US Dollar vs. BRICS: The Significance and What to Expect

For decades, the United States dollar (USD) has been at the core of global finance, powering transactions from trade in oil to everyday cross-border payments. Now, a grouping named BRICS—formed originally by Brazil, Russia, India, China, and later South Africa—has expanded in January 2024 to include Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE). This bloc, sometimes known as BRICS+, is evolving into a larger and potentially more influential cluster, with talk of a parallel international financial order that could place real pressure on the dollar’s status.

Some hail it as a pivotal shift that might erode Western dominance. Others point out the new group’s wide-ranging interests, internal divisions, and divergent policies. How might this bigger, more diverse BRICS influence the dollar’s role in international trade? Could a “BRICS+” currency or system truly challenge the deeply rooted dollar ecosystem, and how do factors like the New Development Bank (NDB) or the quest for de-dollarization fit in? Below, we integrate up-to-date data on the membership changes and explore whether this new arrangement might transform global financial flows—or just remain a set of loosely coordinated economies with competing aims.

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Understanding BRICS and Its 2024 Expansion

What Is BRICS, and Who Are the Members?

The acronym BRIC emerged from economic writings in the early 2000s, originally referring to Brazil, Russia, India, and China as fast-rising powers. By 2009, these four states were meeting in official summits to discuss trade, development, and reform of global institutions. In 2010, South Africa joined, transforming it into “BRICS.”

A major turning point arrived in 2023, when six more countries were formally invited to become members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. Not all, however, completed the membership track:

• Argentina initially accepted but ultimately withdrew after a government change in December 2023.
• Saudi Arabia has yet to finalize its membership as of late 2024.
• Egypt, Ethiopia, Iran, and the UAE officially joined in January 2024.

These newest members, together with the original five, are sometimes called BRICS+. By some estimates, BRICS+ now represents around 45% of the world’s population and 35% of global GDP on a purchasing power parity (PPP) basis. The group’s expanded domain covers nearly 30% of global oil production and 22% of merchandise exports, although China remains overwhelmingly dominant in export volumes.

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Informal Structure, Rotating Chair

Unlike formal alliances or treaties, BRICS lacks a permanent secretariat or binding charter. Its rotating chair (which passed to Russia in January 2024) sets the agenda, hosts the annual summit, and coordinates group activities. Members gather to discuss economic development, energy, trade, and broader global governance issues. Key decisions emerge from consensus rather than strict rules. The arrangement now includes further categories of affiliation:

• Full membership for 10 nations so far (the original five plus the new four, and Argentina’s vacancy after it withdrew).
• Invited membership possibly awaiting ratification (Saudi Arabia).
• A newly created ‘partner status’ for certain countries that didn’t secure immediate membership but want a closer relationship, widely reported to include around 13 countries.

Given the new expansions, how the rotating chair and membership rules might adapt remains unclear. But it’s safe to say that the broader membership could make forging a single, coherent strategy more complicated, even as it boosts overall heft.

The US Dollar’s Dominance at a Glance

Historic Roots of the Dollar’s Power

The dollar’s central role traces back to the Bretton Woods system in the mid-20th century, which made USD the reserve currency par excellence. Even after the US dropped the gold standard in 1971, habits stuck: global commodities (notably oil) remained priced in dollars, and investors felt safer holding US Treasury bonds than almost anything else. Over time, the US dollar became a near-universal reference point.

According to the International Monetary Fund (IMF), approximately 58% of allocated global foreign exchange reserves were still in dollars by late 2023, overshadowing other leading currencies like the euro (~20%) or the yuan (~3%). This “exorbitant privilege” grants the US cheaper borrowing costs and outsized sway in trade. Critics, especially among emerging economies, argue that US monetary policies exert undue influence on their own economic prospects: for instance, Fed rate hikes can trigger capital flight from developing markets.

Why Challenge the Dollar?

If you’re a developing state, you might resent the exposure to US-based sanctions or macroeconomic shifts. Political tensions—particularly with Russia and Iran—only amplify the impetus to reduce dependence on US-dominated clearing systems like SWIFT. Although forging alternatives is no simple task, states see a chance to build parallel institutions—supported by the BRICS+ membership expansion—to counter what they consider Western-tilted rules.

