“The expansion of BRICS has made it clear that the de-dollarization of the international finance system is inevitable.”
This view, from economist William Gumede—who’s also executive chairperson of the Democracy Works Foundation in South Africa—has been echoed around the world since BRICS leaders announced the expansion of the bloc on Aug. 24 at a summit in Johannesburg
In January, BRICS—originally established in 2009 to represent the world’s strongest emerging market economies—will add Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE) to its ranks.
Mr. Gumede, one of South Africa’s leading academics and thought-leaders, has been researching the potential impacts of de-dollarization since 2014.
The average per capita GDP of the G7 economies was currently six times that of BRICS economies. But, the unexpectedly swift expansion of BRICS would increase the trade bloc’s share of the global economy much faster than earlier predictions.
“These forecasts did not take into account that BRICS would expand its membership very quickly. A larger BRICS will mean the world will increasingly use U.S. dollars less,” he said.
Mr. Gumede said the bigger BRICS alliance would eventually rival the Group of Seven (G7) large industrial economies of the United States, European Union, United Kingdom, France, Japan, Italy, and Canada, which together are home to 16 percent of the world’s population and account for 62 percent of the global economy.
Welcoming the new members in Johannesburg last week, Brazil’s President Lula da Silva said their addition would mean BRICS would represent 46 percent of the global population and 37 percent of the world GDP.
The expansion means BRICS now consists of some of the globe’s largest oil producers: Russia, Saudi Arabia, UAE, and Egypt. Nigeria, another major oil exporter, is set to join when the bloc gets even bigger, probably at its next summit in Russia in 2024.
“BRICS is going to dominate the world’s energy supply,” said Mr. Gumede. “The strength of the U.S. dollar is also partially based on the currency as underpinning oil trade—the so-called petrodollar—and members of OPEC (Organisation of the Petroleum Exporting Countries) settle their accounts in U.S. dollars.
“Therefore, enlarging BRICS to also include the oil producers and persuading them to use a new BRICS currency, rather than the U.S. dollar, to settle their accounts, will be a game-changer. It is likely to accelerate the de-dollarization of the world.”
Jakkie Cilliers, Head of the African Futures and Innovation program at the Institute for Security Studies in Pretoria, attributed the unexpectedly rapid expansion of BRICS, and its moves towards de-dollarization, to Russia’s invasion of Ukraine and its consequences.
“BRICS has seen the West hit Russia with all kinds of financial sanctions, and threaten sanctions against South Africa for supposedly supporting Russia, and as a result it wants to end, or at least ease, its dependence on the dollar,” he told The Epoch Times.
“De-dollarization, first mooted by [Russian President Vladimir] Putin, is a potent symbol of a shift away from a Western-led global order towards a new era of more uncertain and fluid multipolar connections. Change is in the air, and the next three decades will see the steady unfolding of this trend.”
Mr. Cilliers said BRICS was “cloaking itself in resentment” against the West.
“It’s quite easy for Russia and China to take advantage of the ill-feeling that still exists across much of the developing world because of colonialism, imperialism and sanctions by leading Western countries.
“Never mind the fact that Russia and China show similar imperialistic tendencies,” he commented.
He said the Global South was “particularly unhappy” with international finance institutions, and with the U.S. Federal Reserve Bank.
“When the Fed hikes interest rates, it sometimes sends smaller economies into turmoil. They’re subjected to shocks for no domestic reason. So they see the dollar as providing the United States with a very powerful weapon to use in its interests,” said Mr. Cilliers.
“This is what unites BRICS in its desire to move away from the dollar-backed international financial system.”