US President Donald Trump’s unease with BRICS strengthening to stand up to the Group of Seven was evident in his proposed 10 per cent tariff on all BRICS members for conducting trade in non-dollar currencies.
Think tank Global Trade Research Initiative (GTRI) said on Friday the US seems to have overlooked the fact that countries are opting for dollar alternatives for trade transactions because of the US’s own economic and geopolitical actions.
BRICS members comprise India, Brazil, Russia, China, South Africa, Saudi Arabia, Egypt, United Arab Emirates, Ethiopia, Indonesia, and Iran.
What’s more, Trump’s 10 per cent tariff plan on BRICS and 500 per cent penalty on countries buying Russian oil makes it difficult for countries to negotiate trade deals with the US, said the think tank.
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GTRI said the US sanctions and SWIFT bans on countries like Russia, Iran, and Venezuela have led to blocking of dollar-based payments, forcing nations like India and China to trade in local currencies with Russia.
SWIFT is a global messaging system that routes payment instructions between banks worldwide.
“The shift from dollar wasn’t a revolt; it was the only route left,” opined GTRI founder, Ajay Srivastava.
He said over 90 per cent of the Russia-China trade is now settled in rubles or yuan; while India pays for Russian oil in rupees and dirhams.
“Even Saudi Arabia is open to non-dollar oil trade – cracking the 1970s petrodollar pact,” he added to underscore the fact that Trump ignores the fact that it is the US actions that forced countries to search for the dollar alternatives in the first place.
“In essence these deals are MASALA deals – Mutually Agreed Settlements Achieved through Leveraged Arm... India must stay cautious,” Srivastava said.
Talking about the need for SWIFT to come into play, he said, “SWIFT connects over 11,000 banks in over 200 countries and was designed to be a neutral platform for trade-related payments. But under US pressure, SWIFT has blocked access to countries under American sanctions, like Iran, Venezuela, and Russia.”
“As a result, countries importing oil and gas from sanctioned suppliers had no option but to bypass the dollar. India pays for Russian crude in rupees and UAE dirhams through non-SWIFT channels. China uses yuan to settle Russian gas trade. This isn't an anti-dollar strategy – it’s a survival mechanism triggered by US sanctions,” the GTRI further said.
In 2022, the RBI allowed trade settlements to be made in Indian rupees, thereby helping countries with dollar shortages, and leading to Russian banks opening rupee accounts in India for oil payments.
However, India has rejected China's call for a BRICS common currency, Srivastava said.
Trading in local currencies is a country's sovereign right, added Srivastava.
With proper planning, local currency trade can cut transaction costs by up to 4 per cent by avoiding double-dollar conversions at both the buyer and seller end, he explained.
“As more countries realize these savings, local currency trade is likely to grow,” he added.
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