With the BRICS summit just around the corner, India's Foreign Minister S Jaishankar publicly stated that India will not take economic and political measures to support "de-dollarization", and the US dollar is still India's preferred currency for settling trade.
It is really unexpected that he will regret his actions and stir up the long-planned "de-dollarization" plan of the BRICS countries with his own strength. The Modi government has made its position clear. The "heart" of Russia is half cold again.
"De-dollarization" is in the long-term interests of the mainland and other BRICS countries, so why should India go against it?
Is this really determined to be loyal to the United States? What impact will this move have on the BRICS countries? We need to take care of the "de-dollarization" thing.
The U.S. dollar dominates the world's currencies, and the country is under a dangerous wall
Why do we have to "de-dollarize"? The reason is very simple, because the US dollar dominates the pattern of world currencies, which has caused many countries to suffer big losses. This history can be traced back to the second half of the 20th century.
At that time, World War II had just ended, and most of the countries participating in the war suffered heavy losses due to years of war, but the United States suffered the benefits and became the world's largest economy. The global economic order urgently needed to be rebuilt, so at the United Nations International Monetary and Financial Conference in 1944, the Bretton Woods system, which had a profound impact on the global economic pattern for generations to come, was established.
The system was established, and the US dollar was established as the world's main reserve currency, directly linked to gold. The International Monetary Fund (IMF) and the World Bank (WB) were established to help countries around the world recover their economies, but in fact to maintain the hegemony of the US dollar.
Under this system, the currencies of IMF member countries must maintain a fixed exchange rate with the United States dollar. This ensured the relative stability of international monetary relations after World War II in the short term, and indeed promoted the recovery and development of the capitalist world economy, but in the long run, it laid a big "mine".
Over time, United States' trade deficit has increased. In other words, in order to meet the global demand for dollars, the United States must export dollars through a current account deficit, which in the long run has greatly weakened people's confidence in the dollar. The account has been in deficit, who would dare to engage in financing with you?
As a result, United States' gold reserves are dwindling. Countries are beginning to worry about whether United States still has enough gold to support its dollar status and whether it can still meet its commitments to its external debt.
After such an operation, the United States pressure directly exploded. Finally, in 1971, United States President Richard Nixon announced the closure of the golden window, and the Bretton Woods system came to an end.
However, the written article is gone, and the de facto dollar retains Breton's inertia and still dominates the position of the world's currency, to this day.
With the end of the Bretton Woods system, the absence of the fixed exchange rate and the introduction of the floating exchange rate system, the world market will begin to fluctuate from minute to second. Although the dollar stands at the center of the world's currency market, its value is constantly changing, so it is risky to stand in the surrounding countries.
At this time, many countries have begun to explore how to reduce their over-dependence on the US dollar in order to avoid risks. This is the precursor to today's "de-dollarization". For example, during the oil crisis in the 70s of the 20th century, oil-producing countries banded together to raise oil prices to deal with the risk of a weaker dollar.
However, no matter how many measures were taken by various countries at that time, there was still some "small fight" after all. The main reason is that the productivity of all countries in the world is not comparable to that of United States, except in the special case of the Soviet Union. The bipolar pattern has been deadlocked for many years, and then it has become a superpower, and no economy has stood out and caught up with the pace of United States.
United States has always been at the top of the global market, so naturally the dollar will not come down from the dominant position of the currency.
Since the beginning of the 21st century, the situation has finally changed. With the rise of emerging market economies around the world, the rise of China, India and other countries, and the continuation of the Soviet Union's legacy by Russia, the global economic pattern has undergone significant changes.
One of the most important changes is that everyone is beginning to disagree with the dollar-dominated international monetary system. The single currency as a medium for global reserves and transactions is simply too risky!
Nowhere is this more evident than in the 2008 global financial crisis. The crisis originated in the subprime mortgage crisis in the United States, but its effects quickly spread to global markets. The value of securities related to residential mortgages in United States has fallen sharply, and a credit crunch and liquidity crisis have erupted worldwide. This has directly destroyed the economies of many countries, and has made the common people suffer a lot.
In 2006, shortly before the economic crisis, Brazil, Russia, India and China met for the first time, kicking off BRICS cooperation. BRICS is synonymous with emerging markets in the world, aiming to promote common development among member countries and strive to build a more just and equitable international order. To put it bluntly, it is to work against United States hegemony.
The collapse of the dollar in the financial crisis made everyone realize that it was time for "de-dollarization". The BRICS alliance comes at the right time, and it seems that it is destined to assume a particularly prominent responsibility in the process of "de-dollarization" of the world.
In 2011, South Africa officially joined the cooperation, the initial "BRICS" was formed, and the trend of "de-dollarization" in the world became more and more obvious. Since then, Saudi Arabia, Egypt, the United Arab Emirates, Iran, and Ethiopia have also joined the cooperation, forming the "BRIC Ten" today.
There are many troubles in dollar settlements, and the BRICS coalition is weakened
The US dollar dominates the global currency market, on the one hand, it puts countries under a dangerous wall, but if the United States market goes wrong, the global economic crisis will break out; Whenever the Fed adjusts interest rates, world markets will be shaken. On the other hand, it has enabled United States to have extremely powerful political sanctions, further consolidating its hegemonic position.
Anyway, the international payment system is all up to me in dollars, and if any country makes me unhappy, I will impose economic sanctions on it, restricting it from using dollars for international trade, and directly make his market crash!
Since the 90s of the 20th century, the United States has imposed a series of economic sanctions on Iran, prohibiting oil transactions with Iran, freezing Iran government and personal assets, restricting transactions between financial institutions and Iran banks, and restricting Iran from using dollars for international trade, which has greatly weakened Iran's oil export earnings.
