Belgium
Source: moderndiplomacy.eu

Amid focused debates and high optimism to establish an economic clout, BRICS (Brazil, Russia, India, China and South Africa) together with new members and its partners (outreach format) are steadily looking forward to a new era of de-dollarizing the global economic system by introducing a new currency and also to set up a new payment system, most likely, during the forthcoming October 2024 summit in Kazan, the Republic of Tatarstan.

In pursuit of defining the collective determination to achieve these economic policy goals, BRICS has over the months been deliberating broadly the effectiveness and the importance its newly-designed mechanisms and a well-balanced approach for reconstructing the western dominated dollar-system in the world.

With a couple of months away for taking a landmark collective decision on this, BRICS recognizing the strong working ties among members, has demonstrated its readiness by engaging in consistent dialogue and cooperating with like-minded alliance of partners and international corporate actors. In strict adherence of its guidelines, and the resolutions adopted at the XV BRICS summit in South Africa, an appreciable progress and accomplishments have been made on several initiatives under Russia’s BRICS leadership.

Despite the fact that there were months of back-and-forth movement with the dialogue on these economic initiatives, the strategic perspectives for their further development with and to incorporate, in particular, most of the developing countries in the Global South. There are following plans with a major information campaign discrediting Europe and the United States. The relevance of this is that, most of these influential countries with growing discontent against western hegemony have expressed interest in the ideals and aspirations of the ‘informal association’ BRICS which was created in 2006.

According to information monitored in the reputable global media, more than 30 countries have expressed their readiness to join BRICS. Under Russia’s chairmanship, integrating more new members into BRICS has been suspended, even though recognizing the increasing interest, Russian Foreign Minister Sergey Lavrov explained “the modalities of ascension have to be collectively discussed” at subsequent summits in future.

Laying down a joint payment mechanism will be a key discussion topic at the forthcoming summit, which is going to be the final event of Russia’s BRICS presidency, said Viktoria Panova, who heads an expert council tasked with overseeing Russia’s presidency. “Active efforts are underway to create a financial payment mechanism that would make cooperation between BRICS countries easier, maintaining their sovereign trade and economic exchanges. This issue tops the agenda because every member of the group sees it as important,” the expert said, and reported by the local Russian media.

News came in late July that BRICS members had developed a system similar to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), from which Russia had been disconnected after the invasion in Ukraine. The mechanism will operate on the basis of the BRICS Bridge supranational payment platform. Payments will be conducted in the national currencies of BRICS countries, while the New Development Bank will act as a platform for integration, conversion and clearing. That said, it’s also important to discuss ways for new BRICS members to interact with the New Development Bank, according to Panova’s explanation.

As BRICS association continues to challenge the US dollar dominance in the global markets, creating the payment system has become the highest priority, the financial project seriously heading for a debut at the upcoming 2024 summit. Several arguments and propositions have given strength to whta is referred to as the BRICS Bridge to navigate around the western-dependent SWIFT system. More specifically, its creation will allow developing countries especially in the Global South to limit or restrict their dependence on the US dollar, but instead there will be the possibility to promote their own national currency usage for trade settlements.

The New Development Bank (NDB) was established in 2015 by the members as an alternative to multilateral financial institutions, now welcomed four countries into its membership, Bangladesh, the United Arab Emirates, Uruguay and Egypt. Its founding members, the BRICS members consisting Brazil, Russia, India, China and South Africa. While multilateral financial institutions, especially the International Monetary Fund and the World Bank have been active and in the headlines, the NDB with its skeleton organizational structure and limited investment profile – all these are little known and/or made public, raising policy implications surrounding the operations since its establishment.
There have been an evolving scholarly debates and research on the BRICS Bank, from its initial establishment to the current period as the NDB enters its second decade. Boston University Global Development Policy Center’s scholar, Gregory T. Chin, in July published an article titled “The ‘New’ New Development Bank: A Decade Plus in the Making” in which so many questions were raised. Among a series of obvious questions is what makes the NDB governance and agenda unique, what has been its achievements over the past decade, and now at the fore-front with de-dollarization and increasingly on multipolarity.

