The Atlantic Council, a NATO outpost in the U.S., has just announced the launching of its “dollar dominance monitor” to assess de-dollarization efforts worldwide, but focusing especially on the BRICS nations—Brazil, Russia, India, China and South Africa. The GeoEconomics Center, which is running this “first of a kind” project, explains it is confident that the dollar’s role as the primary reserve currency is secure in the near and medium term as “all potential rivals,” including the euro, “have a limited ability to challenge the dollar in the immediate future.”
Worrisome to them, however, is that the BRICS nations are seeking to reduce their reliance on the dollar. While they haven’t made significant progress on de-dollarization efforts, including creating a common currency, the Atlantic Council insists, these efforts nonetheless “pose a long-term challenge to the dollar’s hegemony” because of, among other things, their combined share of global GDP. “Alternative financial plumbing may be a leading indicator that precedes any shift away from dollars.” Thus, assessing the dollar’s relative strength at present and anticipating its future status, will be critical for tracking “the rise of competing financial settlement networks and payments architecture.”
That Global Majority has been steadily moving away from the crumbling dollar-dominated financial system. The Council notes that since the beginning of Russia’s special military operation in Ukraine (February of 2022) and the G7’s escalation of its use of financial sanctions, “some countries have been signaling their intention to diversify away from dollars.” The BRICS have been actively promoting the use of national currencies in trade and transactions, while China has expanded its alternative payments system, the Cross-Border Interbank Payment System (CIPS) to its trading partners and seeking to increase international usage of the renminbi.
China appears to be the project’s major concern, seeing it as the driver of the BRICS, but it “identifies the BRICS as a potential challenge to the dollar’s status due to the `individual members’ signal of intent to trade more in national currencies and the BRICS’s growing share of global GDP.” Of all the BRICS currencies, “the renminbi has the greatest potential of competing with the dollar as a trade and reserve currency.”
The Atlantic Council’s GeoEconomics Center does a comprehensive analysis of each BRICS member’s de-dollarization efforts, which it will now do on a regular basis. It selects two key indicators of the strength of the alternative financial infrastructure China is building: its swap lines with the BRICS countries and membership in its CIPS payment system.
