The De-Dollarization Myth – Why BRICS Can’t Kill the US Greenback Just Yet.

One aspect of the 16th BRICS Summit in Kazan, Russia, receives insufficient attention. The summit’s organizers subtly encouraged participants to bring US dollars and euros just days before the leaders of Brazil, India, China, South Africa, and Russia convened to discuss, among other lofty goals, lessening their shared reliance on the US dollar. They pointed out that these currencies were preferred by Russian banks over the ruble for exchange. It’s the kind of subtle, depressing irony that reveals more about the real progress of de-dollarization than most official announcements ever will. The rhetoric was audacious. The currency exchange booth provided an alternative narrative.

One of the most exaggerated geopolitical discussions of the last few years revolves around this tension between what the BRICS countries say about the dollar and how they really act around it. There is actual substance to the de-dollarization narrative. After World War II, the dollar’s share of global central bank reserves was approximately 72%; today, it is only about 59%. This significant decline has been accumulated over decades. Because the world chose to use their currency as its common language, countries in the Global South are genuinely frustrated with a financial architecture that gives Washington tremendous leverage, including the ability to freeze reserves, cut off SWIFT access, and squeeze economies through sanctions. It’s reasonable to be frustrated. It is much more difficult to maintain the conclusion drawn by some that the dollar is about to collapse as a reserve currency.

The dollar’s dominance was never coincidental, and the difficulty of dismantling it can be explained by knowing how it was constructed. The Bretton Woods agreement, which pegged the dollar to gold at $35 an ounce, established the dollar as the primary reserve currency of the world following World War II. Secretary of State Henry Kissinger traveled to Riyadh to negotiate a potentially more durable solution when that peg was abandoned in 1971 because US gold reserves were no longer sufficient to support it.

His meeting with King Faisal resulted in an elegant petrodollar agreement: the United States would offer military protection in exchange for Saudi Arabia and OPEC pricing oil globally in US dollars. Global demand for dollars became artificial and structural as a result. First and foremost, every nation that required oil needed dollars. For fifty years, American financial dominance was supported by that one fact.

It’s possible that the scaffolding is beginning to come loose gradually, unevenly, and without any obvious replacement waiting in the wings. At Davos in early 2023, Saudi Arabia’s Finance Minister Mohammed Al-Jadaan made the first announcement of the kingdom’s openness to trading in currencies other than the dollar in almost fifty years. The United States was no longer the only guarantee of Saudi security since Saudi Arabia and Russia had already signed a military cooperation agreement in 2021. These are actual changes. They are important. However, there is a gap between changing rhetoric and changing the entire structure of international trade, which tends to cause expectations to collapse more quickly than timelines.

The proposed BRICS currency has been discussed at summit after summit without becoming anything tangible. It is said to be backed by gold, which would make it a historically striking return to something akin to the gold standard. Some analysts interpret the significant gold accumulation by central banks in Singapore, Turkey, China, Russia, and India as a prelude to a new monetary order. It’s a reasonable explanation.

In an unpredictable geopolitical environment, it may also represent individual nations hedging their own balance sheets, which is quite different. At the summit in Johannesburg, Vladimir Putin referred to de-dollarization as “irreversible” and “gaining pace”. For years, he has made variations of that claim. It is tempting to interpret the statements as aspirational rather than descriptive given how slowly the pace has actually changed.

The US isn’t exactly a passive observer either. The message was clear when Donald Trump threatened BRICS countries that any attempt to replace “the mighty U.S. dollar” would result in 100% tariffs and exclusion from the American market. It served as a reminder of something that is often overlooked in discussions about de-dollarization: any nation that is serious about giving up the dollar must also decide how much access to the American economy it is willing to give up. That computation doesn’t work out well for the majority of countries. The US market is still too big, too liquid, and too entwined with international supply chains to simply abandon. Sanctions were imposed on Russia. Most others are making more thoughtful decisions.

More dubious analysts believe that the de-dollarization narrative has significantly outpaced the real data. Commodities expert Jeffrey Christian, who keeps a close eye on currency markets, referred to it as a “bad joke” and pointed out that very few people are actually dumping dollars in significant amounts. The BRICS countries make up 16% of global trade and 24% of the world’s GDP, which are significant figures but insufficient to anchor a rival reserve currency without a degree of internal cohesion that these countries have not shown.

China and India have a disputed border. With every election cycle, Brazil’s trade orientation changes. There are sanctions against Russia. South Africa is negotiating its own economic upheaval. It takes a level of trust and institutional alignment that just doesn’t exist yet to build a shared currency on that alliance.

All of this does not imply that the dollar’s position is unassailable or unchangeable. Even if collapse is not imminent, erosion still occurs. There was not a single dramatic moment as global reserves fell from 72% to 59%. Further slippage could occur over the next ten years, especially if Washington keeps using financial sanctions as a regular diplomatic tactic. This would force more nations to look for solutions out of self-preservation rather than ideology. However, a world that seeks alternatives to the dollar and a world that has discovered one are very different. Despite its aspirations, BRICS hasn’t succeeded in closing that disparity. Despite its detractors, the US dollar is still the currency that people use to complete tasks.