The theme of adding members to the NDB immediately raises the issue of purpose. For this collection, Jim O’Neill returns to the theme of the ‘BRICs’, the term he coined (South Africa was not included in O’Neill’s original formulation, which was focused on Brazil, Russia, India and China). Similar to the question of BRICS expansion, O’Neill emphasizes the importance of figuring out criteria and procedures for NDB membership expansion; the need to reach consensus on the criteria for admission, linking them to a redefinition of collective purposes and specific goals; a clearly defined scope of activity, and value-added, for their future collective action. That however, O’Neill suggests that the 2023 addition of the main petro-states in the Gulf and Middle East to the NDB membership would be useful for supporting the Bank’s drive for more local currency use.

Ultimately, it is also fair to debate whether the NDB members and senior management have been daring enough in building-up the Bank, given the initial vision of the BRICS governments when launching the NDB – in building its global profile and presence, in pursuing alternative ways of doing things that support a Southern developmental agenda: whether on membership expansion, regional offices, outreach and partnership, or on the tangible goals of promoting local currency use, tackling climate change and environmental protection, as well as promoting sustainable infrastructure and renewable energy.

In another webinar meeting held in Geneva, Switzerland, participating experts noted that digitalization of the economy involves so many aspects – at the initial stage of digitalization entails explicit streamlining and creating a regulatory framework for this process. And one of the bottlenecks in dealing with digital markets is market definition – the application of traditional market definition tools is challenged by the tendency of digital markets to be highly innovative and dynamic.
As the number of BRICS member countries is growing, the association remains informal, and moreso it is beginning to work more actively. The more active it transforms, the more practical contradictions and problems. Nevertheless, experts noted that there is a significant convergence among BRICS jurisdictions in recognizing the importance of certain essential standards, such as consumer welfare standards, but there are also some differences that are worth highlighting.

Authorities in different countries, especially Brazil, Russia, China and South Africa, recognize other objectives, such as ensuring economic freedom or a level playing field for small and medium-sized enterprises. And these goals can somehow be translated into more elaborate legal standards for assessing abuse of dominance. This includes the issue of antitrust regulation, both within individual countries and various interstate associations.

Victor Oliveira Fernandes, Commissioner of the Brazilian Administrative Council for Economic Defense (CADE), Alexey Ivanov, Director of the BRICS Competition Law and Policy Center, Deni Mantzari, Associate Professor, University College of London and a few other experts pointed out that developing approaches to competition policy reflect the interests of the development of the BRICS economies. But there other important main issues including new approach to antitrust regulation of the digital economy. But much attention has to be paid on the fact that cooperation exactly within the framework of supranational associations can give real results in the fight against violations of fair competition rules by global monopolists in local markets.

Nevertheless, the development of new definitions and indicators is one of the most important tasks of the meeting. As part of the presentation, Victor Oliveira Fernandes, Commissioner of CADE, stated that within their organization a number of new indicators have already been developed to define the platform market: for example, the ability to unilaterally impose conditions, including as a show of bargaining power, ownership of key datasets, ability to influence choice through online platform architecture, lack of transparency.

For this article a couple of the BRICS members, and several policy experts and scholars acknowledged early August in separate interviews with this article author that the BRICS payment platform development has reached an advanced stage, and if it continued as planned, it would explode as a bombshell globally. The BRICS Bridge could have an expected impact as majority members of the association declared their support for de-dollarization approach or process, (unfathomable tragedy for the western currency’s future) and promoting unilateral trade. It could however increase the overall trade dealings and essentially strengthen emerging relationships between the association’s members in the long term.

Within the stipulated guidelines, Russia took over the BRICS one-year-long presidency on January 1, 2024. Russia’s presidency features more than 250 various events, with a scheduled BRICS summit in Kazan in October 2024. Since its inception in 2006, BRICS has experienced two phases of expansion. In 2011, South Africa joined the original group, which included Brazil, Russia, India, and China. On January 1, 2024, five new members officially entered BRICS, namely Ethiopia, Egypt, Iran, Saudi Arabia and the United Arab Emirates.

