Is a New Currency Possible for BRICS?
At present BRICS countries account for 35 percent of the global economy. This is higher than the 30 percent share of developed countries in recent months.
By Antony Vigilious Clement
The first meeting of leaders of the ‘BRIC’ alliance of Brazil, Russia, India, and China was held in Russia in 2009.
Then in 2011, it became a five-nation confederation with the addition of South Africa. Iran, Egypt, Ethiopia and the United Arab Emirates also joined at the recent summit in Russia.
Many more countries have expressed their desire to join the block. It cannot be said that it is a formal block.
The BRICS conglomerate can be said to be moving towards a goal of coordinating economic and diplomatic efforts to create an alternative to the Western G7, the United Nations Security Council and the World Bank.
At present BRICS countries account for 35 percent of the global economy. This is higher than the 30 percent share of developed countries in recent months.
China’s share of world exports was 14.2% in 2023 and India’s share 1.8%. In the same year, China’s exported goods were worth US$ 117 billion to India. But by 2023, India’s exports were only US$ 16.25 billion.
India’s exports to Russia in FY 2023-24 were US$ 61.44 billion. India’s imports from the US in 2023 were US$ 40.12 billion.
In the same year, India’s exports to the US were worth US$ 75.81 billion. The US is now India’s top trading partner, overtaking China. By this we can understand what kind of partners the US, China and Russia are.
Under the shadow of the aforementioned complicated trade relations amongst BRICS nations and US, the three years of the ongoing Russian-Ukrainian war, Iran’s stance on attaining nuclear weapons, a yearlong Israeli-Hamas war, threatening climate change issues, and Donald Trump’s US presidential election success, the BRICS summit was held in Kazan the city of Russia in October 2024 this year.
BRICS leaders and newly joined members successfully participated, to the disappointment of others, especially the US.
For, in these circumstances, it has been projected that Russian President Vladimir Putin and Chinese President Xi Jinping have isolated the West, making global headlines.
This is not to say that the organization lacks the appreciation and support of many countries for raising up strong leadership under the BRICS umbrella to challenge America’s global leadership. This is definitely positive for Russia and China.
However, India’s positioning itself as a neutral country here. This situation should be seen as a leverage for India, since India has very deep ties with the US and Russia.
Putin is secretly helping in various ways to improve India – China relations, India and China are now cautiously calculating moves to renew their friendship; India cannot endanger friendship with any of these nations.
It must also not be forgotten that this move was particularly important after the BRICS summit at Kazan, when China and India mutually agreed to amicably resume their traditional patrolling points in the Line of Actual Control (LoC).
Putin seems to have succeeded in this.In this context, the purpose of the consultation held at the Kazan conference in seeking to replace the US dollar with a unified BRICS currency or to enact business in another currency is a warning for Washington.
Brazilian President Luiz Lula de Silva first proposed a separate currency for Latin American countries to trade independently of the US in 2023 at a regional conference of Latin American countries.
Consequently, at the BRICS conference held in Johannesburg, South Africa in August 2023, the President of Brazil requested a common currency for BRICS trade.
Meanwhile, Donald Trump, who eventually won a second term as president, accused the US President Joe Biden’s administration during the ongoing US election campaign for playing mute during the last two years of BRICS currency discussions.
Trump has warned that he will not tolerate BRICS policy as President.Following his victory, Donald Trump, who will take office as President of the United States in January 2025, was busy in selecting cabinet choices for the important portfolios from his pool of supporters.
Then, suddenly, without any discussion, he issued a stern warning on social media against BRICS countries, causing a huge shock across the world.
He warned, “BRICS countries would be taxed 100% if they tried to introduce a new currency to replace the US dollar.
BRICS leaders should give the US a commitment not to introduce a new currency to replace the dollar. If not, we will have to say goodbye to the US market.”
Donald Trump’s frustration is understandable. How could he not realize that the creation of a new currency to replace the dollar would certainly destroy the US economy? Putin diagnoses the problem of the US dollar as a weapon of sanction.
Although India is not against the US dollar, Putin reckons that this aggressive US use of the dollar means that India has no choice but to find a new way to do the trade.
In the meantime, it is China who is looking to gain much from these troubled waters. China hopes to take advantage of this situation to curb America’s international power.
Chinese leaders have been encouraged to propose their own currency for BRICS internal trade. Russia observes this development closely, whilst India is reluctant.
Nevertheless, the strongest voice of this BRICS-currency movement is Russia’s attempt to do business out with the US’s sanctions associated with Russia’s full-scale invasion of Ukraine.
Amidst the soaring US external debt, domestic challenges and political turmoil, around 58.36% of the world’s foreign currency reserves are in the US dollar.
The US dollar is undeniably a focal point in world trade. Relatedly, the US keeps the Euro as its reserve currency. Therefore, it is not easy for BRICS countries to create a new currency. Trump knows that there is no imminent threat.
Simultaneously, the United States cannot reduce its trade deficit gap and increase its global dominance. Therefore, Trump’s warning appears to be an anticipatory move to get other countries to do what he thinks upon taking office in January.
Yet, Trump’s global economic landscape shows growing tensions as the US grapples with challenges to its financial dominance.
Further, when the United States imposes high taxes, it is the Americans who suffer the most.India would like to sustain a balanced foreign policy and knows the impact of the potential BRICS currency.
India may support a new currency for BRICS in principle. Still, it cannot abandon its important US trading partner. There is no immediate possibility of a BRICS currency nor of a rapid decline in American dominance.
So de-dollarisation of the US Dollar should not be part of India’s economic policy nor of our politics or diplomacy.
