The war in Ukraine and the freezing of Russian FX reserves in 2022 have prompted much discussion on the ‘weaponisation’ of the dollar, the splintering of geopolitical blocs and ultimately the “inexorable” decline in the use of the dollar – or ‘de-dollarisation’. An integral part of this debate will not only be how those geopolitical groupings develop but also whether other currencies can challenge the dollar’s international role.
The subject of de-dollarisation should gain more traction
We suspect the subject of de-dollarisation might gain some traction this summer when senior leaders of the BRICS nations meet in South Africa on 22-24 August. At the top of the summit’s agenda is the proposed expansion of this geopolitical grouping and perhaps some proposals relating to a common payment system in BRICS currencies. Regarding BRICS expansion, speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade. The focus here tends to be on countries that have already joined the BRICS-sponsored New Development Bank (NDB). These include countries such as the United Arab Emirates, Egypt, and Bangladesh.
The proponents for accelerated change argue that some of the major oil exporters like Saudi Arabia, Iran and Nigeria might be included, too. Experts, however, warn that friction between China – a proponent of expansion – and the more reticent India makes the subject highly uncertain.