Russia
Source: brics-plus-analytics.orglink

On BRICS+ policy coordination
The idea of policy coordination among BRICS has clearly become more popular in the past several years and yet there is still a lack of detail and focus with respect to the possible modalities of such cooperation in the sphere of trade and macroeconomic policy. Recent trends in intra-BRICS discussions suggest that there may be some headway in attaining greater policy coordination among BRICS in the trade sphere. In the macroeconomic area, there may be scope to explore coordination in anti-crisis measures, including with respect to how the stimuli from BRICS core economies propagate throughout the BRICS+ circle (including the BRICS regional partners) as well as the broader Global South perimeter. Greater progress on policy coordination in the macroeconomic sphere could be facilitated by strengthening and expanding the mandate of the BRICS Contingent Reserve Arrangement (CRA). 
In the trade sphere, the BRICS economies have recently agreed to pursue policy coordination in the WTO. A more specific commitment on the part of the core members of the bloc would be the formation of a common platform in the WTO’s “groups in negotiations” to coordinate common approaches to WTO reform and trade liberalization rounds. As discussed in our earlier publications one of the priorities in the trade sphere for BRICS needs to be the delineation of a road-map of trade liberalization within the BRICS/BRICS+ circle. The role of the BRICS/BRICS+ regional blocs such as the African Continental Free Trade Area (AfCFTA) or Mercosur within the BRICS+ trade liberalization will need to be explored in greater depth, given that trade policy in a growing number of BRICS economies is increasingly delegated from the national level to the level of the respective regional integration blocs.       
In the fiscal sphere one of the promising venues for coordination may be discussions on anti-crisis policies as well as the coordination of economic stimuli with the respective regional integration platforms and their development institutions. During an economic downturn core BRICS economies may coordinate their approaches to anti-crisis policies and synchronize their stimuli to deliver a stronger effect on the recovery of the economies of the developing world. Involving regional development institutions in this process together with the BRICS CRA and the New Development Bank (NDB) may streamline economic policy coordination across the main regions of the Global South and amplify the scale of resources available for launching such anti-crisis stimuli.  
In the sphere of monetary policy, the current discussions appear to revolve around common approaches to de-dollarization and the use of new payment systems. Greater focus will need to be accorded to the development of CBDCs across BRICS and their inter-operability. Discussions about a common unit of account or a single BRICS currency will need to be accompanied by work on the stability/convergence criteria with respect to macro indicators such as inflation or the volatility of the respective national exchange rates. There may also be scope to explore the modalities of coordinating anti-crisis policies in the monetary sphere during economic downturns, including with respect to such factors as capital account liberalization and international best practice in anti-crisis policies across EM. Finally, there has been some discussion recently on advancing greater financial literacy within the BRICS circle – an area where the BRICS Central Banks could potentially cooperate with substantial benefits for greater financial inclusion.
Overall, trade and macroeconomic policy coordination for BRICS should be prioritized in the coming years, given the mounting risks to the global economic outlook and the notable potential harbored in South-South economic policy cooperation/liberalization. We continue to see the regional integration arrangements of the Global South and their respective development institutions (regional development banks and regional financing arrangements) as the key conduits to a more effective and inclusive economic policy coordination framework across the developing world. Within this framework a strengthened BRICS CRA with an expanded mandate would provide an important institutional support to Global South macroeconomic policy coordination efforts. Greater BRICS policy coordination in the trade and macroeconomic sphere should be conducive to further boosting South-South trade and investment which in turn may lower the susceptibility of emerging market economies to volatile swings in capital flows and monetary policy shifts in the advanced economies.

country
Source: www.globaltimes.cnlink

Countries showing interest in BRICS membership have seen a significant increase over the years. Malaysia and Thailand are the latest countries in Southeast Asia to express interest in joining the group. The number of African and Latin American countries seeking to join BRICS is continuously increasing, and there is also a gradual spread of applicants from various regions in Asia. It can be said that BRICS countries as typical representatives of the Global South and BRICS cooperation as a new practice of South-South cooperation have obtained a wide consensus among an increasing number of developing countries.

BRICS has received positive attention mainly due to having shown real development success over the past nearly two decades. The unfairness and irrationality of the existing international system and international order have continuously harmed developing countries. These two factors combined have driven more emerging markets and developing countries toward closer alignment with BRICS.

Although financial and economic cooperation is just one of the pillars of BRICS cooperation, it is the primary dimension that attracts most countries to the group. Against the backdrop of long-term sluggish global economic recovery, the earliest five BRICS members contribute over 50 percent to global economic growth. Now, with five new members, BRICS not only sees a better average growth rate, but also more potential in terms of resource endowment, market capacity and development scale.

Furthermore, BRICS has pioneered the establishment of the New Development Bank, mobilizing resources for infrastructure and sustainable development projects in multiple member countries. This has given other countries ample confidence to apply for membership. At the same time, BRICS insists on the peaceful resolution of international disputes, effectively safeguarding global and regional security. It also promotes cultural exchanges to enhance mutual understanding among people and pushes for the coexistence and mutual learning among different civilizations. Furthermore, it provides BRICS wisdom and BRICS solutions for other countries to handle international relations effectively. As the BRICS spirit indicates, openness and inclusiveness grant each member more dignity, while strengthened collaboration and consensus result in greater gains for everyone.

