What is happening in the Global South?

The world has, for several years, been increasingly fragmented into geopolitical blocs often fitting into a West versus Global South dichotomy. BRICS, a representative of the Global South comprising a broad coalition of nations, has furthered global divisions by adopting a policy of de-dollarisation and the prospect of a new ‘BRICS currency’. These talks regarding a new currency to challenge the US dollar’s global hegemony, of which in 2023 100 per cent of oil was traded in USD, have been occurring since 2022 and have recently reared their head again ahead of a BRICS summit in late October 2024. Aims are often different from reality and even though some BRICS nations like Russia have been particularly outspoken about a new currency its prospect is a long-term goal. 

BRICS, founded in 2009, originally consisted of Brazil, Russia, India and China. Since then, over 40 nations have considered joining the geopolitical bloc according to a Russian official. At the turn of 2024, 4 of the largest economies in the Middle East and North Africa joined- Egypt, Iran, Saudi and UAE.  Many other nations from Malaysia and Indonesia to Argentina are close to full membership.

Combatting the US dollar and trading in other currencies appeals to all current and future members. For a developed and strong economy like China, a BRICS currency would mean that US sanctions, such as high trade tariffs, would be futile. If China and any other nation relied less on the dollar then the effects of US sanctions will not be adverse. For developing nations, more de-dollarisation which comes through a BRICS currency, means national markets are freed from US exchange rates thereby affecting their markets less. In short, de-dollarisation could drive growth and improve business confidence. 

On September 30 2024 at the Russian Energy Forum, Russian President Vladimir Putin announced that BRICS nations are actively working on the creation of their payment system. This harks back to 2022 when Putin introduced the idea that BRICS countries plan to produce a new global currency. This idea has been supported by other BRICS members such as Brazilian President Lula da Silva who, in 2023, welcomed de-dollarisation proposals. Solidarity and consensus for a new shared currency has not stopped there, as the Iranian Ambassador to Russia Kazem Jalal announced at the Russian-Islamic World Kazan Forum in May 2024 that the respective nations were cooperating to produce new forms of exchange. A BRICS blockchain-based payment system would reduce the need to use the dollar in buying and selling goods by allowing member states to trade in their currencies. 

What is in it for you?

There are some considerable positives of a BRICS currency for member states, both developed and developing. It would undoubtedly strengthen economic integration within BRICS countries, as did the Euro for EU states. It would reduce the influence of the US on the global stage and also reduce the risk of vulnerability of BRICS members to global shocks. If this eventually materialises, then the US would lose financial power. The world would become even more fragmented which would therefore impact the way the West governs and acts on the international stage. There have been some steps towards de-dollarisation.

But the prospect of a BRICS currency fully materialising is more of a long-term aim than a short-term reality. Indeed, de-dollarisation is a legitimate policy that nations adhere to, and to some extent has begun to work. Nasdaq, the world's second largest stock exchange, reported that in 2023 one-fifth of oil trades were made using non-US dollar currencies. However, the overall picture has not changed: the US dollar is still the dominant force in global financial systems and as David Lubin said “it is hard to imagine a world without dollar dominance”. The Atlantic Council’s GeoEconomics Center released a report in June 2024 illustrating the US dollar as the world currency. Even Leslie Maasdorp, the CFO for the New Development Bank- BRICS’ bank- said a new currency is a long-term ambition.

The West is still accountable and has real agency in affecting BRICS member behaviour. After all, some BRICS nations, like India, are non-western as opposed to anti-western members like Russia and Iran. The US presidential election outcome later this year will play into the urgency at which BRICS acts. If Donald Trump is elected, nations like China and Russia may push for a more zealous approach to a new currency, as the Republican candidate has threatened to place 60 to 100 per cent tariffs on Chinese imports. 

What happens next?

BRICS will continue to hold talks on this subject. Indeed, a summit in Kazan is expected to occur from October 22-24. The group will also grow and is expected to gain several members in the coming years. New members will strengthen BRICS to some degree, but on the other hand the organisation will face challenges. 

BRICS is a broad coalition of highly divergent nations with dissimilar economies and cultures. Following one policy, therefore, such as a new BRICS currency will be imagined differently from nation to nation. Relations between BRICS member nations are also not idyllic. Russia and China, although united by anti-western thought, possess distrust towards each other. Likewise, possible new member states such as Malaysia have ongoing disputes with China over territory in the South China Sea. So, in the future BRICS will grow in size and therefore influence, but it will also have to deal with internal issues which will undoubtedly erect blockades to one united currency to offset the dollar. 

Instead, a more likely immediate prospect is de-dollarisation through trading in other currencies. China and Russia have been trading in rubles and renminbi, with the latter accounting for 39.4% of all Russian trade in 2023. Malaysia, Kenya and India follow the same example. These steps combat the dollar, while a radical united currency is conjured up.

The Polis Team in Exeter, UK