Defying the Dollar

Responses were split between dismissal and fear. On the side of the former, commentators dismiss the event as a “dud” and simply the creation of “a bigger talk shop” for China, whose three days of deliberations were merely an “assortment of princelings, autocrats, demagogues, and war criminals” whose “doings and sayings ranged from the semi-farcical to the meaningless.”

For the latter, the whole thing is part of Beijing’s “battle for global supremacy” and its attempt, jointly with Russia, to “challenge US influence,” aimed at rivaling the G7, and even NATO and military blocs like the Quadrilateral Security Dialogue (the Quad) and AUKUS. These two attitudes were neatly brought together in a Bloomberg column that labeled the event “the Summit of the Subpar Superpowers” and BRICS itself a “China-dominated vessel” meant to “echo its denunciations of the US and EU.”

The truth is, it’s neither. Firstly, the BRICS summit wasn’t the nothingburger that much of the commentariat seems to hope that it was — even if it isn’t quite the doorway into a new global order that it’s sometimes been painted as.

The addition of six new member states — Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) — means the grouping now edges out the G7 in its share of world GDP, representing anywhere from 29 to 36 percent, depending on who you ask, as well as close to half the world’s population. (The G7 contains around 10 percent of all humans on the planet). That’s a big deal, and if nothing else, a signal of the way the world’s balance of power is shifting in a period of sunsetting US and European influence.

Maybe more importantly, with its new members, BRICS has now firmly anchored itself in the middle of the world’s oil trade. It now counts as members four of the world’s largest individual oil producers (Saudi Arabia, Russia, Iran, the UAE); three members of OPEC (Saudi Arabia, Iran, the UAE), which as a bloc is itself the world’s biggest oil exporter; and two of the world’s top oil importers (China and India).

As a result, BRICS is now responsible for 42 percent of global oil output, more than double what it held before, and 36 percent of the world’s oil consumption. That’s an enormous amount of the world’s oil trade, and may well send a shiver down the spines of power players in Washington, especially with the US-Saudi relationship going through a rough patch.

That relationship, coupled with the worldwide pricing of oil exports in US dollars, is one of the foundations of the dollar’s status as the global reserve currency, as well as the United States’ dominance of the international financial system — as core to its position as the world’s most powerful nation as its ubiquitous military. That same role of the US dollar also happens to be one of the BRICS founding members’ most long-running, fundamental grievances.

This petrodollar system has already taken a few notable dents before this summit. India, the world’s third-largest oil importer, started buying discounted Russian oil in non-dollar currencies — including the Chinese yuan — last year, while Beijing and the Saudi government have likewise discussed trading oil in yuan — something this BRICS expansion could be a step toward.

Wary US leadership might be heartened by the fact that, other than Russia, member states seemed to pour cold water on leftist Brazilian president Lula da Silva’s call for setting up a common BRICS currency modeled on the euro. But discussions at the summit did focus on how member states can increase the use of their own local currencies when trading with each other — ominous, even if nothing much was reportedly agreed on that front, given how much of the global oil trade is controlled by and conducted between this expanded BRICS membership.

Meanwhile, the group’s New Development Bank — set up in 2014 as an alternative to the International Monetary Fund (IMF) and World Bank for lending to poor countries, and currently led by former Brazilian president Dilma Rousseff — is trying to cut into the amount of global debt held in dollars. “Local currencies are not alternatives to the dollar. They’re alternatives to a system,” Rousseff pointedly said about this plan.

So while the “de-dollarization” that countries like Brazil, China, and Russia have long been angling for have not made much headway yet, we may be watching them put in place the pieces needed to more directly challenge dollar supremacy somewhere down the line. Members also discussed continuing to develop alternative payment systems to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), another potential way to circumvent the US-dominated financial order.

These are big strides on an issue that’s barely budged for more than a decade. Why now? While the 2008 crash and anxiety over Washington’s trigger-happy sanctions policy have fueled these concerns for a long time, the unsuccessful US-led attempt to collapse the Russian economy in response to the invasion of Ukraine is the real catalyst here. Experts and establishment voices, including Treasury Secretary Janet Yellen, warned about this last year, that other countries could see the unprecedented US sanctions on Russia as a cautionary tale about what could happen to themselves if they ended up on Washington’s bad side, and that it would hasten a move away from the dollar as a result.