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How the BRICS+ Aims to Reshape Financial Flows

Local-Currency Settlement and Payment Systems

Instead of an overnight leap to a single “BRICS coin,” the group’s strategy has generally begun with incremental moves:

1. Bilateral trade in local currencies: China and Russia have used yuan/ruble transactions to bypass certain sanctions, while India, China, and others have explored rupee/yuan trade deals with external partners.
2. BRICS Pay or parallel payment networks: Russia’s 2024 Chairship prioritized new platforms for cross-border settlement that don’t rely on the Western SWIFT system. For instance, a “BRICS Pay B2B” concept is in the works, focusing on business-to-business transactions in local currencies.

Because Russia and Iran are grappling with Western sanctions, building a parallel system is urgent for them. This impetus could push the entire bloc to expedite local-currency usage, though countries like India and Brazil remain cautious about how it might affect relations with the US and other Western allies.

The New Development Bank (NDB)

Established in 2014, the NDB is BRICS’ formal financial body—treaty-based, with a founding capital of $100 billion. Its initial mission is to fund infrastructure and “sustainable development” projects across BRICS and emerging markets. The NDB is headquartered in Shanghai, and each member gets a seat on its board of governors. However, membership in the NDB is open to all UN member states, so we’ve already seen Bangladesh, the UAE, and Egypt join before they formally became BRICS members. Uruguay is a prospective member.

• Lending: The NDB has approved $32.8 billion for 96 projects since it began operations in 2016. That’s comparatively modest next to the World Bank’s annual commitments (over $100 billion in many years).
• Local-currency push: The bank primarily conducts lending in dollars, but it’s aiming for 30% of financing in local currencies by the end of its 2022–2026 strategy period. Some see that as a stepping stone to undermine total reliance on the greenback.
• Management challenges: Observers like economist and former NDB Vice President Paulo Nogueira Batista note slow disbursements, subpar transparency, and difficulties in implementing large-scale projects. Nonetheless, many stress the NDB’s potential significance if its leadership and capital injection from new members improve.

Contingent Reserve Arrangement (CRA)

Created alongside the NDB, the CRA is essentially a $100 billion pool of currencies that central banks can swap to address short-term liquidity shortages. Yet it’s never been used—partly because it’s still denominated in dollars, ironically leaving it constrained if a sanctioned member like Russia needs urgent relief. Observers feel it looks good on paper but, due to minimal usage and complicated approval processes, it hasn’t reshaped global finance as some had hoped.

A “BRICS Coin” or Unified Currency?

Speculative talk about forming a shared currency has grown louder, spurred by voices in Russia and in Brazil’s president, who see it as an ultimate form of “de-dollarization.” But the 2024 Kazan summit brought no final breakthroughs. Differences in monetary policy, capital controls, and trust hamper short-term unity. India’s Reserve Bank, for instance, has consistently shown skepticism. At best, the group might arrive at partial solutions, like pegging local-currency valuations to a reference basket or creating a digital settlement platform to handle cross-border transactions.

The Expanded BRICS+ Membership: Who Joined and Why?

Egypt

Egypt joined BRICS in January 2024, hoping that membership provides better access to development funding from the NDB and alternative trade arrangements. Facing a severe economic crunch—high inflation, a struggling currency, and heavy debt—Egypt sees the bloc as an opportunity to lessen reliance on the IMF or Western loans. Cairo also expects the New Development Bank might offer more favorable lending terms for infrastructure. Some analysts caution that meaningful payoff might take time; the group is informal, and any new financing or local-currency deals must be negotiated with each member individually. Still, Egypt’s Suez Canal and strategic trade location can amplify BRICS connectivity, appealing to the group’s interest in global shipping routes.

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Ethiopia

Ethiopia, grappling with post-conflict rebuilding and economic strains, also joined in January 2024. Officials emphasize that membership is an affirmation of Ethiopia’s independence in foreign policy—balancing US or EU ties with new Global South partnerships. For Ethiopia, NDB financing could underpin big infrastructure or social projects, bypassing some Western conditionalities. The country’s 120 million residents represent a potentially large and rapidly growing market that might interest investment from China and India within the BRICS platform. Ethiopia’s supporters see this as a way to break cycles of debt distress by diversifying away from IMF/western-led frameworks.

