[SnS_12]

About 20 countries now interested in joining BRICS despite Ukraine crisis
Ahmed Adel, Cairo-based geopolitics and political economy researcher.

Although the Western world alludes that Russia is internationally isolated after launching a special military operation in Ukraine over a year ago, the number of countries expressing an interest in joining BRICS continues to increase. According to Russian Foreign Minister Sergey Lavrov, there are around 20 countries wanting to join BRICS. Among them are Algeria, Argentina, Egypt, Iran, Mexico, Saudi Arabia, Turkey, and number of African countries.

Russia Writes Off 20 Billion In Debt To African Countries

http://infobrics.org/post/37828/

https://www.telesurenglish.net/amp/n...0320-0015.html

https://youtu.be/TKpONehNdgo

The current five members of BRICS already combined together equal to 42% of the world population and if they do actually release a common currency or basket of currencies which member countries can trade with via NDB then that would be a start and will attract more countries to join them. With China mediating ties between Saudi and Iran it could soon mean the Yemen conflict might stop and could eventually see a decline of arm imports made by Saudi from US?

[condor]

Originally Posted by V.Narayan

..h Henry Kissinger’s master stroke of creating the petro-dollar ... This created a permanent and massive demand for the US$ by countries all over the globe and created a supply of US$ outside USA that way exceeded the supply of dollars within the US.

The point about the petro-dollar and this demand making the $, and hence the USofA becoming powerful is mentioned many a time. Can you please help me understand how ? Why I ask: there has been a demand for the $, and it has been the defacto standard. But isnt it more show than go ? More like a status symbol ? How can just a (simple) demand/de-facto standard give the US power with this demand ?

[Samurai]

Originally Posted by condor

But isnt it more show than go ? More like a status symbol ? How can just a (simple) demand/de-facto standard give the US power with this demand ?

No, it means every country in the world needs to buy dollars even if they are not buying oil from USA.

Read this post from 2011 about how currency is used in international transaction.

Petro-dollars is a further twist on the example from the link. If India wants to buy oil from KSA or Russia, first India has to procure dollars. That is because the seller only accepts dollar. Therefore, USA can simply print and sell dollars just because India is buying oil from KSA. This is what made them the richest country in the history of the world.

[SmartCat]

Originally Posted by SnS_12

With China mediating ties between Saudi and Iran it could soon mean the Yemen conflict might stop and could eventually see a decline of arm imports made by Saudi from US?

How Yemen conflict unwinds will give us an idea about the future. Also, peace between 2 ideologically (Shia/Sunni) different but equally powerful neighbours like Iran and Saudi can be temporary in nature. Especially, since there will eventually be leadership change. Before Iranian Revolution, Saudis had a good relationship with Iran.

Originally Posted by condor

The point about the petro-dollar and this demand making the $, and hence the USofA becoming powerful is mentioned many a time. Can you please help me understand how ? Why I ask: there has been a demand for the $, and it has been the defacto standard. But isnt it more show than go ? More like a status symbol ? How can just a (simple) demand/de-facto standard give the US power with this demand ?

If it helps simplify matters, just think that USA has a blank cheque. Need $100 million dollars to topple a Middle East dictator? Done. $20 billion for 5 new aircraft carriers? Done.

Now USA can afford this not because it is a "rich country" or has the largest economy. USA's tax revenues are significantly lower than their expenses - the difference is around $1.4 trillion now.



They can afford this simply because they can print whatever money they need to fund their geopolitical extra-curricular activities. Other countries cannot run large deficits like USA because their currencies are accepted only locally. They cannot use it for imports for example.

But USA can. Because they can create dollars which is widely accepted by all countries, they literally have unlimited money.

[vamsi.kona]

A lesser dollarised international trade would be better for all involved and given the experiences of what having 1 currency dominate the global trade can do, it is better if nations do not try to replace USD with something else. It is better if bilateral trade is done with the currencies of the nations involved. Creating a new currency directly as a competition to USD will push US to take steps, however drastic, to defend USD either overtly or covertly. From the reports I read, the wars on Iraq, Libya were a direct result of the rulers trying to trade oil in Euros rather than USD.

