BRICS: Shifting the Sands - Oil Payments in Local Currencies Challenge US Dollar Dominance

The BRICS nations are making significant strides in their ambition to reshape the global economic landscape. A key element of this strategy is the move towards settling oil payments in local currencies, a direct challenge to the US dollar's long-held dominance. Recent reports indicate that BRICS: 20% of Oil Payments Settled in Local Currencies, Not US Dollar ! By 2025, around 20% of oil trade was conducted in non-dollar currencies, showing a tangible shift by BRICS countries towards reducing dollar reliance. At the recent BRICS summit, this ambition was further reinforced.

The inclusion of major oil producers within the BRICS alliance is a game-changer. With Iran, Saudi Arabia and the United Arab Emirates joining BRICS, the multilateral mechanism now includes major global oil producers and importers. Analysts said this expansion strengthens BRICS's position in the global energy market.

The UAE's Call for Diversification

The United Arab Emirates (UAE) is asking BRICS countries to settle oil trade in local currencies and not the U.S. dollar. The Middle Eastern nation is aiming to diversify its economic partnerships and reduce reliance on the dollar. This move signals a growing desire within the region to explore alternative financial arrangements.

BRICS's Infrastructure for Local Currency Trade

To facilitate this shift, BRICS is developing alternative financial infrastructure. The “BRICS Bridge”, a digital payment platform, aims to facilitate trade in local currencies, while “BRICS Clear”, an independent financial messaging system, offers an efficient and secure alternative to traditional international payment systems. These initiatives are crucial for supporting the increasing volume of trade settled in non-dollar currencies.

Is the US Dollar's Reign Coming to an End?

While BRICS is aiming to control the global oil sector and bring the US dollar down using local currencies, the road ahead is not without its challenges. Despite Saudi Arabia's announcement last year that it would accept local currencies for oil payments, the vast majority of its crude exports continue to be settled in US dollars. However, the trend is clear: a growing percentage of oil trade is being conducted in alternative currencies, and BRICS is at the forefront of this movement.

The long-term implications of this shift are significant. A reduced reliance on the US dollar could reshape global financial power dynamics and create new opportunities for BRICS nations and their trading partners.