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Iran

Iran is under heavy US sanctions that curb trade and financial access, so joining an anti-sanctions environment is appealing. Iran’s leadership aims to harness BRICS membership for both psychological and economic gains. Psychologically, it underscores that Tehran is not globally isolated; practically, it hopes for new trading routes that circumvent SWIFT and dollar channels. That said, critics say Iran might still struggle to secure big gains without normalizing relations with the West—Western sanctions can still hurt potential partnerships. China and Russia might strongly back Iran’s inclusion to tilt BRICS more “anti-West,” but states like India or Brazil might prefer a more neutral approach.

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United Arab Emirates (UAE)

Alongside India and China, the UAE is a major trading partner in Asia and the Middle East. Officials see membership as a chance to develop new trade corridors and possibly attract infrastructure deals from the NDB. The UAE also brings the potential to contribute capital, given its vast sovereign wealth. Yet it must balance membership in the BRICS with a long-standing security relationship with the US. Analysts highlight that the UAE’s growing influence in the region and potential role as a financial hub could help the NDB or future BRICS digital payment systems. On the other hand, friction could arise if “anti-West” rhetoric intensifies, complicating the UAE’s ties with Western markets.

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Saudi Arabia

Saudi Arabia received an invitation alongside the other states in August 2023 but has so far withheld formal acceptance. While some sources initially reported it had joined, Riyadh ultimately said it was still examining membership’s pros and cons. Observers tie that hesitation to the kingdom’s desire not to alienate the US, its major strategic partner. Saudi Arabia’s BRICS membership could transform the bloc’s oil weighting and finances drastically. But for now, it remains an open question whether the kingdom will integrate fully or remain on the sidelines.

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Opportunities and Risks for the Expanded Group

A Greater Share of Global GDP and Population

With the new entrants, BRICS+ collectively covers 45% of humanity and about 35% of global GDP (PPP). Petroleum resources are notably higher; the group accounts for around 30% of global oil output, especially with the UAE and Iran in the mix. They also hold significant sway in other commodities. This scale can offer more bargaining power in trade deals, shape commodity pricing, and raise the impetus for a “multipolar currency environment.”

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Tensions Within the Bloc

However, bigger size can also mean more fragmentation. The original five already had internal disputes, from the Sino-Indian rivalry to diverging Russia-Brazil interests. Newcomers add fresh complexities:

• Iran vs. the West: Iran’s presence might push an anti-sanctions narrative, but can hamper bridging deals with Western financial groups.
• Egypt and Ethiopia: Tense relations exist over Ethiopia’s Grand Renaissance Dam on the Nile, fueling water-rights conflicts.
• UAE: Typically robust ties with the US could clash with an “anti-West” posture from Russia or Iran.

As the membership balloons, forging consensus might grow harder, resulting in either broad statements lacking detail or potential cracks in unity.

More Diplomatic Clout, but Varied Agendas

The newly accepted states carry distinct geopolitical roles—Egypt’s sway in North Africa, Ethiopia’s large population in the Horn of Africa, Iran’s strong anti-US stance, and the UAE’s financial strength. By bridging Asia, the Middle East, and Africa, the group might coordinate on some big positions in the UN or push certain reforms at the IMF and the World Bank. Yet, from nuclear concerns (Iran) to cross-border tensions (Ethiopia-Egypt), these regional frictions could hamper any single “BRICS voice.”

De-Dollarization in a Looser “Non-West” Sense

Though some members clearly want to reduce reliance on the US dollar, not all share a strident anti-West vision. Brazil and India, for example, maintain key relations with the US and Europe. The expanded membership does expand the room for alternatives to the dollar in local or regional trade. But forging a single monetary framework—like a shared currency—still seems improbable in the near term.

