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The Impact of De-Dollarisation on Global Power Dynamics
1. Abstract
1.1 Research Objectives
This study analyses BRICS Plus de-dollarisation strategies and the US dollar’s response, assessing their effects on global economic alliances and power structures (Saaida).
1.2 Key Findings
BRICS initiatives include promoting local currencies, alternative payment platforms, and a dedicated development bank. US countermeasures have adapted sanctions and diplomatic alliances. Early indications suggest growing financial autonomy within BRICS while dollar dominance remains robust (Saaida; Gerding and Hartley).
1.3 Implications
The trajectory may yield either reinforced dollar hegemony or a shift toward a multipolar monetary landscape, with significant diplomatic and economic consequences (Gerding and Hartley; Catão and Terrones).
2. Introduction
2.1 Background on US Dollar as Reserve Currency
The US dollar’s post-World War II ascension under Bretton Woods, its deep capital markets, and widespread trade invoicing solidified its reserve status. Recent data show its share of central bank reserves and FX turnover remain above 50 percent (Gerding and Hartley).
2.2 Emergence of De-Dollarisation
Following Russia and China’s December 2023 pledge to settle bilateral trade outside the dollar, BRICS Plus intensified efforts to diversify reserves and reduce sanction vulnerability (Saaida).
2.3 Research Questions
What motivates BRICS de-dollarisation? How has Washington countered? What are the power dynamics if de-dollarisation succeeds or falters?
3. Literature Review
3.1 Reasons for USD’s Reserve Status
A unipolar currency world grants the hegemon favorable borrowing costs and sanction leverage. Empirical measures—including central bank reserve shares, global debt securities, and trade invoicing—confirm enduring dollar dominance through 2023 (Gerding and Hartley).
3.2 Motivations Behind BRICS Formation
BRICS consolidation aims to redress US-led monetary architecture by expanding currency swap lines, creating a New Development Bank, and fostering South-South economic collaboration using non-dollar instruments (Saaida).
3.3 Previous Studies on Power Shifts
Studies of Latin American and emerging economies highlight de-dollarisation’s role in enhancing financial stability and geopolitical independence, underscoring the intersection of monetary policy and international relations (García-Escribano and Sosa; Catão and Terrones).
4. Methodology
4.1 Research Design and Approach
An analytical-descriptive design integrates qualitative case analysis of BRICS policies with global currency trend assessments (Saaida).
4.2 Data Collection and Sources
Sources include academic studies on BRICS initiatives, IMF and BIS statistics on reserve compositions and trade invoicing, and analyses of de-dollarisation patterns (Gerding and Hartley).
4.3 Analytical Framework
We employ thematic analysis to identify de-dollarisation drivers, US counteractions, and emerging power configurations, constructing success and failure scenarios.
5. Results
5.1 De-Dollarisation Initiatives by BRICS
Key actions include promoting settlement in national currencies, establishing regional payment platforms to rival SWIFT, and leveraging the New Development Bank to fund projects in non-dollar denominations (Saaida).
5.2 USD Countermeasures
Washington reinforced sanctions frameworks, deepened alliances, and engaged financial institutions in dialogue to sustain confidence in dollar-based systems (Saaida).
5.3 Preliminary Power Shifts
BRICS members report modest gains in monetary autonomy and reduced sanction exposure. However, global finance remains largely dollar-centric, limiting immediate realignments (Saaida; Gerding and Hartley).
6. Discussion
6.1 Scenarios if BRICS Succeeds
Should BRICS achieve effective multi-currency trade settlement, a genuinely multipolar currency system could emerge, diluting US financial leverage and prompting realigned geopolitical blocs (Saaida).
6.2 Scenarios if BRICS Fails
Persistent coordination issues or technical hurdles could stall de-dollarisation, reinforcing the dollar’s primacy and marginalising alternative arrangements.
Note: This section includes information based on general knowledge, as specific supporting data was not available.
6.3 Long-Term Global Implications
Enduring de-dollarisation may fragment capital markets and foster regional monetary zones, but it also encourages diversification of reserves and innovation in cross-border payments (Saaida).
7. Conclusion
7.1 Summary of Findings
BRICS de-dollarisation tactics strain but have not displaced dollar hegemony. US adaptations maintain dollar stability, yielding incremental shifts in power.
7.2 Policy Recommendations
Governments should enhance financial infrastructure in local currencies, engage in diplomatic outreach, and support multilateral frameworks to mitigate fragmentation.
7.3 Areas for Future Research
Further work could assess digital currency roles, quantify trade invoicing transitions, and model long-run impacts of BRICS-led monetary mechanisms.
8. References
8.1 Academic Sources
Catão, Luis A.V., and Marco E. Terrones. “Financial De-Dollarization: A Global Perspective and the Peruvian Experience.” IMF Working Paper no. WP/16/97, International Monetary Fund, 2016.
García-Escribano, Mercedes, and Sebastián Sosa. “What is Driving Financial De-dollarization in Latin America?” IMF Working Paper no. WP/11/10, International Monetary Fund, 2011.
Gerding, Felix, and Jonathan S. Hartley. “De-dollarization? Not so fast.” Economics Letters, vol. 238, 2024, article 111665. Elsevier B.V.
Saaida, Mohammed. “BRICS Plus: De-Dollarization and Global Power Shifts in New Economic Landscape.” BRICS Journal of Economics, vol. 5, no. 1, 2024, pp. 13–33. doi:10.3897/brics-econ.5.e117828.
8.2 Data and Reports
No external data sources were cited beyond the academic publications listed.