Yves here. To add to Korybko’s post, many commentators predicted that the BRICS meeting would lead to concrete steps, or a least a commitment, to launching a new currency. That did not happen. But deciding to admit new member is still an important step.
Note a potential complicating issue is the plan to admit Argentina, when its frontrunner for the presidency, Javier Milei, has vowed to dollarize the economy. Admittedly Milei does not have an overwhelming lead, so even if he remains the top contender, he is likely to have to form a coalition government. Even so, if Milei personally or his party wind up in a strong position, that would seem to set up Argentina as a dissenter on large-scale “ditch the dollar” plans.
By Andrew Korybko, a Moscow-based American political analyst who specializes in the global systemic transition to multipolarity in the New Cold War. He has a PhD from MGIMO, which is under the umbrella of the Russian Foreign Ministry. Originally published at his website
It’s too early to say whether the scenario of BRICS broadly bifurcating into yuan- and non-yuan-using members will come to pass, but it can’t be ruled out since India prefers its own currency for obvious reasons while others are afraid of facing the US’ wrath if they help the yuan replace the dollar. As BRICS enters a new era after its latest expansion, its members must not let their growing differences impede the group’s work on advancing their shared goal of accelerating financial multipolarity processes.
The 15th BRICS Summit ended on Thursday with the organization inviting Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE to join as full-fledged members beginning next year. This historic expansion carries with it substance and symbolism, but also pros and cons, all of which will be analyzed in this piece. To begin with, it’s crucial to clarify that formal membership in BRICS isn’t a prerequisite for any given country participating in financial multipolarity processes, but it does help accelerate their efforts.
Any government can decide to prioritize the use of national currencies in bilateral trade, though it’s best for them to coordinate this with the largest number of countries and largest markets possible, hence the primary benefit that formal membership in BRICS brings. These six countries and those that’ll eventually follow in their footsteps have frequent meetings with a wide range of their counterparts’ policymakers throughout the group’s many meetings that are held each year ahead of its annual summit.
All others who’ve yet to obtain this privileged access but are still sincere in their desire to accelerate financial multipolarity processes can likely count on being invited to annual summits from here on out owing to the precedent set by South Africa this year. They’ll probably also be able to formalize some sort of partner relations with BRICS in the coming future too, not to mention already having the opportunity to apply to join the New Development Bank (popularly known as the BRICS Bank).
Bangladesh, Egypt, the UAE, and Uruguay joined the BRICS Five in this institution, but the first and last have yet to become full-fledged members of this group as a whole. Even so, joining the BRICS Bank could possibly become one of the fastest pathways for countries to formally become BRICS members. In any case, the point is that participation in this institution contributes to accelerating any given country’s financial multipolarity plans, especially regarding the use of national currencies in bilateral trade.
Having clarified that, the decision to invite those six previously mentioned countries as full-fledged members will drastically change the group’s dynamics owing to their very different economies and domestic situations. Iran, Saudi Arabia, and the UAE are major energy exporters who could agree to sell their resources in non-dollar-denominated currencies, most likely the yuan (at least to begin with), which could greatly accelerate financial multipolarity processes.
Argentina, Egypt, and Ethiopia, meanwhile, are energy importers and are also experiencing serious economic problems right now. The first is suffering from runaway inflation, the second is propped up by its Gulf patrons, and the third is recovering from the devastating Tigray Conflict. Nevertheless, they’re also important members of their respective regions, with Ethiopia having outsized influence in Africa due to its hosting of the AU headquarters and historical support of Pan-Africanism.
Inviting three members from each of these two very separate categories of countries suggests that the BRICS Five agreed amongst themselves to compromise on economic substance and geographic symbolism correspondingly in order to advance their shared vision of expanding the group this year. The consequence of doing so in this manner, however, is that effective coordination between them is now much more difficult than before owing to their previously mentioned differences.
