Durban Accords: What Happened with BRICS?

Pool photo by Alet Pretorius/NYT

All eyes were on the BRICS Summit during the Durban Accords in South Africa. The three-day event has had several important headlines coming out of it, and more news may yet still follow.

As the BRICS nations of Brazil, Russia, India, China and South Africa meet to discuss their geopolitical agenda and hash out goals for the alliance, they are giving the world a look at what the future may look like.

De-dollarization tops BRICS agenda

The U.S. dollar has enjoyed global reserve currency status for nearly a century now. If BRICS nations have their way, that privileged status won’t last much longer. The weakness of the U.S. dollar is top of mind for all BRICS countries, and plenty outside of BRICS too.

Though the U.S. still holds the top position in both GDP and total wealth, and is a second-to-none superpower, its global relevance is on the decline. Rivals like Russia and China are clearly motivated to diminish U.S. influence in the world, but more importantly they’re betting on stepping up to replace the U.S.

With the world’s #2 largest economy and its 1.4 billion citizens, China may be the only real rival to U.S. geopolitical dominance on their own. China’s “soft power” campaign across Asia, Africa and Europe are well-documented. By itself, though, China doesn’t have the tools required to replace the U.S. role in the global financial system. The BRICS alliance gives China much-needed support. Earlier this year, China and Brazil formed a bilateral trade agreement to dump the U.S. dollar and settle their trades in their own currencies (yuan and real) instead. That’s $150 billion in annual dollar demand, gone.

Russia’s president, Vladimir Putin, announced that the de-dollarization movement is “gaining momentum” as well as “objective and irreversible.”

No specific plans were outlined or announced, but the BRICS Summit made clear that a BRICS vs U.S. dollar showdown is on the horizon.

BRICS adds six new countries

BRICS expansion has been a hot topic for a while, with as many as 40 countries hoping to join the five-member BRICS alliance.

At the BRICS summit, six new countries were announced to be joining the alliance:

Argentina
Egypt
Ethiopia
Iran
United Arab Emirates (U.A.E.)
Saudi Arabia

The new countries will officially become part of BRICS next year, but their admission was announced now with leaders of current BRICS countries calling this expansion an important step for them. There could be a hiccup with Argentina’s membership as the country is in the midst of an election and the top candidates for the presidency are opposed to joining. However, Brazil is an important ally of Argentina and may have a lot of pull with the country, particularly after the blustering of the campaign trail comes to an end and the new leader doesn’t have to pander to the voters.

While there are still more countries interested in joining BRICS, this list signals danger for the U.S., and particularly the petrodollar. Saudi Arabia is the #2 oil producing country. Iran, Egypt and the U.A.E. aren’t far behind. The new BRICS+ will boast SIX of the top ten oil-producing nations!

The direction of this expansion indicates BRICS+ intend to attack the dollar’s monopoly on global oil trade.

BRICS currency unlikely soon

A lot of speculation leading up to the BRICS Summit was surrounding the possible launch of a new global currency, but so far that doesn’t look to be happening imminently. Launching a new currency isn’t something you can do overnight! For example, the euro was first discussed in 1980, launched in 1999 as a unit of exchange and only in 2002 were euro coins and banknotes released to the public. A new currency takes quite a bit of preparation and planning.

The BRICS expansion is definitely a step in that direction, though. Getting more countries on board, particularly major oil exporters, will give any new currency a significant advantage on launch.

BRICS nations also made it clear that de-dollarization is still a top priority, and knocking the U.S. dollar off the world stage isn’t the only part of that. Something has to replace it. China may hope their yuan fills the gap, but the rest of BRICS (and soon to be BRICS+) will want a piece of the action. So a shared BRICS currency will definitely be in the cards. The question is just a matter of timing. When will BRICS+, with all their new oil-producing partners, be ready to agree on terms for a new currency and launch it?

The other interesting question is whether the new currency will be gold-backed. A gold-backed BRICS currency would be a huge game-changer by being able to offer something the U.S. dollar hasn’t in a long time: Actual intrinsic value. Furthermore, making a currency convertible into gold on demand isn’t an anachronism. Rather, it’s the obvious step to grant the new currency instant legitimacy. Surely that’s one significant reason core BRICS members China and Russia have been buying huge quantities of gold recently?

