Dysfunctionality of the dollar system and Russia's chairmanship of the Brics in 2024

Abstract

This paper discusses the topic of BRICS monetary and financial initiatives with a focus on Russia’s chairmanship of the group in 2024 and next steps. In so far as monetary and financial matters are concerned, the point of departure of the BRICS is the widely recognized dysfunctionality of the dollar-centered system, a consequence of two distinct factors: i) the weaponization of the US dollar and of the Western cross border payment network; and ii) the structural weaknesses of the economy of the United States, the country issuing the hegemonic international currency. The BRICS, rightly or wrongly, are often seen as the main potential source of alternatives to the current flawed international monetary and financial system. The Russian government concentrated its efforts in 2024 on a crucial aspect of the international system – the infrastructure for cross-border payments – and presented a relatively detailed proposal for a new network that would be independent from and immune to Western sanctions. This initiative was discussed in 2024 and endorsed by the BRICS Leaders in the Kazan summit as a basis for further work. However, progress has been slower than expected because of important barriers to action that are examined in the paper. As the group expands in terms of the number of full members and partner countries, the usual practice of the BRICS to take decisions based on consensus may be a recipe for paralysis, given that it effectively grants veto power to any individual member. Moreover, US resistance is always very intense to anything that touches the dollar or other fundamental aspects of the current world financial system. The very concrete reasons for this resistance are examined in the paper. Members of the BRICS, to varying degrees, are vulnerable to US pressure and reprisals. This vulnerability of the group, especially of some of its members, is also discussed.