For that matter, the entire US led Western
countries face a new challenge in the form of BRICS which was inaugurated originally
as BRIC at the leaders’ summit held in Yekaterinburg, Russia in 2009 representing
Brazil, Russia, India & China. The next year saw South Africa in and the rubric
got altered as BRICS. Why BRICS is a challenge?
There are eleven full members and ten partner
members, who would be absorbed into full membership in due course. More than 30
countries have officially applied or expressed interest in joining BRICS in the
offing. These potential members are spread across Asia, Africa and Latin America.
Turkey is the only country that has foothold in Europe who wished to join.
America, Canada and the entire Western European
nations along with Australia and Oceania see BRICS as nuisance at least or as
geoeconomics threat at most. Germany
is not left out of this conundrum. Here are the salient threats Germany
foresee:
Threat Perception
1. Rules based international order promulgated by America and America alone to which Germany subscribed without any qualm faces the frontal attack. This global order thrives on Dollar hegemony in the form of holding reserve currency and trade currency and to be added there to as remittance currency used in credit card transactions
2. Hitherto the US financial structure was nourished by the petro dollar mechanism where oil trading would be denominated in USD and America can leisurely print any amount of US Dollar currencies without having gold-backed security
3. Foreign policy of US led West was anchored upon global military power vested in the West and any country opposes the US dictum would be penalised
4. The instruments of punishing a misbehaving nation include sanctions, freezing of collateral reserves held in American and in European financial institutions. Moreover, expelling those found guilty from the SWIFT is also resorted to
5. Secondary sanction regime was also added where a country who is in the cross hairs of either USA or Western nations could not deal in open market with another entity as the latter would also be subjected to the same sanctions regime imposed on the primary culprit.
BRICS Challenge
1. Brics Pay replacing Visa and MasterCard and the German variant Giocard is indeed a master stroke by BRICS members
2. An innovative mBridge a multilateral central bank digital currency (CBDC) platform developed by China to enable real-time, direct, and low-cost cross-border payments between commercial banks and central banks is a direct challenge to SWIFT
3. CIPS by China denoting Cross Border International Payment System incorporating 210 direct participants and 1619 indirect participants is gaining ground
4. Local currency cross border settlement where parties
in a transaction have the option to either use Yuan or any other currency or
both in combination as approved by the respective monetary authorities lends not
only to convenience but go through without oversight by America. The most
famous case is Rupee-
Ruble transaction between India and Russia.
Strategy Advice
1. Granted though it is, Germany not being severely affected at this juncture as regards to the level and quantum of holding foreign country currency reserves the future may not be that rosy. At present, more than 80% of currency reserves in Germany is denominated in USD. In May 2026 out of 38.5 Billion of non-euro Currency float, 26.5 Billion is held in USD
2. German Chancellor Friedrich Merz made a bold move recently instructing German
Bundesbank to add Chinese Yuan to currency reserves. He was right Yuan
continues to be an under-valued currency by way of deliberate move by the Chinese
authorities or as conspirational agenda by the Federal Reserve.
Be that as it may, navigating strategy amid geoeconomics endorses what Chancellor Merz did to meet up with BRICS challenge!
Cheers!
Muthu Ashraff
Strategy Adviser
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Strategy Adviser
No comments:
Post a Comment