 9partner countries and over 30 countries have already expressed their desire to participate in BRICS as members or partners.The group comprises of Brazil,Russia, India, China,South Africa, Saudi Arabia,Egypt,United Arab Emirates, Ethiopia, Iran and Indonesia as members and nine partner countries are Belarus,Bolivia, Kazakhstan,Cuba, Malaysia, Thailand, Uganda, Uzbekistan, and Nigeria. The growingmembership among countries conveys about its approach to the problems of the developing countries.The block stresses on reforms in international institutions especially financial institutionsby increasing the participation of countries for making crucial decisions for the world.It wants strengthening of global south to do away with the hegemony of a few countries in handling crucial global affairs. It bears a high potential to shape newinternational order with less western dominance.
It currentlyrepresents more than 50% of world population and 40 % of the world trade, the combined GDP of BRICS has surpassed G7in 2025. It comprises of world fastest growing economies like India and China and has emerged as a spokesperson for global south. BRICS approach to world problems is different from western dominated G7 and has been vocal for more participation in international institutions like IMF and world Bank, UN security council, WTO etc. With respect to Russia Ukraine war none of the BRICS countries supported sanctions on Russia. InfactChina along with other BRICS countries criticised the use of sanctions as a geopolitical weapon. Members like India and China used western led boycott of Russian energy to secure cheaper oil,gas and other commodities for themselves. Thereby not only helped their economies but also provided enough oxygen to Russian economy.The presence of China,Russia and Iran in the group makes America to suspect the things.
Seeing the growing clout of BRICS,US president Donald Trump recently issued a stern warning to BRICS member countries and their allies, threatening to impose 100% tariff if they proceed with the plans to introduce or support a currency to replace the US $ in international trade. Trump demanded formal assurance from BRICS countries that they will neither create new BRICS currency nor back any other currency to replace mighty US $. Post this warning Trump has gone to the extent of saying that BRICS is “dead”. Responding to Trumps de-dollarisation strife S jai Shanker clearly mentioned in parliament that attacking dollar is not a part of India’s economic or political strategy. He held that BRICS discussions are aimed at finding common ground and working together to shape global order and their common thread is commitment to multi polarity.
This warning of America has many ramifications as, was it to disintegrate BRICS? was it a veiled threat to India? Does America feel the growing clout of BRICS especially among other developing countries detrimental to its interests? Is it an attempt to make American presence being felt in Asia? Is it an attempt to stop the growing clout of BRICS countries? Will it help America to put India against China? etc
It may be pointed out that BRIC countries have been trying to find out a way to remove dollar dominance while maintaining their currencies at the same time.In 2010, the BRICS Interbank Cooperation Mechanism was launched to facilitate cross-border payments between BRICS banks in local currencies. BRICS nations have been developing “BRICS Pay” – a payment system for transactions among the BRICS without having to convert local currency into dollars. And there has been talk of BRICS crypto currency and of strategically aligning the development of Central Bank Digital Currencies to promote currency interoperability and economic integration.
In 2014, BRICS countries launched the New Development Bank, its founding agreement outlined that its operations may provide financing in the local currency of the country in which the operation takes place. Yet till date the bank remains heavily dependent on dollar for its survival. The Local currency financing represents around 22% of the bank’s portfolio, although it hopes to increase that to 30% by 2026. Over the past years, Russia, China and Brazil have started greater use of non-dollar currencies in their cross-border transactions. Iraq, Saudi Arabia and the United Arab Emirates are actively exploring dollar alternatives and their central banks have sought to shift more of their currency reserves away from the dollar into gold.
It may be however premature at this level to see whether BRICS can provide alternative to dollar transactions especially because of the asymmetrical status of their economies.The group contains fastest growing economy like India on the one hand and on the other China is already far ahead of other countries of the group.The other economies like Brazil,Russia and South Africa have fallen short of growth. The other impediment is cross border dispute among the countries.The relationship between two major countries i.e. India and China are on tenterhooks. thirdly none of the countries involved has shown any desire to discontinue its local currency.Rather the goal appears to create an efficient integrated payment system for cross-border transactions as the first step and then introduce a new currency.
Putin in BRICS summit at Kazan Russia- oct 2024 held “it is not us who refuse to use dollar but if they will not let us work what can we do? we are forced to search for alternatives.” Putin accused America of weaponizing dollar calling it a big mistake. In fact the discussion in Kazan cantered around boosting non-dollar transactions and strengthening local currencies.
De-dollarisation got its steam mainly in post Russia-Ukraine war. Russian officials have been championing for de-dollarisation to ease the pain of sanctions. Because of sanctions, Russian banks have been unable to use SWIFT- the global messaging system that enables bank transactions and the West froze Russia’s US $330 billion in reserves.It is worthwhile to point out that China has developed an alternative to SWIFT called the Cross-Border Interbank Payment System (CIPS). But CIPS is much smaller, with roughly 1,300 financial institutions participating, while as in SWIFT over 11000 institutions participate over 200 countries.The second reason for de-dollarisationin BRICS was rising interest rate in US.It raised concern about dollar dominated debt. The Federal Reserve Bank increased its key interest rate 10times in 14th months before Dec 2024. The hike in interest rates was mainly resorted to stabilise its prices.The Beijing directly blamed the Fed’s interest rate hike for causing turmoil in the international financial market and substantial depreciation of other currencies.
Dollar’s global dominance is indisputable as 88% of international transactions are conducted in U.S. dollars, and the dollar accounts for 58% of global foreign exchange reserves. (Its value in near future will depend upon the actual outcome of Tariff on American economy).Yet de-dollarization – or reducing an economy’s reliance on the U.S. dollar for international trade and finance is well thought idea becauseoften countries get roughed for no fault of theirs.USA has been using dollar to further its own interests.Chinese government has clearly pointed to the dollar’s dominanceas the “the main source of instability and uncertainty in the world economy”.
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