Brics urges middle east to ditch US dollar for oil trade

Paco Dennis

Paco Dennis

SF VIP
Location
Mid-Missouri
BRICS is continuing to expand it's influence. It is now a major "bloc" of nations cooperating in new ways that are better for them than dealing with the US.

BRICS member Russia is urging countries in the Middle East to stop accepting the US dollar for oil payments. Russian President Vladimir Putin is hitting out at the US for pressing economic sanctions against the country. The White House sanctioned Russia after it invaded its neighboring country Ukraine in February 2022. Russia has been reeling under severe economic pressure since then as the inflow of funds through direct trade has dried up.

Notwithstanding the sanctions, Putin has called for the Middle East to deliver a tit-for-tat outcome against the US. He urged oil-producing countries, including BRICS nations Egypt, and the UAE to not accept the US dollar for oil payments.

edgf.JPG

Putin explained that the Middle East has the power to end the US dollar’s global dominance through oil and gas. “If oil producers in the Middle East stop using the US dollar, it will be the end of the dollar,” he said. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.

It is long been speculated that BRICS inducted oil-producing countries into the alliance last year to push the de-dollarization agenda. BRICS is aiming to make oil-producing nations accept local currencies for cross-border settlements and not the US dollar.

Saudi Arabia is the main oil-producing nation that has kept the option of joining BRICS on hold. The Kingdom is weighing its options of being a part of the bloc and is yet to conclude its decision. However, Saudi Arabia might decline BRICS membership as its economy is looking to thrive beyond the oil and gas segment.
The Kingdom is now opening up the country to tourism and needs the help of the US, Europe, and the West. In conclusion, the Middle East might not stop accepting the US dollar for oil trade as it needs support from the West for tourism.
BRICS Urges Middle East To Ditch US Dollar For Oil Trade


 

Don't mistake currency exchange rates for a nation's GDP.
My take? The US is currently in THE most enviable position in the world. The problems we have, are shared by many countries whose economies are doing more poorly than ours. Our currency remains stable, the Fed has managed to bring inflation down to a more reasonable level, we remain an oil-exporting and food-exporting country.

Exchanging dollars is a shrinking market, in fact, something that has been recognized for a number of years by governmental agencies and financial institutions. There are a number of high-level collaborations going on 'behind the scenes' to establish global digital currency standards, which would greatly simplify international trade and shipping.
========

Note re first article: The rouble has continued to fall; it is forecasted to finish 2024 at the currency exchange rate of 90 soms per dollar, down from its current inflation-boosted level of 93.

Russia’s central bank to hold extraordinary meeting after rouble falls to 16-month low
Bank will discuss interest rate after high spending on war in Ukraine and drop in export revenues put further pressure on Russia’s economy
London Guardian U.S. 14 Aug 2023
(excerpt)
Russia’s central bank has announced it will hold an extraordinary meeting on Tuesday to discuss the level of its key interest rate after the rouble fell to its weakest point in almost 17 months. The currency has been steadily losing value since the beginning of the year and slid past the psychologically important level of 100 to the dollar on Monday morning.

It has weakened by 26% this year as a result of a collapse in export revenues and growing military spending, making it the third worst-performing global currency in 2023. The decline has led to calls from senior Kremlin officials for higher borrowing costs.

&&&

Brics’ biggest challenge in the near term is not falling apart
The biggest challenge now facing the bloc is not whether it can reform global governance or introduce a common currency, but whether it can remain united and focused without the politics of future members steering it off course
South China Morning Post by Abishur Prakash: 03Sep2023
Abishur Prakash is the CEO of The Geopolitical Business, an advisory firm in Toronto
(excerpt)

In mid-August, the front runner in Argentina’s presidential race, Javier Milei, called for radical changes. If elected, he would bring Argentina closer to the US, reform trade with Brazil, freeze ties with socialist countries, leave the Mercosur trading group, and end Argentina’s relationship with China. Milei referred to China as an “assassin”, pointing fingers at the Chinese government for not respecting people’s freedoms.

A little more than a week later, it was announced that Argentina would join Brics, a grouping that currently comprises Brazil, China, India and Russia, in addition to South Africa. If Milei is elected as Argentina’s next leader, it will not just create challenges for South America, but for Brics as well.