To be clear, it’s a positive development that a broad range of countries will now participate in BRICS’ countless gatherings each year ahead of its annual summit, but the only thing that they all have in common is their interest in accelerating financial multipolarity processes via their national currencies. That’s not to downplay the importance of BRICS expanding in the way that was ultimately decided upon, but just to inform readers of its newfound limits in order to temper their expectations.
At the same time, BRICS also has more opportunities than before in the sense that more countries can now participate in whatever alternative financial architecture their group unveils in the future such as an inclusive non-Western SWIFT-like payment system. These benefits balance out the obstacles and arguably make the latest move worthwhile in the long term, which is the period that they have in mind, not the short- or medium-terms per se.
Those of their supporters who anticipate the death of the dollar in the very near future will inevitably be disappointed since the BRICS Bank overwhelmingly lends in that currency and only plans to have national ones constitute 30% of its total. Furthermore, BRICS declared before the latest summit that it isn’t interested in de-dollarizing nor in opposing the West, but that it only wants to hedge against forex risks and ensure fairer representation for developing countries in the global financial system.
While some might claim that these goals are identical, the difference lies in the intent, with the false perception risking a Western overreaction that could lead to them waging Hybrid Wars against some members while the correct one reduces those chances. That’s not to say that the second scenario isn’t without its risks, however, since BRICS could still bifurcate even if it’s left to its own with only minimal Western meddling.
To briefly explain, it’s obvious that the yuan will become the preferred non-dollar-denominated currency within BRICS due to its ease of use stemming from all members’ massive trade ties with China. India wouldn’t like that though due to its strategic differences with China, but there might be limited opportunities for using the rupee apart from some symbolic BRICS Bank loans to other members. If faced with the choice of using dollars or yuan to purchase new members’ energy, it’ll likely stick with dollars.
Other members might feel the same as India does despite not sharing its strategic differences with China if they calculate that it’s not worth speeding up the yuan’s replacement of the dollar in non-Western economies out of fear that doing so could provoke the US into making them its next Hybrid War target. Washington can’t pressure everyone at once and destabilize them as punishment for defying its implicit demands, which is why it has to choose its targets wisely.
Prioritizing the use of national currencies that aren’t the yuan isn’t anywhere near as much of a threat to the US’ global financial hegemony as speeding up the yuan’s replacement of the dollar. The first is natural and pragmatic, while the second could easily be perceived by the US as hostile and supposed proof that a government has fallen too far under Chinese influence. Accordingly, the former is unlikely to be chosen as the next Hybrid War target, while the latter will definitely encounter difficulties with time.
It’s too early to say whether the scenario of BRICS broadly bifurcating into yuan- and non-yuan-using members will come to pass, but it can’t be ruled out since India prefers its own currency for obvious reasons while others are afraid of facing the US’ wrath if they help the yuan replace the dollar. As BRICS enters a new era after its latest expansion, its members must not let their growing differences impede the group’s work on advancing their shared goal of accelerating financial multipolarity processes.
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I was surprised to see that Argentina had made that list but there is one thing that I will note. Having Egypt, Iran, Saudi Arabia, and the UAE join BRICS means that the Persian Gulf is now flanked on both sides by BRICS members as is the Suez Canal. And Ethiopia seems to be in a pretty strategic place too for that matter.
This was my first thought too on the hearing the news: those members were chosen to counter US influence in the ME. Are heads exploding in Washington now? Or is the denial so great that the blame game of “who lost the ME” starting?
Heads have been exploding their for quite some time without any help from China.My Reading of this is that the dollar isn’t being overthrown. The BRIC’s including Russia and perhaps especially China don’t want to overthrow the dollar, because they profit from it . But that gradually the participants will gain some protection from dollar aggression, which could therefore deter some of the latter…or provoke it depending on how this is all perceived by Washington and its satellites
Despite some errant talking heads trying to derail some of the sessions by trying to insert Ukraine into discussions, I can tell you from Johannesburg that the mood was upbeat during this summit. The leaders who were here know full well that the forces arrayed against multipolarity are formidable and that any ill-timed or ill-judged movements resulting from irrational exuberance could delay progress and set this movement back by many years. There was no sense of that here, and one is left with the feeling that while there will be inevitable bumps along the way, the commitment to drive forward this tectonic shift in global affairs is resolute and the march towards multipolarity is inexorable. The Brics is in good hands and the world isn’t going back to Feb 2022.
