Abdelmonem Fawzi
We live in a new multipolar world of ideological turbulence, in which the West is not the main player.
The reason is, with its declining power since the eruption of the war in Ukraine, NATO has turned into an epoch of complexity.
We have seen strong disagreements between the US, on one hand, and many of its European allies, on the other.
This makes it necessary for us to ask about whether we are witnessing the old powers of the East returning to the fore.
There is China, the imperial survivor of the ages. There is also post-Soviet Russia. This latter power is accelerating NATO’s demise with the war in Ukraine.
The good news is that strong appearance of BRICS nations – Brazil, Russia, India, China, and South Africa – on the international scene makes these nations set themselves as an alternative to existing international financial and political forums.
The alliance now offers a diplomatic and a development financing forum outside the Western mainstream.
The acronym began as a somewhat optimistic term describing the world’s fastest-growing economies at the time.
The BRICS countries try to position themselves as representatives of the Global South, providing ‘an alternative model to the G7’.
The acronym BRIC, which initially stood for Brazil; Russia; India, and China, was coined in 2001.
At the time, the four countries had achieved high economic growth rates and the BRIC label stood for economic optimism about the future of those nations.
In 2010, South Africa was invited to join the group, adding the ‘S’ to BRIC.
In 2014, with $50 billion (around €46 billion) in seed money, the BRICS nations launched the New Development Bank as an alternative to the World Bank and the International Monetary Fund.
In addition, they created a liquidity mechanism called the ‘Contingent Reserve Arrangement’ to support member states struggling with payments.
These offers were not only attractive to the BRICS nations themselves, but also to many other developing and emerging economies that had had painful experiences with the IMF’s structural adjustment programmes and austerity measures.
This is why many countries expressed interest in joining the BRICS group.
In 2021, Egypt; the United Arab Emirates; Uruguay, and Bangladesh took up shares.
Most of the world waits the ground-breaking developments set to unfold at the BRICS summit this month.
With the potential introduction of a gold-backed digital currency, the BRICS countries aim to challenge the dominance of the US Dollar and enhance their financial sovereignty.
The imminent BRICS summit promises a momentous event in the realm of international finance.
This gathering holds the potential to unveil a gold-backed digital currency that could significantly impact the global payments landscape.
By introducing an alternative to the dominant US dollar, the BRICS nations seek to bolster their financial sovereignty and reduce reliance on existing monetary systems.
The Russian government reported through state-controlled RT News that the BRICS nations have confirmed the introduction of a new tradable currency backed by gold.
An official statement is expected during the BRICS summit which will be held in South Africa.
In a significant step towards the de-dollarization of the global economy, as many as 41 countries have applied for BRICS membership, challenging the dominance of the US dollar that has persisted since World War II.
Today, almost all international transactions are executed in greenbacks, as stated by the American business magazine, Fortune.
Rivalry with China, fallout from Russia’s war in Ukraine and wrangling once again in Washington over the US debt ceiling have put the dollar’s status as the world’s dominant currency under fresh scrutiny.
Russia’s sanctions-imposed exile from global financial systems last year also fuelled speculation that non-US allies would diversify away from the dollar.
As we know, the dollar’s share in official FX reserves fell to a 20-year low of 58% in the fourth quarter of 2022, according to IMF data.
What happened in 2022 was a very sharp plummeting in the dollar share in real-terms. This came in reaction to freezing half of Russia’s $640 billion in gold and FX reserves, following its 2022 invasion of Ukraine.
This had sparked a rethink in countries, such as Saudi Arabia; China; India, and Turkey about diversifying to other currencies.
Still, the US dollar is on one side of almost 90% of global forex transactions, representing about $6.6 trillion in 2022, according to data from the Bank for International Settlements.
About half of all offshore debts are in dollars, and half of all global trade is invoiced in dollars.
Nevertheless, there just is not a mechanism for getting banks and firms and governments to change their behaviour at the same time.
While there may not be a single dollar successor, mushrooming alternatives could create a multipolar world order.
Nations were realizing that one or two dominant reserve asset blocks were “just not diversified enough”.
Global central banks look at a wider variety of assets, including corporate debt, tangible assets, such as real estate, and other currencies.
This is the process that is underway: the dollar is going to be used less in the global system.
The BRICS may become less an economic club of rising powers seeking to influence global growth and development, and more a political one.
The evidence is that BRICS nations – since the start of the Russian war in Ukraine – have only distanced themselves further from the so-called West.
None of the founding nations of the alliance takes part in sanctions imposed on Russia.
This has become increasingly clear with near-historic levels of trade between India and Russia, or in Brazil’s dependence on Russian fertilizers.
It remains to be said that the BRICS alliance is not so much counter to the West, but more a forum for increased sovereign and autonomous thought.
In a bipolar world order, the summit of the alliance this month can represent a crucial juncture, marking the beginning of a new era in the global arena.
