BRICS+ could end dollar dominance – ex-White House adviser
The US dollar is facing a growing challenge from BRICS countries due to the bloc’s planned expansion and efforts to boost the use of national currencies in trade among members, according to Joe Sullivan, a former special adviser on the White House Council of Economic Advisers.
In an article for Foreign Policy magazine published earlier this week, Sullivan suggested that BRICS is likely to strip the dollar of its hegemony over global trade even if it doesn’t have a single currency.
BRICS currently comprises Brazil, Russia, India, China, and South Africa, but will be joined by Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE this coming January. According to estimates, the expanded group, which Sullivan refers to as BRICS+, will represent nearly half of global GDP by 2040.
“BRICS+ may bring the Global South’s economic statecraft from the 20th to the 21st century… In the 21st century, non-Western economic blocs, such as BRICS+, can gain influence over the West... Twentieth-century oil embargoes may seem passé, even puny, relative to the 21st-century trade and financial actions that BRICS+ could theoretically now manage,” Sullivan says.
He notes that three of the bloc’s original members – Brazil, China, and Russia – are major exporters of precious metals and rare earths. The addition of Egypt, Ethiopia, and Saudi Arabia – the three countries that surround the Suez Canal, a key trade artery – will give the bloc influence over 12% of global trade. Saudi Arabia, Iran, and the United Arab Emirates, which are major exporters of fossil fuels, will give the group greater weight in commodities markets. Moreover, Saudi Arabia owns over $100 billion in US Treasury bonds, which “broadens the economic leverage at the disposal of BRICS+ in financial holdings,” Sullivan says.
Meanwhile, BRICS countries are also actively boosting the use of national currencies in mutual trade, and have even signaled the possibility of introducing a new single trade currency at a summit next August. While such a currency is still a work in progress, Sullivan says that BRICS+ has the power to topple the US dollar’s dominance even without it.
“The BRICS+ nations do not need to wait until a shared trade currency... before they swing their newly enlarged economic wrecking ball at the dollar. The BRICS+ states do not even necessarily need to have a shared trade currency to chip away at King Dollar’s domain. If BRICS+ demanded that you pay each member in its own national currency in order to trade with any of them, the dollar’s role in the world economy would go down,” Sullivan stated, noting that once that happens “a variety of currencies would gain in importance.”
The economist noted that the globe in general is “much riper for de-dollarization now than it was even six months ago” due to “tectonic shifts” in China’s economy and in Washington. Sullivan believes that the recent slowdown in China’s economic growth “means a more balanced BRICS,” which “more believably serves shared interests rather than those of a domineering China.” Meanwhile, he also noted that there is growing skepticism about how closely dollar hegemony matches US national interests in Washington itself.
“Rumors of the death of the dollar as a global reserve may have been exaggerated in the lead up to August’s summit [of BRICS countries in Johannesburg]. This time around, however, the rumors of its death may be no exaggeration,” Sullivan concludes.
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