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- Dedollarization by BRICS nations is facing serious headwinds as the newly elected US president, Donald Trump emphasizes the importance of maintaining the U.S. dollar’s international standing.
- For over a decade, BRICS policymakers have focused on reducing dollar dependence, but most cross-border transactions and other emerging markets are still invoiced in dollars.
The BRICS alliance (Brazil, Russia, India, China, and South Africa) has been pushing for “de-dollarization” to reduce dependency on the U.S. dollar in global trade and finance for over a decade. However, challenges arise due to the dollar’s entrenched role in emerging markets and finance. Vladimir Putin, Russia’s president, offered a nuanced perspective when he outlined Russia’s stance on the use of the US dollar Within the BRICS alliance.
In an interview on Thursday, Putin clarified that Russia doesn’t intend to abruptly break from the dollar altogether. Instead, Russia plans to limit the dollar’s role in settling international transactions. Putin described the dollar as a “pillar of U.S. power” implying that countries are exploring other currencies in response to shifting global economic conditions.
JUST IN: 🇷🇺🇺🇸 President Putin says Russia is not abandoning the US Dollar. pic.twitter.com/zsNsCyHN53
— BRICS News (@BRICSinfo) November 7, 2024
During Donald Trump’s campaign, he made it clear that if he won the presidential race, he would push to keep the U.S. dollar as the world’s reserve currency. During a rally in Wisconsin, he stated that countries turning away from the dollar won’t be able to leave it behind without consequences. If they choose to abandon the dollar, they will find themselves unable to conduct business with the US, as the country will impose a 100% tariff on their goods. With Donald Trump now having won the 2024 election, BRICS is likely to face significant challenges.
BRICS Plans to Dethrone the Dollar
During the interview, the BRICs chair added that the payments in dollars are decreasing gradually but as a means of savings, it’s going down step by step. Additionally, the president reaffirmed that this move is simply rising to the challenge in modern times driven by evolving global economic conditions.
As detailed in our previous report, the financial strategy of BRICS focuses on several key initiatives. Firstly, the member countries are working on creating robust interbank payment systems that facilitate cross-border transactions. This system will connect the payment networks of each member country, allowing them to conduct transactions independently.
Additionally, there is a growing trend among BRICS nations to conduct trade using their local currencies, which will enhance economic collaboration within the alliance. By doing so, BRICS aims to increase its financial independence, making its economies less vulnerable to dollar fluctuations and reducing the influence of the U.S. over its financial transactions.
Moreover, BRICS leaders, including Lavrov, have suggested that the alliance may expand as more countries are drawn to the potential for a more equitable economic framework. Notably, the founding members of BRICS welcomed into their fold five new members: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) during its summit in October.
Although Donald Trump and the BRICS coalition are on opposing sides when it comes to the role of the US dollar, both share a common interest in advancing cryptocurrency adoption. BRICS, for instance, has made plans to establish Bitcoin mining and AI computing facilities within BRICS nations. This move highlights a broader trend where different political figures and global alliances recognize the potential of cryptocurrencies despite their differing views on traditional financial systems.