Since you’re at Johannerburg, can I ask your opinion (or even knowledge) of Dr Oscar van Heerden?
We wrote an article (infobrics.org) yesterday about future of BRICS under the title “It’s not an Either-or nor Is It Black and White” where he makes the argument that the main inssue for both BRICS and G7 is to confront US unilateralism.
His argument seems to be that (BRICS) countries are looking to both be and to have reliable partners and it would be great if The West would turn around and join the club instead of the current neo-colonialist tendencies.
I’ve seen him once or twice being interviewed on tv but never really dug into his writings. In the linked article he asserts that SA needs to articulate a clear foreign policy, which strikes me as odd because by far the most impressive cabinet member we have is our foreign relations minister Dr Naledi Pandor, who makes it a point to articulate clearly and unequivocally said foreign policy to all and sundry at a every opportunity (even to a visibly flummoxed Andrew Blinken during his visit to our shores). SA has been highly vocal about its opposition to the Israeli treatment of Palestinians and followed this up with the downgrading of our diplomatic mission to that country, our position on Ukraine has been firm and consistent, and our foreign policy resolutely advocates for mutually beneficial relations with all countries that seek the same with us. Furthermore, we have refused to buckle under the weight of threats from the G7 capitals and our own powerful pro-west business interests who demand that we nail our colours to the western mast once and for all.
I concur that the overwhelming sentiment during the summit was in line with the argument he makes that, much like SA, the Brics grouping wants to be a reliable partner to all and to have reliable partners, but expecting the west under its current crop of leaders to jettison neocolonial tendencies and engage with global south countries as peers and not minions to be ordered around is fanciful in the extreme. Now that he’s popped back onto my radar i’ll be sure to follow his thinking and writings.
Thuto, always good to hear from you. Thanks for your insight.
Thanks for your kind words Juno mas :-)
I’ll second juno, thanks for the insight!
I have to tell you but mood is no predictor of success. The mood was similarly very upbeat at the Munich Security Conference, mid February 2022. The participants were very much looking forward to the conflict in Ukraine, which they saw as imminent.
I’m not suggesting it does, what it does do though is signal intent, and commitment (at least at this point). The mood was upbeat, not irrationally exuberant (which would be worrying) , and none of the participants were glossing over the challenges that lie ahead. I’d actually be very worried if it was sombre and for me the key difference is that the Munich Security Conference was salivating at the prospect of putting an adversary to the sword, and so certain were they of the outcome that the resultant glee ensconsed them in an impenetrable bubble of delusion that no amount of contradictory evidence could pop (e.g. Russia withstanding the sanctions much better than many had predicted). The Brics on the other hand are ambitious, yet pragmatic, and (so far at least) there’s a willingness amongst the members to talk about the goals of the grouping and the attendant obstacles that will have to be overcome for those goals to be achieved.
Yep. Every one of these articles brings me closer to this conclusion (Star Wars: A New Hope quote via YouTube)
s/droids/mutli-polar-things-to-upend-US-hegemony/ *
[* This notation is from the Unix operating system. The syntax – s/a/b – represents substituting string “a” with string “b”]
One thing I’ve been thinking about is how systems of governance vary across all the current BRICS, and that in itself is an issue. To what end does it matter bringing in the African global south if the same corrupt “leader-for-life” types are in charge there.
Something else will have to emerge. BRICS is perhaps an amuse bouche of sorts, or a sublime head fake while serious efforts to upend western hegemony begin germinating elsewhere.
