Trump’s BRICS salvo an exercise in dollar destruction

A week after US President-elect Donald Trump threatened 100% tariffs against any backers of a “BRICS currency”, key emerging powers such as India have quickly distanced themselves from any BRICS-led de-dollarization initiative.

“Right now, there is no proposal to have a BRICS currency. So I’m not quite sure what is the basis for [Trump’s remark],” India’s External Affairs Minister S Jaishankar said during the Doha Forum held in New Delhi this week.

India’s top diplomat acknowledged there are ongoing discussions on streamlining and deepening “financial transactions” among BRICS nations, but he made it clear that “each country doesn’t have an identical position on this.”

“[W]here India’s concerned, the United States is our largest trade partner and we have no interest in weakening the dollar at all,” he added, emphasizing India’s prioritization of ties with the West.

Days earlier, Reserve Bank of India Governor Shaktikanta Das also clarified that “[t]here is no step which we have taken that specifically wants to de-dollarize [which] certainly [is] not our objective” despite ongoing attempts to diversify the country’s pool of foreign currency reserves.

India’s central banker also questioned the viability of a BRICS currency given the “geographical spread of the countries…unlike [common currency systems like] the eurozone which has geographical contiguity.”

Nevertheless, the next Trump administration might end up boosting prospects of a BRICS currency in his roughshod attempt to reassert American primacy.

A ham-fisted approach to bilateral relations with major rising powers, meanwhile, will likely only strengthen their resolve to band together and collectively undermine any US-led global order.

Not only India but other non-Western powers such Indonesia, Turkey, Malaysia and Saudi Arabia will also likely not only join the BRICS but also more actively contribute to new “de-dollarization” initiatives.

In recent years, America has tried to solicit international support and has been gradually building a new coalition to “de-risk” from China, particularly in high-tech items such as high-end semiconductors and the equipment used to make them.

But Trump’s likely unilateralist policies, including high blanket tariffs, could encourage rising powers, especially those in BRICS, to double down on efforts to “de-risk” from the US, paving the way for a new global order altogether.

To be sure, de-dollarization is complicated and largely still aspirational. For instance, India has struggled to effectuate its more narrow, bilateral non-dollar-denominated trade with key partners such as Russia.

Amid a historic boom in India’s import of heavily discounted Russian oil, Moscow is accumulating US$1 billion every month that it struggles to use due to both Western sanctions and India’s capital control measures.

“This is a problem,” Russia’s Foreign Minister Sergei Lavrov told reporters during last year’s Shanghai Cooperation Organization (SCO) meeting. “We need to use this money. But for this, these rupees must be transferred in another currency and this is being discussed now,” he added.

Leading Russia experts such as Alexander Knobel have warned that Russia’s mass of “frozen funds” will likely “reach tens of billions of dollars,” and that the “situation is aggravated by India’s historically high aggregate trade deficit, which reduces the possibilities of clearing settlements with third countries.” 

In the past, similar problems also emerged amid a boom in non-dollar-denominated trade between Iran, another BRICS member that is also heavily sanctioned by the West, and major oil customers such as India and China.

Nevertheless, the world’s most populous nation continues to maintain robust ties with Russia, a major source of armaments and hydrocarbon goods throughout the past decades.

This week, Indian private refiner Reliance (RELI.NS) secured a massive deal with Russia’s state oil firm Rosneft (ROSN.MM). The 10-year agreement, amounting to a whopping 0.5% of the entire global supply, is worth roughly $13 billion a year.

The new deal notably accounts for roughly half of Rosneft’s seaborne oil exports, making Indian markets a leading customer.

Russian President Vladimir Putin will likely visit New Delhi in the near future, as the two BRICS members solidify trade and energy ties. The Eurasian power alone accounts for a third of India’s energy imports while the South Asian power has replaced the European Union as Russia’s top energy customer.

Eager to maintain American primacy, Trump warned over his social media platform (Truth Social) that partner nations could “face 100 per cent tariffs, and should expect to say goodbye to selling into the wonderful US economy” unless they commit to “neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar.”

Harkening back to his “Make America Great Again” foreign policy mantra, the incoming US president warned any backers of a BRICS currency: “They can go find another ‘sucker.’ There is no chance that the BRICS will replace the US dollar in international trade, and any country that tries should wave goodbye to America.”

With Trump advocating for a peace deal in Ukraine, however, some in India are hoping for lighter Western criticism of its long-standing relations with Russia. Nevertheless, the South Asian powerhouse has remained staunchly non-aligned in its foreign policy, eager to exploit great power rivalries for its own national interest.

“Whenever the West bashes us, we gain credibility in Moscow,” an informed source in New Delhi told this writer, underscoring India’s preference to play the superpowers off one another while maintaining simultaneous strong ties with both Washington and Moscow.

If anything, India’s Narendra Modi-led administration is relatively bullish on relations with a second Trump administration.

“We had a strong and solid relationship with the first Trump administration…Yes, there were some issues mostly trade-related, but there were a whole lot of issues on which President Trump was actually forward-leaning,” Jaishankar said during the Doha Forum this week. 

“I would say from our perspective there is a certain personal relationship between Prime Minister Modi and President Trump. In terms of politics, we really don’t have divisive issues,” he added, underscoring New Delhi hopes to leverage personal diplomacy with the incoming US leader.

Given India’s economic momentum and its emerging centrality to global growth, it’s foreign policy leanings will be instrumental to any global de-dollarization drive.

Currently, the US dollar accounts for more than half of the world’s trade invoices and more than 80% of all international currency transactions. However, Trump’s policies could inadvertently contribute to the gradual decline of US dollar use in coming years.

On the one hand, it remains to be seen how the next US administration will deal with outstanding bilateral issues with friendly BRICS members such as India.

“A major source of concern is the fate of large number of Indians illegally residing in America,” a source in India with deep ties to Washington, DC, told this writer. As many as 18,000 Indians could face deportation in coming months if Trump enacts the draconian immigration policies he avowed on the campaign trail.

Moreover, Trump’s fiscal policies, including massive tax cuts, could add as much as $15 trillion to America’s already sky-high $36 trillion national debt. Meanwhile, Trump’s plan to impose unprecedented tariffs across the board may not only spike inflation at home but also torpedo global trade and undermine the value of foreign currency reserves held by its major trading partners.

Malaysian Prime Minister Anwar Ibrahim has welcomed the end of an American-led unipolar world and, accordingly, has pivoted to the BRICS and China, which he has described as a springboard for the creation of a more multipolar order.

For his part, Indonesia’s new president, Prabowo Subianto, has reversed his predecessor Joko Widodo’s policy by actively seeking membership in the BRICS. By joining the bloc, these new rising powers seek to bolster ties with Beijing, a major investor and trade partner, as well as express certain discontent with the US-led order.