At the same time, I hope the decline of USD is more gradual and not sudden or too fast. The impact of a major economy like USA collapsing, which it certainly would if USD were to stop being the dominant currency within short period given the debt levels it has, would be too drastic and destabilizing for global economy.

[no_fear]

Originally Posted by SmartCat

Other countries cannot run large deficits like USA because their currencies are accepted only locally. They cannot use it for imports for example.

But USA can. Because they can create dollars which is widely accepted by all countries, they literally have unlimited money.

A minor point to add. Japan is the other country on this list to print money like there is no tomorrow. Their current deficit is USD 10 trillion. Japan's debt is held domestically, unlike the US, hence it stays below the radar.
And the Yen is beloved by governments and institutions since it is considered safe haven, like the Swiss franc and gold.

[SmartCat]

Originally Posted by no_fear

Their current deficit is USD 10 trillion. Japan's debt is held domestically, unlike the US, hence it stays below the radar.

Can you double-check? That is probably in Yen



That comes to around $300 billion. India's budget deficit is around $180 billion.

And the Yen is beloved by governments and institutions since it is considered safe haven, like the Swiss franc and gold.

Yes, whenever there is a major financial crisis, money rushes into bonds & treasury bills denominated in US Dollar/Japanese Yen/Swiss Francs

[no_fear]

Originally Posted by SmartCat

Can you double-check? That is probably in Yen

Attachment 2436200

That comes to around $300 billion. India's budget deficit is around $180 billion.



Yes, whenever there is a major financial crisis, money rushes into bonds & treasury bills denominated in US Dollar/Japanese Yen/Swiss Francs

My apologies - I quoted the government debt figure - that is USD 8.46 trillion at the moment.

The deficit is what you mentioned.

[Imran.Syed]

And Saudi Arabia/OPEC+ just announced a production cut. Brent nearing $86 a barrel. This is going to make US-Saudi relations so much worse but the timing of it just makes more and more sense. Saudis just invested Billions in China's upstream oil refinery projects. Does not affect China much but boy will this make things worse for EU and other western nations.
I think one key unofficial member of the OPEC+ is Texas (the private US oil companies.) Anybody agree/disagree?

Not hopeful for peace lasting in the Middle East. Too many wild cards and self-interests in the game. But people are people and people are greedy. Especially dictators. In the end it would be quite comical if greed is what brought peace to Middle East.

All the GCC oil producing nations have their currencies pegged to the dollar and defend this peg viciously. It gives them stability. Saudi Arabia might devalue their currency a little bit in the future though as they want more companies to open shop in their country.

But Dollar is still King. They can settle in Yuan and try everything they want under the sun, China knows it, the Saudis/GCC know it.

There's a new nexus being created to completely stave off western countries from Asian and African Regions. This is old news now but post 2020, it has only accelerated.
Between China and Asian/African/South American nations, they have all the resources that are the backbone of any economy; Energy, Agriculture, Manufacturing, Services and soon, Technology.
Suddenly it appears clear that US needs the world more than the world needs the US. US/EU getting busy with domestic issues is also a good/bad sign of this pivot from not stopping any time soon.

It is surprising it took the world this long to realize that China and Middle East/African countries complement each other much better than US and the rest.

I have a feeling US will try to severely restrict China under the pretext of defending Taiwan or will strongly stretch its muscles in the Middle East through Israel. Peace in the MEA is US's nightmare.

China is so much worse than the US though. What US does in secret, China does rather openly and without any checks or balances. If China displaces the US, we as citizens don't really gain much except maybe less foreign interference in domestic policies.

[download2live]

Originally Posted by V.Narayan

Two news items of the week that caught my eye. You don’t always find these in mainline Western media at times. Of the BRICS – four have started some trade settlement between themselves in non-$ currencies, usually there own and each is putting in place or has already put in place a system for electronic settlements between the banks of the two nations.

The dominance of dollar is enforced/projected by the sheer power of US military (especially Navy). Saddam (euro for petroleum) and Gaddafi (gold for petroleum) found it the hard way.

This is one of the reason why Warren Buffet says "Never bet against America".

[V.Narayan]

Dear @Imran.Syed, Thank you for expounding your perspective and making some very interesting observations. My take below on the key points you raise. My perspective is different while we fully understand that each of us including the world's leading diplomats and Foreign Ministers are like the blind men trying to describe an elephant.

