Is Brics succeeding in ousting the dollar?
The 10-nation Brics alliance, which has roped in the UAE and Saudi Arabia as its newest members, is advancing to eliminate the US dollar in all of its global trade and transactions in 2024.
Brics members China and Russia recently signed a trade agreement where they will use local currencies up to $260 billion. The trade deal will be initiated to settle payments in exchange for commodities purchased between the two nations. Both China and Russia will settle payments in the Chinese yuan and the Russian rouble, and not the US dollar. As per the deal, 95 per cent of the $260 billion worth of trade will be settled in yuan. The remaining 5.0 per cent will be settled in Ruble and the Euro. The development indicates that the Brics alliance is serious and will do almost anything to push the de-dollarisation agenda ahead, currency experts said.
The Brics alliance kick-started the de-dollarisation agenda to pull the greenback down from the global reserve status and replace it with local currencies. China and Russia were on a world tour convincing developing countries to use local currencies for trade and not the US dollar. They found success in it as several developing countries are considering the de-dollarisation initiative to strengthen their local currencies.
However, currency experts said the de-dollarisation initiative has fallen flat as the greenback hammered all local currencies of Brics nations. The DXY index, which measures the strength of the dollar, shows the currency trading around the 106.27 level. That’s a robust surge from its low of 101.8 during January this year.
A recent statement made by a diplomat indicates that the Brics 2024 summit will focus mainly on the de-dollarisation agenda. The Brics 2024 summit is scheduled to be held in October in the Kazan region of Russia. The 16th summit will see four new countries being a part of the meeting including the UAE, Egypt, Iran, and Ethiopia. Saudi Arabia could also attend the upcoming summit if the Kingdom agrees to be a part of the grouping.
Russian deputy foreign minister Sergey Ryabkov said in a recent interview that the 2024 Brics summit will achieve historic milestones. He explained that the alliance will become “much stronger” after the 2024 summit ushering developing nations into a “multi-polar world.” The idea of a multi-polar world is the key to de-dollarisation where Brics countries will end reliance on the US dollar. We are incrementally moving toward success. I am absolutely sure of that,” he said. “I think that the summit in Kazan this October will be marked by new achievements in cooperation between Brics countries,” he said.
The UAE, represented by the UAE Ministry of Finance and the Central Bank of the UAE, participated in the first Brics finance ministers and central bank governors meeting held on February 27 in São Paulo.
The UAE delegation included Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs. Commenting on the sidelines of the UAE’s participation, Al Hussaini emphasised the importance of the first meeting of 2024 under the Russian presidency of the Brics group. He highlighted the aspirations of the UAE, which is a global hub for trade and economic development, to play an active role within the group. He noted that Brics has been developing its role since the beginning of the year, following the addition of six new countries, including the UAE. This gives Brics a strong push towards enhancing its position in achieving the group’s goals and strengthening its role in international cooperation towards sustainable development.
The UAE officially joined the Brics group after a successful application ratified by the five founding nations. In October 2021, the UAE also joined the Brics’ New Development Bank, established in 2015 to mobilise resources for infrastructure and sustainable development projects in emerging markets, developing countries, and Brics nations.
Al Hussaini represents the UAE on the board of governors of the New Development Bank as a governor, and Younis Haji Al Khoori, Undersecretary of the UAE Ministry of Finance, as an alternate governor. Thuraiya Hamid Alhashmi is a member of the bank’s board of directors.