BRICS Shake the World With Powerful New Members and Currency Plans

The BRICS Leader’s Summit ended on August 24 with a momentous decision to expand the membership of BRICS for the first time since 2010, as reported here.

Saudi Arabia, the United Arab Emirates, Egypt, Argentina, Ethiopia, and Iran were all admitted to membership effective January 1, 2024. Both Brazil and India have some reservations about this move. But in the end, Russia and China used their muscle to push through the new members despite objections.

The BRICS are now BRICS+ with eleven full members and on their way to greater political power and a new currency union. As a result of this expanded membership, the new BRICS currency will emerge in the year ahead. This is because all current and prospective BRICS members and the entire Global South (including members of the Shanghai Cooperation Organization and the Eurasian Economic Union) are suffering from the weaponization of the U.S. dollar and the threat that their dollar-denominated reserves may be frozen by the U.S., as recently happened to Russia.

It is understandable that individual emerging markets might want to promote the use of their home currencies in trade. But that effort is doomed to failure. Almost any currency can be used as a way to keep score on trade balances.

The difficulty is what the surplus country can do with the currency. There are no large, liquid bond markets outside the U.S., Europe and Japan in which to invest.

There are practical limits on how much a surplus country can buy from a deficit country if the market is limited to the goods and services of the deficit country. The answer is either to use the dollar or the euro (which the Global South want to avoid), or start a new currency union that’s big enough to offer a diverse range of goods and services (and eventually bonds) such that the surplus country feels comfortable receiving the new currency as payment.

The implications of expanded BRICS membership go far beyond the currency union. With the additions of Saudi Arabia, Iran and UAE, the BRICS have now effectively surrounded the Persian Gulf. With the addition of Egypt and Saudi Arabia, they now effectively control the Red Sea and the Suez Canal.

The addition of Argentina gives BRICS control of the Straits of Magellan for transit from the Atlantic to the Pacific Oceans (good luck in the Drake Passage; I’ve been there. It’s a daunting body of water).

BRICS are moving closer to the dual visions of Halford Mackinder (theorist of the World Island and Heartland both based in Asia) and Alfred Mahan (theorist of sea power who emphasized control of critical straits and other sea chokepoints).

The BRICS are consolidating physical control of both the land and sea pivots of history. This is all happening under the noses of U.S. policymakers who seem ignorant both of history and current events.

Expanded BRICS membership does mark the beginning of the end of the petrodollar era. Membership of Saudi Arabia in the BRICS is a large step in that direction. This is why the admission of new members and the launch of a new currency cannot be viewed in isolation. They are two parts of a common project. The expanded membership is precisely what makes the new currency more feasible.

Corporate leaders and institutional fiduciaries looking to incorporate state of the art predictive analytics to their risk mitigation and strategic analysis should click the link to learn more about Raven Predictive Analytics®.