The 2024 Kazan Summit: Key Developments and Debates

New Partner Status, Yet Undisclosed

In October 2024, Russia hosted the annual BRICS Summit in Kazan. One big announcement was the creation of a “partner” category for countries not yet ready—or not selected—for full membership. While 13 countries were reportedly offered this status, no official name list was published. Press outlets cited states such as Belarus, Bolivia, Nigeria, Turkey, Uzbekistan, and Vietnam as possibilities. This approach seemingly postpones contentious membership decisions while letting the group claim more “global south” momentum.

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Further Movement on Finance?

Hopes ran high that Russia and China might accelerate parallel financial structures:

• BRICS Cross-Border Payments Initiative: The summit communique welcomed it, but only as a “voluntary and non-binding” measure.
• New impetus to the NDB: The group encouraged expansions in membership and local-currency lending.
• Talk of a “BRICS currency”: No official steps emerged. The final declaration tasked finance ministers and central bank governors to “continue consideration of local currencies,” with an update expected in 2025.

Security and Political Statements

Amid the wars in Ukraine and the Middle East, Russia and China called for the bloc to weigh in on conflict resolution—although no sweeping statements emerged. The summit also signaled that BRICS aims to keep a “non-aligned” stance, deferring major divides by producing a broadly worded statement on peace and multilateralism.

Attendance by UN Secretary General Sparks Criticism

UN Secretary General António Guterres joined the Kazan summit, prompting frustration from Ukraine and some Western analysts. They felt it gave undue legitimacy to a forum partly championing Russia’s narratives. Guterres’s office defended the move as standard practice, akin to attending G7 or G20 gatherings.

Implications for International Trade, Finance, and Power Balances

Could the Dollar Truly Be Undermined?

No single event spells the downfall of the USD, but these developments chip away at the global “all-dollar, all-the-time” norm. If big commodity trades (like oil) shift into local currencies, or the NDB scales up non-dollar lending, that can reduce overall dollar demand. Yet the US bond market’s stability and liquidity still lure many. Widespread trust in the dollar remains strong, so near-term transformations might be incremental rather than revolutionary.

New Payment Pathways

Iran, Russia, and others subject to Western sanctions particularly favor new systems for cross-border settlements. They see it as a shield from US-based financial controls. If the group finalizes robust digital solutions or fosters cross-border local-currency networks, that might carve out sizable pockets of trade bypassing the dollar. But adoption beyond the BRICS+ might be limited unless trade partners globally find it more convenient or profitable to pivot away from well-oiled US-led networks.

For Emerging Economies and Global South

Smaller emerging markets could watch carefully. If the BRICS expands further—adding more mid-tier states—and its financing arms become more accessible, that might open fresh lines of infrastructure funding minus the usual Western conditionalities. Some might pivot to the NDB for major development needs. Yet pitfalls exist: the bloc’s internal strife or inconsistent rule sets might hamper large-scale, stable financing.

Reconfiguration or Symbolic Growth?

Analysts often compare BRICS to the G7 or G20. The G7 has institutional inertia and a smaller but more cohesive membership. The G20 includes nearly all global heavyweights. BRICS might land somewhere in-between: bigger than the original five but less structured than the G20. If it can unify around major financial or development projects, it could gain weight. Or it might remain a big talk shop, with minimal tangible coordination.

How Investors and Economies Should React

Diversify, Observe Local Currencies

Investors might keep an eye on new local-currency trade deals or the spread of a digital yuan-based or multi-currency settlement system. Equities in BRICS+ countries can climb if they secure more infrastructure investments or reduce vulnerabilities to Western interest-rate swings. Commodity players might see changes if, for instance, oil deals are widely denominated in yuan or rubles. But caution is warranted; the grouping’s plans could stagnate if members are hesitant to commit.

Geopolitics and Diplomatic Maneuvers

Policymakers in Washington or Brussels may watch warily as big oil exporters like the UAE or potential members like Saudi Arabia strengthen ties with Russia, China, or Iran. They might weigh whether to reduce reliance on SWIFT-based sanctions if alternative channels become more resilient. At the same time, mid-sized states (like Brazil or India) still seek balanced relationships with the West. So, this is not an ironclad anti-West alliance—at least not yet.

