Russian President Vladimir Putin hosted the annual BRICS summit in the city of Kazan last week. The yearly powwow of leaders in developing economies (Brazil, Russia, India, China, and South Africa) typically features anti-West discussions and how to reshape the global order. Was this year any different? The latest meeting could be best summarized as an alliance showcasing its growth and potential might to the rest of the world.
The BRICS Street Boys: A Primer
The primary highlight of the 2024 BRICS summit was the coalition's official expansion. In January, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) officially joined the group, whose sole objective is to counterbalance the US-led international community. Putin emphasized Tehran's membership with cordial language, calling it "great symbolic significance." Additionally, 36 nations attended the gathering – BRICS officially established BRICS+ last year, which includes 13 partner countries – and 20 heads of state visited Kazan.
China and India held a bilateral meeting and ended their disputed border strife. BRICS collectively condemned Israel. Saudi Crown Prince Mohammed bin Salman stayed home and instead met with Secretary of State Antony Blinken. But the economics might have been a more riveting tale than the geopolitical realm.
BRICS Economics
On the economic front, there were two noteworthy developments. Putin was gifted a so-called BRICS bill, a mock currency that featured member countries and their flags at the center of the money, symbolizing the broader de-dollarization campaign. Later, Putin recommended establishing a BRICS-based grain exchange.
"A number of BRICS countries are among the world's largest producers of grain, vegetables, and oilseeds. We propose opening a BRICS grain exchange," he said. "This would facilitate predictable price indicators for products and raw materials, taking into account their special role in ensuring food security."
Indeed, it is unclear how far BRICS is from either launching a currency or creating a grain exchange. Liberty Nation News has weighed the likelihood of the coalition competing against the US dollar, which is the world's chief international reserve currency.
In the short term, any such production would be years from launch, struggle to attract mainstream investment adoption, and fail to achieve confidence in global capital markets. At the same time, the organization is planting the de-dollarization seeds by abandoning the greenback in cross-border bank claims and global debt securities, according to data from the Bank of International Settlements. Moreover, SWIFT transaction statistics show that BRICS currencies maintain nearly 7% of volumes, mainly due to the explosive growth of the Chinese yuan.
On a longer-term trajectory, any BRICS currency could play a pivotal role in the worldwide economy, especially considering that BRICS+ possess nearly half of global foreign exchange reserves.
"The final question for now is whether the decline of the US$ is gaining momentum," said ING commodities strategists in a research note. "Looking more broadly at the evolution of the dollar role in the key areas of the global economy and markets (see the table below), the US dollar usage is steadily declining in only two areas – central bank FX reserves and FX derivatives, from a very high level in both cases. The US dollar is being pushed out mostly by other DM [developing market] currencies, but in the past couple of years, EM [emerging market] currencies have joined the push."
Meanwhile, the grain exchange would be a significant game-changer for BRICS and a risk for dollar hegemony. The initiative was approved by members. Eduard Zernin, head of the Grain Exporters Union, which exports 80% of Russian grain, told Reuters that launching a joint grain exchange with the BRICS' New Development Bank would require years of preparatory work. Once formally manufactured, it could potentially transform the global agricultural market.
One area that BRICS+ has concentrated on and has excelled in is bilateral and regional trade settled in local currencies. Aside from energy – the group represents one-third of emerging-market fuel transactions and accounts for nearly a third of global oil production – agriculture enjoys a substantial portion of trade. Russia is the world's largest wheat exporter, India controls 40% of the global rice trade (65% in Basmati), Brazil maintains 60% of all soybean exports, and South Africa is one of the world's largest exporters of soybeans and sugar. Egypt is quickly becoming an agricultural powerhouse, shipping millions of tons of cotton, potatoes, and fresh fruit.
This comes after it was reported that Russia is in talks to erect an international precious metals exchange to facilitate fair prices and trade growth. With more central banks accumulating the yellow metal, gold bugs could view this as a possible creation of a gold-backed currency. Grab the popcorn!
So Close Yet So Far Away
In the end, while the annual summit did not result in groundbreaking developments, it laid a few bricks in the road to dethrone the United States from atop the Western-dominated world order. The de-dollarization corridor is still bumpy, but the final destination on this yellow-brick road can be seen beyond the horizon. Whether this will be a trail of tears or a path of prosperity will be determined in the coming years.
