In an important step towards reducing dependence on the US dollar, the BRICS countries are actively working on a platform for payments in national currencies.

Russian Foreign Minister Sergei Lavrov announced this during the meeting of BRICS foreign ministers in Nizhny Novgorod. According to a press release from the Russian news agency, TASS, on June 10, Lavrov said:

“Active work is underway to implement the decisions of last year’s Johannesburg summit, particularly with regard to the improvement of the international financial system and the development of a platform for payments in national currencies in mutual trade.”

This initiative was born at the Johannesburg Summit in 2023. Notably, it aims to promote trade and credit among the BRICS countries using their own currencies instead of the dollar. While details on the platform’s implementation and timeline are still unclear, experts expect further developments during the upcoming meeting of the BRICS bloc on October 22-24, 2024 in Kazan, Russia.

BRICS payment platform and sanctions against Russia

Russia, which faces significant sanctions from the US and its allies, is particularly keen to move away from the dollar. In this context, President Vladimir Putin recently highlighted that 40% of Russia’s import and export transactions are now denominated in rubles. However, the dollar’s deep presence in the global financial system poses a formidable challenge to any attempt to devalue the dollar.

Christopher Granville, Managing Director of Global Political Research Global Data TS Lombard, suggests that the new BRICS payments system could be a digital currency system. This will enable central banks to handle local currency transactions directly.

Lavrov himself previously mentioned a digital currency-based settlement system to local media in April, as reported. Business Insider.

Analysts say that the US is a weak spot for the dollar.

Despite the growing momentum behind efforts to debase the dollar, analysts say replacing the dollar is no easy task. On that note, Goldman Sachs president of global affairs Jared Cohen wrote Foreign Policy:

“The two most important problems for advocates of wholesale dollarization are that it is impossible to replace something with nothing else and that the United States’ competitors do not currently have the ability or will to replace the dollar, even if they The rhetoric sometimes suggests otherwise.”

Interestingly, some experts have identified US inaction rather than foreign efforts as the main threat to the dollar’s hegemony. Steven B. Kaman and Mark Sobel, two think tank analysts, argue that growing political and financial problems within the US could erode confidence in its currency. They warn that factors such as political inaction, runaway US spending and debt, limits on Fed independence, rising trade protectionism, and threats of a devaluation of the dollar could increase the risk of de-dollarization.

As the world looks closely at the BRICS countries’ efforts to establish an alternative payment platform, the US must address its internal challenges and maintain the dollar’s global dominance. Thus, failure to do so could lead to market distortions, volatility, and damage to global prosperity, including America’s own interests.

The upcoming BRICS meeting and the US response will be important in shaping the future of the global financial landscape.

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