The Cutting Edge Outlook: The BRICS assemble in Johannesburg

The collective group composed of Brazil, Russia, India, China and South Africa otherwise known as the ‘BRICS’ is set to meet on the 22nd of August in Johannesburg. Founded on the 16th of June 2010, the group has been widely perceived as an attempt to counter the growing influence of the ‘G7’ by combining emerging economies together in a ‘G4’ style format. Some of the key issues that have been touted by traditional news outlets to be discussed during the meeting, are the discussion of a common currency, the adoption of new members, global geopolitics, trade, and infrastructure.

A switch in allegiance and the rise of new powers.

According to news sources, around 20 nations have formally applied to join BRICS and over 40 countries in total have expressed interest in joining the bloc. Most noticeable is the willingness to join by Saudi Arabia and the United Arab Emirates, given their status as long-term “Western” allies.

The aforementioned countries have been traditionally considered to be allies of the United States Government, especially given Operation Desert Shield and Desert Storm, One may have considered Saudi Arabia a key US ally in the region. As such, this apparent U-turn in geopolitical allegiance could be concerning for the U.S., which has seen its grip on the region slip, following the weaponization of the dollar against Russia for its invasion of Ukraine.

The beginning of de-dollarization

The group has been considered by the West to be attempting to counter the G7 and potentially increasing attempts to ramp up de-dollarization attempts, as China appears to be aiming to reduce the global influence of the dollar. Therefore, news outlets have been touting that the group may be considering the creation of a common currency that is backed by a basket of precious metals, which may include gold.

Given gold’s status as a universally accepted method of payment, an attempt to return to the gold standard could be perceived as an attack on the financial system that was built around the dollar, therefore reducing dollar influence around the world gradually.

However, it is of vital importance to note that this scenario at least for now seems unlikely, as the group would have to jump over major hurdles in a very short time span in order to announce a common currency at the current meeting.

Therefore, we would personally not expect any major changes in global policy but rather, more agreements and announcements of increased collaboration between the nations and at best a roadmap for gradual negotiations in the creation of a common currency.

The Global stage?

It is no secret that the group is attempting to increase their global credibility, as key players on the international stage. The group currently represents over 40% of the population and approximately 25% of the global economy, yet it would appear that not all of its members are regarded as equals by the international community. As such, given the group’s ambitions, we would not be surprised if they attempt to take a more active role in the Ukraine-Russia conflict, in order to garner a positive reputation as negotiators and have succeeded where the “West” has failed.

Disclaimer:

This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.

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