Opinion | Can an expanding Brics really offer a persuasive alternative to the US dollar?

The dollar cannot be dethroned in one fell swoop, but Brics members pledging to increase use of local currencies is a start and major oil producers joining the grouping raises questions about the future of the petrodollar

Gold could re-emerge as the basis of a new Asian-directed financial architecture in the expanded Brics

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Saudi Crown Prince Mohammed bin Salman (right) welcomes Chinese President Xi Jinping during a ceremony in the capital Riyadh, on December 8, 2022. Saudi Arabia, which has just been invited to join Brics, said last year that it was open to receiving payments for oil in currencies other than the US dollar. Photo: AFP

Published: 7:30pm, 1 Sep 2023

The Brics summit in South Africa made it clear that de-dollarisation and expansion of the grouping of Brazil, Russia, India, China and South Africa are inevitable. Six additional countries will become part of Brics from January next year and dozens of countries are reportedly interested in joining.

When Iran, Saudi Arabia and the United Arab Emirates join Brics next year, which is also a US presidential election year, we could see steps towards the unravelling of the petrodollar. The summit advocated increased use of members’ national currencies in trade settlements, and the Saudis have already indicated they are open to accepting non-US-dollar settlements for oil.

With nearly all the major oil producers being members of the expanded Brics, their influence on the Organisation of Petroleum Exporting Countries Plus would be felt.

But what is de-dollarisation? While it is an attack on the US dollar, which Russian President Vladimir Putin has accused Washington of weaponising, there is more to it. First, it means increased use of the renminbi, the rouble, the rupee and other members’ currencies.

Second, a distinction can be drawn between an overnight collapse of the petrodollar and the incremental undermining and dilution of the use, relevance and power of the US dollar, which will take some years. While there has been talk of a Brics currency, the details are unclear.

The key word is “incremental”. The US dollar cannot be undermined unless a stable, alternative architecture is in place. Some members of the expanded bloc may not wish to de-dollarise as it is not economically feasible for them now or in the near future.