The war in Ukraine quickly revealed the extent to which the U.S. and its allies could weaponize the U.S. dollar against a common geopolitical foe. However, although less ‘unified,’ the response from the rest of the world has been consistently opposed to U.S. dollar dominance and to Washington’s sanctions.
President Putin’s diplomatic efforts throughout the war in Ukraine have been surprising, as he has managed to maintain common interests with almost everyone outside of North America and Western Europe. For example, many analysts believed that Turkey and Russia would inevitably disagree and eventually fight over the Ukraine issue (which they still might), but Putin managed to coax President of Turkey Recep Tayyip Erdogan with a European gas hub deal that would sit in Turkey via the proposed TurkStream Pipeline. Hungary and Serbia, both relatively friendly to Moscow, would benefit the most in Europe from such a deal. At the same time, Turkey has stated that it would like to expand its status in the Shanghai Cooperation Organization (SCO), which overlaps significantly with the members of the BRICS (Brazil, Russia, India, China and South Africa).
The SCO is an energy and security agreement, which could complicate Turkey’s NATO membership. The SCO is ultimately led by China and Russia as a pan-Eurasian movement with its focus on multipolarity-led geoeconomic and geopolitical cooperation. The SCO, with its central leaders also leading the BRICS, expands China and Russia’s geopolitical interests further into Africa and Latin America. As we observe the BRICS initiative invite and potentially incorporate other nations into the BRICS framework, we get a unique and strong list of candidates – Egypt, Kenya, Mexico, and Thailand, which were invited by China in 2017, and Argentina, Egypt, Indonesia, Kazakhstan, Nigeria, UAE, Saudi Arabia, Senegal, and Thailand, which were invited to the meeting in May of this year. Keep in mind that Argentina, Indonesia, Mexico, Saudi Arabia, and Turkey are all G20 economies.
Lastly, Iran has become more of a security and economic partner to China and Russia than ever before. Zbigniew Brzezinski–who was the national security advisor under President Jimmy Carter - warned of an ‘anti-hegemonic coalition’ formed by Russia, China, and Iran in The Grand Chessboard, and believed that such a coalition of diverse powers would lead to America’s demise in Eurasia.
The ‘easiest way’ for the ‘anti-hegemonic coalition’ to limit U.S. power in Eurasia would be through limiting the importance of the petrodollar, and the U.S. dollar in general in international markets. Dollar dominance is likely not going anywhere anytime soon, but the global push for gold, led by China and Russia, has led to the dollar’s vulnerability as the last currency that guarantees confidence in a precarious global financial order. Buying dollars is like betting on the house to win in the casino, no one believes that the house could go bankrupt, which is a legitimate and intelligent position. However, we can also note that the dollar’s share of global bank currency reserves has consistently been shrinking, about 11% over the last 20 years. Further, U.S. politicians abuse the U.S. dollar via internal imbalances to keep taxes low while financing welfare programs. On the international stage, the dollar has become a weapon used to punish adversaries via SWIFT, which became abundantly clear after the start of the war in Ukraine. Lastly, the rest of the world has reacted to the weaponization of the dollar by discussing the potential for a creation of a new global currency reserve consisting of a basket of BRICS countries’ currencies, potentially backed by gold. Although the dollar continues to increase in value, inflation continues to persistently run rampant, while political infighting and instability is a common theme across the European and North American continents.
At the same time, Russia has ‘coincidently’ financed countries in Africa, specifically Uganda, in its gold extraction efforts, which have led to consistent discoveries of more gold deposits. The issue was always that African counties could not extract minerals because of technological and capital restraints. Now, Moscow and China have increased their interest in Africa and have made it a priority to increase trade and assist African nations during the current period of geopolitical instability. New gold discoveries in Uganda, valued at close to $13tn have caught the eyes of the world; Uganda can thank Russia, and its ally China, in assisting their mining projects during tough times when the U.S. and Europe failed to notice Uganda. In July, the Ugandan Government said exploration surveys in the country revealed estimated gold deposits of around 31 million tons. Around 320,158 metric tons are refined gold, with an approximate value of $12.8tn.
Even in Africa, China and Russia have secured friends who could potentially contribute to their broader mission of greater global multipolarity led by the BRICS and the SCO. Uganda’s discovery is worth more than 6 times that of the value of current U.S. dollars in circulation.
Therefore, the balance of power, in terms of global finance and the world economy, is rapidly shifting to non-Western nations. The discoveries of gold in Uganda, along with the aggressive use of U.S. sanctions during the war in Ukraine, has revealed that the BRICS countries, and their partners, will need to develop a non-dollar global financial system to avoid future sanctions. The growing tensions between the U.S., and China and Russia create concerns for future disagreements between the East and West. Should China, Russia, and their partners declare that they hold more gold than the U.S., it will be a significant blow to U.S. dollar credibility. The global financial system will rapidly change throughout the next 5-10 years if Uganda works with the BRICS to push the world toward further de-dollarization.