If BRICS countries' strivings for prosperity serve as a "pulling force" attracting other emerging markets and developing countries, then the obduracy of a few developed countries is the "push force" urging the Global South to gradually align with BRICS. Faced with the international political and economic order constructed and dominated by the developed country bloc, especially certain hegemonic powers, developing nations have consistently demanded reforms that more accurately reflect the shifting balance of power within the international system and better represent their voices and interests. The Global South is increasingly aware that they must have a reliable leader to maximize and safeguard their legitimate rights and interests during the long and arduous process of North-South dialogue. This role has historically fallen to BRICS.

The multipolar process advocated by BRICS and its commitment to multilateralism stand in stark contrast to the hegemonism, power politics and unilateral sanctions pursued by certain developed nations. More importantly, the existing "rich man's club" resembles a closed circle, where even if some countries manage to secure a "ticket" to the periphery of the discussion, they are still unable to achieve truly equal dialogue and share the benefit with the members of this exclusive grouping.

In contrast, BRICS has consistently kept its doors open, responding sincerely to the expectations of all parties. It promotes the accession of eligible members to the group through pragmatic actions and prepares to address the urgent need for an expanding circle of friends by establishing the partner country model.

In conclusion, the appeal of BRICS remains steadfastly poised to exhibit significant international impact in the new era of "greater BRICS cooperation." Of course, to maintain and further enhance this attractiveness, the group must continually deepen institutional mechanisms, elevate cooperation efficiency and adeptly manage the sensitive and complex relationships with other emerging markets and developing countries, as well as developed nations.

The author is the executive dean of the Institute of BRICS Studies at Sichuan International Studies University. opinion@globaltimes.com.cn

Russia
Source: en.interaffairs.ru

US weaponization of dollar is backfiring as BRICS and wider developing world accelerate away from dollar-based trade and holdings, writes ‘The Asia Times’.

Economic and financial sanctions often backfire. The most notable example is the weaponization of the dollar against Russia. The measure has sparked a global movement to de-dollarize, the opposite of the punitive move’s strategic intent.

The historic miscalculation didn’t stop US Senator Marco Rubio of Florida from introducing a bill in Congress to punish countries that de-dollarize. The bill seeks to ban financial institutions facilitating de-dollarization from the global dollar system.

Rubio’s bill, ominously called the Sanctions Evasion Prevention and Mitigation Act, would require US presidents to sanction financial institutions using China’s CIPS payment system, Russia’s financial messaging service SPFS and other alternatives to the dollar-centric SWIFT system.

Rubio is not alone in targeting countries bidding to de-dollarize. Economic advisors to presidential candidate Donald Trump are discussing ways to punish nations that are actively shifting away from the dollar.

The Trump team has proposed “to sanction both allies and adversaries who seek active ways to engage in bilateral trade in currencies other than the dollar.” Violators would be subjected to export restrictions, tariffs and “currency manipulation charges.”

US policymakers and pundits in the financial media were initially dismissive of de-dollarization. They argued the dollar is used in some 80% of all global financial transactions. No other currency even comes close.

But financial sanctions against Russia became a turning point. The trend to de-dollarize expanded rapidly and has now arguably become irreversible.

In May this year, the Association of Southeast Asian Nations (ASEAN) announced plans to de-dollarize their cross-border trade and use local currencies instead. The announcement made few global headlines but ASEAN is a huge trading bloc comprised of ten countries with a combined population of 600 million people.

Other agreements to bypass the dollar system include barter deals. Iran and Thailand are trading food for oil while Pakistan has authorized barter trade with Iran, Afghanistan and Russia. China is building a state-of-the-art airport in Iran, to be paid for in oil.

Cryptocurrencies are also being used to bypass the dollar system and avoid scrutiny from the long arm of American law. Cryptos like Bitcoin enable individuals to send and receive funds from anywhere in the world anonymously, outside the legacy banking system.

De-dollarization is high on the agenda of BRICS, which is rapidly becoming the world’s largest economic bloc.