Originally Posted by Imran.Syed

I think one key unofficial member of the OPEC+ is Texas (the private US oil companies.) Anybody agree/disagree?

100% agree. :-) The worship of Mammon at cost of all else is at the core of the value system of most large private oil companies. I say this despite not being the sort given to hyperbole and extreme statements.

Not hopeful for peace lasting in the Middle East. Too many wild cards and self-interests in the game. But people are people and people are greedy. Especially dictators. In the end it would be quite comical if greed is what brought peace to Middle East.

Peace in the MEA is US's nightmare.

You are right that the mix remains volatile as ever. There was real hope in 1993 with the Rabin-Arafat-Clinton Oslo peace accord. But alas Rabin was assassinated by forces within Israel who simply did not want the peace accord to grow roots.

All the GCC oil producing nations have their currencies pegged to the dollar and defend this peg viciously. It gives them stability.

But Dollar is still King. They can settle in Yuan and try everything they want under the sun, China knows it, the Saudis/GCC know it.

No one is saying that the $ will die tomorrow. I think most writers on this thread understand that these trends move gradually. Yuan full convertibility, emergence of a globally acceptable digital currency, a settlement system to at least compete with SWIFT are some of the pre-requisites. It will take 15 to 20 years to get to a point where 40% of world trade occurs in non-$ mediums. But the train has now left the station. IMHO the real replacement for the $ will be a digital medium and not the Yuan. The $ and the digital unit would probably, my guess, run in parallel for years and decades.

Suddenly it appears clear that US needs the world more than the world needs the US. US/EU getting busy with domestic issues is also a good/bad sign of this pivot from not stopping any time soon.

This is the one good thing that has emerged from the aftermath of the Ukraine war. As our EAM put it so well that Europe's {read West's} problems are the world's problems but the world's {read global South's} problems the West can ignore. When China repeatedly violated our borders with violence Europe clicked their tongues. When NATO bandied together to invade and decimate Afghanistan {even though Afghanistan as a nation had nothing to do with 9/11} it was justified in their minds and hearts as a mission of peace. But when they had an unwanted war at their doorstep which has nothing to do with the global South they expected every one to join the chorus.

I have a feeling US will try to severely restrict China under the pretext of defending Taiwan or will strongly stretch its muscles in the Middle East through Israel.

China is so much worse than the US though. What US does in secret, China does rather openly and without any checks or balances. If China displaces the US, we as citizens don't really gain much except maybe less foreign interference in domestic policies.

Every prima donna power tries to throttle upcoming powers. So, this is par for the course. If China ever becomes the prime power IMHO they will be a lot worse than the USA and an absolute nightmare for us.

[dragracer567]

Originally Posted by V.Narayan

This trend towards partial de-dollarization of trade in some ways was inevitable as the size of the US economy versus the global collective GDP shrinks. The anti-US lobby should not start to assume the end of the $ is nigh or even desirable. What could replace it could be a lot worse. But yes some dilution of US hegemony is good for world trade & the risk the US debt pile means for the globe.

The world at this point is the most uncertain it has ever been since 1989 when the USSR collapsed leaving the US as the sole superpower, leading to a wave of economic and political revolutions that built wealth at an unprecedented scale. I’m no fan of the US, but this building of wealth which was unparalleled in human history - especially in the developing world was guaranteed by primarily American corporations investing and expanding worldwide in the name of globalisation along with trade secured by the US Navy along the world’s crucial arteries and chokepoints - something no other country is capable of doing to this day.

The conventional wisdom since the 2000s was that the Chinese will slowly take over this role. Even within the US, this was generally accepted as a fact, especially after Obama was elected into office. However, the miscalculation was that everyone assumed that the Chinese would continue to grow forever - the notion that got seriously challenged post-covid when the Chinese economic growth stalled and is a shadow of its pre-covid times. We have to keep in mind that China is still not a ‘rich country’ and has a long way to go before it becomes a high-income economy. Structural issues in the economy, the inexplicable crackdowns on Chinese corporations by Uncle Xi and the horribly bad demographics that make Japan seem stable are real issues staring China in the eyes. At this point, it really is possible that the Chinese economy might never surpass the US economy in nominal terms. Not to say that the US is in a better situation - it is exhausted by two decades of war, it’s politics is dangerously polarised, safety is non-existent and trust in its leaders is at a historic low (something to reflect at the future of Indian democracy as well)! Offcourse, this was America in the 70s as well before it reinvented itself but we can’t really count on precedence for the future. And all this is while the US is still the most dynamic western economy, the rest are either dependent on natural resources (Canada and Australia) or are in perennial decline (most of Europe).

