Why not all BRICS players back Russia's bid for de-dollarized world

Amid the unity on show in the Russian city of Kazan this week, BRICS leaders remained divided over the value of de-dollarization — a geopolitical difference that could become starker as the bloc expands, analysts said.

By the time the summit wrapped on Thursday, the bloc's early members — Brazil, Russia, India, China and South Africa — had welcomed Iran, Egypt, Ethiopia, and the United Arab Emirates as full members.

In addition, 13 others had been invited to join as "partner countries," further expanding the BRICS footprint.

The players seemed to find common ground on areas such as cooperation on the environment, financial reform, and resolving global conflicts, with mentions from Chinese President Xi Jinping and his Russian counterpart Vladimir Putin.

Xi and Putin were seen having a side discussion on Thursday, which ended in them shaking hands, sparking interest in the content of their discussion.

Sarang Shidore, director of the Global South Program at the Quincy Institute for Responsible Statecraft, said BRICS nations appeared to be united on issues such as green protectionism and "paralysis" at the World Trade Organization.

Shidore said those were "clear criticisms of the United States" and reflected a fragmentation of the world not just in geopolitics, but also based on climate and the energy transition.

"These tendencies of fragmentation are being noted and increasingly being criticized in a forum like BRICS ," Shidore said.

But the unity did not carry through to Russia's proposal to unhitch the world's financial system from the U.S. dollar.

Other nations may not like the U.S. dollar's dominance in international trade, Shidore said, but "when they look at the cost-benefit analysis of going full-speed ahead and creating an alternative, there are all kinds of barriers, internal, geopolitical, technical, and of course the fear of strong U.S. retaliation."

Moscow has been promoting an alternative payment system for international trade, called the BRICS Bridge, to overcome some of the financial barriers thrown up by Western-led sanctions triggered by Russia's invasion of Ukraine.

Those barriers include being cut off from Swift — the main international payment messaging platform used for settlements.

In Kazan on Thursday, Putin said "it is essential to build alternative multilateral financial mechanisms and supply chains that are reliable and free from any dictate."

BRICS leaders went some way along that road, saying in their joint declaration that the nations welcomed improvements to cross-border payments, including the use of local currencies in transactions.

They also agreed to explore the feasibility of establishing an independent cross-border settlement and depositary infrastructure.

Agathe Demarais, a senior policy fellow for the European Council on Foreign Relations, said there was growing interest in using digital currencies as a tool to circumvent Western financial sanctions and possibly reduce reliance on Swift and the U.S. dollar.

"Because they have no link to Western financial mechanisms, such digital currencies appear immune to Western economic statecraft tools like sanctions," she said.

But it was "hard to imagine" a widespread adoption of BRICS financial tools because the dollar's dominance was "entrenched," with the currency accounting for more than 80 percent of global transactions.

"The BRICS grouping is made up of an eclectic mix of countries, which have highly different economies and a wide variety of geopolitical objectives. This situation will probably weigh on the group's boastful pledges to deepen financial and monetary integration," Demarais added.

Shidore agreed, saying the BRICS members were not lining up behind Russia on this idea.

"I think the grand sweeping system that Russia wants, which is a unified interface where everybody sort of starts unhooking from the dollar and uses this platform, is very idealistic at this point. The politics is mostly not aligned with it within BRICS," he said.

"I'm not sure that even the Chinese would embrace it wholeheartedly, given that they have a dialogue with the United States that actually is moving forward, glacially as it may be."

Shidore said states were divided over whether to urgently devise an alternative system or "to continue to experiment for a while with local currencies more at the margins."

"Russia might be its more radical state, but broadly the BRICS group would like existing global institutions to be more open, more representative, more effective, and that's the message," he said.

Read the full story at SCMP.