IS BRICS THE END OF THE U.S. DOLLAR AND A GIANT STEP TOWARD A SHIFT IN GLOBAL DOMINANCE?
BRICS, an acronym for Brazil, Russia, India, China, and South Africa, is an alliance of governments joining together major economies, comprising 41% of the world’s population and holding 24% of the world’s GDP. The alliance was originally coined BRIC (before South Africa joined in 2010) by Goldman Sachs economist Jim O’Neil in 2001 when he claimed that by 2050 BRIC economies would dominate the global economy.
Is O’Neil’s claim coming to fruition and what would that mean for the U.S. economy?
President Cyril Ramaphosa has recently confirmed that Saudi Arabia intends to join BRICS. Saudi Arabia is the third most valuable natural resource reserve in the world. The country has the second-largest proven petroleum reserve and the sixth-largest measured natural gas reserve. It is also the number one exporter of petroleum in the world. If Saudi Arabia joins BRICS, could this mean the end of the petrodollar?
For years China and Saudi Arabia have been in talks about using the yuan instead of the Dollar for Chinese oil sales. China currently purchases more than 25% of the oil that Saudi Arabia exports. If those purchases were priced in yuan, the standing of China’s currency could skyrocket.
In 2014, Russia was expelled from the G7, at that time the G8, as a result of the annexation of Crimea. At that time, China, who never received an invitation to join due to accusations of human rights violations, alongside Russia began taking steps to de-dollarize their economies.
Russia has since strengthened the BRICS alliance by selling discount oil to BRICS countries outside of SWIFT (Society for Worldwide Interbank Financial Telecommunications). As a result, Russia has increased its sales of oil to China by 55% and has passed Saudi Arabia as the top supplier of Chinese oil.
With the Saudi’s frustration over the U.S.’s lack of support for their intervention in the Yemen civil war and the Biden Administrations’ attempt to strike a deal with Iran, and Russia’s successful alliance with China, these year-long “talks” about replacing the U.S. dollar with the yuan in oil sales seem to be coming to a head.
Does the potential of Saudi Arabia to join BRICS display the world powers posturing us away from western dominance and into a global currency?