Brics+ was inevitable. But the nations that have been added – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates – bring a new sense of uncertainty and fragmentation to the bloc.

By expanding the group the way it has, Brics has actually become more fragile than it has ever been. Its future is truly unknown. There are several reasons for this. First, since its inception, Brics has been a grouping of new economic powers who shared objectives in areas like development and trade.

But, by adding Iran, the environment within Brics fundamentally changes. China and Russia are already facing off with the United States in their own ways. The inclusion of Iran, however, creates a new “axis” within Brics with the US as the core antagonist.

These three nations will push ideas that make Brics less about the Global South rising up and more about fighting the US-led world order – that is, evading sanctions. Second, and connected to the first, is that as the environment within Brics changes, and becomes more about clashing with the West, it will put one nation in a very awkward position: India.

The other major economic power in the group besides China and Russia, India will see its main geopolitical bloc potentially derailed by expansion. New Delhi does not have any inclination to become an anti-US or anti-Western power.

For most of India’s history, non-alignment and neutrality have been the guiding principles. Will India oppose whatever the Beijing-Moscow-Tehran axis pushes, from energy to security? And, if India is outvoted or outmanoeuvred, pushing New Delhi in a direction it does not like, will India stay in Brics or leave?

... Lastly, through expansion, Brics will be forced onto battlefields it might not be ready for. If Israel takes action against Iran, if the conflict in Libya spills over into Egypt, or the war in Sudan spills over into Ethiopia, it will complicate matters for the Brics grouping.

Is Brics ready to deal with these kinds of challenges beyond diplomacy? Would Brics be prepared to marshal resources, from sending in Brics peacekeepers or establishing Brics emergency funds, to keep its members stable? Such steps, even if intended to bring calm, could generate their own shock waves.

But, one thing is for sure, Brics’ decision to expand may create headaches in the short term. The biggest challenge facing Brics is not whether it can reform global governance or introduce a common currency. The more pressing issue is whether Brics nations can keep the bloc united, focused and above water, without the politics of future members, such as Argentina and Iran, taking the boat off course.

And all of this is just after the first round of expansion. The next round could add yet another layer of fragmentation and uncertainty to the group. Through expansion, Brics is accelerating in a new direction. There is no turning back.

Many nations are now playing the waiting game when it comes to Brics. Countries like China and India are no longer the new kids on the block. The real showdown between the established order and new order is just beginning. And nobody wants to bet the wrong way. From the Western nations to emerging powers, everybody will be watching Brics+ to see what transpires.
 
If other countries want to trade in a currency that is partially or completely controlled by authoritarian regimes, that is their choice.
 

While it might seem simple for countries to replace the dollar as a medium of exchange... it would also reduce the demand for dollars and cheapen the dollar. With the United States net international investment position at nearly $20T... that would collapse a good many financial institutions, that are taking advantage of a strong dollar.

Not saying it won't happen, but just take a gander back to the 2008 dollar value, compared to today.

The holders of all those dollarized assets will put up quite a fight, imho.
 

IS BRICS THE NEW SUPERPOWER?​

The BRICS bloc is a growing home for nations eager to counter the West's position, or at least hedge their bets when it comes to international trade, development support, and conflicts including Russia-Ukraine and Israel-Palestine, writes Marita Kassis.

MARCH 27, 2024
.
D
issatisfaction with the world order, and the growing tensions between rich countries and poor ones, are making the BRICS (Brazil, Russia, India, China, South Africa as well as Egypt, Ethiopia, Iran, United Arab Emirates, and Saudi Arabia) all the more attractive to nations. Over 40 countries have shown interest in joining the group, taking a seat on the table and having their say in the forum.
South Africa’s latest stance against Israel in the ongoing Israel–Gaza war put the BRICS at the forefront of every discussion again. South Africa brought a case against Israel to the International Court of Justice in January 2024, accusing it of genocide against the Palestinians in Gaza. It continued to urge the ICJ to protect Palestinians against an Israeli attack on the densely populated city of Rafah.

