The U.S. dollar's global dominance has been a sure thing for about a century. Now BRICS and emerging economies are looking to dethrone it.

Simone Del Rosario Business Correspondent

Could BRICS nations dethrone US dollar dominance with a new currency?

Aug 22, 2023

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Brent Jabbour (Producer), Emma Stoltzfus (Editor)

The U.S. dollar’s global dominance has been a sure thing for about a century. Now emerging economies are looking to dethrone it.

Foreign ministers from Brazil, Russia, India, China and South Africa, nations known collectively as BRICS, have recently discussed using alternative currencies to challenge U.S. global influence. Representatives from the bloc gathered in Cape Town, South Africa, in early June ahead of a pivotal August summit.

“In the aftermath of the United States doing some pretty severe financial sanctions on the Russians, people are wondering if there’s a way to get away,” geopolitical strategist Peter Zeihan told Straight Arrow News’ Simone Del Rosario.

View the full interview here.

BRICS influence

The BRICS bloc already consists of more than 40% of the world population and about a third of global economic output. Now it is considering expanding its ranks for the first time in more than a decade.

At least 19 countries have asked to join the emerging-nations group, according to Anil Sooklal, South Africa’s ambassador to the group. Saudi Arabia, Iran, Argentina and the United Arab Emirates are among those interested in joining.

Back to dedollarization

With the likes of China and Russia in the group, it’s unsurprising BRICS is looking for ways to diminish U.S. influence. Since its creation, BRICS has been a counter to Western economic influence, from using the U.S. dollar as the world reserve currency to the U.S.-centric World Bank.

BRICS countries established the New Development Bank in 2015 as an alternative to the World Bank to facilitate funding for projects in developing nations.

While the NDB currently uses the U.S. dollar for most of its financing, President Dilma Rousseff announced this year the bank plans to finance more projects in local currencies to avoid foreign exchange fluctuations.

“We need to create a diversified global currency system,” Rousseff said in May. “In the future, it is unlikely that one single currency can dominate the world’s currency system.”

More than 58% of global reserve currencies tracked by the International Monetary Fund are held in U.S. dollars as of 2022. Less than 3% is held in the Chinese renminbi, the currency of the second-largest economy in the world and the most dominant nation in BRICS.

Would a BRICS currency work?

While BRICS members have discussed the possibility of creating a BRICS currency to counter the U.S. dollar, Zeihan expressed serious doubts about establishing a new currency.

“If it’s an independent authority, wow, the best way to get what you want for your country is to bribe the hell out of that authority. And that’s one of the reasons why this just can’t work.”
Peter Zeihan, geopolitical strategist

“Either it’s independent, in which case it’s the most corrupt system you can imagine, or one of the countries manages it, in which case that country manages it for his or her own economy, in which case everyone else is left on the outside,” Zeihan said. “Even with the United States weaponizing the dollar, it is still the least bad option for everyone, even the Russians.”

Without naming the Russians, South Africa Foreign Minister Naledi Pandor said the purpose behind exploring alternative currencies is, “to ensure that we do not become victim to sanctions that have secondary effects on countries that have no involvement in issues that have led to those unilateral sanctions.”

The next BRICS summit is scheduled for late August in South Africa but Russian President Vladimir Putin will not be in attendance. The International Criminal Court has issued a war crimes arrest warrant for Putin, and as a member of the ICC, South Africa is theoretically required to arrest him if he steps foot in the country.

Read about the effect Russian sanctions have had on the move away from the U.S. dollar here.

Countries are souring on the U.S. dollar. Is dedollarization really a risk? Catch the full interview with Peter Zeihan here.

Tags: Brazil, BRICS, China, Dedollarization, Economy, GDP, Geopolitics, IMF, India, International Criminal Court, Peter Zeihan, Renminbi, Reserve Currency, Ruble, Russia, Sanctions, South Africa, U.S. Dollar, Vladimir Putin, Yuan

SIMONE DEL ROSARIO: So why is everyone talking about dedollarizing now? Why is this some big concern?

PETER ZEIHAN: Because people are the worst, we always pay attention to the wrong things. This is something that pops up from time to time. Whenever the United States does something that some country finds annoying, or whenever some country thinks that they found a way to crack the code, It has never amounted to anything, but we’d go through this every six to nine months. So the issue right now is you’ve got the Brazilian president talking about a BRICS currency. And in the aftermath of the United States doing some pretty severe financial sanctions on the Russians, people are wondering if there’s a way to get away. And what’s turning out is there’s a whole lot of nothing. So you know, if you just want me to kind of go down in the battery of what’s gone down here?

SIMONE DEL ROSARIO: Let’s do it.

PETER ZEIHAN: Okay. So, you know, at the top of the list, the Argentine’s say they’re all in and I would argue that you should never look to the Argentine’s for financial guidance, unless you’re looking for ways to you know, do more truancy. The Bangladeshis are saying that they will pay the Russians in rubles for a nuclear power plant that they could never afford to build in the first place. So that was already a dead project. You’ve got the Brazilian saying they’re all on board. But if you look under the hood, you know, you’re seeing some very interesting things for the rest of them. The Russians and the Indians actually got into an argument about a week and a half ago about how neither side thought the other side’s currency was worth anything. And that dropped the Indians out of the coalition. The Chinese their first and foremost issue is about making sure that they have full control over their financial system. That precludes the very concept of an open international currency exchange. And even today, with all this talk, they’re nowhere near the height level that they used to have for the percentage of their trade that was handled in yuan. They’re not even back to where they were before the financial crisis. And so we’ve got R and C whose relationship is a tryst. We’ve got R and S who compete, we’ve got R and I who don’t trade, I and C who don’t trust, C won’t let enough happen to make anything move and that just leaves B and S and you know, color me a skeptic.

SIMONE DEL ROSARIO: What would you say is the most predominant currency outside of the U.S. dollar that everyone’s saying, this could replace it?

PETER ZEIHAN: Well, people talk about the yuan, but it will never be that. It was the euro until the financial crisis, and then that went away. The next one down is the pound. And until Brexit is figured out one way or another it’s a noncandidate.