The rise of BRICS and the decline of SWIFT

One of Trump’s legacies will be the rearranging of global trade and alliances. Because of its powerful military and economic clout, the US has long been the guiding force in global affairs, able to dominate world trade and commerce and forming stable trade relationships and alliances with other major capitalist nations such as Canada, the European Union, Japan, South Korea, and other nations. Trump has undermined that with his unilateral actions.

There was a time when the Non-Aligned Movement (NAM) threatened US hegemony by creating an alternative power bloc comprised of developing countries (of which China was then one) that was broadly socialist in outlook and sought to be independent of the then two superpower blocs of the US and the Soviet Union. The US always disliked it, seeing any kind of independence as anti-US, and while that movement still exists, the US-backed coups in Indonesia and Ghana that overthrew their leaders Sukarno and Kwame Nkrumah (two of the five founders of the NAM) considerably weakened it. The deaths of the other three founders (Jawaharlal Nehru in India, Josef Tito of Yugoslavia, and Gamal Abdel Nasser of Egypt) further reduced its influence.

But a new bloc known as BRICS (named after the five countries Brazil, Russia, India, China, and South Africa) has arisen to try and find new ways to counter US hegemony. It has since expanded to include Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates. As can be seen from its composition, unlike the NAM, it is all over the map politically, ranging from communist nations to right wing dictatorships to oil-rich oligarchies. What unites them is not politics but economics, the need to achieve some level of independence from US hegemony in trade and commerce.

That stranglehold on commerce is due to US dollar being the currency of trade and all trade exchanges having to pass through US-dominated exchanges. This enables the US to impose its will in the form of economic sanctions and the like against any country it deems deserves it. Trump has greatly abused this power and this has galvanized efforts to counter it, as Prabir Purkayastha wrote after the two-day BRICS summit held in New Delhi in September.

The objective reality is that the US, EU, NATO, and the G7 (clubs of settler-colonial and ex-colonial powers) are no longer the decisive forces in the world. Instead, the world is moving towards a much more flexible multipolar world order. The writ of the West, whether through their financial sanctions or military interventions, no longer runs. The BRICS Delhi Declaration strategically focused on creating alternative channels of trade and financial flows. These are to be independent of US banks and the SWIFT system through which most global transactions are negotiated. It is through US control of the SWIFT system and the Western banks that the West can impose what it calls ‘global’ sanctions on Russia and Iran, with which they are at war – either directly, as in Iran, or through their proxy, the Volodymyr Zelenskyy-led Ukrainian government against Russia.

The war on Iran provided the strategic backdrop of the summit, even though it was not directly mentioned in the proceedings. The US military interventions, either through Israel in West Asia or directly as in Venezuela, show that the US is not willing to leave its position as the world’s sole hegemon – or as Francis Fukuyama called it, the ‘American Imperium’. …

Given that the US is still the world’s largest economy in nominal terms (though not in purchasing power parity terms), and that it can freeze any country out from most bank and financial transactions through the SWIFT system, the Delhi summit decided to focus on trade as its most important issue. This is central to most countries’ desire for independent foreign and economic policies, and to maintaining their autonomy. …

Why are countries trying to move away from SWIFT and the Western financial systems? This stems from the enormous financial power the US wields within such a system: the power not only to impose financial sanctions on any country for political reasons, but also to seize money held in Western banks that operate through the SWIFT system. In 1979, Iran’s money in US banks was seized by the US. In 2022, Russia’s money in European banks was seized by the EU countries. …

This is the extraterritoriality that the US enjoys by virtue of it being the world’s hegemon and the US court’s interpretation of its laws. According to the US, any transaction in dollars anywhere in the world falls under US law and US courts’ jurisdiction. …

The strategic route the BRICS has taken is not to try to create an alternate currency that every country can use. Such an alternate system would require either a new currency or a currency of a member state to be backed by the central banks of the BRICS countries. Instead, it has chosen a system that allows each country to transact in their domestic currencies for goods they buy from others. Several problems must be addressed if this is to be done. One is a simple mechanism for transferring money from one side to the other, provided both sides have agreed on a conversion rate. The other is how to link the central banks on both sides to enable such a transaction. …

The move away from SWIFT, the US dollar, and US–EU currencies and banking systems is not merely a convenience for BRICS countries. It matters if they want to exercise their right to trade with whichever country they want, based on their domestic laws and not the extraterritorial reach of US and EU laws. In effect, it is simply asserting that the days of colonialism and neocolonialism are over. …

If the BRICS can address the critical issue of how we can build a trading system on a one-to-one basis without going through any third-party intermediary, it would be a major achievement. The time for such a system has not only come, but we also have the instruments for it: the payment gateways of four major economic powers in BRICS. This is by no means a major technological problem and only needs the will for such an implementation.

