Goldman Sachs chief economist Jim O’Neill coined the acronym BRIC in 2001—for Brazil, Russia, India, and China—to highlight these countries’ rapid economic expansion. Eight years later, the four countries established BRIC as a formal organization. The bloc became BRICS in 2010 when South Africa was admitted.
To ramp up their bid for stronger global influence, BRICS countries are planning to increase membership. Reports said this is one of the major agenda in the August 22 to 24 summit of BRICS heads of state in Johannesburg, including the plan to create a BRICS currency.
“BRICS has acquired a very important stature in the world, with many countries across various continents of our world seeking to be part of it,” said South African President Cyril Ramaphosa.
China’s big agenda is to have all BRICS members back up the political diplomacy it has pursued in several parts of the world. For example, China achieved a huge diplomatic coup in March when it unveiled a rapprochement between longtime US ally Saudi Arabia and US target Iran that it had been quietly working on for months.
That breakthrough has already resulted in some valuable steps toward de-escalation in the Middle East. It also drew the two countries and the United Arab Emirates, a key Saudi ally, closer to the non-US trading system being established by BRICS. In June, the foreign ministers of the three countries attended the BRICS meeting in Cape Town. There’s a strong possibility that these three countries will be among those admitted to full membership of BRICS in August.
Pundits said Saudi Arabia’s accession to BRICS would bolster Crown Prince Mohammed bin Salman’s attempts to diversify his nation’s economy, an effort that has brought it much closer to Russia and China in recent years. China is the kingdom’s most important oil customer, while Saudi relies on relations with Russia to help prop up crude prices through Opec+.
Other countries that reportedly expressed interest in joining BRICS include Afghanistan, Bangladesh, Belarus, Comoros, Cuba, the D.R. Congo, Gabon, Guinea-Bissau, Kazakhstan, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe.
The founding impetus for the BRICS was to build economic coordination among its members. This thrust is expected to come into full play in their August summit when attending heads of state will start discussing the creation of a BRICS currency.
Some financial analysts said the creation of the euro in 1999 is a viable model for the proposed BRICS currency. However, this would require the establishment of a new central bank and an agreement among the BRICS nations to phase out their own sovereign currencies.
Central to the BRICS plan to establish a new reserve currency is the US trade war with China, as well as US sanctions on China and Russia. After Russia attacked Ukraine, Russian officials have been championing de-dollarization to ease the pain from sanctions, which prevented Russian banks to use SWIFT, the global messaging system that enables bank transactions. The West also froze Russia’s $330 billion in reserves last year.
Part of the shift away from the dollar is being orchestrated by China. President Xi Jinping is seeking to carve out a bigger role for the yuan in the global financial system, and his government has made expanding the currency’s use abroad a priority.
Mihaela Papa, a co-investigator on the Rising Power Alliances research project, said: “A BRICS version of the euro is unlikely for now; none of the countries involved show any desire to discontinue its local currency.” But she explained that building blocks for this already exist. “In 2010, the BRICS Interbank Cooperation Mechanism was launched to facilitate cross-border payments between BRICS banks in local currencies. BRICS nations have been developing ‘BRICS pay’—a payment system for transactions among the BRICS without having to convert local currency into dollars.”
The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar’s dominance. However, if the bloc succeeds in creating a BRICS currency, and this will stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar’s value, which would pose significant implications for the global economy.