The US is an imperial power. Unlike other former empires such as Britain, France, Germany, and Belgium, it hides its imperial nature by various ways, as Daniel Immerwahr describes in his book How to Hide an Empire that I reviewed back in 2019 and further discussed here. Rather than exercising direct over control over large countries, the US empire consists of small regions it calls ‘territories’ and bases scattered over all the world, because that enables it to exercise control without having to deal with large local populations. It is what Immerwahr calls a ‘pointillist’ empire.
China is challenging the US on the global stage and is also adopting the pointillist model with its ‘Belt and Road Initiative’ in which China invests heavily in infrastructure and other development projects in countries around the world, cementing economic links. Back in 2019, the Chinese leader Xi Jinping hosted a summit on this and despite heavy lobbying by the US to deter countries, 125 nations signed up and attended.
But there is another form of imperial dominance and that is via the dominance of the US and its western allies (plus Japan) in the global financial system and in particular with the US dollar being the preferred reserve currency for international trade. Groups like the G7 nations consisting of the US, Canada, France, Germany, Italy, Japan, and the UK meet regularly to strategize over how to run the world.
But that too is being challenged by the so-called BRICS group of nations, initially consisting of the five largest economies not in the G7 (Brazil, Russia, India, China, and South Africa).
BRICS institutions are considered an alternative to institutions such as those led by nations of the G7 bloc comprising some of the leading economies. Together BRICS has implemented competing initiatives such as the New Development Bank, the BRICS Contingent Reserve Arrangement, BRICS pay, the BRICS Joint Statistical Publication and the BRICS basket reserve currency.
This group is intended to be a counterweight to the US dominated G7 and has expanding its reach by adding Egypt, Ethiopia, Iran and the United Arab Emirates. Turkey, Azerbaijan and Malaysia have also applied to become members and other countries have expressed interest. This reminds of the way that the Non-Aligned Movement emerged in 1955 back in the days of the Cold War between the US and the USSR. It consisted of nations who did not want to be drawn into military alliances with one side or the other (NATO or the Warsaw pact) but wanted to remain independent. It was initiated by Yugoslavia, India, Egypt, Indonesia, and Ghana and eventually grew to 120 nations.
What is particularly threatening to US dominance is the possible emergence of an alternative global reserve currency to the dollar and an alternative method of trade that bypasses the US-dominated system,. Having the US dollar be the currency in which countries keep their reserves and do trade gives the US enormous leverage, because they can threaten to cut out of the system any country that they seek to punish for whatever reason.
While the U.S. dollar is by far the most-used currency in global business and has survived past challenges to its preeminence, members of the alliance and other developing nations say they are fed up with America’s dominance of the global financial system.
The dollar represents roughly 58% of the world’s foreign exchange reserves, according to the IMF and major commodities like oil are still primarily bought and sold using dollars. The dollar’s dominance is threatened, however, with BRICS’ growing share of GDP and the alliance’s intent to trade in non-dollar currencies — a process known as de-dollarization.
…At a summit of BRIC nations in October, Russian President Vladimir Putin accused the U.S. of “weaponizing†the dollar and described it as a “big mistake.â€
“It’s not us who refuse to use the dollar,†Putin said at the time. “But if they don’t let us work, what can we do? We are forced to search for alternatives.â€
Russia has specifically pushed for the creation of a new payment system that would offer an alternative to the global bank messaging network, SWIFT, and allow Moscow to dodge Western sanctions and trade with partners.
Trump has of course threatened that any attempt to dethrone the US dollar from its dominant position will be met with tariffs, which seems to have become his all-purpose weapon to deal with any problem..
Trump, in a Truth Social post, said: “We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.â€
That hardly seems like a productive strategy since such threats will only reinforce the idea of many countries that they need to disengage from the dollar in order to become more independent. Doing so will not be easy but the rise of the Chinese economy to match the size of of the US makes the prospect of creating an alternative more viable.
The BRICS have been talking about doing these things for decades and it’s gone no where. They all think it’s a good idea in abstract but as soon as they get into the negotiations over the actual terms and who gets to control the system it breaks down. It’s easy to say having a currency outside the dollar would be nice but whoever gets to set the banking terms and trading terms for this currency is effectively setting some of the economic and trade policy for all of the BRICs countries. An interbank system outside the US dominated banking system is more possible but without their own currency it’s just a convenience not a real attack on dollar dominance.
In any case it isn’t happening right now. With Russia at war and China’s economy in the dumps there is no way to do it or finance it. It’s something Trump can say he is against now and then declare victory later without having to actually do anything.
Honestly, with the way the US tosses its weight around with sanctions, it’s no surprise that there would be nations who are tired of it and looking to restructure some of that power away.
If Iran ovethrows its government and if India gets a non-chauvinistic leadership it would be a good start for a non-aligned bloc.
I seem to recall there was a chap had a cunning plan for undermining US dominance. He was in charge in an oil rich state, and he started making moves to start selling his oil in euros instead of dollars.
His name was Saddam Hussein -- I don’t hear about him much nowadays, does anyone know how his plan panned out?
The problem with BRICS is that in economic terms, it consists of a great white shark (China), a codfish (India), and a collection of minnows. Any alternative reserve currency it introduced would thus in practice be controlled by China. There’s been a lot of talk about a “multipolar world” but economically, the USA and China are the only two poles that count. If the EU was a state, it would be a third pole, but it isn’t, and looks much more likely to fall apart completely than to continue along the path of increasing integration.