BRICS Builds a Parallel Financial System to the Dollar

The status of the dollar as the preferred reserve currency remains central to global power. Most international trade in oil, machinery, and raw materials is priced and settled in dollars, which forces central banks, multinational firms, and trading nations to hold substantial dollar reserves.

That requirement creates a self-reinforcing cycle in which worldwide demand for dollars props up the currency and allows Washington to borrow more cheaply than almost any rival.

Around half of all United States (US) banknotes, especially high-denomination $100 bills, circulate outside America, but the real leverage lies in US government bonds. Foreign central banks and sovereign funds hold close to 25% of publicly held US debt, roughly $9 trillion. If trade were not so heavily denominated in dollars, investors would probably demand higher interest rates before lending to Washington. In 2022, the US imported about $1 trillion more than it exported, effectively financing that gap on the back of dollar dominance.

Russia’s efforts since 2022 to reroute oil sales into Chinese yuan and Emirati dirhams to bypass sanctions have become representative of a broader trend. Indian refiners that once relied almost entirely on dollar payments now sometimes settle Russian crude purchases in yuan or local currencies. What began as sanctions avoidance has become part of a deliberate dedollarisation strategy, driven both by domestic doubts about US fiscal stability and by the determination of rising powers to escape Washington’s financial reach.

China has, since 2017, steadily reduced its reliance on the dollar in cross-border transactions and domestic savings, pursuing a wider ambition to build a yuan-centred system less exposed to US leverage. That project has a flagship platform in BRICS, originally Brazil, Russia, India, China, and South Africa, and now enlarged into BRICS+ with Egypt, the United Arab Emirates, Ethiopia, Indonesia, and Iran. Together these states account for about 45% of the global population, roughly 35% of global output, and close to 30% of the world’s oil production, giving the bloc real weight.

The stated goals of the group, to expand trade settlement in local currencies, develop independent payment systems, and grow the Shanghai-based New Development Bank (NDB), point towards a slow decoupling from Western-dominated financial structures. The NDB remains modest compared to the World Bank, but its increasing use of local currency lending signals a bid for greater financial autonomy among members that once depended heavily on Western capital markets.

Data from the Bank for International Settlements shows that the dollar still features in about 88% of global foreign exchange trades, while China’s yuan is involved in roughly 7%. Yet the dollar share of global reserves has slipped to its lowest level in 20 years. Emerging market central banks are diversifying into gold as insurance against US debt and sanctions risk, with the gold share of their reserves more than doubling over the past decade, led by China, Russia, and Türkiye.

Commodity flows reflect the same pattern. Russia sells much of its oil to India, China, and Turkey in local currencies. Saudi Arabia has explored yuan pricing for part of its oil exports, an idea that would have been unthinkable not long ago. Each step does only a little damage to dollar primacy, but together they chip away at its monopoly position.

For South Africa, still the smallest economy among the original BRICS members, the bloc offers both economic options and political cover. It allows Pretoria to diversify trade and investment away from traditional Western partners and deepen links with China, India, and the Gulf states. Recent friction with Washington over South Africa’s case against Israel at the International Court of Justice, and its ties with Russia and Iran, has anchored its commitment to the BRICS project more firmly.

For the first time in decades the dollar faces not just scattered rivals, but an organised institutional architecture designed to limit its reach. For many observers this marks more than a drift away from the West and looks increasingly like a conscious turn against its financial dominance.