Coalescing Around Commodities

Of course, this is not just about the US dollar. There are tremendous geopolitical advantages, no matter what, to having this kind of heft in the trade of key commodities, and oil is just one part of the picture.

By one 2019 analysis, BRICS nations were already responsible for nearly half of both the global supply and consumption of commodities, including supplying half or more of the world’s aluminum, copper, iron ore, and steel, as well as more than 40 percent of its wheat, sugar, and coffee, and around a third of its corn. They’ll now add to this a top coffee and gold producer in Ethiopia, a top wheat and corn exporter in Argentina, and a major natural gas producer in Egypt.

The group now also has four of the top fifteen holders of reserves of lithium — a critical ingredient for the approaching transition from fossil fuels — including, with Argentina, the world’s second-biggest holder, and a country tipped to become the number-two producer of the metal in four years. (The country with the most reserves, Bolivia, has also applied for membership).

With members simultaneously looking to beef up trade with each other while looking for workarounds to the US-led financial system, it’s not hard to see why joining the “economic alliance” might look attractive to countries like Cuba, Venezuela, and Syria, all under years of brutal Western sanctions, and all of which have applied for membership. BRICS’s four original members have carefully refused to sign on to US sanctions against fellow member Russia, as have all of its new members — or have even taken measures that have explicitly undermined those sanctions.

It also helps lay the groundwork for making BRICS, as its various member states have called for and as this summit’s declaration laid out, a voice and advocate for the Global South, specifically for those nations we call “developing” countries. This has always been a component of the BRICS vision, whose 2010 addition of South Africa didn’t make a whole lot of sense economically but had great political meaning by including an African voice. We can see something similar now with the entry of Ethiopia, one of the continent’s most populous and fastest-growing economies and the headquarters of the African Union.

The explosion of curiosity in the grouping, with more than forty nations allegedly expressing interest and more than twenty formally applying to do so, suggests that the Global South itself doesn’t view all this as just self-serving talk. It also points to the level of discontent with what is, in practice, an often self-serving and fickle US-led world order, and one in which a small cohort of wealthy and mostly Western countries have disproportionate sway — something the summit declaration specifically name-checked as wanting to change.

Fear of a Multipolar Planet

On the other hand, it’s also not hard to see why at least some in the US and European establishments might look at this, or hear the BRICS members’ grandiose statements about building a multipolar world order, and imagine a threat — especially given Russia and China’s roles.

Echoing much of recent commentary, one Financial Times article warned that BRICS was becoming “a fan club for an aspiring hegemon,” pointing in part to the new entry of countries “beholden to China through ties of debt or investment,” like Ethiopia and Egypt. Another ominously laid out the Chinese government’s “blueprint for an alternative world order,” much of which overlaps with BRICS’s own rhetoric about reforming the UN.

But this is needless fearmongering. Despite allusions to NATO and AUKUS, BRICS isn’t a military alliance nor any kind of military bloc or partnership, and there are significant divisions between members. It’s hard to imagine India, with its own great-power ambitions and a long-running rift with Beijing, becoming a mere “vassal” to China, for instance. Splits even emerged over the issue of enlarging the membership, with Brazil and India less keen than others on letting in as many countries as they did this past week.

If a multipolar world really is on the other side of this turbulent and chaotic period we’re living through — a world in which instead of one powerful state dominating the globe without check, global power will be split between and revolve around several different states or groupings that balance each other out — it’s not a zero-sum game. The promise of such a world is that countries don’t have to throw their lot in with one powerful state and end up at its mercy, especially if that state has a tendency to meddle in others’ internal affairs or exploit them for its own profit. They have options.

Signs indicate that this is what’s going on here, as many of the BRICS members, new and old, have a foot inside both the partnership itself and the US-led tent. Lula and Brazil enjoy a warm relationship with the Joe Biden administration. India is one-fourth of the US-led and anti-China Quad. Egypt is a major recipient of US military aid and security assistance. Saudi Arabia and the UAE get a scandalous level of obsequiousness from the United States, as its continued support for their horrific war on Yemen shows.

