Russian President Vladimir Putin signaled recently that the new reserve currency would be based on a basket of currencies from so-called BRICS nations—an alliance that includes Brazil, Russia, India, China and South Africa.
“The matter of creating the international reserve currency based on the basket of currencies of our countries is under review,” Putin said on Wednesday at the BRICS Business Forum. “We are ready to openly work with all fair partners.”
The dollar has long been seen as the world’s reserve currency, but its dominance has been waning in recent years as central banks look to diversify their holdings in currencies like the Chinese yuan.
“This is a move to address the perceived US-hegemony of the International Monetary Fund,” said Chris Turner, global head of markets for Amsterdam-based multinational bank ING. “It will allow BRICS to build their own sphere of influence and unit of currency within that sphere.”
Russia’s motivation partly comes from the sanctions leveled against its economy by the U.S. and other Western nations.
“The Central Bank of Russia effectively admitted as much, and no doubt some BRICS nations—especially China—took notice of the speed and stealth at which the US Treasury moved,” Turner said.
Russia has also moved to reroute some of its trade to BRICS nations and away from the West.
“We are actively engaged in reorienting our trade flows and foreign economic contacts towards reliable international partners, primarily the BRICS countries,” Putin said.
One economic blog wrote that this seems to be the result of a decades-long effort to undermine the U.S. dollar and the economic strength it has given us.
“It seems to me that the BRIC nations understand exactly how precarious of a financial situation the U.S.—and our dollar—is in,” said Quoth the Raven.
“Despite the dollar’s recent strengthening, these nations have been in the midst of a multi-decade-long plan to de-dollarize,” it added. “Even before the Ukraine conflict started, both China and Russia were stockpiling gold and working on denominating transactions outside of the U.S. dollar. It was another ‘secret’ that was out there in the open.”