After almost a century of dominating the money markets and calling the shots over the world economy, emerging and developing countries have had enough of the US dollar and want change.
At a recent meeting of the BRICS nations – Brazil, Russia, India, China and South Africa – Russian President Vladimir Putin argued the de-dollarisation of the world economy was gathering pace and is irreversible.
What Putin says comes with a shovelful of salt as the Russians seem truth-adverse about almost everything.
However, he reiterated the thoughts voiced by Brazilian President Luiz Inacio Lula da Silva earlier in the year, who questioned why every country based their trade on the dollar.
A Russian official at the BRICS summit in South Africa also suggested the group was developing a new currency aimed at displacing the dollar – but no one knows if this is true.
Table of contents
- Global Political Power Play
- The Limitations of Military Might
- The Strategy of a New World Order
- The Complications Surrounding a BRICS Currency
- The Soft-power Battleground: Africa
- BRICS’ Expansion and Its Implications
- Swaying African Allegiance through Aid and Investments
- Future Infrastructure Initiatives: A Comparative Look
- BRICS Currency FAQ
- Related Information
Global Political Power Play
Wanting to shift from dollar dominance is nothing new, but diplomats and economists point out that ongoing tension between China, Russia and the USA is hotting rivalries. These countries understand that whoever wields the biggest economic weapon wins.
Dollar dominance allows the US to impose tight sanctions on Russia over the Ukraine War and stops China from importing US semiconductors to enhance technology. The ultimate threat is exclusion from the global SWIFT payment system, which prevents banks from trading in dollars.
So, the struggle to cast off the yoke of the dollar is more about political power.
The USA projects power by including or excluding groups from the dollar network. Russia and China want to exert the same influence but can only do so with a currency that is under their control. This war of wills continues for as long as the US chooses to weaponise the dollar.
The Limitations of Military Might
Russia and China like demonstrating their power by showing off weapons and their armed forces. Both have large militaries but, despite their size, are paper tigers.
Putin’s special military operation was planned to last three days. Almost 600 days later, his under-supplied forces with poor morale failed to win on land, sea or air despite their paper dominance.
For Russia, this is the first time the armed forces have fought a NATO-supplied and trained nation, and they need better strategy and tactics to overcome a smaller but professional force.
On paper, China has massive, well-equipped armed forces but has not fought a war in decades, so relies on the strength of numbers to steamroller their opposition. The jury is out on how China will perform in such circumstances, but the feeling is Beijing is no better at organising a military than Moscow.
The Strategy of a New World Order
That’s why Chinese President Xi Jinping and Putin want a new world order. They can’t fight NATO and can’t shrug off the dominance of the dollar, so they need to set up an alternative and hope the rest of the world follows their lead.
They hope other leaders fear Washington will turn on them in the future. Nations with US debt are already victims of interest rate hikes by the Federal Reserve. These rate hikes have pushed up repayments, and nations with borrowings have no control over when and how much they will increase.
The Complications Surrounding a BRICS Currency
However, many argue a BRICS currency is a non-starter. A currency needs an institutional framework that the grouping would struggle to develop.
The other question for China is, why treat Russia as an equal partner?
Russia is limping through sanctions, while China has the world’s second-best-performing economy. The Russians have self-inflicted shortages mainly due to corrupt generals and politicians skimming profits wherever possible.
Meanwhile, the G20 group of developed nations quickly reacted by offering the African Union a permanent seat at conferences.
All of Africa’s 55 countries belong to the AU. The move gives them a voice among the world’s leading economies.
The Soft-power Battleground: Africa
Why is this important? Africa is the soft-power battleground between East and West. Besides a vast, impoverished market, Africa has immense wealth in untapped mineral deposits.
Russia and China have made separate power plays in Africa, ploughing piles of cash towards essential infrastructure projects. Under the guise of the Kremlin-funded Wagner Group, Russia has also deployed a mercenary army in countries like Mali and Chad.
BRICS’ Expansion and Its Implications
The counterpunch from BRICS was to invite six new members to join: Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates. The aim is to change the political and economic landscape of the global south – countries south of the equator. BRICS will open for new members in January.
Swaying African Allegiance through Aid and Investments
The struggle for African hearts and mines continued with a pledge to ship 50,000 tonnes of ‘free’ grain to the continent’s most impoverished countries. The grain pledge came with a promise to become a reliable supplier of food and fuel to Africa.
Of course, Putin neglected to add that Russia pulling out of the grain corridor deal with Ukraine and blitzing port facilities was why there was a food shortfall anyway.
Future Infrastructure Initiatives: A Comparative Look
China had already proposed investing billions of dollars in the Belt and Road Initiative, which includes building railroads to link the Asian Pacific with markets in Central Asia and North Africa.
US President Joe Biden has countered with the Partnership for Global Infrastructure and Investment on behalf of the G7 nations.
The program aims to narrow the gap between the $40 trillion the continent needs to build and the available funding with an immediate $600 million investment.
BRICS Currency FAQ
The G7 is an economic forum for the USA, UK, Canada, France, Germany, Italy and Japan governments.
The G20 is an expanded economic forum for the world’s largest economies.
The African Union is a grouping of all 55 countries in Africa.
The Silk Road is a network of roads that joined China with Europe for more than 1,500 years.
BRICS is an economic bloc comprising Brazil, Russia, India, China and South Africa. New members from January 1 are Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates.
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