Global Commodity Markets and Pricing

If major producers from OPEC-like states join the BRICS family, the group’s voice on energy trade might grow louder. Over time, consistent cross-border oil trades in non-dollar units could spark partial de-dollarization in energy markets. However, rewriting global oil benchmarks (like WTI or Brent) takes more than a few side agreements. The new impetus from countries like Iran or the UAE might still matter if they can attract more partners or align with China’s big energy appetite.

Potential Future Scenarios

Scenario 1 — A Steady, Gradual Multipolar Shift

• Timeline: 2024–2030
• Key Features: The expanded BRICS fosters more local-currency settlements, invests more in cross-border development, and slowly reduces total reliance on the dollar. The NDB hits new capital injections, partially from the UAE.
• Outcomes: The dollar remains top dog, but loses some share in global reserves (maybe dipping from ~58% to near ~50%). Some states find an alternative path in times of Western sanctions or monetary tightening.

Scenario 2 — A Disjointed Alliance With Limited Real Impact

• Timeline: Now–2028
• Key Features: Internal tensions among new members hamper major collective decisions. The group remains a talk forum, with expansions leading to even fewer unanimous statements or large-scale financial breakthroughs.
• Outcomes: The dollar’s centrality continues. BRICS+ occasionally issues statements criticizing Western financial institutions, but no robust alternate system emerges. The “BRICS brand” might even fade if expansions yield no big projects.

Scenario 3 — Intensifying Anti-West Moves

• Timeline: Could emerge rapidly, especially under crisis
• Key Features: If fresh sanctions or heightened hostility push states like Russia, Iran, or China to accelerate a “BRICS clearing union,” the group might unify around an anti-dollar stance. The “BRICS Pay” system or a partial digital currency sees quick adoption, at least for strategic trades.
• Outcomes: High market volatility. Some countries in BRICS+ cling to US markets anyway, creating internal friction. The world sees deeper financial fragmentation, with Washington losing some sanction power but the group facing slow adoption beyond states seeking to dodge US constraints.

Scenario 4 — Partnerships Over Full Membership

• Timeline: Extends beyond 2030
• Key Features: The new “partner status” might draw a large set of middle-income countries. BRICS membership stays around 10–12, but partner networks keep expanding.
• Outcomes: Through these partner states, the bloc develops enough critical mass in certain sectors (e.g., green transitions, commodity pricing) to shape policy, yet still defers significant steps on a single currency or fully consolidated actions.

Is the Future More Diverse, or More Divided?

The BRICS were never a neat alliance. Now, by adding states with distinct aims—Egypt hoping to tackle currency crises, Iran seeking a bulwark against US sanctions, Ethiopia striving for development, the UAE forging multiple alliances—the group’s expansion brings greater scope but also greater complexity. Some foresee unstoppable “rebalancing away from the West,” while others see nothing more than a bigger, more unwieldy committee.

One reality stands clear: the US dollar retains formidable structural advantages. Despite rhetorical calls for “de-dollarization,” implementing an alternative is a messy business. Many BRICS+ economies remain cautious about going all-in on anti-West frameworks; they rely on US or EU trade and can’t simply break away from those markets. Meanwhile, new financial architectures, such as local-currency or digital solutions, might expand but won’t immediately upend how trillions of dollars move each day.

Still, membership expansions do highlight frustrations with existing global governance, especially among developing countries that see Western-centric rules as stacked against them. BRICS+ might prove an essential forum for these states to coordinate requests for institutional reforms. Over time, if the NDB scales up or if local-currency trade becomes typical across Asia, Africa, and parts of Latin America, the US dollar’s proportion of global transactions could shrink.

When analyzing these shifts, a balanced perspective is crucial. The group’s successes—like the NDB or certain currency-swap deals—remain partial and overshadowed by internal divides. But even partial changes can shape the trajectory of global economics. For investors, policymakers, and those watching the interplay between power blocs, this expanded BRICS signals an era of more fluid alliances and parallel frameworks. The “dollar vs. BRICS” debate ultimately reminds us: global order is not static, and new coalitions often arise from dissatisfaction with the status quo—even if forging a coherent alternative is far from simple.