After nearly eight decades of uncontested dominance over world trade, the US dollar is in an uproar as many countries turn away from it, undermining its power in the global economy. The use of the "financial nuclear bomb" by the West against Russia has sped up efforts to decouple from the greenback and look for alternatives.

The BRICS, which consists of Brazil, Russia, India, China and South Africa, has been actively striving to develop its own currency to reduce its reliance on the US dollar for more than a decade. Russian President Vladimir Putin, during the BRICS meeting in 2022, declared that the group was aiming to establish an "international reserve currency". No doubt this will again be one of the key topics at the 15th annual BRICS summit from August 22–24 in South Africa.

One of the primary drivers of a new global currency is growing dissatisfaction with the US dollar's hegemony and its use as a tool for political and economic coercion. De-dollarization gained traction after the Ukraine conflict when Washington banned Russian banks from SWIFT and froze approximately $300 billion in Russian foreign exchange holdings. It stoked fears among other nations that America could permanently weaponize its currency against any nation that does not acquiesce to Western diktats.

The US economy itself is another factor in the de-dollarization process. With 132.3% of the nominal GDP in March 2021, the US debt was at an all-time high. In addition, the "rising interest rates" and current "debt ceiling crisis" in the US have prompted many emerging market economies to look for alternatives due to their fears over their dollar-denominated debt.

The fall of American political influence globally also is triggering a faster de-dollarization as countries display diplomatic and economic autonomy to insulate their economies from geopolitical risks. For instance, India, a crucial US ally in South Asia, refused Western demands to cut off trade with Russia in the wake of the Ukraine conflict. Lastly, given the increased unpredictability of global dangers, there are doubts about America's ability to maintain its status as a safe haven for investors.

All these factors led nations and regions from India to Argentina, Brazil to South Africa, and the Middle East to Southeast Asia to redouble their efforts to reduce their reliance on the dollar.

Saudi Arabia has indicated interest in diversifying and hedging its security by normalizing relations with its neighbors, putting the petrodollar's foundation at risk. For the first time in nearly 50 years, oil-rich Saudi Arabia declared its openness to trade in currencies other than the greenback, and seven of the 13 members of OPEC have applied for BRICS membership. Moreover, Saudi Arabia is now considering settling some portions of the oil trade in Chinese yuan with China, which buys more than 25% of the oil that Saudi Arabia exports.

Bilateral trade between countries and accepting each other's currencies is becoming the new norm to reduce US dollar dependency. For instance, China has signed agreements with more than 40 countries or regions for the clearing of yuan in bilateral trade. Similarly, 18 countries, including Germany, Singapore and the UK, have agreed to trade in the Indian rupee. It is noteworthy that the yuan had already surpassed the dollar as the most popular currency in Russia in February 2023.

The BRICS currency is rumored to be backed by gold; if true, this would mark the historic return of the gold standard and provide stability for the new currency. Central banks have therefore been stockpiling their gold reserves at a record pace. Singapore (51.4 tons), Turkey (45.5 tons), China (39.8 tons), Russia (31.1 tons) and India (2.8 tonnes) made the greatest purchases of gold in the first two months of this year.

Meanwhile, the IMF's COFER reports that the dollar's share of global foreign exchange reserves fell below 59 percent—its lowest level in 25 years. According to top currency analyst Stephen Jen, the greenback's dominance as a reserve currency eroded last year at 10 times the pace seen in the past two decades. All the signs of de-dollarization are beginning to appear, and countries are preparing for a new currency as a result.

It won't come as a surprise if the BRICS emerge as the greatest economic alliance in the world in the near future, as it has all the elements required to hold the position. The combined GDP of the BRICS countries, which now make up more than 40% of the global population, is 31.5%, exceeding the G7's GDP of 30.7%. It is plausible to see BRICS countries as completely self-sufficient, trading among themselves without depending on the US.

Undoubtedly, China's BRI, the greatest infrastructure development initiative in history comprised of 151 nations, approximately 75% of the world's population and more than half of the global GDP, will serve as another impetus. China has also committed to establishing the RCEP, the largest trading bloc in the world, and has a significant trading relationship with ASEAN. As these newer regional trading blocs mature, we expect that partner countries will use an alternate reserve currency to trade among themselves, further squeezing the dollar's space.

Since 2009, BRICS summits have been held annually; each one has successfully concluded without any major disagreements. Despite some disagreements in their bilateral relations, India and China have a common vision that the BRICS as a platform can play a crucial role in enhancing their international status and influence. This commonality of interests will make BRICS stronger to circumvent US monetary hegemony.

Last but not least, we expect that BRICS countries will engage in constructive dialogue at the upcoming event to introduce a currency that will help countries find greater independence from US financial hegemony.

The authro is strategic affairs analyst, Dhaka, Bangladesh. The views don't necessarily reflect those of China Daily.

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