Russia’s Landmark BRICS Summit And The Specter Of De-Dollarization

Authored by Adam Morrow via The Epoch Times,

This week saw a landmark summit of the BRICS group of nations, a nine-country economic bloc led by Moscow and Beijing, which drew representatives from 36 countries, including 22 heads of state.

Held from Oct. 22 to 24 in the Russian city of Kazan, the event focused largely on “de-dollarization”—the idea of phasing out the U.S. dollar as a reserve currency and preferred medium of global exchange.

“We do not reject … the dollar,” Russian President Vladimir Putin said at the summit. “But if we are prevented from working with it, what do we have to do? We have to search for alternatives. And this is what is happening.”

Most Western experts, however, dismiss the idea of de-dollarization as unrealistic, if not downright impossible given the greenback’s longstanding position as the world’s standard currency for commercial transactions.

“To build an alternative financial clearing system to accommodate transactions in rubles or yuan may be possible for BRICS members—but it’s a long shot,” Ariel Cohen, a senior fellow at the Atlantic Council, a Washington-based think tank devoted to international affairs, told The Epoch Times.

Ambassador Matthew Bryza, a former White House and senior State Department official, agreed.

Bryza told The Epoch Times that the notion of de-dollarization—as espoused by Moscow and Beijing—had “no prospects for moving forward as a result of the BRICS.”

“It’s possible the United States will overuse sanctions and leave a critical mass of countries, eventually, to want to de-dollarize the economy,” he said.

“But whether or not to use the dollar—for now—is driven by the financial utility that most of the world sees in using the dollar,” added Bryza, who sits on the board of the Washington-based Jamestown Foundation.

Others, however, take a different view.

“The aim of BRICS isn’t to replace the dollar as a global currency,” Mamdouh Salameh, a UK-based global energy expert, told The Epoch Times.

Rather, he said, it is to “create their own financial system based on a common currency for conducting transactions among themselves, thus avoiding the adverse impact of the dollar on their economies, trade, and finances.”

According to Salameh, a former visiting professor of energy economics at ESCP Europe Business School, London, BRICS members believe the dollar “could be headed for a major devaluation—if not collapse—due to a rising national debt that reached almost $37 trillion in 2024.”

Cohen dismissed these fears, saying the dollar’s leading position is rooted in the strength of the U.S. economy—and U.S. military power.

“As long as the United States plays a global economic and financial role, supported by military power, people shouldn’t worry about the dollar,” he said.

“If, however, with the continuation of the national debt increase, or military weakness, then all bets are off—especially if the United States starts to disengage from its global role,” Cohen added.

BRICS was founded in 2006 by Brazil, Russia, India, and China, with South Africa joining in 2010. This year, Iran, Egypt, and Ethiopia, and the United Arab Emirates also joined the expanding club. Saudi Arabia has been invited to join, but is not currently a member.

As it currently stands, the nine-member bloc is said to account for between 40 and 45 percent of the world’s population and roughly one third of the global economy.

Russian President Vladimir Putin gives a speech during a BRICS business forum in Moscow on Oct, 18, 2024. Mikhail Metzel/Pool/AFP via Getty Images

‘Weaponizing’ the Dollar

Under the Bretton Woods system, the U.S. dollar became the world’s go-to medium for commercial exchange in the aftermath of the Second World War.

BRICS seeks to challenge the dollar’s leading position by reducing its use in financial transactions in favor of the national currencies of its member-states.

Speaking at the summit, Putin said that some 95 percent of all trade between Russia and China is now transacted in rubles and Chinese yuan.

Addressing participants on Oct. 24, he said that the Bretton Woods system had served to ensure the dollar’s supremacy in the post-war global order.

“At that time, the stability of the dollar was ensured … by its linkage to gold,” he said, adding that this linkage was broken in the 1970s, when the dollar was taken off the gold standard.

“Now, the only guarantee of the stability of this world currency [i.e., the dollar] is the stability of one economy: the U.S. economy,” Putin said.