Until 2022, BRICS had few clearly defined goals apart from a shared desire to develop a counterweight to the G7. But the weaponization of the dollar system and the freezing of US$300 billion in Russian reserves held in Western banks gave the group sharp new focus and purpose.
BRICS is economically driven and has no ideological program. It is primarily focused on economic development and cooperation. Its ethos is based on consensus and reciprocity.

US control over the global financial system can be traced to 1974 when the American government convinced Saudi Arabia to sell its oil only in dollars. The agreement followed the US decision in 1971 to default on the gold standard. President Richard Nixon closed the so-called gold window where dollars could be exchanged for physical gold.

The US was fighting two wars at the same time – the war in Vietnam and the war on poverty – and the government issued more dollars and debt than could be backed by gold. The petrodollar assured continued global demand global for dollars.

The agreement required all oil-importing countries to maintain dollar reserves. Oil-exporting countries invested their dollar surpluses in US bonds and treasuries, providing continuous financing for the US national debt.

Pricing oil in dollars tied the global economy to the dollar system. Oil represents less than 10% of global trade, but is essential to the other 90%.

Control over the world’s reserve currency gives the US significant power over other countries. It controls the on-and-off ramps of the global financial system and can sanction any country it perceives as an economic or political adversary.

Moreover, the government can issue loans to foreign countries in its own currency. The International Monetary Fund loans money to countries that need to import essentials like oil, food and medicine but lack the needed dollars.

Providing loans to countries typically comes with strict neo-liberal conditions, namely opening up the economy, privatizing public enterprises and liberalizing financial markets. The results have been less than optimal.

The petrodollar made it easier for the US to finance its debt and led to profligate spending by the US government. In 1985, just ten years after the petrodollar agreement, the US became the biggest debtor in the world.

In 1974, the US national debt was $485 billion, or 31% of GDP. This year, the national debt surpassed $35 trillion, representing 120% of GDP.

Interest payments on the national debt will exceed $850 billion this year, making it the biggest item in the national budget, ahead of defense spending and social security. Without a major course correction, servicing the national debt will crowd out all discretionary spending in a few years.
The debt crisis underscores rising US concerns about de-dollarization. Fewer users of the dollar means fewer buyers of US debt.

Investors have long regarded US bonds as a safe haven. Bonds offer a stable return and payment is guaranteed by the government. But in the past few years, investor demand for long-term US debt has come under pressure. A clear sign of trouble: the dollar and gold, which for years had traded in a narrow bandwidth, started to diverge.

The concern of investors is based on simple arithmetic. If the US issues more dollars/debt than economic growth justifies, it causes inflation. When bond yields are 4% and inflation is 8%, bonds are a loss-making investment, which is not good for pension funds and other investors with long-term commitments.

The US bond market is valued at $50 trillion, a massive amount by most measures. But the figure pales in comparison to the nominal value of the global dollar system, which is virtually incalculable but in excess of a quadrillion dollars. 

The off-shore shadow banking is estimated at $65 trillion.
The derivative market is valued at $800 trillion.
The off-shore shadow banking market is $65 trillion.
The eurodollar market is $5 trillion to $13 trillion.

De-dollarization means that many of the trillions of dollars floating around the world will gradually come home. When countries move toward multicurrency trade, demand for dollars will only decline.
Dollars flowing back into the US will not only spur inflation but also reduce the pool of potential buyers of US debt. Fewer buyers means higher interest payments, which leads to higher debt.

De-dollarization is the first challenge to the dollar since 1944, when the Bretton Woods Agreement made the gold-backed dollar the benchmark for all other currencies. Given the geopolitical tension between BRICS and G7 countries, a Bretton Woods II is highly unlikely.

Instead, we will see a growing number of multicurrency agreements and at some point the launch of a BRICS trading currency. The BRICS currency unit will be asset-backed but will be digital only. No coins or paper money would be issued.

The global financial system is thus likely to fragment into three parts: the dollar-led fiat system, multicurrency agreements and a BRICS-led trading currency. The dollar system will exist alongside the other two systems but the dollar is likely to be the world’s last reserve currency.

Reserve currencies are a remnant of the (neo)colonial era. They primarily benefit corporations and the wealthy. A multicurrency system will primarily benefit countries, allowing them to take responsibility for their own future by reclaiming their monetary and fiscal autonomy.

