Dismantling U.S. Economic Dominance, BRIC by BRIC

The greatest threat to the U.S. dollar isn’t a rival currency–it’s a financial system that doesn’t need one. 

And that’s exactly what the BRICS alliance–originally Brazil, Russia, India, China, and South Africa–is trying to build. What started as a loose economic partnership has evolved into a strategic alliance bent on dismantling U.S. economic dominance. But before turning to BRICS, it is necessary to examine the historical context that set the stage for today’s financial order.

For decades, the greenback has reigned supreme as the global reserve currency:

Why? That’s not an easy question to answer. A more focused analysis might consider a number of factors that propelled U.S. dollar supremacy following the 1971 collapse of the Bretton Woods system. Namely, the “size of the domestic economy, … the importance of the economy in international trade,” and the “depth of government bond markets.” For our purposes, let’s consider just one piece of this complex dynamic: oil.

More specifically, the petrodollar system. Born out of a 1974 agreement between the United States and Saudi Arabia, this system indirectly ensured that oil be primarily traded in U.S. dollars (in exchange for military protection to the Saudis). By anchoring global oil sales to the dollar, the United States effectively guaranteed perpetual demand for its currency. As long as foreign governments need dollars to buy oil, they’re forced to hold large reserves of U.S. currency.

And what do those governments do with their massive reserves? You guessed it: reinvest in our debt by buying U.S. Treasuries:

As long as oil flows through dollars, the United States dictates the rules of global finance.

This cycle has allowed the United States to borrow and spend without restraint, financing its deficits through an endless stream of foreign demand for U.S. Treasuries (brief U.S. debt history lesson here). But that era may be coming to an end. If this foreign demand wanes, the U.S. will be forced to confront an economic reality it has long avoided.

No entity is working harder to unravel this system than BRICS. Essentially, they are accelerating a shift toward multipolarity: a decentralized financial system where multiple currencies dominate global trade.

Unlike past proposals for a single alternative currency, BRICS isn’t trying to create a direct dollar competitor. Dethroning the dollar directly is improbable, but increasing the use of other major currencies–particularly the Chinese yuan, Indian rupee, and Russian ruble–will dilute its dominance. BRICS understands that if it can chip away at the cycle of U.S. Treasury purchases, it can topple the dollar’s global reign. And their main target? The oil market. The BRICS strategy involves three key components: promoting trade in local currencies, creating alternative commodities markets, and developing regional payment systems. 

Let’s unpack each one. 

The most straightforward of these strategies is the replacement of the U.S. dollar with local currencies, which is already underway in several parts of the world. Under heavy G7 sanctions levied in early 2023, Russia has since struggled exporting oil (and, subsequently, receiving payments). As expected, destination countries for Russian oil have witnessed drastic changes in export volume (millions of barrels/day).

This sanction-induced vacuum has forced Russia to divert a majority of its oil exports. As the second largest oil exporter–behind only Saudi Arabia–this shift is striking. India and China have become the primary channels for these Russian exports, but what’s important here is that these transactions are no longer happening in U.S. dollars. 

Russia sells oil to both China and India in yuan and rupees, respectively. Coupled with the fact that China and India are among the two biggest importers of oil, this trend spells doom for the dollar’s centrality in global oil trade. Even Saudi Arabia–the key entity behind the establishment of the petrodollar system–has recently expressed an openness to accepting yuan for Chinese oil sales, a move that would denote a direct assault on the U.S. dollar’s global dominance. 

Russia is spearheading this assault. In order to support and formalize prospective currency shifts, they have proposed a BRICS commodities exchange where oil and other resources could be priced in local currencies (or potentially a BRICS currency basket) as opposed to dollar-linked benchmarks. This seemingly benign proposal is more than a symbolic move–it’s a structural reconfiguration that threatens to eliminate U.S. financial intermediaries. 

Currently, Russia and China are scrambling to develop alternative payment systems in an attempt to bypass Western-controlled networks like the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Although still limited in reach, Russia’s SPFS and China’s CIPS represent the early stages of a parallel financial ecosystem where BRICS can execute transactions shielded from U.S sanctions. 

How, exactly? By routing payments through foreign banks in countries like China, Turkey, and Kazakhstan, these systems create a blind spot. It would be much easier for sanctioned entities to obfuscate the true origin of payments, effectively evading regulatory detection. Because SWIFT is the primary network through which financial institutions conduct international trade, any major circumvention of it drastically reduces the effectiveness of United States monetary regulation (and U.S. dollar dominance). 

Part of the reason Russia is so adamant about these initiatives lies in the financial shock they experienced following their invasion of Ukraine. In response to their aggression, the United States froze Russian central bank assets (effectively preventing them from using their reserves to service debt). While technically permitted under U.S law, the legality of the move was nebulous under international financial norms. This action highlighted the danger of over-reliance on the U.S dollar, which subsequently supercharged Russia’s interest in BRICS and alternative currencies. 

By focusing on the market for oil, BRICS is targeting the dollar’s most vulnerable pressure point. Oil isn’t just another commodity–it’s the world’s most coveted and traded resource. Beyond that, it’s central to every nation’s economy. If oil flows increasingly through yuan, rupees, and rubles, foreign demand for U.S Treasuries will gradually decline. And with it, America’s ability to deficit spend to infinity. 

Ironically, the biggest boost to BRICS’s de-dollarization efforts might be coming from the United States itself. All indications point toward a second Trump term that will only intensify the already aggressive foreign policy he implemented during his first. His onslaught of sanctions and tariffs send a clear message to foreign governments: over-reliance on the U.S financial system is a vulnerability. These confrontational tactics may be inadvertently accelerating the very BRICS initiatives he opposes.

And these swelling international concerns aren’t purely theoretical; we’re already seeing decisive action. Indonesia’s recent decision to join BRICS just weeks before Trump’s inauguration is evidence of this. As the fourth most populated country and the first Southeast Asian BRICS member, this move signifies both regional momentum and the potential for Indonesia to emerge as its own global superpower (with BRICS assistance). Factor in its role as a major exporter of crude petroleum, natural gas, and rubber, and Indonesia’s strategic economic importance within BRICS becomes undeniable. This timing is not coincidental–it is a direct reflection of growing skepticism of U.S economic dominance amidst our aggression and unpredictability.  

So, what can we do? Well, here’s something we shouldn’t do: ramp up oil production. As one of Trump’s main proposals, this energy initiative is problematic. Increasing oil output would be shortsighted and broadcast the wrong message. Tightening our grip on the oil market would only affirm international anxieties about U.S. dominance and validate the growing desire among nations to escape it. Perhaps the wiser path lies in reassuring our global partners that we seek prosperity through cooperation, not coercion.

Featured Image Sources: Getty Images | U.S. Department of the Treasury | International Monetary Fund | U.S. Congress | The International Energy Agency