By: Manlio Graziano
The BRICS Summit: Not (Yet) A Brave New World
One issue on the agenda of this year’s BRICS summit – taking place from August 22 to 24 in Johannesburg – should be the creation of a currency, or rather a monetary basket, that could serve as an alternative to the dollar. Yet, this idea is almost entirely impracticable, for the reasons cited below. And that fact should signal just how unrealistic is the larger hypothesis of making this summit the opening stage in the creation of a large political and economic confederation of the so-called Global South.
“De-dollarization” is a formula that many like, but no one is able to realize. Europe has tried, with modest results, yet today the weight of the euro in international exchanges is declining. Japan tried, at the time of the Asian financial crisis of 1997, but opposition from Washington killed the initiative in the bud. Today the five BRICS countries – Brazil, Russia, India, China and South Africa – would like to try, but without really believing they can pull it off. The New Development Bank (the BRICS’ bank) is in a liquidity crisis due to … a lack of dollars, which are now arriving in drops, not buckets, owing to the sanctions against Russia (along with China, it holds almost 40% of the bank’s capital). Furthermore, even in exchanges between the five countries, the dollar remains the most used currency. Finally, analysts say, the economic disparities among the BRICS are so strong as to make a contract between their five currencies extremely difficult.
But the main problem is of a political nature. The body’s three main countries (China, India and Russia) are essentially geopolitical rivals; they may share a common immediate goal – to weaken the United States – but even here each comes with a different caveat. Moscow must keep the door with Washington ajar to avoid being devoured by China; Beijing must do the same to avoid being dragged into the abyss by a possible Russian collapse; and New Delhi must do so because the main threat to India is China, not the United States.
The world will be de-dollarized one day. That’s for sure. But it will be when the United States loses its hegemonic role in the world – not when a meeting of the heads of rival states decides it.
“De-dollarization” is a formula that many like, but no one is able to realize. Europe has tried, with modest results, yet today the weight of the euro in international exchanges is declining. Japan tried, at the time of the Asian financial crisis of 1997, but opposition from Washington killed the initiative in the bud. Today the five BRICS countries – Brazil, Russia, India, China and South Africa – would like to try, but without really believing they can pull it off. The New Development Bank (the BRICS’ bank) is in a liquidity crisis due to … a lack of dollars, which are now arriving in drops, not buckets, owing to the sanctions against Russia (along with China, it holds almost 40% of the bank’s capital). Furthermore, even in exchanges between the five countries, the dollar remains the most used currency. Finally, analysts say, the economic disparities among the BRICS are so strong as to make a contract between their five currencies extremely difficult.
But the main problem is of a political nature. The body’s three main countries (China, India and Russia) are essentially geopolitical rivals; they may share a common immediate goal – to weaken the United States – but even here each comes with a different caveat. Moscow must keep the door with Washington ajar to avoid being devoured by China; Beijing must do the same to avoid being dragged into the abyss by a possible Russian collapse; and New Delhi must do so because the main threat to India is China, not the United States.
The world will be de-dollarized one day. That’s for sure. But it will be when the United States loses its hegemonic role in the world – not when a meeting of the heads of rival states decides it.
The opinions expressed in this article is of the author alone. The Spykman Center provides a neutral and non-partisan platform to learn how to make geopolitical analysis. It acknowledges how diverse perspectives impact geopolitical analyses, without necessarily endorsing them.