The Stop-and-Start BRICS Push to Dethrone King Dollar

Whatever happened to the coalition of emerging economies known as the BRICS? A year ago, it was the talk of the town. The bloc – featuring Brazil, Russia, India, China, and South Africa – expanded, politicians shook hands, and economists grabbed a microscope to comb through the details. In the home stretch of 2024, has anything changed for BRICS? Is it all hype or a long-term uprising?

Turkey Courts BRICS

At its 15th summit in Johannesburg, South Africa, BRICS opened its arms to Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE). Argentina, under the libertarian Javier Milei, turned down the invitation when he was sworn in as president. Now, Turkey has reportedly applied to become a member of the Moscow-chaired cabal, according to a Kremlin official. Omer Celik, a spokesperson for Turkish President Recep Tayyip Erdoğan’s ruling party, noted that Ankara has aspired to join the BRICS alliance but refrained from confirming a formal application.

The state has had a mixed and rough relationship with the rest of the world. Straddling Asia and Europe, Turkey joined the NATO military alliance in 1952. It has attempted to sign up with the European Union for the last twenty years, but stalled negotiations have led to frustrations on both sides.

How Washington would feel about Erdoğan cozying up to America's adversaries remains unclear. However, Russian President Vladimir Putin expressed interest in Turkey joining the group, telling reporters that Moscow “will support this aspiration and desire to be together with the countries of this alliance, to be together, closer, to solve common problems.”

Dethroning King Dollar?

For years, there have been murmurs, rumblings, and speculation that BRICS is about to develop a currency that rivals the US dollar. Based on several reports and comments for the last decade, the entity would create an instrument based on a basket of currencies, such as the Chinese yuan, Russian ruble, and the South African rand. Others have suggested BRICS would produce a gold-backed currency.

As of September 2024, nothing has materialized. In fact, there might even be trouble in paradise. Reports suggest that Chinese banks have rejected 80% of payments made in the Russian ruble. Moscow, one of the pioneers of the international de-dollarization campaign, has supposedly imported $30 million in US dollar banknotes. Beijing's economic dominance is waning while India's prowess is expanding.

Some of these under-the-radar trends might paint a portrait of an alliance fracturing. But Diane Rousseff, the head of the group's New Development Bank (NDB), contends that replacing the greenback is a top priority. “One of the main focuses of the [New Development Bank] is to increase the use of local currencies,” Rousseff said at the NDB's 9th annual meeting last month. “We have decided that up to 30% of the bank’s total funding will take place in local currencies.”

Indeed, BRICS members are chipping away at the US dollar hegemony, comparable to a dozen ants nibbling on the washed-up carcass of a blue whale. The insects will eventually consume the mammal, but it will take years. India will accept local currencies for trade, reducing its exposure to dollar-denominated transactions. Russia aims to link the Chinese yuan to a new stablecoin. BRICS and BRICS+ members are hoping to reshape global payments by establishing alternatives to the SWIFT payment messaging system. In April, the Chinese yuan outperformed the euro in trade payments, according to new data from SWIFT. Ultimately, it is the little things that count.

US Dollar Hegemony

Despite these efforts, the US dollar's hegemony remains intact. The Atlantic Council's key indicators highlight the dollar's strength in the global economy: The currency represents 58% of global foreign reserves, 54% of export invoicing, and 88% of foreign exchange transactions.

The US government's dollar weaponization will likely be its undoing in the long run. For now, the greenback's dominance is "well-entrenched and structural in nature," says JPMorgan Chase. "Meaningful erosion of dollar dominance is likely to take decades, and the decline in the dollar's share of global trade and overall FX reserve holdings should not be confused with de-dollarization," the bank stated in a report. Still, the bank notes, "We are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the renminbi [the official "people's currency" of China], and geoeconomic fragmentation."

Until the BRICS become as good as gold, the US dollar will continue to glitter on the world stage.