BRICS currency vs USD

As the October 22nd BRICs summit nears, the subject of a BRICS based currency is set to be unveiled as the discussions of de-dollarization will certainly rise to the surface again.

Let’s reflect on comments that were made in a recent discussion, George Yeo, the former Foreign Minister of Singapore, who shared his insights on the increasing global shift away from reliance on the US dollar. He pointed out that the dominance of the US on the world stage is largely enabled by the strength of the dollar and the “exorbitant privilege” the US enjoys as a result.“The US has 800 military bases around the world,” Yeo noted. “Who is funding those bases? US taxpayers, maybe some others. But the US can print money, and when they print money to finance military bases, in a sense, all of us—in Singapore, in China, and in Europe—are being taxed to finance the security the US provides.” Yeo went on to highlight the issue of the US “weaponizing the US dollar” and the international financial system. He explained that this has led to a growing resentment among nations: “You are saying that your enemy, who was an old friend, must now be my enemy, and people resent it.”He suggested that while many countries still rely on the US for now, they are seeking alternatives. “I’m surprised that, in the last few months, at every dinner and social gathering, people talk about de-dollarization. This is not good for the US.” Yeo expressed puzzlement over US policy, particularly the continued expansion of sanctions: “The very actions of the US are causing the momentum for de-dollarization to increase. I’m quite sure that among the big countries—China, Russia, and others, especially those in BRICS—there will be a push for an alternative system. Not to replace the current system, but to tell the US, ‘Look, don’t overplay this, because if you do, we have an alternative.’ It’s not as good, but we won’t be hostage to the current system.” Yeo’s observations come at a time when many countries, including Brazil and nations in Southeast Asia, are increasingly seeking to use other currencies for trade. Events such as the US imposing tough sanctions on Russia following the Ukraine invasion in 2022 have prompted nations with different geopolitical interests to consider alternatives to the dollar.

For instance, Russia now uses the Chinese renminbi for about one-third of its international trade, and trade between China and Russia is mostly conducted in their respective currencies. Additionally, China made its first gas payment to the UAE in its own currency in 2023, and in November of the same year, China and Saudi Arabia signed a currency swap deal aiming to use their own currencies more frequently in trade.

Yeo’s insights underscore the growing sentiment among nations to diversify away from the US dollar and the broader implications for global trade and finance. As he noted, “The alternative is not perfect, but it’s better than being hostage to a system that is increasingly weaponized.”