BRICS Expand Numbers & Influence
The rapid growth of the BRICS coalition—Brazil, Russia, India, China, and South Africa—is shaking the global economic order. And challenging the U.S. dollar’s supremacy. The dollar currently makes up 60% of global reserves and 88% of forex trades. But the BRICS’ energized push to de-dollarize signals a big shift in global financial power.1
The Dollar Advantage
The U.S. dollar’s status as the world’s reserve currency provides significant advantages to the United States. It allows the U.S. to finance its debt at lower costs and exert economic pressure through sanctions. However, BRICS nations are questioning this dominance. They seek to reduce their dependence on the dollar.
BRICS’ New Currency Initiative
At the 2024 BRICS meeting in Kazan, the coalition unveiled plans for a new currency called the Unit. This currency is part of a de-dollarization agenda. It aims to replace the dollar with a system backed by local currencies and gold. The desire for such a currency reflects rising geopolitical tensions. These include the U.S.-China trade war and sanctions on BRICS members.
The New Development Bank (NDB) is the BRICS anti-West counterpart to the IMF. It says this currency project is on a “medium to long-term” horizon. The initiative supports efforts to diversify reserves. Central banks are buying record amounts of gold to prepare for a potential shift away from the dollar. This trend has already driven gold prices upward, a movement expected to continue.
Progress Toward De-dollarization
Progress in de-dollarization is already evident. In 2023, 20% of global oil trade was conducted outside the dollar, a significant increase compared to previous years. Russia and China, in particular, are favoring trade in their local currencies. Russia is also designing a new international payments system since it was banned from SWIFT (the Western inter-bank trading system). 2
A new BRICS commodities exchange is also in the works, aiming to trade resources like grain, oil, natural gas, and gold. If adopted by all BRICS members, this exchange could disrupt current global commodity pricing.
By including oil producers like Nigeria and Iran, BRICS is targeting the petrodollar. A key to the dollar’s global dominance. The petrodollar is the practice of trading oil in U.S. dollars only. It has long supported the dollar by creating a global demand for it. With five of the top ten oil producers now in BRICS, the bloc’s push to trade oil in local currencies or a new BRICS currency could undermine the system. It would affect over 30% of global oil production.3
BRICS Expansion and Global Influence
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The expansion of BRICS underscores its growing influence. By adding Nigeria and Indonesia, BRICS now represents 54.6% of the world’s population and 42.2% of global GDP. More than 30 countries expressed interest in joining BRICS in 2024, signaling a shift in global alliances.5
Demographics further strengthen BRICS’ position. By the end of the century, over 80% of the world’s population will live in Asia or Africa. BRICS includes the three most populous African nations: Nigeria, Egypt, and Ethiopia. And the most populous countries in Asia (and the world): China, India, and Indonesia. This demographic shift will inevitably reshape global power dynamics.
Political and Economic Strategy
BRICS’ economic strategy complements its political agenda to rebalance global power relations. A common currency would boost the coalition’s influence and negotiating power. Speeding up the shift to a multipolar world economy. China, the second-largest economy, is using BRICS expansion to create an alternative world order. It aims to pull southern hemisphere countries directly under its economic influence, and away from the U.S.
According to a research fellow at Chatham House, “From Beijing’s point of view, establishing China as an alternative pillar of global order is a critically important objective and it can’t be met without the support of the developing world. And since some 120 countries count China as their main trading partner, this shouldn’t be too difficult.”6
Resistance and Challenges
The U.S. has not taken these developments lightly. President Donald Trump pledged a 100% tariff against BRICS nations if they continue efforts to undermine the dollar. However, China is offering zero-tariff policies for less developed countries as a counter. The U.S. is wary of pushing these countries further under China’s influence. So, such threats may have limited impact.
Conclusion
The passage of time is on BRICS’ side. As the coalition grows in population and economic strength, its ability to challenge the dollar’s dominance will increase. A multipolar world economy seems inevitable.
As the saying goes, an avalanche starts with a single snowflake. The BRICS coalition’s efforts to challenge dollar dominance may be gradual, but they are gaining momentum. Change happens slowly, then all at once. For those thinking long-term, preparation is key. Physical precious metals held in a Gold IRA can protect the value of your savings from a changing world order. Contact American Hartford Gold today at 800-462-0071 to learn more.
