Putin’s plan to replace the dollar

What is BRICS? 

BRICS, an acronym for its founding countries of Brazil, Russia, India, China, and South Africa, is a consortium of emerging economies, today consisting of ten countries—Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates – all seeking an alternative world order.  Putin, the Russian president, is its unofficial leader. 

Russian President Vladimir Putin delivered a speech at the BRICS summit in Kazan, Russia, on October 23 2024.  He unveiled a mock-up of a new BRICS banknote, featuring the flags of the five core BRICS countries—Brazil, Russia, India, China, and South Africa.

The BRICS banknote mock-up.

Putin with the proposed BRICS banknote.

Looking at the above photos, it looks like BRICS had just launched a common currency. This is exactly what Putin wanted the world to think, to show that Russia is far from isolated on the international scene. Alas, no BRICS currency was launched, and the other BRICS countries are not in favour of this, especially after Trump threatened 100 per cent tariffs on all BRICS countries, if they replaced the US dollar as a reserve currency. 

In Kazan, Russia had a simple goal: to launch as many financial schemes as possible in order to diminish the impact of Western sanctions on Moscow. Putin suggested as a first step, for the bloc to strengthen the use of national currencies in cross-border trade rather than rushing toward a new currency – for now. 

Russia was also most insistent on a financial scheme called BRICS Bridge which eliminates intermediaries for international transactions, so the financial transactions do not need to go through a correspondent bank, likely to be located in the United States or go through SWIFT, the Western-controlled global payment system between banks.

The repercussions of the BRICS Bridge are massive. As Brazilian President Luiz Inácio Lula da Silva said in 2023, “Every night, I ask myself why all countries have to base their trade on the dollar. Why can’t we do trade based on our own currencies? Why do we need to settle cross-border trade using the greenback instead of our own currencies?” But that’s not the only issue - the dollar is the currency of choice for issuing sovereign debt, which places developing economies at the mercy of the monetary policy of the U.S. Federal Reserve.

Eliminating the US dollar from trade and ditching Western financial mechanisms offers protection against sanctions from G-7 countries and their allies, since in most cases those sanctions only work, if the sanctioned country’s businesses use Western currencies. It also makes it easier to hide sensitive transactions that could trigger U.S. secondary sanctions, such as Chinese sales of military equipment to Russia.

References:

Article – “Russia’s Plans to Replace the Dollar Are Going Nowhere”, Agathe Demarais, Foreign Policy,  November 18, 2024

https://foreignpolicy.com/2024/11/18/brics-currency-dollar-russia-china-swift-finance-sanctions/