US Vs BRICS: How Trump is `weaponizing’ dollar to force countries into submission

Washington: President-elect Donald Trump warned BRICS countries against any move to replace the US dollar. Dismsmissing the possibility of the BRICS nations challenging the dollar's dominance, he has sought a commitment from the nine-member group that includes India, Russia, China, and Brazil.

BRICS, formed in 2009, is the only major international group of which the United States is not a part. Its other members are South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.

This comes in a month after a Brics summit held in Kazan, Russia, where the countries discussed boosting non-dollar transactions and strengthening local currencies.

Alternative to US dollar:

For the past few years, a few of its member countries, in particular Russia and China, are seeking an alternative to the US Dollar or create own BRICS currency. However, India has so far not been part of the move.

Trump warns BRICS Countries:

“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER,” the president-elect said in a post on Truth Social, a platform owned by him.

“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,” Trump warned.

“They can go find another 'sucker!' There is no chance that the BRICS will replace the US Dollar in International Trade, and any Country that tries should wave goodbye to America,” he said. At the 2023 summit in South Africa, BRICS countries committed to study the feasibility of a new common currency. A proposal in this regard was made by the Brazilian President Luiz Inacio Lula de Silva.

Putin called it Big Mistake:

At the recent BRICS summit held in Kazan, Russia, discussions centred on boosting non-dollar transactions and strengthening local currencies, Russian President Vladimir Putin accused the US of "weaponising" the dollar, calling it a "big mistake."

"It's not us who refuse to use the dollar. But if they don't let us work, what can we do? We are forced to search for alternatives. The bloc is not currently considering a unified BRICS currency or creating an alternative to the ‘Swift’ payment system," he stated.

Proposal for common currency:

The leader of one member country, Brazil’s Luiz Inácio Lula da Silva, in 2023 proposed on creating a common currency in South America to reduce reliance on the US dollar.

What is the purpose of common currency?

BRICS has discussed the idea of creating a common currency to facilitate trade among member countries and reduce reliance on the US dollar.

This would reduce dependence on the US dollar for international trade and transactions among BRICS nations. It is to encourage member nations to trade in their national currencies rather than relying on a third-party currency.

While the concept of a common BRICS currency is being explored, significant economic, political, and logistical hurdles remain, including differences in economic structures, monetary policies, and geopolitical priorities. It is more likely that the group will focus on broader financial cooperation and using local currencies in trade in the near term.

Using BRICS currencies and banking networks outside the US dollar-denominated system could allow member countries such as Russia, China and Iran to circumnavigate Western sanctions. But the chances of a new currency are probably slim due to the alliance’s economic and geopolitical differences.

What is India’s response?

India, an important pillar of BRICS is against de-dollarisation. "…ask you about de-Dollarization as a possibility for the world. At times India has expressed interest in alternative currency. It can serve as a reserve mechanism. I wonder how do you see that right now what you see as the role of the dollar and these discussions about your national policy?", India’s External Affairs Minister S Jaishankar said during his appearance at the Carnegie Endowment for International Peace this fall.

“I think you have us confused for someone else because we have never actively targeted the dollar. That's not part of either our economic policy or our political or our strategic policy. Some others may have,” Jaishankar said.

“What I will tell you is a natural concern there. We often have trade partners who do not have dollars to take. So, we now have to look at whether we forgo dealings with them or do we find some settlement which works otherwise. So, there's no, I can say malicious intent vis-a-vis the dollar in business. WE are trying to do our business,” he said.

“Sometimes you make it difficult in the use of dollars. We have some trade partners with whom trade in dollars becomes difficult because of your policies. We have to obviously look for workarounds. But for us, as we spoke about rebalancing, we spoke about multiple obviously all of this is also going to reflect on currencies and economic needs,” said the External Affairs Minister on October 1 this year.