BRICS: a new gold-backed global currency?

The upcoming BRICS summit in South Africa on 22 August could shake up the global financial structure with the unveiling of a roadmap for the creation of a new global currency backed by physical gold.

The Russian news agency RT reported that the Russian embassy in Kenya announced the initiative: “The BRICS plan to introduce a new gold-backed trading currency at the summit in August. The gold standard will greatly benefit the strengthening of the single currency”. He added that “41 countries have asked to join the BRICS”.

It is no secret that the five emerging states that make up the BRICS group (Brazil, Russia, India, China and South Africa) are working on the introduction of their own currency. Russia and China, the main drivers behind this idea, signed agreements decades ago to initiate de-dollarisation programmes to protect and shield their economies from US government and International Monetary Fund (IMF) sanctions.

It would be a digital currency based on the Chinese yuan, encrypted to enforce payments due between participating parties, but unlike cryptocurrencies, it would not be decentralised. Still, if the decision to adopt a new global currency linked to commodities, namely gold, is eventually confirmed, it could redefine the global financial structure and pose a significant threat to the dollar as the world’s reserve currency.

A feasible proposal in the long term?

South Africa’s Minister of International Relations and Cooperation, Naledi Pandor, stated that the BRICS want to “ensure that we do not fall victim to sanctions that have spillover effects on countries that are not involved in the issues that have given rise to these unilateral sanctions”, and that discussion of the feasibility of a common currency is on the horizon.

On the other hand, Leslie Maasdorp, vice president of the BRICS New Development Bank, warned that: “It will take a long time for currency movements to develop, so any discussion of alternative currencies is in fact a much more medium to long-term aspiration“, adding that although proposals are being considered, “right now there is no suggestion of creating a BRICS currency and the Chinese yuan is a long way from becoming a reserve currency”.

In this context, India has distanced itself from its partners in the group, announcing that it might not participate in the launch of a single currency. Subrahmanyam Jaishankar, foreign minister, told a press conference on Monday, 3 July 2023, that India has no plans to create a BRICS currency. Instead, India is focused on strengthening its national currency, the rupee, and strengthening the rupee will be the government’s top priority.

The geopolitical rivalry between China and India was foreshadowing potential tensions, especially when we consider that India sees China, led by Xi Jinping, as trying to become a global economic and military superpower and that the BRICS could be the springboard to achieve this goal.

One thing is clear, the summit to be held from 22-24 August in Cape Town will be noticed and will be watched with interest and concern by hegemonic Western actors opposed to the rebalancing and sharing of global power.

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