BRICS Advances De-Dollarization to Counter US Sanctions

As global momentum towards de-dollarization accelerates, BRICS member countries are forging ahead with plans to create a new reserve currency backed by a basket of their respective currencies. This initiative is seen as a strategic countermeasure to the impact of US sanctions on the global economy. BRICS, an intergovernmental organization originally comprising Brazil, Russia, India, China, and South Africa, has recently expanded its membership to include Iran and several other nations. According to RT Today, de-dollarization stands as one of the primary objectives for BRICS members. Discussions are underway on the establishment of a new currency to supplant the dollar in international financial transactions.

As the current chairman of BRICS, Russia is spearheading a comprehensive financial agenda. This includes bolstering the role of member states within the international monetary system, enhancing interbank cooperation, and facilitating settlements in national currencies. Russian President Vladimir Putin's aide, Yuri Ushakov, announced in March 2024 that BRICS is developing a payment system based on blockchain technology. Named the BRICS Bridge, this system aims to integrate the financial systems of member countries by utilizing central bank digital currencies for transactions.

The US dollar currently dominates the global exchange system, accounting for about 90% of all currency transactions. However, by 2023, one-fifth of oil transactions were conducted in non-dollar currencies. This shift indicates a growing trend towards diversifying away from the dollar.

Research suggests that stabilizing other currencies against the dollar could mitigate the efficacy of US sanctions, a critical concern for countries facing such economic pressures. In this context, Russian Deputy Foreign Minister Sergey Ryabkov announced that the de-dollarization agenda would be presented in a new format at the upcoming BRICS summit in Russia in October 2024.

If successful, the establishment of a competitive financial system could appeal particularly to countries in the global south. These nations hope that a robust alternative to the dollar-dominated system will compel US policymakers to reconsider the frequent use of sanctions as a foreign policy tool.

The BRICS initiative represents a significant challenge to the current global financial order, underscoring a shift towards greater financial independence and cooperation among emerging economies.