Some BRICS members view de-dollarization as a means of protecting themselves from U.S.-led sanctions, which have discomfited Russia for the past 10 years.

A joint declaration issued in Kazan decried the “disruptive effect of unlawful unilateral coercive measures, including illegal sanctions, on the world economy [and] international trade.”

Addressing the summit on Oct. 23, Iranian President Masoud Pezeshkian, whose country has long been the target of U.S. sanctions, accused the United States of “using the dollar as a weapon … to control other nations.”

But according to Bryza, just how de-dollarization would insulate BRICS states from possible sanctions would “depend on how many countries join the ‘de-dollarized’ currency union.”

“It doesn’t matter if Russia and other BRICS countries come up with a way to conduct their trade based on something other than the dollar,” he said, “as long as the rest of the world continues using the dollar.”

“And the rest of the world doesn’t want to risk being subject to U.S. sanctions, or be banned from using the U.S. financial system,” Bryza said.

The U.S. Treasury Department in Washington on Oct. 3, 2024. Madalina Vasiliu/The Epoch Times

Bypassing SWIFT

The notion of de-dollarization also involves the creation of alternative methods of cross-border payment so as to achieve independence from Western systems.

Currently, the primary system for international payments is the Belgium-based SWIFT (Society for Worldwide Interbank Financial Telecommunication), which was set up in 1973.

Because the U.S. Treasury Department has considerable oversight over SWIFT, Russia, along with other BRICS states, claim the system has been “weaponized” by Washington and its allies.

Therefore, BRICS states hope to create an alternative system, which would—theoretically—insulate its members from the threat of U.S.-led sanctions.

The joint declaration issued in Kazan calls for “more efficient, transparent, safe, and inclusive cross-border payment instruments built upon the principle of minimizing trade barriers and non-discriminatory access.”

Ferit Temur, a Turkish political analyst specialized in Russian affairs, noted that Russia has already launched its own “Mir” payment system, although this has met with limited success.

“But whether the Mir system—or another system—is developed, it isn’t a realistic goal for BRICS countries to quickly eliminate SWIFT,” Temur told The Epoch Times.

“This is due to the SWIFT system’s high rate of use, both among BRICS states and in trade with the rest of the world,” he said.

Nevertheless, de-dollarization—as envisioned by Moscow and Beijing—“may find a response in a significant part of the world over the next 10 to 15 years,” he said.

According to Bryza, an alternative system has “zero prospect of succeeding, because SWIFT works great—as long as you don’t invade another country.”

“Russia’s political ambitions won’t ever be able to overcome the enormous financial and economic benefit the SWIFT system provides,” he said.

“They can try to de-dollarize all they want,” Bryza said. “But until the entire world has a de-dollarized economy, this won’t have much of an impact at all on insulating these countries from sanctions.”

Salemeh, by contrast, described de-dollarization as a “very realistic approach” to the economic problems facing certain BRICS states.

BRICS members, he said, want to protect their economies from “the weaponization of the dollar, U.S. sanctions, and the dollar’s fast-declining purchasing power.”

“They are further encouraged by central banks reducing their dollar holdings and buying gold because of the lack of confidence in the dollar,” Salemeh added.

Cohen conceded that a rival, de-dollarized system “may be a possibility,” going on to assert that such a move would “make sanctions enforcement more difficult.”

“However,” he said, “it won’t make the dollar obsolete.”

Cohen said Russia is “taking the lead” on the de-dollarization scheme, “but the country that can really pull it off—in terms of the size of its economy—is China.”

Wesley Alexander Hill, lead analyst and international program manager for energy, growth, and security at the International Tax and Investment Center, described all the talk about de-dollarization as “totally overblown.”

Russia and China, he said, are both fully aware that “the systems they have set up cannot compete with the dollar.”

“China does have the theoretical capacity to challenge the dollar in the global financial system,” Hill told The Epoch Times. “But this is an extremely long-term project—the work of 20 to 30 years.”