In a world long accustomed to the dominance of the US dollar in global finance, the BRICS alliance, consisting of Brazil, Russia, India, China, and South Africa, has been quietly exploring a bold idea: the creation of a common currency. This vision, articulated by Brazil’s President Lula da Silva and supported by Russian Foreign Minister Sergey Lavrov, envisions a financial revolution that could reshape the global economic landscape.
The BRICS alliance
The BRICS alliance, initially conceived as an acronym for a group of emerging economies, has evolved into a platform for economic cooperation and collective action on the international stage. One of the most audacious proposals within this alliance is the notion of a common currency, akin to the euro in Europe. This idea gained momentum when President Lula da Silva declared his support, stating, “I am in favour of creating, within the BRICS, a trading currency between our countries, just like the Europeans created the euro.”
However, the path to creating a common currency among BRICS nations is fraught with challenges. Establishing a currency union requires harmonising monetary policies, managing inflation rates, and creating a central authority to issue and regulate the currency. The European Union’s experience with the euro illustrates the complexities involved in such an endeavour, including the need for rigorous economic convergence and coordination.
Dependence on the US dollar
The motivation behind this ambitious proposal is the desire to reduce dependence on the US dollar in international trade and finance. Many countries worldwide have expressed concerns about the dollar’s dominance, which allows the United States to exert significant influence over global financial systems. Additionally, the dollar’s role in international transactions exposes countries to the potential impact of US economic policies and sanctions.
A crucial element in this vision’s feasibility is the role of digital technologies. As technology continues to advance, digital platforms like blockchain have the potential to revolutionise cross-border transactions. BRICS nations are keenly aware of this and are exploring digital avenues to facilitate international trade. By leveraging digital technologies, these countries can potentially bypass traditional financial systems such as the SWIFT network, making international transactions more efficient and less dependent on Western-dominated infrastructure.
The envisioned transformation is expected to be largely completed by 2030, ushering in a new era in global finance over the coming five to seven years. If successful, it could render the G7 and G20 platforms obsolete or, at the very least, diminish their influence as Western-oriented powers. The implications of such a shift would extend beyond finance, potentially impacting the United Nations and the management of global economic affairs.
However, one of the key challenges facing BRICS nations, particularly Brazil, India, and South Africa—the alliance’s oldest members—is ensuring that this new BRICS platform does not become a vehicle solely for defending the geopolitical interests of China or Russia. Balancing diverse economic and geopolitical interests within the alliance will be essential to its success and credibility on the global stage.
While the idea of a common currency among BRICS nations is ambitious and represents a significant departure from the status quo, its realisation remains uncertain. Progress toward this goal will require careful negotiation and coordination among the member countries. Furthermore, it will be vital to address concerns and reservations from both within and outside the alliance.
Non Dollar Oil Purchase
In the meantime, some BRICS nations are taking steps to reduce their dependence on the US dollar. India, for instance, recently conducted a significant transaction with the UAE, purchasing 1 million barrels of oil and settling the bill in Rupees. Such actions are indicative of a broader trend among BRICS nations: a concerted effort to conduct international transactions in their local currencies, thereby asserting economic sovereignty and reducing vulnerability to the dollar’s volatility.
In conclusion, the idea of a common currency among BRICS nations represents a bold vision for the future of global finance. It underscores a shared desire to challenge the dominance of the US dollar and promote a multipolar world order. While numerous challenges lie ahead, including the need to balance diverse interests within the alliance, the potential implications of such a transformation are substantial. As the winds of change continue to gust, the world watches with anticipation to see whether BRICS can truly alter the course of global financial dynamics.