Donald Trump assumed his “bully” persona on Sunday as he took to social media to threaten the BRICS bloc against a possible move to de-dollarise international trade. “The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER,” announced Trump on his platform, Truth Social.
Developing nations have had a rather turbulent relationship with the US dollar—the go-to currency for global trade in the modern age. It is no secret that the decision by the victors of World War 2 back in 1944 at Bretton Wood in New Hampshire to adopt the US dollar over the earlier “gold standard” had a rippling effect on the fate of global trade.
Developed nations among the 44 allied countries that signed the Bretton Woods Agreement did so to protect their forex reserves since they depleted their gold reserves by the end of the war. Before the US entered the war, the nation served as the major arms supplier to the allied bloc, and they paid America in gold.
By 1944, most of the gold from the Allied territories was in the US. This prompted the need to create a new global standard in trade, and the US dollar was adopted. Fast forward to 2024, global central banks held more than half of their reserves in dollars, according to an IMF report.
BRICS, the nine-country group championed by heavyweights Brazil, Russia, India, China, and South Africa, includes Iran, Egypt, Ethiopia, and the United Arab Emirates. Formed in 2009 as a bloc to encourage cross-country investments between the members, it soon evolved into a geopolitical group with annual summits and foreign policy.
Back in 2023, at the South Africa summit, the BRICS bloc mused at a feasibility study for a new common currency, following a proposal by the Brazilian President Luiz Inacio Lula de Silva.
India commits to US dollar despite BRICS nudge
Out of the members, Russia, China, and Brazil have been championing de-dollarisation for quite some time, especially as a payment instrument. India, however, has always stated that it has no plans to let the US dollar go.
External affairs minister S. Jaishankar at the Carnegie Endowment for International Peace in October doubled down that the dollar “can serve as a reserve mechanism” despite India expressing interest in alternative currency at times.
Jaishankar also remarked that the global media has confused India “for someone else,” stating that “we have never actively targeted the dollar.” He also explained that de-dollarisation was neither part of India’s economic policy nor political and strategic policy.
However, Jaishankar also said that other settlement methods were being considered only regarding trade partners who do not deal in dollars.
On the last trading day of November, the Indian Rupee crashed to a record low of 84.60 against the dollar despite the gains of benchmark indices Sensex and Nifty. In contrast, the Rupee performed much better against the Euro by November-end, appreciating to 89.34 from the 91+ levels it hit around US Election day.
The rouble, however, appreciated 2 per cent against the dollar on Friday. Despite Russia’s move to de-dollarise, Vladimir Putin clarified that Russia does not reject the US currency.
“We—Russia, in any case—do not reject the dollar and do not intend to do this. We were merely denied of using the dollar as the payment instrument,” Putin said during the plenary session of Moscow-based thinktank Valdai Discussion Club last month. However, he also reminded that “the entire power of the US, to date, rests on the dollar.” The Russian President also said that the nation was looking to create new payment instruments to keep up with the trends of global economic development. This has invited the ire of US President-elect Trump, who has always had a tumultuous relationship with Putin.