Russia
Source: russiancouncil.ru

The signing in December 2023 of the U.S. President’s decree imposing secondary sanctions on foreign financial institutions found to be supporting Russia’s military-industrial base made international settlements between Russian companies and their counterparties in “friendly” nations much more difficult. The precedent of discrimination against Russian clients was set as early as February 2024 by a number of leading banks in Turkey, the UAE, India, China, Kazakhstan and Uzbekistan. Citing security concerns, they took to declining requests to open accounts for Russian legal entities, suspending transfers, increasing payment processing times, rejecting or returning funds and screening Russian partners for cooperation with the Russian defense industry and inclusion in sanctions lists. In July, Bloomberg reported new problems faced by several Russian exporters when making payments in yuan. Along with that, there were reports about the suspension of transactions made by Russian residents with cards issued by some Russian banks that use the Chinese payment system UnionPay.

The obvious reason for another demarche of the “allies” was the June expansion by the Biden administration of the list of sanctioned individuals and legal entities both in Russia and abroad. The targets of secondary sanctions now include financial institutions in Asia, the Middle East, Europe, Africa, Central America and the Caribbean, whose activities are somehow connected with supporting the Russian military-industrial sector. The new sanctions list also features branches of leading Russian banks located in Beijing, Mumbai, New Delhi and Hong Kong. It seems that banking hiccups for Russian counterparties are becoming an unhealthy practice of “friendly” nations as a protective measure against secondary sanctions. Meanwhile, the blocking of Russia’s international settlements may have ambiguous grounds. A more comprehensive analysis of the motives behind the tightening of sanctions is required to understand them and identify potential solutions.

Who is to blame?

It can be argued that the main reason for today’s geopolitical tensions in the world is the persistent desire of the Western bloc led by the United States to maintain its dominance in the financial and innovative development of the global economy. By extending secondary sanctions to foreign financial institutions, the White House administration is trying to derail Russia’s efforts to build an alternative financial infrastructure together with “friendly” nations, which would be independent of Western institutions. This move seems more than justified given the growing weight of the Global Majority countries in the real sector of the world economy. Meanwhile, the coalition of developed nations seeks to keep emerging economies in a dependent and subordinate position as suppliers of raw materials and manufactured goods, while preventing their participation in the management of international financial flows. This clash of interests is fundamentally impossible to resolve due to several specific features inherent in the functioning of the system of international relations at the present stage.

First, the loss of functionality of and trust in global institutions (WTO, IMF, UN Security Council, UN International Court of Justice, International Criminal Court) as a mechanism of checks and balances for resolving conflict situations on a multilateral basis. The inefficiency of global regulators is evident in the rise of trade, currency and sanctions wars, increased military spending and more direct armed conflicts, the escalation of pandemic and cybersecurity threats and the aggravation of climate, energy and food risks.

Second, the absence of a clear center of gravity consolidating ideologically close developing nations into a single geopolitical bloc. The countries of the collective West recognize the U.S. as an undisputed leader, whose actions are unconditionally supported by them, even if they are at odds with the norms of international law and sustainable development goals. This position stems from a lingering sense of civilizational superiority of the white race, which for centuries served as a justification for the global colonial system. But even in modern times, the neocolonial perspective on international relations persists in the Western worldview, as reflected in the politically correct division of countries into developed and developing ones. In contrast, the Global Majority countries strive for a more equal, fair, multipolar world not dominated by any single pole of power. This may also explain the absence of a clear leader among the developing countries that could promote a coordinated political agenda at the global level. At the same time, China’s aspirations for world leadership in the economic, scientific and technological realms are evident.

Third, the lack of effective leverage over the rapacious financial appetites of the hegemon in the world economy due to the U.S. control over the key institutions of the global financial architecture. The U.S. holds a blocking stake in international monetary and financial organizations—the IMF and the World Bank Group—which set the rules of the game in the global financial system. All commodity prices, which de facto serve as tangible security for the dollar emission (as gold once did), are denominated in the U.S. dollar. Stock pricing in strategic commodity markets is subject to occasional manipulations, which generate surplus profits for U.S. investment funds and losses for developing economies heavily dependent on exports of raw materials. The Big Three U.S. rating agencies still control 95% of the global credit rating market. This has a direct impact on the cost of raising financial resources in the international capital market. The lower the cost of borrowed resources, the stronger the financial advantage and capacity for acquisitions. Institutional monopolization of global financial intermediation functions puts U.S. business in a privileged position in the system of global corporate control. For example, 14 out of the world’s 20 largest asset management companies come from the U.S. These firms are majority shareholders of the most well-capitalized corporations such as Microsoft, Apple, Alphabet, Amazon, Nvidia—the world leaders in creating global digital and information technologies. Another indication of this financial dominance is that in the fiscal year 2023, U.S. corporations accounted for 38% of the total profits generated by the world’s 500 largest companies.

