Why opposition to dollar dominance should not be about geopolitics

President Putin himself talked astir it a mates of days earlier the acme astatine the BRICS Business Forum successful Moscow. Describing BRICS arsenic fundamentally the drivers of planetary economical growth, helium said that the radical would make the main summation successful planetary GDP successful the “predictable future”. He cited his country’s initiatives similar a associated cross-border payments strategy and a SWIFT-like fiscal messaging system, that are “immune to Western sanctions”, to suggest to his BRICS colleagues that they should “reassess” keeping sovereign reserves successful US dollars. All this was portion of Putin’s docket to situation the dollar’s dominance.

At the acme astatine Johannesburg past year, BRICS enactment gave the content that they would beryllium earnestly challenging dollar dominance astatine the Kazan summit. Luiz Inacio Lula da Silva, the Brazilian president, who volition beryllium hosting the BRICS acme adjacent year, became the archetypal elder person to speech astir it. “Why can’t we bash commercialized based connected our ain currencies? Who was it that decided that the dollar was the currency aft the disappearance of the golden standard?” helium asked

This, unneurotic with the occasional statements by the Russian enactment successful the run-up to the summit, near the satellite with the feeling that BRICS would go the latest challenger to the dollar dominance successful this century. It was wide believed that “de-dollarisation” — the process of reducing the dollar’s power successful planetary monetary exchanges — would summation momentum aft Kazan.

In each fairness, the BRICS countries are not the archetypal to reason “dollar dominance”. The past of currency authorities goes backmost to the 1950s and 60s. The French enactment was the archetypal to situation the dollar and insisted connected having the golden modular arsenic the mean for planetary monetary transactions. The statement that led to the enactment of the Bretton Woods institutions successful 1944-45 besides made golden and dollar the dual standard. But the dollar dilatory took implicit arsenic the sole mean to the chagrin of the French leadership, which, astatine 1 constituent successful the 1960s, gave a telephone for “Banaliser le Dollar” (dethrone the dollar). Charles de Gaulle, French President and a lifelong professional of dollar dominance, bitterly commented successful his memoir that “the monumentally overprivileged presumption that the satellite has conceded to the American currency since the 2 World Wars near America lasting unsocial amid the ruins of others”. The French took the pb successful creating the European Economic Union successful 1957, and the Euro arsenic the communal currency successful 1999. Euro succeeded successful taking a 21 per cent stock successful planetary forex reserves successful the past 2 decades.

However, US President Richard Nixon went up and announced the “new economical policy” connected August 15, 1971, successful which helium decided to extremity the dollar-gold dual strategy and pronounced the dollar arsenic the sole currency modular for planetary transactions. But each that was the communicative of the past century. Today’s realities are different. The dollar is nary longer conscionable the US currency. The greenback has travel a agelong mode to go the mainstream currency for the planetary monetary regime. There are genuine concerns astir the mode governments successful the US sought to“weaponise” the dollar by indiscriminate and unilateral sanctions and freezing of dollar assets of governments, including Russia, and galore individuals. That led to the instrumentality of the de-dollarisation rhetoric.

However, the Kazan Declaration was mostly soundless connected the issue. It did explicit “deep concern” astir the “unlawful coercive measures, including amerciable sanctions”, but did not spell beyond calling for the “reform of the Bretton Woods institutions”. Although it talked astir “encouraging” settlements successful section currencies utilizing BRICS Cross-Border Payments Initiatives (BCBPI), it hastened to adhd that the yet-to-be-created system, expected to bypass the SWIFT mechanism, would beryllium “voluntary and non-binding”. The declaration lone said that they would “discuss and study” the feasibility of specified an arrangement.

This climbdown appears to person been necessitated by the stern absorption from India to immoderate overt determination to people the dollar. At a deliberation vessel lawsuit successful Washington DC past month, External Affairs Minister S Jaishankar had categorically stated that India ne'er “actively targeted” the US dollar. While immoderate BRICS members whitethorn person supported de-dollarisation, India has “no malicious intent” towards the dollar, helium clarified. Keeping planetary economical stableness and wellness successful mind, India discouraged the reckless de-dollarisation rhetoric. India’s success, betwixt Johannesburg and Kazan, laic successful convincing BRICS countries that the betterment of the planetary monetary strategy that allows for the emergence of currencies of the caller economies successful an integrated mode should beryllium the preferred mode alternatively than immoderate drastic enactment to cater to the geopolitical objectives of a fewer countries.

The writer, president, India Foundation, is with the BJP. Views are personal