BRICS - New World Order?
What do you think about the BRICS?
What will be the future of the international trade?
How will it affect the USD and the US allies’ nations?
Can it be the New World Order?
The initial acronym BRIC was coined by Goldman Sachs the investment bank to represent the 4 countries with the highest economic growth, Brazil, Russia, India and China. However, 9 years later in 2010, it changed to BRICS as South Africa was invited to join this new group which adopted a new approach to the international trade, catalyzed by the embargo on Russia, the war in Ukraine, COVID-19 and the willingness of Africa and other 3rd world developing countries with huge natural resources to be liberated from the western world.
Can this new alliance threaten the existing world order?
Here are some interesting numbers of the BRICS countries:
3.27 Billion people live in these 5 countries, almost 42% of the world’s population.
GDP over 26.03 trillion U.S. dollars in 2022, almost 26% of global GDP.
In Q1 & Q2 of 2023, the BRICS nations purchased almost 200 tons of gold and precious metals.
The BRICS countries developed BRICS Pay- a digital payment system to support local currencies without USD.
In 2015 the BRICS established the New Development Bank (NDB).
BRICS individual countries have developed their own alternative payment system to replace the Swift.
A new mutual currency and low transaction fee will be discussed in this year summit. They aim to have this new currency rely on a gold treasury.
So far, we’ve reviewed only 5 countries. However, it is important to note that there are almost 30 more countries that wish to join this alliance, which would alter the global balance of power. The expansion of BRICS will be discussed at the August summit that will be held in South Africa, and the list of candidate countries includes: Turkey, Bahrain, Saudi Arabia, the United Arab Emirates, Mexico, Afghanistan, Algeria, Argentina, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Uruguay, Venezuela, and Zimbabwe.
Scenarios and latest announcements
Since 1974 Saudi Arabia has an agreement with USA, to trade their oil in USD in exchange for US protection. If Saudi Arabia joins the BRICS, it will eliminate this agreement and sell its oil using currencies other than USD. It can even force the EU to trade in new currencies and ditch the USD.
Since 2019, China has been aiming to “RMB bloc” by trading in Yuan. It started by purchasing from Russia in Yuan, then agreed with Brazil and Argentina to trade in their local currencies instead the USD, convinced Saudi Arabia to consider selling its oil in Yuan or maybe even RMB rather than USD, Pakistan, Iran, Iraq, Thailand and Bolivia are also willing to do so.
In Africa, the president of Kenya, William Ruti, just declared that they want to trade more freely in the Intra-Africa trade by using the Pan-African payments system launched in 2022 and explained that USD will be used only when Africa buys from the US.
The government of Chile decided to move the country’s largest reserves of lithium in the world, which is needed for every rechargeable battery in the world, to be under the state control and created uncertainty for the western investors.
Western countries approach is yet to be clear but France already decided to be active and took its actions. Prime Minister of France, Emmanuel Macron, has visited Africa several times this year. He asked to attend the upcoming BRICS summit but Russia objected the participation due to his unacceptable policy towards Russia.
According to the declarations it seems that the BRICS wants to be separated from the USD, EUR and GBP. But does it mean that the BRICS is becoming a direct competitor to the G7?
We better follow this historic change that is happening in front of us, and understand the effects of the international Trade.
BRICS - New World Order
International Trade Expert, Logistics and Payments.