On Sunday, February 4, 2024, BRICS member Russia confirmed its effort to establish a new payment system without including the US dollar.[1] For a long time, Russia has been aiming to create a payment mechanism aimed at settling cross-border transactions with BRICS and other developing countries in a new currency. The decision to create the new payment system came as a result of sanctions imposed after Russia’s aggression against Ukraine. The establishment of this payment system will facilitate the flow of payments with Russia, BRICS and other countries in local currencies, with the dollar being the most affected currency.
Kremlin spokesman Dmitry Peskov has officially confirmed that Russia is moving towards creating a new payment mechanism without the dollar. He also described the traditional world order dominated by the dollar as “unreliable, wrong and dangerous”.[2] BRICS members such as India, China, Russia, the United Arab Emirates (UAE) and Saudi Arabia have moved towards using local currencies in international trade agreements. China and Russia are trying to reduce dollar dependence by luring other developing countries in the same direction. In addition, BRICS countries are accelerating their efforts to establish their own internet services without being dependent on American technology.[3] This would open the way for investors who have turned to the US to turn to the BRICS.
On February 5, 2024, the Governor of the Central Bank of Russia, Elvira Nabiullina, announced that 20 countries have adopted the Russian Payment System in order to abandon the dollar in line with BRICS’ plans for dollar independence. Russia stated that there is an alternative to the SWIFT system, which already has more than 159 foreign participants.[4] SWIFT is an international interbank system that transmits information and makes payments between more than 11,000 organizations worldwide. According to Russia, the alternative to SWIFT aims to reduce “overdependence” on the US dollar. Launched in 2023, the BRICS Pay Initiative will continue to help plans for dollar independence in the coming years.
As each BRICS emerging power is building a world order with its own institutions and currency, the Interbank Cooperation Mechanism was established in 2010 to facilitate cross-border payments between BRICS banks in local currencies. High interest rates in the West and the debt crisis in the US have raised concerns about other countries’ dollar-denominated debts and the possible fall of the dollar in the event of a collapse of the Western-centered world economy.
The rhetoric of challenging the Western payment system has become an important infrastructure element, especially for the BRICS alliance. Moreover, Russia’s System for Transmitting Financial Messages (SPFS) provides a solid foundation for this discourse. For much of 2023, the BRICS economic alliance has stepped up efforts to reduce its reliance on the dollar. Both Russia and Iran, one of the newly invited countries, have suffered from the sanctions imposed by the West. Other countries are also concerned about facing similar actions by the West. Therefore, the bloc is trying to cope with the general state of the dollar at the global level.
BRICS countries are leading the restructuring of powerful companies and increasing investments in new technologies such as robotics and artificial intelligence. Accordingly, geo-economic and political processes in the world are moving towards a non-Western, ultra-technological globalization. The current geo-economic order is characterized by sanctions imposed in line with the norms and values underlined by the West in the dominant tradition of international relations, increased competition in the interstate system, mistrust between political and economic actors, and deepening militarization by dominant global actors. The BRICS, economically expanded and having successfully realized their rhetoric, will be difficult to ignore in the system.
While Europe awaits the possible consequences of the Russia-Ukraine War, the US is formulating specific action plans in the Asian region. The decline of Russia’s power due to sanctions and conflicts around the world is shifting the US focus to China. The Belt and Road Initiative and the rise of non-Western systems such as the BRICS are affecting US geopolitical positions in the Asia Pacific region.[5]
The expansion of BRICS is expected to play a global role in the process of “de-dollarization”.[6] China’s pressure to conduct oil trade in yuan and Saudi Arabia’s joining BRICS have the potential to affect the dynamics of global oil trade.
The world has witnessed a profound shift in the global economic and geopolitical landscape over the past two decades, as the BRICS countries’ search for alternative payment mechanisms has provided an increasing counterweight to the traditional dominance of the G7.
At the 2023 BRICS Summit, Russia, Brazil and South Africa fell short of expectations and their share of global Gross Domestic Product (GDP) (in purchasing power parity terms) has fallen dramatically over the last two decades. While these three countries did not fulfill their expected weight, the other five BRICS countries overtook the G7 in terms of total GDP in 2020. According to the IMF, the bloc has the potential to collectively account for 32.1% of global GDP.[7]
The efforts of Russia, an important part of BRICS, to create a new payment system by excluding the US dollar stand out as an important criticism against the dominant Western tradition of international relations. Underlying these efforts is the aim of challenging the hegemony of the dollar in international trade. In addition to Russia, the BRICS countries are strengthening their plans to decouple from the dollar through financial initiatives aimed at facilitating payments in local currencies. These initiatives could diversify the international financial system and allow BRICS to play a more active role in the global economy.
[1] “BRICS: 20 Nations Join Russian Payment System, Ditch US Dollar”, Twitter @BRICSInfo, https://twitter.com/BRICSinfo/status/1754284489251979364, (Date of Access: 05.02.2024).
[2] Same citation
[3] Same citation
[4] “BRICS: Russia Building New Payment System Without U.S. Dollar”, Watcher.guru, https://watcher.guru/news/brics-russia-confirms-building-new-payment-system-without-u-s-dollar, (Date of Access: 05.02.2024).
[5] Zoran Vasileski, “Brics Versus The Global West In The Light Of Current Global Realizations”, Towards a Better Future: Peace, Justice, and Strong Institutions, 2024 (291).
[6] “20 Countries Ditch Dollar For Russian Payment Network”, Cryptopolitan, https://www.cryptopolitan.com/20-countries-ditch-dollar-for-russia/, (Date of Access: 05.02.2024).
[7] “The Rise of the BRICS”, Statista, https://www.statista.com/chart/30638/brics-and-g7-share-of-global-gdp/, (Date of Access: 05.02.2024).
