The world can no longer progress on a US dollar dominated trade or monetary regime. Expanding BRICS would be the best outcome. Image Credit: AP

The changes brought about by the Russian-Ukrainian war are spreading at an accelerated pace, driven by objective developments and historical influences. These warrant a reconsideration when adapting to economic and geopolitical shifts.

A major manifestation of this is the contest among developing nations to join the BRICS grouping, comprising China, Russia, India, Brazil, and South Africa. The Russian Foreign Minister announced at the St. Petersburg Economic Forum that the UAE, Saudi Arabia, Egypt, and Algeria are candidates for BRICS membership.

Moreover, Mexico, Argentina, and Indonesia have expressed their interest in joining this economic bloc, with news suggesting that even France has shown an inclination towards a BRICS role.

Empower BRICS

What underlies this trend that’s rapidly gaining momentum? What are its potential implications? The causes and consequences are substantial, with the potential to fundamentally alter the global financial and economic landscape.

First, the current economic system - along with its regulations and legislation - mirrors the balance of economic power post-World War II. This was a period when Europe, including Russia (or the Soviet Union), was economically devastated, while many nations were either underdeveloped or under the yoke of occupation or colonial rule. Consequently, the present system reflects a power balance that dates back 80 years, rendering it unsustainable under current circumstances.

Secondly, due to these shifts, the world is increasingly unable to sustain a unipolar economic and financial system, which has led to serious issues and even misuse. Some of these issues are directly linked to the monetary system emerging from the Bretton Woods Agreement, which was abandoned in 1971. This departure allowed for uncontrolled and unrestrained printing of securities, particularly of the US dollar, defying the guidelines set by local and international financial and monetary systems.

Thirdly, this hegemony has led to the misuse of certain financial and monetary tools, such as the use of economic sanctions. These have inflicted severe damage on global financial and trade conditions, inhibiting numerous cooperative development projects.

Dated global monetary regime

These shifts have sparked discontent among many nations that no longer tolerate the status quo. They are striving for an alternative embodied in a multiplicity financial and monetary systems - and rejecting the unipolar system that dominates the existing structure. All countries, including those within the EU, recognize the tangible interest in establishing a multilateral financial system.

From this emerges the accelerating global interest in joining the BRICS group, which presents an alternative capable of instigating change thanks to the economic prowess and geopolitical influence of its member nations (who are also part of the G20). Following BRICS’ announcement of a program aimed at accomplishing their objectives for a multipolar financial and monetary world, two major directions have been emphasized.

The first involves basing their trade exchanges on their national currencies, a move that has seen substantial progress, attracting even nations outside the bloc to join. The second direction contemplates the possibility of issuing an international currency for circulation, set according to monetary systems and legislation that prevent any one party’s dominance, thereby ensuring equal rights and privileges for all.

A multi-polar economic base

While acknowledging these will require time to materialize - and may encounter difficulties - they are anticipated to yield a multipolar financial and economic system. This system, devoid of any single party’s dominance, will be more equitable and advantageous for the global economic system.

Besides the dollar, the euro, the yuan, and the common trading currency of the BRICS group are expected to feature prominently. And potentially, a single Gulf currency, should the GCC countries overcome significant hurdles facing its issuance.

In this scenario, the new system will echo the contemporary balance of economic power and reconcile the discrepancy between the antiquated current financial and monetary system and the economic power centers that have been reconfigured over the past two decades. This will pave the way for a more fair and balanced global economic order.