Russia, China Confirm They Have Stopped Using US Dollar Permanently

Russia and China have declared a dramatic breakup with the US dollar. Now, 90% of their trade is conducted using their own currencies, the Russian ruble and Chinese yuan. This decision was reinforced during a high-level discussion between Russian President Vladimir Putin and China’s Xi Jinping, which focused on strengthening the BRICS alliance and advancing their mutual interests without the American currency.

Both leaders have committed to nurturing what they call a “comprehensive partnership and strategic operation.” For the better part of three years now, the BRICS nations have been advocating for de-dollarization (dethroning the US dollar), believing that it is the best thing to do not just for their economies but for the global economy at large.

De-Dollarization Has Been Beneficial

Putin highlighted the positive outcomes of ditching the US dollar, noting an improvement in trade dynamics between the two nations.

This move is also a strategy to encourage other BRICS nations to follow suit, setting a precedent for the entire global economy to move away from the US dollar for good. Putin has said that he seeks to undermine the US dollar’s traditional dominance and free BRICS economies from external pressures or sanctions, particularly those caused by Western countries.

A Unified BRICS Currency is Still in The Works

One of the most ambitious aspects of the BRICS’ financial strategy is the potential creation of a common currency for the bloc, and according to Putin, the plans for that are still very much underway. This idea was discussed extensively during the 14th BRICS Summit, during which the Russian president announced plans to explore a “new global reserve currency,” which would operate alongside the national currencies already in use.

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The potential for a BRICS currency has received support from various member nations, including Brazil. Brazilian President Luiz Inacio Lula da Silva expressed his endorsement, questioning the current global currency dynamics dominated by the US dollar.

Despite the enthusiasm, the bloc’s walk to a common currency is filled with challenges. In 2023, speculation about an announcement of a BRICS currency at the upcoming summit turned out to be overly optimistic. Moreover, the reactions from other countries have been mixed. For instance, India resisted a Russian proposal to conduct oil transactions in yuan, opting for the rupee or US dollar instead. 

There Have Been Skepticisms over BRICS Currency

Interest in the BRICS economic model is growing, with South Africa’s BRICS ambassador, Anil Sooklal, revealing that up to 40 countries have expressed interest in joining the alliance just this year. The 2023 BRICS Summit saw the inclusion of several new members. However, Saudi Arabia and Argentina have notably declined to join.

Also Read: Global Economy Faces Threats From Dollar Nationalism

The concept of a unified BRICS currency remains controversial. Critics argue it could create economic dependencies, particularly on the Chinese yuan, which might not be in the best interest of all member states. Furthermore, the diverse economic bases of the BRICS countries will bring additional challenges to the adoption of a single currency. India and South Africa also think the same.

The US dollar’s role as the dominant global reserve currency has decreased, though it remains the most widely used. Its share of the reserve currency market has decreased as the euro and other currencies have gained traction. It is generally believed that introducing a BRICS currency would weaken the effectiveness of US sanctions. 

Cryptopolitan reporting by Jai Hamid