True, but this could be “developing a deep bench”. My initial reaction was a double take on the heavy representation of Suez adjacent nations, see Rev’s comment.
> My initial reaction was a double take on the heavy representation of Suez adjacent nations, see Rev’s comment.
Indeed, yes.
i think korbyko lost his bet against the “alternative media conspiracy”, and to hide his failure he’s using the strawman argument of the yuan substitution of the dollar, something that never been on the table. expanding the use of local currencies is at the expense of the dollar, and countries like saudi arabia are dumping dollars to a record rate, yuan or not. apart that the chinese don’t want to have a passive balance like the usa etcetera. i found disappointing the absence of any consideration about the power changes in middle east and the effects on the petroldollar, as if isn’t important how a currency can be spent. for example if buying oil with it is allowed or or not. i’ve reading korbyko by some time, and i found him quite balanced and rational in his analysis, so i’m quite surprised to see him fight a crusade against the windmills of the “alt media conspiracy”, losing his rational stance and lowering the quality of his writings.
You are the one who is strawmanning. Korybko was clearly criticizing his pet bête noire about their hyping that BRICS would launch a new currency. Pepe Escsobar , the Duran duo, both on the Duran and their separate shows. Even Michael Hudson has gotten himself in the position of being seen as a backer (I’ve seen him invoked as such) when his position is more complex and realistic. Many of the military/CIA commentators, such as on Judge Napolitano, and others like Andrei Martyanov in other venues have been this in as if it were established fact.
And Brad Setser, the experts on international dollar flows, debunks the claims about dollar holdings. For instance, the Saudi central bank does hold less….but that’s been made up by its sovereign wealth fund. China has been selling $ to defend its currency, so not the same.
Dollar share is actually up compared to the 1990s pre Euro: https://twitter.com/Brad_Setser/status/1694815258613813532
The use of dollars for investment dwarfs that in trade (investment is 60X or more that of trade). Reducing dollar use in trade is very important to escape sanctions but it way way way short of enough to dethrone the dollar.
Having said that, I concede that the way Korybko refuses to name names and uses a device that implies unified messaging is piss poor. It’s lazy and cowardly.
I am annoyed and have chewed him out privately over this. I don’t like his justifications and have told him I am not running any more posts that refer to or make insinuations about these cheerleaders. But he is not off base in his characterization.
I had meant to post this here, not on the Argentina discussion:
I hope that you DON’T think I’ve advocated a new BRICS currency. I’ve discussed a parallel to Keynes’s bancor or SDR to settle and denominate balances among BRICS bank members, NOT a new currency
Here’s what Lavrov said two days ago:
Sergey Lavrov: No one is talking about the “single currency” now. Now all attention is focused on finding ways to ensure mutual trade, economic projects and investments in such a way as not to depend on the system controlled by the United States and its Western allies, to be independent of the dollar, euro and the yen.
Quite a long time after the creation of the BRICS New Development Bank, another project was formed within the framework of the “five” called the “pool of reserve currencies”. This is the forerunner of the steps that we are now planning to take to facilitate the use of national currencies and, most importantly, to create an alternative payment system.
So make sure that you don’t give the impression that I’m in the group that you’re criticizing.
i think that the notion of currency can be easily misread, cause it may refer to a account unity like the bancor or the ecu, or to a currency that can circulate in the economy. they’re different things, and korbyko pretends to not see that lapalissian difference, even if it’s clear that that’s not just michael huson that refers to an account unity and not to a circulating currency. i surely underline the existence of the often forgotten ecu cause the ecu was abandoned with an hostile move of usa finance and germany towards my country, that got ruined, first economically and then demographically. the main problem is that the euro, that replaced it, was completely ill conceived: the plan was to build an union gregary to the germany, and now the germany is the sickman of europe again, the model broken. and so the move to dismantle the ecu for the euro was not necessary and laying on the german interest of waging an economic war to other european states, that’s the opposite of an union. why the brics should go to an economic war between themselves? they’re not like europeans, a population that tends to be parted in tiny countries with reciprocal hostility, and i honestly don’t understand how europe can be an example for anything nowadays.