What I do see happening is the world dividing into smaller fiefdoms where local landlords exercise power. A nice example is the Middle East where countries like Saudi Arabia and the UAE (supported by Israel) is increasingly not beholden to the US and shares power in a delicate balance with other regional powers like Turkey and Iran while playing US and China off eachother. India is also playing a crucial role here - infact there is even a Middle Eastern Quad now called I2U2 consisting of India, Israel, US and the UAE. Large countries are reclaiming their backyards with the prime example being the eye-watering investments that India is pouring into its neighbours to compete with Chinese money. Offcourse, fiefdoms are never stable and there is always a higher possibility of war as compared to being in a unipolar or bipolar world. This means, yes, the US dollar will almost surely decline but what would replace would be a basket of arrangements (Narayan sir hinted about this in the Ukraine war thread but I disagreed with him then ) without an international standard such as the SWIFT system. Western systems would still be trusted more but most transactions might take place in a patchwork of bilateral arrangement. It’s hard to even imagine how crypto would get involved in this mix.

[V.Narayan]

Originally Posted by dragracer567

The world at this point is the most uncertain it has ever been since 1989 when the USSR collapsed leaving the US as the sole superpower, leading to a wave of economic and political revolutions that built wealth at an unprecedented scale.

Thank you@dragracer567. This is one of the most erudite, well crafted and balanced posts on geo-politics I have ever read on Team BHP. This quality of writing one gets to read in places such as the Foreign Affairs Journal of Washington which I devour each month. It is a joy discussing matters with you because unlike some you never go burrowing down a jingoistic rabbit hole.

My thoughts follow on the points you have raised. Didn't think I'd let it pass did you :-)

I’m no fan of the US, but this building of wealth which was unparalleled in human history - especially in the developing world was guaranteed by primarily American corporations investing and expanding worldwide in the name of globalisation along with trade secured by the US Navy along the world’s crucial arteries and chokepoints - something no other country is capable of doing to this day.

Very true. If you live in a {global} village with only one truly rich landlord then to get rich yourself you need to align with him regardless of whether you like him or not. South Korea, ASEAN, Germany, Japan all rose up by aligning themselves politically and economically with USA. It came at a cost of geo-political freedom but economically it did wonders for them. In an earlier era, Canada, Australia and New Zealand benefitted similarly by aligning themselves with UK the 'mother country'. We are finally grown up in our world view that it pays to align with USA economically and to some extent militarily while walking a balancing rope in our independent relations with Russia, Middle East and China.

The conventional wisdom since the 2000s was that the Chinese will slowly take over this role. However, the miscalculation was that everyone assumed that the Chinese would continue to grow forever - the notion that got seriously challenged post-covid when the Chinese economic growth stalled and is a shadow of its pre-covid times. We have to keep in mind that China is still not a ‘rich country’ and has a long way to go before it becomes a high-income economy. Structural issues in the economy, the inexplicable crackdowns on Chinese corporations by Uncle Xi and the horribly bad demographics... At this point, it really is possible that the Chinese economy might never surpass the US economy in nominal terms.

Of course none of us can predict the next 2 decades but I agree China is not overtaking the USA any time soon. If leaders such as Hu Jingtao and Jiang Zemin had continued the long line of stable leaders without pathological egos China could have continued its inexorable ride. But Xi Jinping has in fact been a blessing for us all. He will exit only when he dies and leave behind a weaker China. On another topic I have often, especially in the post 2008 era, doubted the accuracy of Chinese GDP figures. That is another discussion that is worth a separate post.

Not to say that the US is in a better situation - it is exhausted by two decades of war, it’s politics is dangerously polarised, safety is non-existent and trust in its leaders is at a historic low -- Offcourse, this was America in the 70s as well before it reinvented itself but we can’t really count on precedence for the future. And all this is while the US is still the most dynamic western economy, the rest are either dependent on natural resources (Canada and Australia) or are in perennial decline (most of Europe).

