BRICS envisions a new multi-polar world order, free of Western dominance. An alliance that started out with just four nations, Brazil, Russia, India and China in 2009, has attracted the attention of other nations that share the same values and goals. South Africa joined in 2010, while 6 more emerging economies were invited into the fold in January 2024, including Argentina, Ethiopia, Egypt, Iran, Saudi Arabia and the UAE. With this expansion, the BRICS+ bloc now commands significant political and economic weight globally.
A key theme of the bloc’s initiatives is that emerging economies want their voices heard. The US has sanctioned 70% of developing countries, which led to 40 nations wanting to join the BRICS bloc after 2023. Following the six countries that were added in 2024, nine more are expected to be included by end-2025. The common interest among all these nations is to boost economic development, and drive multilateralism while opposing non-UN sanctions. A more recent focus is to de-risk their economies from the existing US-led financial ecosystem and reduce the reliance on the USD. Let’s take a look at how this could play out for the rest of the world.
Reshaping Global Trade
US-imposed sanctions failed to inflict as much damage to the Russian economy as the White House might have hoped, thanks to its BRICS mates, India and China, since both nations increased imports from Russia.
China, a major manufacturer of EVs, solar panels and heavy goods, has found regions to expand to within the current and aspiring BRICS+ markets. The total value traded between China and Russia stood at 1.4 trillion yuan from January to October 2024. This was 4% higher than the trade value in the same period in 2023. Trump’s sanctions against Russia and continued rivalry with China may further support the growth of the yuan’s share of global trade and valuation against the greenback.
However, for now, the USD is gaining against the Chinese yuan, with Acuity’s AssetIQ widget reflecting bullish sentiment for the USD/CNY pair.
Dollar Dominance at Risk
BRICS+ announced the development of a blockchain-based transaction system, BRICS Pay, with local currencies. The end goal is to eliminate the need to issue USD to achieve greater trading autonomy. While Russia-China and Brazil-Iran have already experimented with bilateral trade using their own currencies, building cohesive international mechanisms may prove more complex.
Lower Reserves, But Trades Hold
The dominance of the US dollar is slowly but definitely declining. Central banks’ greenback reserves are at 59%, compared to the 72% following World War II. Preferences for reserve currencies are shifting. Yet, the USD is still used for nearly 90% of global forex transactions. No single currency is as strong and stable as the US dollar. Therefore, sufficient de-dollarisation to weaken the DXY is a long-term goal.
Souring Relations
Donald Trump had already promised increased tariffs before taking office for his second term as the US President. He added Canada and Mexico to the nations that would be charged over 25% tariff, which means Trump might have already ruffled some feathers. He has also emphasised that if the BRICS bloc goes through with the new payment infrastructure, the US may impose 100% import sanctions.
Being the world’s largest economy and importer of goods, this is more than a threat. This may isolate the US as various nations actively de-risk their economies, forming new trade relationships. However, while the relations within the bloc deepen, whether internal trade can compensate for the loss of trade remains to be seen.
Meanwhile, the USD is strengthening against the Canadian dollar. This is reflected in the bullish sentiment on the USD/CAD pair as seen on Acuity’s AssetIQ widget.
Gold May Shine Brighter
Gold reserves among central banks have increased. mBridge, the expected new BRICS currency, is expected to get 40% of its value from gold and 60% from the currencies of the member nations. Given that China is the largest economy in the group, the yuan may dominate the currency part. Gold imports from BRICS nations rose through 2024. Member countries may continue pushing gold demand to keep their economies independent of the USD.
New Order in the Energy Markets
BRICS added Iran, Saudi Arabia and the UAE, raising the share of the bloc’s crude oil output in global production to 43%. BRICS+ now accounts for 32% of the global natural gas output. This will increase further after Kazakhstan, Kuwait and Bahrain are added to the bloc. The BRICS+ global petroleum imports stand at 38%, which may increase to 55% after the new additions materialise.
A high share of global crude oil supply and demand-side markets may give the bloc greater control over the oil markets. Additionally, India and China, two of the countries with the highest renewable energy capacity, are core members of the bloc. This may further create opportunities in energy trading.
BRICS’ energy dominance will be different from that of the OPEC+, which focuses on controlling oil prices by capping supplies. The syndicate’s control on oil prices is increasingly under threat as non-members ramp up production while members extend output cuts. With Trump also pushing his “Drill, Baby, Drill” agenda, oil prices could remain bearish in 2025. This is already reflected in the AssetIQ widget, which shows bearish sentiment for Brent Crude prices.
BRICS envisions a form of global governance not dominated by the West. In 2025, under the leadership of Brazil, the primary focus will remain on popularising the new intra-member payment system, BRICS Pay, whose beta version is already operational. However, the market confidence on it weighing on the greenback is weak.
The Kazan Declaration introduced “participation on a voluntary basis,” allowing member countries to push forward their domestic financial agenda. This may create friction among member nations that choose to prioritise domestic interests over those of the group. More importantly, the Brazilian and Indian economies have been expanding rapidly, and a large-scale disruption in global trade could stifle growth. The two nations are less enthusiastic about ramping up de-dollarisation efforts.
Many countries may adopt the new payment system more slowly to shield their economies from shocks. China, which has strong capital control and is testing a digital currency, may also be less interested in a common currency. Reaching a consensus with divergent points of view may remain a challenge in the 2025 Brazilian conference.