In fact, there are notable potential upsides to that kind of world and the efforts to build it. China and India reportedly made progress at the summit on de-escalating tensions over their now three-year-long border dispute. The entry of both Iran and Saudi Arabia suggests that the China-mediated rapprochement between the two is holding strong and even deepening. Speaking of Iran, joining BRICS and the promise of upped bilateral trade it brings with it is a crucial lifeline to its people, who have been suffering excruciatingly under entirely unfair US sanctions.

And if, as the Financial Times warns, a byproduct of the BRICS goal to make the United Nations more democratic and representative of the developing world is that China ends up with a stronger hand, this is not a good reason to oppose these developments. Democracy and multilateralism are good, and the UN should be reformed: as Moscow’s invasion of Ukraine made very clear — many rightly expressed outrage at how Russia’s permanent veto power on the Security Council made it impossible for the UN to demand a withdrawal of its forces or to condemn its illegal annexations — the organization is undemocratic and absurdly organized to serve the interests of a few wealthy countries. Opposing a change to this because it could have benefits for China would make as little sense as opposing the transition from fossil fuels because it might have some geopolitical upsides for the United States.

There may be downsides, too. If, say, both China and the United States have to compete to court a state like Saudi Arabia, it’s less likely to face pressure over its atrocious human rights record and warmongering. But then, this is already the case under the current world order.

Maybe the biggest possible downside is that not all that much would necessarily change. A multipolar world order might go some way toward curbing the worst abuses of unilateral state power we’ve seen in the post–Cold War world, but by itself, this would not upend the fundamentally exploitative nature of the global economy or the unfair power relations between big and small states.

While the grave, post-summit warnings about the authoritarian and undemocratic nature of BRICS countries might be a little hard to take seriously — other than Russia and China, all of its member states are ones Washington has clamored for good relations with, often by turning a blind eye to their unsavoriness — it is true they virtually all suffer from various crises and rising authoritarian nationalism, as well as having their own great-power pretensions. While this may not make them all that different from those at the top of the global pecking order today, it does mean that a multipolar world won’t by itself be a panacea for the many ills of our current world order, including rampant inequality, corporate exploitation, and political domination by the wealthy. Those are issues that will require a global, well-organized, and unified Left to radically change the power balances within states, not just between them.

No Need for Panic

It would be encouraging to see global power become decentralized and shift more in the favor of developing countries, even if that would only go part of the way toward creating a truly just planet. It would be a grim success if BRICS and the world it’s trying to build simply replace exploitation of the Global South by big business in the West with its exploitation by big business in Russia and China.

And if a truly multipolar world really does become a reality, the jury is still out on whether or not BRICS — with its loose-to-nonexistent structure, its various members’ divisions and internal crises, and the thin common thread binding them all together — will even be the vehicle that delivers it. But a multipolar world is not necessarily a China-dominated one, nor is it something to be automatically feared. It could even be a better one, providing a more effective check on unilateral use of power, increasing the sway of the vast majority of the world’s population in global affairs, and holding incentives for better behavior by great powers.

That includes the United States, which could be finally freed from the costs and burdens of endless adventurism abroad and its elite’s single-minded obsession with staying the world’s top dog, and could instead rechannel its resources and energy into fixing the myriad domestic crises that ordinary Americans have been living through for years. As luck would have it, this would also be the surest way for the United States to safeguard its own continued stability, economic progress, and world leadership status, and so ensure that it could actually act as a counterweight to rival competitors in any multipolar world order when that time comes.

But that won’t come through endless efforts at military and economic dominance, which have so far only turned most of the world against the current international order, helped inflame foreign nationalisms, and partly fueled the United States’ own internal instability. It can only serve as that counterweight if it sees the kind of left-wing organizing needed to transform the US political economy away from the one that exists now, siphoning out the country’s collective wealth to place into a few powerful hands to widespread popular anger, and into one that works for the shared prosperity of all of its people. The choice is as much America’s as it is those states it considers foes.