Will BRICS Local Currencies Dethrone the US Dollar? Oil, Gas & Depreciation Fears

The dominance of the US dollar in global trade is facing a potential challenge from the BRICS nations (Brazil, Russia, India, China, and South Africa). A key aspect of this challenge involves the use of local currencies for international transactions, particularly in the oil and gas sector. But how realistic is this prospect, and what would be the impact on the US dollar?

BRICS members view the US dollar as an obstacle to their economic growth. Reliance on the dollar exposes them to fluctuations in US monetary policy and hinders their economic autonomy. The desire to bypass the US dollar is driving their efforts to promote trade in their own currencies.

The BRICS Oil & Gas Challenge to the US Dollar: The central question is whether BRICS can convince major oil-producing nations to accept local currencies, instead of the US dollar, for oil and gas trade. However, the U.S. dollar could depreciate if BRICS convinces Gulf countries to accept local currencies for oil and gas trade. This is a significant hurdle, but some developments are already underway.

Gulf States Shifting Away From the Dollar? Oil-producing countries like the United Arab Emirates (UAE) and Saudi Arabia are beginning to accept local currencies for exporting certain commodities. This marks a subtle but important shift away from the traditional dollar-dominated system. This trend, if amplified, could indeed lead to a depreciation of the US dollar.

Trump's Warning and the Reality: U.S. President-elect Donald Trump has warned the BRICS countries that if they attempt to replace the “mighty U.S. dollar” they would face “100 percent tariffs and should... While such threats loom, the economic reality is that the global landscape is changing. The BRICS nations are increasingly important players in the world economy, and their moves cannot be ignored. While some reports indicate setbacks - Therefore, the BRICS idea of using local currency for oil and not the US dollar is not progressing but failing. - the ambition remains.

The Impact of BRICS Local Currency Trade: If the BRICS nations successfully transition to using local currencies for a significant portion of their trade, particularly in vital sectors like energy, the US dollar could face considerable downward pressure. A weaker dollar would have far-reaching consequences, affecting everything from import prices to the value of US assets.

Is the US Dollar Losing Its Grip? The future of the US dollar's dominance is uncertain. While the transition to local currencies faces challenges, the ambition of the BRICS nations and the changing global economic landscape suggest that the dollar's reign may face increasing challenges in the years to come. Also Read: BRICS: 5 Countries Pay 93% of Trade in their own currencies within the bloc, signaling a move towards greater economic independence.

Ultimately, the extent to which the US dollar depreciates will depend on the success of the BRICS nations in fostering trade in local currencies and convincing key oil-producing countries to participate in this new system. The situation remains fluid, and the potential impact on the global economy is substantial. However, the U.S. dollar could depreciate if BRICS convinces Gulf countries to accept local currencies for oil and gas trade. Oil-producing countries like the United Arab Emirates (UAE) are key to this shift.