In December 2024, US President-elect Donald Trump threatened the BRICS nations with 100 percent tariffs if they go ahead with “their de-dollarisation plans”. In reality, last year’s documents adopted at the 16th BRICS Summit in Kazan contained no references to “de-dollarisation” or an “alternative payment system”. Instead, in their 2024 declaration the BRICS member-states highlighted the “the need to reform the current international financial architecture” so that it becomes “more inclusive and just”. Donald Trump was likely responding to a narrative of some media outlets which sought to portray the BRICS summit in Kazan as Russia’s attempt to “end the dollar’s dominance” by forging an alliance of countries backing “an alternative platform for international payments that would be immune to Western sanctions”. In reality, however, BRICS summit in Kazan was about reforming the international financial system so that it promotes, rather than hinders, the economic development of countries. Ironically, Trump Administration’s actions in the next few years, if not months, will be among of the key contributing factors that could speed up, rather than hinder the evolution of the new financial architecture outside of the legacy financial system.
A more complex world requires a new level of de-risking
As the world becomes more complicated and fragmented due to the evolving competition between traditional and emerging centres of economic and geopolitical power, countries are being forced to de-risk their exposure to current and potential external conflicts. Some of these risks have become highly prominent recently, such as the weaponisation of the legacy financial system based on the global role of the US dollar as the dominant reserve currency and the prominence of the SWIFT messaging system (controlled by the G-10 central banks) in international payments. Washington’s continued use of the US dollar system as a weapon to “punish” geopolitical opponents and to hinder the rise of economic rivals is bound to lead to the further destabilisation of the established global financial architecture.
At the same time, some countries are also weary of getting hurt in the geopolitical crossfire if they get involved in the active promotion of new payment systems or reserve currencies that seek to dethrone US dollar dominance. Instead, a greater pool of countries will back new payment systems that are not a counterweight but as a solution to the problems and challenges that the legacy financial system cannot address due to its technological inadequacy or its weaponisation by stakeholders.
The BRICS summit in Kazan was about making the first steps towards the reforming of the international financial system so that it promotes, rather than hinders, the economic development of countries while de-risking transactions between them. If the existing international financial system does not serve its principal purpose of facilitating financial transactions between nations and compensating for the disbalances in international trade
then a growing number of countries will seek to establish additional pillars in the financial architecture.
By creating a new financial architecture, the BRICS members seek to stabilise the global financial system and reduce transaction costs in trade between countries. This is especially the case for the energy and food security of the Global South countries. The further weaponisation of the legacy financial system increases risks to their economic development and internal stability. During Donald Trump’s second presidential term, potential US trade wars with China and other countries could only increase these risks, thus further eroding the international trust in the legacy system.
The terminology as de-risking.
The terminology used to describe the new financial architecture should also become an important part of de-risking and thus appeal to a greater pool of countries seeking to enhance their financial and economic development options. At the government and expert level, it is advisable to abandon the use of the term “alternative payment system” when discussing financial solutions to trade relations within and outside of the BRICS framework. Instead, the terms “supplementary payment system” and “supplementary financial architecture” should be used.The same approach should be applied to the term de-dollarisation. Instead, the focus should be on such terms as financial diversification, multi-vector financial policies, and de-risking or managing risk exposure. Moreover, the term “supplementary” more accurately describes the efforts of the BRICS nations in promoting a “more inclusive and just” international financial system.
The system BRICS plans to build is supplementary in nature as it does not and is not able to challenge the legacy system in its current form, especially in relation to access to capital markets, dominated by the US dollar.
The future global order as the Rubik’s Cube
Perhaps, the Rubik’s cube is a good example illustrating the complex emerging multipolar global order, where the six sides of the six colours represent six future core alliances or core institutional platforms for international co-operation. As in the Rubik’s cube, countries belonging to the “core” alliance of the same colour will mingle with other alliances of other colours, forming “situational” alliances (or using other platforms) when they see this as being beneficial to their national interests. Under this scenario, countries are likely to be attracted to the BRICS financial supplementary architecture for specific types of transactions, such as energy and food supplies. This will be especially the case if the legacy financial architecture becomes a hindrance for the cross-border transactions involving vital supplies. At the same time, countries could still use some elements of the legacy financial system, unless it completely loses its credibility or becomes toxic.
From supplementary to autonomous systems?
The forthcoming evolution of the BRICS financial architecture will largely depend on the actions of Donald Trump’s administration, which could lead to the further fragmentation of the global order and the decline of the legacy financial architecture. This scenario is likely in the event of the further weaponisation of the US-dollar system against a wider set of international actors. As a result, the BRICS financial architecture could get a boost from the heightened perception of risks associated with the legacy system by the states of the Global South. However, such a boost is only possible if the supplementary payment architecture offers effective institutional and technological solutions (СBDCs, cross-border payments based on block-chain technologies, etc.) in addressing the vital issues of economic development and the energy and food security of the Global South. Naturally, the United States could threaten to sanction countries and entities that seek to use the supplementary financial architecture, as happened in the case of the Russian System for Transfer of Financial Messages (SPFS), that bypasses the SWIFT network. However, restrictions on payments for trade transactions involving vital supplies could pave the way for the wide use of bilateral and multilateral autonomous cross-border financial systems which will integrate national banks solely designated for specific types of operations backed by gold, commodities or something else. External sanctions against such autonomous systems are unlikely to be effective. In an alternative scenario, Donald Trump may seek to extend the lifespan of the legacy financial system via its depoliticisation, a technological upgrade, or even some kind of a relaunch in case of an unprecedent global financial crisis.
This comment is based on the author’s remarks at the 15th Asian Conference of the Valdai Club in Kuala Lumpur, Malaysia in December 2024.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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