Dimitris Rapidis

The big grouping of emerging economies called with the acronym “BRICS” (i.e. Brazil, Russia, India, China, South Africa) is cutting its foreign reserves in euro. The essence of this decision is of paramount importance for the global political and economic balances, even if for the moment the image is not so clear.

The BRICS respresents the group with the countries that except for USA, and to some extent Europe and Japan, is capable of shaking global balances and re-itinerate them into a different direction. Countries with vast natural resources, strong geopolitical power -mostly in regional, but some of them progressively in global level-, growing levels of market access, considerable reserves counting for almost $5 trillion, immensely populated, and after all, a group of countries that under certain circumstances could challenge US dominance globally.

The BRICS decided in their last Summit in Durban, South Africa (26-27 March 2013) to decrease their reserves in euro, a maneuver that can be translated as a gradual confidence withdrawal against the single currency of Eurozone and one of the most valuable and dominant exchange currencies globally. In similar respect, BRICS could also decrease their reserves in US dollar, but then it comes up the question: in which currency should the group keep its reserves?

The answer comes straight from the intentions of this huge strategic partnership that is planning to establish a robust bank, and therefore a single currency that can substitute national currencies while being consequently considered as a powerful currency for international transactions. Here lies the first problem: How to calculate balances and exchange rates between all these currencies, which value in intra-regional level, but not in global level? And, additionally, which of these currencies will lead the way? This is the first set of questions, and it is inextricably interwoven with the technical part of this project, without certainly ignoring the leverage race all 5 members exert in their regions and internationally.

The second question has to do with the level of influence each member of the BRICS exerts in reference with the USA. Brazil -at least under Lula’s administration- was considered to be one of the major counter-anchors of all Latin American states that wanted to get dismantled from the commercial, economic, and political control of the USA. Brazil is still part of the “axis of hope”, even if leadership in the counrty has changed and Chavez’s always-fresh-air has gone. Russia was always the counterpart of the USA during the Cold War period and this has its significance even if conditions have changed dramatically since the fall of Communism. Nonetheless, Russia exerts significant power in its region and it is considered as the major geopolitical power of Eurasia.

India can be characterized as the most “soft” of these regional powers which have not achieved yet to crystallize its geopolitical robustness -partly due to China’s dominium in Southeastern Asia- and a certain, identifiable model of economic policy. India is the less US-defiant state of BRICS, and this inevitably lowers dominance challenges for Delhi inside the group.

Needless to discuss about China, as it is actually the biggest challenge USA is faced with and has to deal with in the forthcoming years. As of South Africa, it can be easily regarded as the country of the group with the most extroverted concerns dealing with human rights and democracy. This feature per se automatically crowns South Africa as equal interlocutor in the eyes of Washington as the most preferred state to cope with, but at the same time it lowers leadeship expectations from the side of Johannesbourg. Yet, to my point of view, South Africa remains a riddle and I firmly believe that it is the state the least anti-American inside the BRICS. Potentially, this deficiency can be a drawback for the group, but this is an issue we will discuss in another occasion.

The third and final question that comes up is whether BRICS can finally overcome USA’s role in global politics. BRICS have formed a strong grouping inside the United Nations for issues concerning emerging markets, and this is a strategy that can be considered as fruitful mid- and long-term. Nonetheless, there is something that turns extremely difficult the challenging of American dominance, and this is called soft power.

USA has long invested in this complex political strategy which stems from the market and culture influence American products have developed in the international market. This starts from Coca-Cola and Jeans for instance, and it can end up in music and arts as well as in the modern consuming trends. All members of the BRICS have a fundamental disadvantage when dealing with soft power: that none of them has never achieved to challenge American supremacy in this field, despite sporadic efforts especially from China and its expansive consuming model of reproduction. In this respect, this challenge get even more demanding for the BRICS as all 5 members stem from different civilizations, cultures, geographic areas, and certainly economic models and political traditions.

This is why a single currency and a new development bank could finally be the only ground of mutuality amid BRICS, despite all troublesome issues arised. After all, it is all about money, gain, and geopolitical leverage. Isn’t it? Especially in times of uncertainty with growing need of burden-sharing.

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  1. Reduce reserves in Euro. I cannot find this news anywhere else. Could you please give me a link?

    I only found that “The idea is to stop using currencies such as the euro and the dollar for trade among Brics countries. If this is established, it may create a way for Brics currencies to take on the dollar, euro and other currencies.” Which is different. I omit the link to avoid falling in wordpress spam filter 🙂

  2. Will this act as a real alternative to the hegemony of the USA $.

    At the current time all Financial Dealings are in USA $. If this does not alter that detail then there is no point. We need to be able to buy Oil in another currency and Not Gold.

    Over to you Dimitris.

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