Fourth, the deep integration of the international settlement system into the structures of the global banking system. Despite continuous financial innovations, international settlements are still carried out through a network of interbank correspondent accounts. Tracking electronic payments through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) makes it extremely vulnerable to outside interference. The dominance of the dollar and U.S. banks across all segments of the global financial market in the absence of a global alternative to SWIFT gives the U.S. an unprecedented level of financial power to disconnect individual banks from the global financial system, freeze foreign exchange reserves and deny borrowers access to international debt and equity financing.

Fifth, the digitalization of global finance. The rise of financial technology (Fintech) is increasing tensions in international settlements rather than easing them. The digitalization of financial services makes it possible to scale up existing financial intermediation processes while simultaneously exacerbating price volatility and weakening centralized control over the actions of market players due to the widespread use of distributed ledger technology (whose origins, again, trace back to American developers). To streamline financial transactions, major U.S. banks are now actively using cloud services from vendors such as Microsoft Azure, Amazon Web Services and Google Cloud Platform. Meanwhile, the integration of top U.S. financial institutions with tech giants may give rise to a new generation of global financiers, even more insatiable and uncompromising in their choice of methods and means for maximizing profits.

What to do?

It is obvious that within the established global electronic payment infrastructure, which is directly linked to the banking system, evading sanctions will become increasingly difficult. In this regard, participants in international transactions are actively exploring the potential of using cryptocurrencies to make secure payments. Cryptocurrencies undoubtedly offer an interesting avenue for developing a decentralized system of international settlements, but only as a transaction-recording technology or a digital financial asset. At the same time, cryptocurrencies lack such basic functions of money as a measure and store of value. In the former case—because their value is measured in fiat currencies (mainly the U.S. dollar), and in the latter case—because of their extreme volatility. In addition to the risk of rapid depreciation, cryptocurrencies are not immune to default and liquidity risks, as crypto services and exchanges may also be subject to sanctions. The same risks apply to stablecoins.

Overall, it should be recognized that the primary function of cryptocurrency is to serve as a speculative financial asset and a method of conducting financial transactions outside of government control. Therefore, as long as there are sovereign states, it is unlikely that non-sovereign digital currencies will play any significant role in the monetary system, and even less likely that they will be widely used in international settlements, thus limiting the role of the dollar. Neither the U.S. government nor the Federal Reserve sees the advantages of cryptocurrencies over fiat money. So cryptocurrencies are unlikely to replace the dollar as a reserve asset either.

On the other hand, cryptocurrency poses a unique challenge to the current financial system, where regulators have lost control over money circulation. Global income is concentrated in wealthy countries—the issuers of reserve currencies that have exhausted the possibilities for productive investment of the savings of the rest of the world. As a result, excess capital is mainly used for consumption and speculation rather than investment, exacerbating the global debt problem and social polarization between the core and periphery of the world economy. To regain control over money circulation, central banks are actively exploring distributed ledger technology to issue their own digital currencies. However, this prospect is also highly uncertain due to the still poorly understood risks associated with cyber-financial systems, which operate on the root domain name servers of international entities such as ICANN, IANA and VeriSign with strong American dominance. In light of this, the use of digital currencies in international settlements requires the development of proprietary software and server infrastructure to secure digital platforms against the risks of transaction tracking by “unfriendly” states. However, this effort simultaneously introduces intractable “side effects” related to cybersecurity, compatibility of technologies, standards and protocols for digital currency circulation, as well as legal regulation of multiplatform systems at the international level.

BRICS development horizons

A comprehensive analysis of the causes and consequences of the sanctions on Russia spawns more questions than answers. Nevertheless, the problem of Russia’s international financial isolation is only a special case in the generally dysfunctional global financial system. The fundamental flaw of today’s currency standard lies in the contradiction between the globalization of the market and the national form of its regulation. This discrepancy is most evident in the use of the U.S. national currency for international transactions. To gain access to dollar liquidity, all other countries must continuously adapt their macroeconomic and monetary policies, as well as the production and export structures to the interests of the country that issues the key reserve and investment asset. In serving as a link between the U.S. monetary system and the national monetary systems of other countries, the dollar acts as a channel through which the problems of U.S. domestic socio-economic development are transmitted to the global level, spurring imbalances, periodic bursting of financial bubbles and debt crises.