US hegemony is not a good thing for the world. During the days when the US exercised this power more discreetly, it may have not been seen as such a problem. But Trump has bared the ugly teeth of its power, that it can and will exercise it it without any scruples, and there is no going back.

There are still a lot of issues that need to be addressed before the BRICS countries have a smoothly running system that enables them to bypass the US dollar and the SWIFT system in trade. But once they get it going, you can expect many of the rest of the world to join up so that they too can achieve more economic independence. For that reason, expect the US to make every effort to sabotage the process, through its client regimes or by directly overthrowing the leaders of those countries leading the change, as they did with the leaders of the NAM.

The thing that bugs me about this is the deliberate attempt to draw parallels between the Iran War (which the U.S. openly and stupidly started) and the Ukraine war (which Russia started because Putin never got over the fact that several of the *.S.S.R.s didn’t want to be tied to Russia anymore). The whole idea that Zelensky is just a ‘proxy’ for Western Imperialism is, frankly, insulting to Zelensky and Ukraine in general.

All of this deliberate confusion of facts on the ground is in Russia’s favour, of course, as it allows them to not talk about the fact that up until the aftermath of WWII, Russia was part of the settler-colonial West. Just ask anybody in Eastern Europe. Heck, Russia’s actions in Ukraine are pretty much them trying to re-assert colonial ties.

Of course, it’s not as if China doesn’t also have a centuries-long history of being a colonial power: just ask Tibet. The other three major nations are all ex-colonies, so they have a lot more obvious reasons to want to stand together amongst themselves, but standing along with Russia and China kind of blunts any attempt at tying this to post-colonial ethics; from those two points of view it is entirely about breaking the U.S. stranglehold so they can do what they want, and if BRICS actually does become a major thing I have little doubt there will be attempts by one or both of those two to centralize things more under their control if possible.

There are lots of reasons to dislike the current system: Greece and Italy had serious economic problems when joining the E.U. and Germany’s insistence on holding the economic rules absolutely did not help; people have been complaining for years (and for good reason) that one of the deliberate features of the World Bank seems to be to make it as punishing as possible for a country to use them to actually get back on its feet without ending up in massive debt again. But I’m having a real problem seeing how BRICS has any chance of being better given some of the people and politics behind it.

… their proxy, the Volodymyr Zelenskyy-led Ukrainian government against Russia.

Even before I read Jenora Feuer’s well-informed comment, this phrase waved a big red flag to me. Parroting Putin never inspires any confidence in any words accompanying it.

As for the world’s currencies, trying to patch together a “just” system requires a lot more economic changes than implementing one more exchange hub.

I hesitate to comment after Jenora’s excellent comment (#1). You have a much better grasp of this than I ever will.

My meagre understanding pretty much boils down to: monopolies bad, competition good. SWIFT currently monopolises global trade. Am I wrong then to think that the emergence of a competitor, even one including a dirtbag like Russia, is a good thing? I can’t see BRICS being used in the West anytime soon, but its mere existence might drive SWIFT to implement some changes for the better. Maybe?

” But I’m having a real problem seeing how BRICS has any chance of being better given some of the people and politics behind it.”

Yeah, just seems like a different pack of arseholes rather than a significant improvement

Despite the awful human rights violations of China, Russia and other countries, the abovementioned power of the World Bank and IMF has probably claimed millions of early deaths due to the draconic conditions imposed. So let us dynamite the position of the $ as the universal reserve currency.

The “B” in BRICS almost elected a Trumpist president last Sunday and all indicates that said person will probably win the runoff election later this month as well. Trump will soon have indirect control of all of South America and part of this economic bloc. I doubt that the US will be worried at all.

PS: I’m in a subdued mood because I didn’t forget to take my meds today. Hooray!

I’m with file thirteen @#3 on this one.

Allowing one country to control the chokepoint of trade is not a good thing. Even if the rival system is not ideal, the fact that all the other countries now have a choice tends to put a check on the monopolist. This becomes even more important when the US president is Trump who thinks nothing of imposing sanctions on countries on a whim.

A better alternative to SWIFT would be a good thing. Even if just at a technical level, SWIFT is outdated. It isn’t likely to happen though, BRICS has been arguing and negotiation about an alternative for more then two decades now. Exactly why negotiations have not gone anywhere is not clear but it’s easy to guess, most of these countries would want to control the running of the system, who is let in and how their currency is traded. Not all of them can be in charge and power sharing agreements for a complex system are very difficult to design. It is the perennial problem for the BRICS countries, the only thing they have in common is a desire to go around the US sometimes. Otherwise they argue all the time and each would like to dominate the group.

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