The BRICS members haven’t sanctioned Russia for the Russia-Ukraine war, indicating the bloc is a welcome home for those wishing to counter the West’s position. "Diplomatically, the war in Ukraine appears to have drawn a stark dividing line between an eastern–backed Russia and the West," political scientist Matthew Bishop wrote for the Economics Observatory.
From an economic perspective, the BRICS bloc is set to become the wealthiest—in investable wealth. The richest of the group are set to become even richer according to a report published by Henley & Partners. Worldwide, there are “1.6 million individuals with investable assets, of more than a million in the group.” Andrew Amoils, wealth analyst at New World Wealth, told CNBC, “The 85% forecast for BRICS will be the highest wealth growth of any bloc or region globally.”

Today, the new BRICS, or potentially BRICS+, represents 3.5 billion of the world’s population, which is about 45% of the world. Their economies are worth more than $28.5 trillion, equivalent to 28% of the global economy. The bloc’s economic weight does not only reside in the trillions of dollars that their cumulative GDPs represent but that “BRICS countries produce about 44% of the world’s crude oil,” which is to this day a Western national security priority.
Aiming to counter the West politically and economically, the BRICS countries set up a bank in direct competition with the International Monetary Fund and the World Bank—both controlled by the West. The New Development Bank aims to lend money to developing countries and boost infrastructure.

To move away from dependence on the power and influence of the U.S. dollar, the group decided to develop a blockchain–based payment. De–dollarizing the financial system in which these countries operate is the only way to avoid repercussions and limitations set by sanctions and regulations. Yury Ushakov, foreign policy aide to the Russian President Vladimir Putin, clarified that “creating an independent BRICS payment system is an important goal for the future, which would be based on state–of–the–art tools such as digital technologies and blockchain.” The establishment of this independent payment system could heavily impact the dollar as the international reserve currency and have significant ramifications on the global financial system, resulting in broad geopolitical implications.

The BRICS bloc is now focusing on trade as a plan to strengthen its alliance. Grain, the flow of which was drastically hindered at the start of the Russia–Ukraine war, is now the runner–up to be traded among the BRICS countries. According to Eduard Zernin, chairman of the Russian Union of Grain Exporters, consultations revolving around the grain exchange among member countries have been completed, with Putin’s support. According to news reports, Russia's share in the world grain market is approaching 25%. As of January 2024, with the addition of the new members, BRICS members accounted for 1.24 billion metric tons of grain production per year.

It will require time for the BRICS bloc to fully integrate itself into a world order that has been built around the dollarization of the global financial system, has looked up to the United States for guidance and protection, and has relied on the known military institutions and historic alliances. However, dissatisfaction around events like Russia–Ukraine, Israel–Hamas, and Cold War tactics in the Gulf and Middle East will fast–forward the process and reshape the policies of countries that usually rely on the West but may now be aiming for self–defense and greater independence.
About
Marita Kassis
:
Marita Kassis is a communications specialist and geopolitical analyst focusing on business, the Middle East, security and counterterrorism.

https://www.diplomaticourier.com/posts/is-brics-the-new-superpower
 
A Strong U.S. Dollar Weighs on the World
NY Times 29April2024
[free link] A Strong U.S. Dollar Weighs on the World

(excerpt)
Every major currency in the world has fallen against the U.S. dollar this year, an unusually broad shift with the potential for serious consequences across the global economy.

Two-thirds of the roughly 150 currencies tracked by Bloomberg have weakened against the dollar, whose recent strength stems from a shift in expectations about when and by how much the Federal Reserve may cut its benchmark interest rate, which sits around a 20-year high.

High Fed rates, a response to stubborn inflation, mean that American assets offer better returns than much of the world, and investors need dollars to buy them. In recent months, money has flowed into the United States with a force that’s being felt by policymakers, politicians and people from Brussels to Beijing, Toronto to Tokyo.

The dollar index, a common way to gauge the general strength of the U.S. currency against a basket of its major trading partners, is hovering at levels last seen in the early 2000s (when U.S. interest rates were also similarly high).

The yen is at a 34-year low against the U.S. dollar. The euro and Canadian dollar are sagging. The Chinese yuan has shown notable signs of weakness, despite officials’ stated intent to stabilize it.

“It has never been truer that the Fed is the world’s central bank,” said Jesse Rogers, an economist at Moody’s Analytics.
 

Back
Top