BRICS Nations are Changing the Global Economy, is the Dollar at Risk?
BRICS Nations are Changing the Global Economy, is the Dollar at Risk?
Geopolitical Analyst: 3-23-2025
For decades, the US dollar has reigned supreme, acting as the linchpin of the global financial system.
From powering international trade to serving as the primary reserve currency for nations worldwide, its dominance has been unchallenged. However, a powerful bloc of nations – Brazil, Russia, India, China, and South Africa, collectively known as BRICS – is now actively seeking to disrupt this established order, pushing for a new financial landscape less reliant on the greenback.
But how serious is this challenge? Could the dollar truly lose its grip on global finance? And what would the ramifications be for the global economy?
The BRICS nations represent a considerable economic force. Together, they account for over 40% of the world’s population and a significant 32% of global GDP when adjusted for purchasing power parity. Over the years, BRICS has evolved beyond a purely economic alliance, forging stronger political and trade relationships, solidifying its influence on the global stage.
One of the primary objectives of this bloc is to reduce their dependence on Western financial institutions and the US dollar-dominated global economy. Understanding the rationale behind this ambition is crucial to grasping the potential shift in the global financial power dynamic.
The answer lies in the perceived weaponization of the dollar by the US government for economic and geopolitical leverage. Because the dollar is the world’s primary reserve currency, the US possesses the power to impose stringent economic sanctions, effectively cutting off nations from global banking systems and controlling significant trade transactions.
The events of 2022 served as a stark reminder of this power. In response to the war in U*****e, the US and its allies froze nearly $300 billion of Russia’s foreign exchange reserves. This bold demonstration of financial power sent shockwaves across the globe, particularly within the BRICS nations.
They realized that their reliance on the dollar made them vulnerable to similar economic repercussions. Consequently, they began taking decisive action to diminish their dependence.
One significant step has been the increased emphasis on trade settlements in local currencies. For instance, India and Russia are now conducting a considerable portion of their trade using the Indian rupee and the Russian ruble, circumventing the need for US dollar transactions.
China, the world’s second-largest economy, has been aggressively promoting the internationalization of its currency, the yuan. The nation has established currency swap agreements with numerous countries and launched the Cross-Border Interbank Payment System (CIPS) as a direct alternative to the US-dominated SWIFT system for international financial transactions.
As a result, China’s trade with countries like Russia, Brazil, and nations in the Middle East is increasingly being settled in yuan. Indeed, by mid-2024, nearly 27% of China’s total trade was settled in yuan, a significant leap from just 17% in 2022, highlighting the growing acceptance and usage of the Chinese currency in global commerce.
Furthermore, the BRICS countries are actively developing new financial institutions to challenge Western dominance. The New Development Bank (NDB), often referred to as the BRICS Bank, was established to provide an alternative to the World Bank and the International Monetary Fund (IMF).
Unlike the IMF, which often imposes strict conditions on loans, the NDB aims to offer developing nations greater financial autonomy without the perceived influence of Western powers. This is particularly appealing to countries in Africa, Latin America, and Asia, many of which have expressed frustration with Western financial policies and lending practices.
The challenge posed by BRICS to the US dollar’s dominance is undeniable. While the dollar remains the undisputed king for now, the concerted efforts of these nations to diversify their financial systems and reduce their reliance on the greenback represent a significant shift in the global economic landscape.
Whether these efforts will ultimately dethrone the dollar remains to be seen, but the increasing momentum behind this movement suggests a future where the global financial system is more multipolar and less reliant on a single currency.
The coming years will be crucial in determining the long-term impact of the BRICS challenge and the future trajectory of the global economy.