You are now grossly mischaracterizing pervious commentary on this topic. ,Korybko was depicting the expressed plans of political leaders, including Vladimir Putin, as well as many many many commentators. Hudson was virtually alone among those with any reach (along with yours truly) in debunking the “new currency/new reserve currency” cheerleading.
We have further pointed out that a bancor type system required considerable surrender of sovereignity, including capital controls:
Bancor was designed among other things, to frustrate the movement of capital to countries with high interest rates. Any system that seeks to restrict the movement of capital will lead those with monetary assets to not be keen to have their funds stuck there, see the efforts of rich Chinese now to expatriate capital via over-invoicing.
you’re right about the bancor, but the ecu established without capital export restrictions. it emerged between countries allied with usa cause the financial enviorment in the usa was disnfuctional. then i think sanctions are directed toward capital export. usa sancitons are almost impossible to be put off cause they need a bipartisan approval by the congress. so once an un sanction is enabled it stays forever. and the usage of this instrument is expanding, so the number of sanctions tends to multiply year after year. that’s capital export control, and that’s why i totally agree with your last sentence ” Any system that seeks to restrict the movement of capital will lead those with monetary assets to not be keen to have their funds stuck there”. but i think the usa believes themselves exceptional and they think the lack of trust can be inherent only to china
Putin seemed very clear in his closing remarks: “I believe that a single settlement currency definitely deserves our attention. This is a complex issue but we have to move towards resolving it in one way or another. The second issue deals with carrying out economic transactions between our countries.”
http://en.kremlin.ru/events/president/news/72095
Lavrov just reversed him at the BRICS summit:
https://tass.com/politics/1664953
Hopefully, they learn by the disastrous example of the EU.
Expanding premature for its own sake is a recipe for failure.
There’s safety in numbers. The US can attempt hybrid war against any individual BRICS member but attempting it against most or all of them simultaneously becomes quite difficult. And I think that’s the point.
I’ve noted that in Russian analysis of its domestic politics there’s a lot of discussion of horizontal vs vertical power structures. BRICS looks like a horizontal power structure as opposed to either NATO or the G7 which is clearly vertical with the US on top. If we look at BRICS this way, some things become clearer. It’s not necessary for them to all have aligned policies on everything. It’s not necessary to have a single currency (and I don’t think BRICS intends to have a “currency” they all use but more of a trade chit for international trade usage, but that still has the complexity Yves as detailed). It’s not even necessary for them to all agree on everything and act in unison.
Russia is a special case, but Russia surviving the sanctions so far is a huge boost to the idea of BRICS and horizontal, international political institutions. The geopolitics of this will be incomprehensible to policy makers in DC because they won’t bother to understand the horizontal nature of it. Which almost guarantees that they’ll overreact to their own detriment.
Saudi Arabia, UAE, Iran, and Egypt being together made my head turn. I finished reading Eugene Rogan’s the Arabs last week, so to see these countries within a friendly organization after the splitting of the larger powers of the Pan-Arab movement over the course of the 60s and 70s is wild. Understanding the Middle East is significantly easier after learning about the Ottoman Empire’s fall. Recognizing this block of nations as equals could have huge implications in anti-imperialist good-will.
I wouldn’t say that Saudi Arabia, the UAE or Egypt belong in the same paragraph with a concept like “anti-imperialist!”.
I suspect, however, that with the United States not in the room it’s much easier to enable Arabs and Persians and Shiites and Sunnis to get on together. Most of the conflict in the Middle East seems to be driven by external divide-and-rule policies, rather the way the Iran-Iraq war was run.
This seems to be the benefit of BRICS; not that they’re geniuses at diplomacy or economics, but just that they aren’t devoted to smashing everything up in the hope that some of the fragments will be small enough to steal.