To resolve this contradiction and improve the efficiency of the global financial system, abandoning the use of national currencies in international settlements in favor of common monetary units as objects of supranational foreign exchange regulation has long been overdue. As geopolitical tensions continue to rise and regionalization processes accelerate, this development seems quite reasonable. Especially because the public demand for common currencies has existed for decades. This is evidenced by dozens of currency unions, both existing and potential, in the world economy (see the figure below).

Figure. Existing and potential currency unions in the world economy

Despite some degree of integration within existing regional currency unions and occasional initiatives to create new groupings, there is no clear progress in this area today. This stagnation is caused not so much by economic reasons as by political factors.

It is no secret that the key to the historical ascent of the U.S. to the pinnacle of the world economy was the political unification of the separate North American states into a single federal state. So the political union emerged in the U.S. much earlier than the monetary union, whose origin is directly linked to the establishment of the Federal Reserve System in 1913. The ability to form a unified state demonstrates a deep understanding among Americans of the economic benefits of running a single economy versus a politically fragmented one.

The situation looks different in other regions. For example, the euro, the single European currency, has failed to create a meaningful counterweight to the U.S. dollar in the global financial arena. The reason for this “fiasco” lies not so much in the difference in economic potentials as in Europe’s political disunity. The euro is the currency of 20 sovereign states that have relinquished their national currencies as symbols of political, economic and financial sovereignty. Meanwhile, many of the 20 member states of the EU’s Economic and Monetary Union pursue their own political, economic and financial ambitions, viewing fellow members as competitors. Hence the serious imbalances in the development of individual eurozone members such as Germany and Greece. To address these gaps, Europe lacks the equivalent of the unified fiscal, banking and exchange policies that are at play in the U.S. As a result, eurozone countries are chronically dependent on the capital markets of London and New York, while the European Central Bank, as the issuer of the single European currency, is reliant on the Federal Reserve’s dollar swap lines. Given these challenges, the euro model can hardly serve as a prototype for creating common monetary units in regional currency unions.

Thus, none of the existing projects of supranational monetary cooperation represents a serious alternative to the dollar-centric financial system. It is important to note that the U.S. spared no investment to make this system convenient for all international participants. That is why the U.S. played a major role in establishing the Bretton Woods institutions, where it remains the largest shareholder. In addition, despite growing opportunism within the U.S. establishment, Washington continues to provide core funding for the most important UN institutions, as well as for high-profile research centers, expert commissions and professional associations, regulatory and supervisory bodies servicing international markets for goods and services. Maintaining this global infrastructure requires enormous and sustained financial injections, involving all other countries besides the U.S., even those under its sanctions. Collectively, these investments ensure the inviolability of the dollar standard.

It should be noted that there are no comparable “investments” in any of the existing currency unions, let alone potential ones, including the BRICS grouping, which aspires to a parity role in the global financial system. The existing BRICS financial initiatives, such as the New Development Bank, the Contingent Reserve Arrangement (CRA), the use of national currencies and payment systems for international settlements are too dependent on the dollar and the U.S.-centric financial architecture, making them largely ineffective. Other obstacles to creating a full-fledged BRICS financial system include a lack of trust among BRICS members and an unfavorable balance of payments.

Despite the problems cited above, the BRICS grouping is possibly the only association capable of seriously challenging the unipolar financial system. Overcoming dependence on the U.S. dollar and Western financial institutions seems contingent on creating a fully self-sufficient BRICS interregional financial architecture. It should include banks, stock exchanges, rating agencies, benchmarks for commodity prices and interest rates, auditing, legal and information standards, essentially mirroring all the elements that currently underpin the dollar’s hegemony. The key difference is that this entire architecture would service a common monetary unit that would simultaneously belong to all BRICS members and none individually, i.e. without granting unilateral advantages and privileges, as is the case with the U.S. dollar.

A BRICS interregional currency is a prerequisite for financial multipolarity. However, the successful launch of this megaproject requires carefully designed principles of issuance, supply, distribution and circulation of common liquidity. This must incorporate the latest advances in financial technology and macroprudential regulation, while also considering the civilizational and structural differences among BRICS economies. Achieving this monumental task will clearly require much more resources than those currently available. Yet delaying serious and consistent efforts in this area may push future unproductive costs to an unaffordable level.