There’s no doubt that BRICS’ planned creation of a new reserve currency will accelerate de-dollarization processes and advance financial multipolarity, but that’s very different from the dollar’s death that many folks prematurely predicted.
Duma Deputy Chairman Alexander Babakov’s remarks last week in Delhi during the Russian-Indian Business Forum about BRICS’ new currency project sent shockwaves across the global information ecosystem. Supporters and detractors alike quickly concluded that the dollar is dead, imagining that this collection of countries will immediately replace that currency’s role with their own. Few bothered to deeply think about this, however, otherwise, they’d temper their popular expectations.
For starters, Babakov didn’t reveal anything new but merely reaffirmed what President Putin shared during last summer’s BRICS business forum. At the time, the Russian leader said that “The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out.” This is an important project, but it’s far from creating an alternative to the dollar like supporters and detractors spun the latest update about this as supposedly signifying.
The next point to be made is that this remains a work in progress, thus meaning that BRICS’ planned reserve currency won’t replace the dollar right away, if at all. Even in the unlikely event that these five completely different economies reach an agreement about how everything will operate by their next summit this summer, it’ll still take time to make a tangible difference in the global financial markets, the impact of which will be challenged by the US’ manipulations that everyone should expect it attempt.
Building upon that, while the creation of totally new reserve currency would be a milestone development in the direction of financial multipolarity, the use of national currencies in international trade will likely prove to be much more popular than BRICS’. The reason for this prediction is that the strengthening of countries’ national currencies bolsters their sovereignty much more than contributing to the strengthening of a multilateral one, though that’s not to say that the latter doesn’t help too.
BRICS countries and their closest partners will likely use a combination of these two currencies, but the preference will almost certainly be for national ones. That said, the BRICS currency might eventually be embraced by third countries across the Global South for conducting bilateral trade in those cases where their national ones have too much uncertainty and neither party feels comfortable relying on Western currencies like the dollar. The preceding scenario could thus lead to that currency playing a pivotal role.
Nevertheless, the dollar will still remain in circulation even in the best-case scenario that the new BRICS currency is unveiled this summer and is subsequently employed en masse in the abovementioned cases. What could change with time, however, is the geographic scope within which the dollar circulates. The indisputable trend towards de-dollarization, which would be immensely accelerated if energy superpowers ditch the petrodollar, could result in its influence receding relative to the present.
The impending trifurcation of International Relations into the US-led West’s Golden Billion, the Sino-Russo Entente, and the informally Indian–led Global South will see the first cling to the dollar-euro duopoly while the latter two prioritize the use of national currencies. The new BRICS one will also be used by the Entente and the Global South, though the former’s Chinese half will still use the dollar-euro when trading with the Golden Billion while the latter will as well.
After all, it’s unrealistic to imagine China and the Global South fully “decoupling” from the West, hence why predictions about the dollar’s death in light of the latest update about BRICS’ new currency are premature and most likely won’t ever come to fruition in any case. At most, as was explained, the dollar’s influence outside the Golden Billion will recede relative to the present but it won’t stop circulating across the world since all BRICS states apart from Russia will use it in their trade with the US.
Popular expectations about BRICS’ new currency project should therefore be tempered so as to avoid unrealistically high hopes that inevitably result in deep disappointment, after which those who held such views could become susceptible to false suggestions about that group’s multipolar intentions. There’s no doubt that this development will accelerate de-dollarization processes and advance financial multipolarity, but that’s very different from the dollar’s death that many folks prematurely predicted.
Andrew Korybko
https://korybko.substack.com/p/popular-expectations-about-brics
