By Darren Taylor
JOHANNESBURG—The possible establishment of a currency to rival the U.S. dollar won’t be discussed at the 15th summit of the BRICS countries that begins in Johannesburg on Aug. 22, South African government officials have told The Epoch Times.
However, this week’s meeting will herald the first step toward the establishment of a gold-backed BRICS currency designed to end what the bloc terms “U.S. dominance of global finance structures,” according to some analysts.
BRICS members are Brazil, Russia, India, China, and South Africa. The bloc was set up in 2009 to represent the interests of major emerging market economies.
The BRICS finance mechanism, the New Development Bank (NDB), is moving away from the use of the dollar in international trade and seeks to be an alternative to the International Monetary Fund (IMF) and the World Bank.
The South African official in charge of this year’s summit, Anil Sooklal, said developing countries are now major shareholders in global trade.
“The United States’ share of global trade has diminished dramatically, and yet over 50 percent of global trade is inversed in the dollar. It doesn’t make sense,” he told The Epoch Times.
“That’s why countries from the Global South are saying we need to expand our trade, our payment settlement system, the manner in which we conduct our financial transactions.
“The BRICS countries want to deepen use of local currencies in the transactions we do among ourselves and with other countries from the Global South.
“It’s not about de-dollarization; this is a natural development where countries are looking to greater financial flexibility, greater financial autonomy, and having greater choices in terms of how they conduct themselves on the global economic front.”
However, Mr. Sooklal’s suggestion that BRICS member currencies such as the rand, rupee, and rouble be used in trade and other transactions going forward was “too impractical” to be taken seriously, according to a political economist at the University of South Africa in Pretoria.
“If that happens, there’ll be huge problems simply because the economies where these currencies come from are not as secure as that of the United States,” professor Everisto Benyera told The Epoch Times.
“These economies could be bigger in terms of GDP and so on, but in terms of security, the United States remains the strongest individually or collectively.”
Mr. Benyera said the only practical way to end dollar dominance is to create a gold-backed BRICS currency, noting that all BRICS countries, with the exception of India, are among the biggest producers of gold globally.
International economic groups list China as the world’s top gold producer, with Russia being third and South Africa eighth. Brazil is 14th.
“The developing world, including much of Africa, produces by far the most gold in the world,” Mr. Benyera said. “So if other notable gold producers become members of an expanded BRICS, as is being suggested, then gold could easily form the basis of a new currency.”
But that wouldn’t happen quickly, he emphasized.
“I don’t see any currency emerging soon to dislodge the U.S. dollar. To move fast with something as significant as this would cause a global economic crisis and a global political crisis,” Mr. Benyera said.
“Some are saying the current war between Russia and Ukraine has got the likelihood of producing an outcome that there’ll be an alternative currency but, as of now, I see the U.S. dollar continuing to be the de facto global currency.”
The creation of a BRICS currency would “take a long time” but is “inevitable,” Brazilian economist Paulo Batista told The Epoch Times.
“The dollar will still be there, but it’ll no longer be the hegemonic currency it’s been since the Second World War,” said Mr. Batista, a former IMF executive director and former NDB vice president. “Why? Because the dollar has a very important enemy: The United States of America itself.
“When Washington uses the dollar politically to target countries seen as hostile, it harms the credibility of the currency and of its own financial system. Confidence in the dollar has been eroded by the United States itself.
“So a slow movement toward diversification of options in the monetary field will happen. It’s just a question of when and how.”
Mr. Batista said countries of the Global South watched as the U.S. government froze $300 billion of Russian international reserves because of Russian President Vladimir Putin’s invasion of Ukraine.
“They’re afraid that the same could happen to them, so they’re looking to BRICS to find ways to decrease their reliance on the dollar,” he said.
Mr. Batista said he doesn’t think that BRICS would expand into an “isolationist, anti-West bloc,” even as its leaders prepare to discuss the potential admission of countries such as Iran and Belarus to the organization.
“I don’t think there’s a strategy to break away completely from the West and to destroy the IMF or the World Bank or the dollar. The idea is to diversify, to offer alternatives, in the form of the NBD and perhaps a BRICS currency. Diversification is inevitable,” he said.
“China, for example, has already created the AIIB—the Asian Infrastructure Investment Bank. So developing nations are moving away from the traditional structures because they’re dissatisfied with the way the governance of the world is working. It’s unbalanced, it’s unfair, it’s often politically manipulated.”
BRICS countries aren’t agitating for the downfall of the U.S. dollar but for “a multi-polarization of the currency system, a diversification, according to Mr. Batista.
“For example, the Chinese renminbi has increased in importance and will continue to increase in importance,” he said. “If the BRICS countries get together and put into circulation a solid alternative currency, this’ll be important as well.”
Mr. Benyera said a currency supported by gold bullion is “a long time coming.”
He pointed out that when colonialism was ending in Africa between 1945 and into the 1960s, Africa’s first statesmen, such as Ghanaian nationalist leader Kwame Nkrumah and Guinea’s first president Sekou Toure, wanted a single gold-backed African currency.
“So history shows that the appearance of a gold-backed currency is not so easily achievable,” Mr. Benyera said. “Africa literally has all the gold in the world, but because each mineral-rich country has chosen to pursue its own narrow interests, and because Africa remains disunited, this has never happened.
“That said, gold is the way to go. That’s what the late (Libyan leader) Col. Moammar Ghaddafi was arguing for; that in order for Africa to be united and strong, it must reach for the lowest-hanging fruit. And that fruit is for us to use our gold as a trading currency among ourselves, then that will spread to the whole world.”
Mr. Benyera predicted that among BRICS countries, India, in particular, would be resistant to the establishment of such a currency.
“India is moving closer to the United States. Prime Minister [Narendra] Modi was in Washington recently and his talks with President [Joe] Biden went very well and they announced all sorts of cooperation,” he said. “Indian officials have high positions at the World Trade Organization and at the IMF.”
India’s position indicates that BRICS isn’t as united as its ambassadors would have the world believe, according to Mr. Benyera.
“Since 2009, it still has not clearly articulated its objectives and vision. It has an identity crisis. Even the BRICS secretariat isn’t that strong. If you compare it to other blocs like the European Union, they moved very fast, they soon consolidated, they soon had a currency, a parliament. But, after 15 years, BRICS has none of these.”
Mr. Benyera said that’s because the BRICS countries aren’t fully dedicated to the bloc and remain focused on achieving their own individual objectives.
“You can’t unite behind a vision when there is no vision,” he said.