For all its faults of which there are many, by God, USA remains a young country, a very dynamic one and one which introspects publicly all the time. This helps it rejuvenate. I remember the USA is sinking story line of the 1970s Ford-Carter era rather well. Their sense of despondency then was greater than today though their divisiveness and calibre of political leaders is worse today. Unlike UK or France they are capable of flipping themselves back to shape. This introspection is something we had started doing quite well especially after Indira Gandhi's demise but alas today that can land you into serious trouble.

What I do see happening is the world dividing into smaller fiefdoms where local landlords exercise power.

--with other regional powers like Turkey and Iran while playing US and China off each other. India is also playing a crucial role here - infact there is even a Middle Eastern Quad now called I2U2 consisting of India, Israel, US and the UAE. Large countries are reclaiming their backyards with the prime example being the eye-watering investments that India is pouring into its neighbours to compete with Chinese money.

This is good for us. We may emerge into a world of 2 big powers and three smaller powers/blocs. We would be one of the latter. One good thing under the present Govt is we are learning and executing very well on this front.

This means, yes, the US dollar will almost surely decline but what would replace would be a basket of arrangements (Narayan sir hinted about this in the Ukraine war thread but I disagreed with him then ) without an international standard such as the SWIFT system. Western systems would still be trusted more but most transactions might take place in a patchwork of bilateral arrangement.

Agree.

All,

As most know there are 3 roles the USD plays today - (i) the medium of denomination ie the unit in which traded goods are priced (ii) the medium of settling traded values - that's where SWIFT comes in; and (iii) a store of wealth - which is where all those US treasury bills go. For the first, most goods, even under bilateral non-USD settlement treaties, will continue being priced in USD even if settlements are in RMB, INR or EUR etc. For the second some bilateral move away from USD will occur and is emerging very steadily. That is not going to change even if another Ukraine kind of event takes place. My guess is, as stated earlier that in two decades about 50% to 60% will still be in USD - the USD will be first amongst equals. For the third the US will learn the hard way that you cannot keep sanctioning nations and expect them to fund your pile of debt. In years to come the act of freezing Russia's $300bn of national reserves that were kept in USD will be seen as an act of monumental folly driven by a deep arrogance by USA. It has not gone unnoticed by China, India, Brazil, Saudia. No one will be very vocal but actions will speak. USA is basically borrowing to repay old debts and to fund their deficits. Every major economy outside the White world, other than Japan & South Korea, is on this bandwagon of de-dollarization of trade. This will be an interesting space to watch next one year.

[vamsi.kona]

One of my worries, not completely without evidence or history, is that as the USA sees more and more nations trying to move away from dollar, if not completely at least to some extent, they will not let it pass easily. The y can attribute a large part of their growth to their role in the two monetary systems that had put them at the centre of global forex, The Bretton Woods system and the petro dollar. Add to that the war ravaged Europe, USA was the primary attraction for many as it was the major power which was also democratic and had a free society.

Now the current changes in international trade are very slowly chipping at that advantage of USD. The US has learnt from its many wars that it cannot take on any major nation head on. But the US agencies are as capable or even more capable in covert ways of bringing things to their side, be it corporations or nations. I have read of instances where CIA went to the extent of creating a social media platform to cause unrest in Venezuela. The advent of social media only makes it far more easy for them to mould opinions and cause unrest in places which they feel are a threat to the status quo. Their domestic situation is quite fragile but one thing that has been proven time and again is that when it is put as Us against Them, Americans tend to unite far more easily.

So it is a very delicate balance nations such as India need to tread. Foreign policy never felt this important for us in the last 2 decades as we were pretty minor players in global space. The next decade or so is filled with huge opportunities and minefields for us to strengthen our status as an emerging power.

[download2live]

Originally Posted by vamsi.kona

One of my worries, not completely without evidence or history, is that as the USA sees more and more nations trying to move away from dollar, if not completely at least to some extent, they will not let it pass easily.

They can take on one nation at a time. Easily. But two?
This might be border rumour mongering but it seems China (along with Russia?) are working on launching a currency based on Gold.
Fed printing dollars at slight wiff of trouble has made countries uneasy. Latest was being the SVB collapse.