For Iran, which eats oil on oil, this is quite deadly.
Since the Crimean crisis in 2014, United States and its allies have also imposed severe economic sanctions on Russia. These include freezing the assets of individuals and businesses, banning the transfer of technology in certain industries, and restricting Russia's state-owned banks from accessing international financial markets.
Especially after the escalation of the Russia-Ukraine conflict in early 2022, the United States directly removed some Russia banks from the SWIFT payment system, which greatly limited Russia's international trade capabilities. Nowadays, the trend of economic globalization is unstoppable, and to prevent a country from integrating with the world market is obviously aimed at bringing down a country's economy.
And how unreasonable is that such power can be tightly held in the hands of United States without restrictions, and how urgent is "de-dollarization" now.
After China rises from the world market, there is a great tendency to catch up with the United States, the world's largest economy, and the United States will naturally not let China go.
Between 2020 and 2024, United States authorities have repeatedly included Chinese companies and individuals on the list of Specially Designated Nationals for a variety of outrageous reasons, including "suspected human rights violations" and "support for North Korea and Iran."
Later, the United States sanctioned some Chinese companies on the grounds of "Russia-related", accusing them of supporting the development of Russia's military and energy industries. To put it bluntly, it is necessary for enterprises and individuals to take a two-pronged approach to make it difficult for our economic development.
At this time, the importance of the BRICS countries is highlighted. It is said that a chopstick is easy to break, and a chopstick is constantly broken. You United States don't care about a Chinese market, you don't care about a Russia - what about the market where China and Russia are united? What about markets where more developing countries are united?
This occupies half of the world's population, and you still have the ability to be domineering?
Today, China and Russia are increasingly using the yuan and rubles for settlement in bilateral trade, reducing their dependence on the US dollar; After the Russia-Ukraine conflict, the economic sanctions imposed by Western countries on Russia have accelerated the pace of direct currency settlement between China and Russia.
At the beginning of 2023, Iran's oil transactions with China were also reported to be in yuan as the payment currency. This is the first time that Iran has officially adopted a large-scale energy transaction in a non-dollar currency with a major trading partner, and it is self-evident how important this move is for Iran, which has been scarred by United States sanctions.
Saudi Arabia, one of the world's largest oil exporters, is also considering accepting the renminbi as a means of payment for some oil transactions. If realized, it will hit the dollar's dominance of the world oil market in one fell swoop.
In addition, the New Development Bank of the BRICS countries, when providing loans to member countries, sometimes disburses loans in local currencies instead of US dollars, which is also an important step of "de-dollarization". A number of countries, including China, are also actively working on digital currencies and SWIFT alternatives, both aimed at reducing the world's dependence on the US dollar.
From January 1, 2024, Russia holds the rotating presidency of BRICS. On October 22, the BRICS summit will be held in Russia, at which a large-scale discussion of the global "de-dollarization" strategy is inevitable.
India, which is obviously one of the original "BRICS", suddenly regretted at this time and did not engage in "de-dollarization" - this really chilled Russia's heart.
Suddenly repenting at the door, what is India's calculation?
What is India's intention in doing so? In fact, if you pay more attention to the international situation in recent years, you already have a bottom in your heart.
In recent years, India has become increasingly closely related to United States, covering many key areas such as technology, defense, economy, and regional security.
During Modi's visit to the United States in 2023, India promised to purchase armed drones produced by United States General Atomics and signed an agreement to allow GE to jointly produce fighter engines in India; U.S.-India Critical and Emerging Technologies Initiative launched; India actively participate in the United States-led Quadrilateral Security Dialogue...... All signs indicate that India is clinging to the "thigh" of United States.
If India expresses its support for "de-dollarization", it may cause dissatisfaction in United States - so many cooperation projects cannot be all yellowed at the moment.
As a result, India did not want to annoy United States on the one hand, and on the other hand, did not want to make the relationship with these "old teammates" of the BRICS countries too stiff, so he had to adopt an ambiguous approach.
"will not take measures to support de-dollarization", and at the same time said that "if China, Russia and other BRICS countries ask for trade settlement de-dollarization, they will accept passive settlement in their own currency", which seems to be a bear's paw and a fish, but in fact it is extremely unfavorable to the formation of the BRICS unified action plan.
There is an Internet joke that says: Fat Tiger beats Nobita, you say that you stand in neutrality, but in fact, Nobita will be beaten harder. This paragraph vividly illustrates India's actions.
If India makes such a statement, how will other BRICS countries react? How will other developing countries react to the BRICS meeting? These are all unknowable risks at this time. The cohesion and influence of the BRICS countries on the issue of "de-dollarization" have been weakened as a result.
Therefore, it is not an exaggeration to say that India wants to single-handedly stir up the "de-dollarization" plan that the BRICS countries have been planning for many years.
Why is India doing this? This actually reflects the fragility of India's economy. India's degree of industrialization is far less than that of China and Russia, the manufacturing industry and the real economy have not yet developed, and the economic foundation is extremely weak.
As a result, India has a significant trade imbalance with other BRICS countries. For example, there is a large backlog of rupees in trade between India and Russia, because India lacks enough products to attract Russia to reverse purchases.
The pace of the virtual economy in Western countries, India's dependence on the dollar will increase, but there is not enough products to compete with other foreign exchanges, which has led to the current result: if it is really de-dollarized, according to this trade imbalance, India's situation may be even worse.
Iron striking also needs its own strength, and this is still the case in the field of international diplomacy and international trade. How this "moth" made by India ends depends on the level of the subsequent BRICS leading countries.