BRICS

The world is currently experiencing rapid and significant geopolitical shifts, with rising global powers like the BRICS Group leading the charge to recalibrate the balance of influence within the Global Financial System. The recent expansion of the BRICS Group, now including 10 nations following the accession of Egypt, Saudi Arabia, the United Arab Emirates (UAE), Iran, and Ethiopia, underscores their growing influence. This bloc is unwavering in its determination to challenge the dominance of the U.S. dollar and to overhaul a global financial infrastructure that it sees as deeply flawed. The BRICS nations argue that the current system, with its structural flaws, serves as a tool for exerting political and economic pressure and contributes to the fragmentation of economies and regions by weaponizing trade and financial constraints.   The BRICS+ nations acknowledge that Dollar Dominance is underpinned by entrenched factors, most notably, the U.S. military power and global confidence in the U.S. legal and regulatory frameworks. Nevertheless, these nations are actively exploring alternatives to reduce their reliance on the dollar, aiming to bolster their financial sovereignty. In pursuit of this goal, BRICS has ramped up efforts to reduce dependence on the dollar by employing innovative mechanisms. Chief among these is the proposal to issue a new, collective currency and establish a multilateral digital settlement and payment platform, dubbed as the “BRICS Bridge.” This platform is poised to foster greater trade integration among member states, particularly as some nations within the bloc, like Russia, face sanctions and exclusion from global systems such as the SWIFT System -The Society for Worldwide Interbank Financial Telecommunication-.   All eyes are now on the upcoming BRICS Summit, set to take place in October in Kazan. The summit is expected to showcase tangible steps toward implementing these initiatives, which could potentially redefine the structure of international trade and finance. The critical question remains: Will Russia and its BRICS allies break the dollar's stranglehold over the global financial order?

Alexander Babakov, vice-president of the State Duma, stated on Thursday, March 6th, that the BRICS (Brazil, Russia, India, China and South Africa) alliance is working on creating its own currency and will submit proposals at the organisation's upcoming summit in August in South Africa.   The declaration was not only the culmination of cooperation efforts between the fifth emerging economies to preserve their position in the global system after Western powers worked since the 1990s to prevent them from assuming their positions in international economic organisations — especially the World Bank and the International Monetary Fund. However, it also raised many questions about the impact of the new currency on the global financial system, particularly given the strength of the five economies in the international arena and the alliance's stated intention to expand to include additional developing nations such as Saudi Arabia, Iran, Egypt, and Bangladesh.   This paper tries to predict the consequences of creating the new currency on the structure of the global financial system and its impact on other major currencies, considering the European Union's experience in creating the Euro.