Brazilian President Luiz Inácio Lula da Silva last week called on the BRICS nations at the 15th BRICS Summit in Johannesburg, South Africa, to create a common currency for trade and investment between the nations in order to reduce the countries’ vulnerability to fluctuations in the dollar exchange rate.
Officials and economists have highlighted the difficulties involved in such a project, given the economic, political and geographical disparity between Brazil, Russia, India, China and South Africa.
The question economists are asking is what the repercussions will be of a possible adoption of a single currency in the context of the geopolitical interests that BRICS members exert in the Middle East oil market, currently dominated by the U.S. dollar.
Dumitru Chisăliță, energy expert and president of the Intelligent Energy Association, explains that this is not the first attempt to dethrone the U.S. dollar, which is present in almost 90 percent of global forex transactions, but that this scenario would bring with it a restructuring of the way in which the price of crude oil is determined at home and abroad.
Brazil’s president believes that non-dollar nations should not be forced to trade in the dollar and has also advocated a common currency in the Mercosur bloc of South American countries. A BRICS currency “increases our payment options and reduces our vulnerabilities,” he told the summit’s opening plenary session, according to Reuters.
South African officials said a BRICS currency was not on the summit agenda. In July, India’s foreign minister said, “There is no idea of a BRICS currency.” India’s foreign secretary said before leaving for the summit that they would discuss increasing trade in their own national currencies.
Russian President Vladimir Putin said the gathering, which he attended by video conference, would discuss shifting trade between member countries from dollars to national currencies. China has not yet commented on the idea. For his part, Chinese President Xi Jinping spoke at the summit about promoting “reform of the international financial and monetary system.”