This is a sort of chicken-and-egg problem. Oil-producing nations don’t want to join the BRICS financial system if the benefits and usage of the new system are not better than the current system. This wasn’t an issue with the first US-created system because no international financial system existed before.

That’s why BRICS is courting Saudi Arabia as a member, and will definitely have Iran join eventually. Having Russia, one of the world’s largest oil producers, as a member definitely helps this along. Russia, China, and Brazil combined already produce more oil than the USA.

Working on it.

• China’s Yuan is now the most traded currency in Russia
• Explained: Why Indian refiners are paying for Russian oil with Chinese money
• To woo China, Saudi Arabia may accept yuan for oil

It’s the power of socialism!

I will just quote from Ben’s article on the topic from his website:

While the Russian BRICS chairmanship proposal will not solve all of these structural problems, it is a step in the right direction.

The BRICS report itself concluded with a cautious tone. “The extent to which the current system has deviated from the proposed model means that the change will take time and will require collective effort across the countries”, the authors wrote, emphasizing that “practical implementation of the aforementioned initiatives will take a phased approach”.

However, the document added, “The important thing is that the process has already begun – alternative payment systems and financial messaging mechanisms are already here, the use of national currencies for bilateral settlement is growing and new ways of transacting, including digital assets, are emerging”.

The BRICS proposal to transform the international monetary and financial system is far from a panacea, but it could help address some of these structural inequalities.

Despite the clickbait title, the article (detailing the Russian document) itself is more than reasonable.

It is a step in the right direction, but very very far from what we’d call a de-dollarization that could end dollar hegemony, and hence US financial imperialism. It will be useful to shield the countries from direct US sanctions, but not a complete de-coupling from the dollar, which is what is needed to end American imperialism.

To their credit, the Russians seem to understand this process better than anyone else, and correctly came to the conclusion that gold, crypto or a shared currency basket (which have variously been floated around) cannot topple the dollar hegemony. They have some very good ideas but are also realistic about the fact that mechanistically, it is very difficult. This alone makes it far more reasonable than the Europeans for creating the abomination known as the euro, which is quite possibly the worst designed currency in modern history.

The problem for BRICS+ is that they should have done this two years ago, not today, when the US Fed rate was still high. The US is already starting to lower its interest rate in September, and the dollars will begin (and has already begun) to flood the Global South again. Without an established infrastructure in place, it would be very hard to get the governments on board. Unlike two years ago when numerous governments across the world were desperate to look for a dollar alternative after the rate hike.

Another important point to consider is whether China is on board with this proposal. There is no other economy than China (EU, Japan are both out) that has the scale and the mass to counter the threat of dollar hegemony. However, there has been some worrying trends of China succumbing to US secondary sanctions and opening up its capital market for foreign investors in the last few months, that indicate that China may be more comfortable with supporting the status quo than to radically challenge the existing system.

The BRICS summit next week will be interesting to watch, but I wouldn’t expect groundbreaking changes.