As the dust settled from the Second World War, Washington emerged as the leading power in the collapsed world order. President Harry Truman recognized this chaos as an opportunity for the United States to act swiftly and assert the country’s dominance worldwide.
The Bretton Woods Agreement, which followed the Allies’ victory over the Nazis, established new international monetary systems, placing the U.S. dollar as the world’s reserve currency. Through the initiatives that stemmed from this agreement, the United States positioned itself as a hegemonic power, setting the stage for Washington’s unipolar moment.
The Cold War became the stepping stone for the United States to achieve its goal of becoming the world’s leading power, as it successfully deployed George Kennan’s strategy of containment to defeat the Soviets, a policy that should be endorsed today to protect the U.S. dollar. The glow of this unipolar moment is beginning to dull as new rising powers have emerged as challengers to the neoliberal world order. Among these, China and Russia have become the most prominent nations confronting the United States’ position in the new status quo. Their growing coalition directly threatens the U.S. dollar’s status as the world’s reserve currency.
BRICS, a coalition of nations that came together in 2006, seeks to leverage global resources in a manner that contrasts with the U.S.-dominated order. Among the group’s key objectives is a macroeconomic policy aimed at creating a new currency for the grouped countries, intended to facilitate economic transactions to deter U.S. interference.
BRICS, which consists of Brazil, Russia, India, China, and South Africa, has since expanded, with countries like Iran and Saudi Arabia joining in recent years. This expanded group now accounts for 35.6 percent of global GDP. As highlighted by Alexander Gabuev and Oliver Stuenkel in their Foreign Affairs report, over 40 other nations have expressed interest in joining BRICS, making it a viable alternative to organizations like the International Monetary Fund(IMF) and World Bank—both of which were created by the United States during its unipolar moment.
It is important to note that approximately 90 percent of all currency trading is conducted using the U.S. dollar, which enables Washington to easily extend and receive foreign loans. Additionally, the White House can deploy effective sanctions against adversaries because it is likely that millions of U.S. dollars are woven into these states’ economies. Signs of de-dollarization are already apparent, but with global oil trading conducted in U.S. dollars reportedly dropping by 20 percent according to a 2023 report.
The New Development Bank, a financial institution set up by BRICS nations, was established to allow member states to support each other financially, creating a rival to the IMF and World Bank. Although a new currency has not yet been released, Russia and Iran have argued that its implementation could shield countries from the crippling effects of sanctions. This is a critical economic weapon that has been effective in containing states like Iran and Russia. For example, during Donald Trump’s presidency, the sanction packages imposed on Iran were instrumental in curbing the country’s actions after the collapse of the nuclear deal. Similarly, U.S. sanctions following Russia’s invasion of Ukraine have severely damaged Russia’s domestic economy, leaving long-term recovery uncertain.
These sanctions would not have been as impactful without the dollar’s status as the global reserve currency. President Vladimir Putin has emphasized that one of his primary geopolitical goals is to undermine the U.S. dollar’s hegemony, which illustrates how vital U.S. sanctions are in curbing Kremlin ambitions.
Maintaining sanction power is crucial for containing the influence and capabilities of authoritarian regimes. While the BRICS currency initiative is still in its preliminary stages, with no specific release date and little detail about its structure, Washington must develop a strategy to contain this potential threat. Doing so is essential for countering the efforts of China, Russia, and Iran, all of whom are engaged in various forms of confrontation with the United States—whether through military actions in the South China Sea, the war in Ukraine, or Iran’s support for militant groups like Hamas.
In this geopolitical chess game, Washington must safeguard one of its most valuable assets—the U.S. dollar—from this emerging tactic, which its adversaries are deploying to diminish its global leadership.