Putin attends virtually

With Russia in the midst of its war with Ukraine, the BRICS meeting was somewhat awkward.

One of its foremost leaders is not only a social pariah in the West, but has an arrest warrant out for him by the International Criminal Court (ICC). South Africa would be obligated to arrest Russian President Vladimir Putin the moment he got off the plane, which simply isn’t good diplomacy.

While it was uncertain how it would be handled, pressure on South Africa to follow through on its obligation to the ICC led Putin to avoid the issue completely. Though he planned initially to attend in-person, and was perhaps even looking forward to speaking directly with his BRICS allies, in the end he chose to call in via video conference.

Unsurprisingly, Putin focused on de-dollarization. He used the BRICS meeting as an opportunity to slam the “illegitimate sanctions” the U.S. and NATO allies enforced on Russia, the “unlawful freezing of sovereign states’ assets.” These steps, he warned, “seriously weigh on the international economic situation.”

He’s right. It turns out that your dollars aren’t really yours, if the President of the U.S. so decrees. Are dollars an asset, or a liability?

India taking steps to de-dollarize

Just last week, India announced that its leading petroleum refiner used rupees to buy oil from new BRICS member U.A.E.’s national oil company. This is part of a new, bilateral trade agreement between the two nations.

What’s the motive? In the interests of, “seamless cross-border transactions and payments, and foster greater economic cooperation,” according to the Reserve Bank of India. Furthermore, such transactions avoid conversion costs (swapping rupees for local currency) on both the buyer’s and the seller’s ends. Fellow BRICS-brother, Brazil and new inductee Argentina are also entertaining the use of the Chinese yuan in place of the dollar for trade between their two nations.

It’s hard to argue against de-dollarization when we realize it’s both less expensive and more reliable to use local currencies for international trade…

China’s Xi cancels appearance at the last minute

President of China, Xi Jinping, had been planned to speak to the BRICS countries during the accords. However, his commerce minister read out Xi’s remarks in his place. Xi had flown out to South Africa to attend the Durban Accords, and he even had given some specific demands for the meeting in order to prepare for his visit. As perhaps the only true economic superpower in BRICS, his attendance was to be a highlight of the meeting. So his sudden punt to an underling came as a big surprise. In fact, several Chinese social media and news accounts prematurely put out articles announcing Xi’s speech at the Durban Accords. While the speech was delivered, it wasn’t delivered by Xi.

Even so, Xi’s speech had some notable moments:

International rules must be written and upheld jointly by all countries, rather than dictated by those with the strongest muscles.

If that’s not calling the U.S. out on its weaponization of the dollar, what is it?

Nobody yet knows what to make of Xi’s absence. One likely explanation could be that it’s a personal health issue. Xi has not been in the public eye much recently, so that lends some credence to the health rumors. While there’s always the chance this was some kind of power move by Xi, perhaps trying to exert China’s dominance within BRICS, the heavy logistics of getting China’s leader and his entourage to South Africa only to have him be a no-show certainly raises questions.

Russia Selected to Chair BRICS in 2024

Russia’s Vladimir Putin takes the chairman’s seat for BRICS which will give him more power to shape and mold the BRICS agenda to his liking. As already mentioned, Putin is a fervent advocate for de-dollarization, so his appointment as chair will likely solidify this as the top priority for the bloc. “Our ‘five’ has rightfully established itself in the global arena as an authoritative structure, whose influence in world affairs is consistently strengthening,” he said in his video address. On the future of BRICS, he made it clear that the group would seek to have stronger influence and control of international money policy and global trade . The specific goals he laid out included “the increase in the role of [BRICS] states in the international monetary and financial system, the development of interbank cooperation, the expansion of the use of national currencies and the deepening of interaction through tax, customs, and antimonopoly authorities.”

A summary of developments

To recap:

BRICS+6 is bigger and more powerful than ever
The new BRICS alliance is relentlessly focused on de-dollarization, and is making strides toward that goal
There’s no new currency announcement (yet)

We’ll be keeping a close eye on the BRICS and keep you updated as we learn more.

brics, china, durban accords, Featured, russia