The BRICS assert themselves against the dollar
BRICS summit, which was held from 22 to 24 August in Johannesburg, was quite rightly
one of the main topics of conversation: this international organisation is
indeed set to take on more and more importance on the world stage. The most obvious
point to mention is that it is growing in numbers: the founding countries
(Brazil, Russia, India, China and South Africa) have welcomed six new members:
Saudi Arabia, Argentina, Egypt, the United Arab Emirates, Ethiopia and Iran. As
a result, the BRICS are starting to make their mark at the global level: 36% of
GDP, 46% of the population, 80% of oil production. And many other countries are
knocking on the door; we are talking about forty candidates.
of a BRICS common currency have been heard, and the fact of no longer depending
on the dollar is a stated objective.
summit's final declaration highlights “the importance of encouraging the use of
local currencies in international trade and financial transactions between the BRICS
as well as their trading partners”. Going via the dollar means having to acquire
it in exchange for one’s own currency, and therefore making the American
currency rise against one’s own. The Central Bank must have enough to meet the
needs of importers; transaction currency and reserve currency go together.
Exchanging goods using one’s own currency relieves these constraints, and this
is what China has been doing in Asia for several years, and more recently with
Saudi Arabia which accepts yuan in return for its oil. In addition, using the
dollar exposes to the extraterritoriality of American law, which can pose a
argument: the risk of seeing your hard-earned dollars reduced to nothing, and
finding yourself banned from international trade. The sanctions taken by the
United States - followed by the European Union - against the Central Bank of
Russia following the invasion of Ukraine sounded like a clap of thunder in a
calm sky. Never before has such a decision been taken, not without impact. The
dollar assets of the Russian monetary institution have in fact disappeared.
Since then, nations may think that in the event of conflict with Uncle Sam,
their dollar assets will decline, hence the urgency of finding alternatives.
part, China did not wait for sanctions against Russia to start reducing its
dollar reserves: since December 2021, its assets in US Treasury Bonds have
fallen by $205 billion, or 20% of the total. And other countries are following
suit. This could have a strong impact on the United States in financing its
budget deficit: who will buy their Treasury Bonds? BRICS against US hegemony,
to be continued.