The dominant role of the US dollar in the global economy is a source of frustration to some members of the BRICS coalition, especially Russia. That is because Russia has been sanctioned by the West in ways that make it nearly impossible to engage in dollar-denominated transactions. Consequently, Russian President Putin is vetting the idea of creating a BRICS currency and, more importantly, creating alternative channels for engaging in international transactions.

One problem for Russia is that, after the start of the war in Ukraine, the major industrial economies banned Russian banks from using SWIFT, the widely used system for messaging transactions worth trillions of dollars. At the latest meeting of BRICS leaders, Russia proposed a new system for transaction messaging, which it calls the “BRICS bridge.” President Putin said, “We are not rejecting or fighting the dollar. But if we are not given the chance to use it, what can we do? We are then forced to look for alternatives.”

Meanwhile, other BRICS members likely have concerns about the possibility of future Western sanctions. However, even if such an alternative system is introduced, if it is not accepted by the large Western powers, it might not be efficacious for facilitating much of the trade and cross-border financial movements that take place in the global economy. On the other hand, if this alternative system is introduced, it could lead to greater fragmentation of the global economy.

Also, at the latest BRICS meeting, Russia promoted an idea that had first been discussed at the last BRICS meeting. That is the creation of a BRICS currency. While Russia is especially keen on this idea, it is not clear that the other members are particularly interested. For example, the finance ministers of China, India, and South Africa did not show up for a meeting last month to discuss this proposal. Their aversion might reflect concern about US intentions. The US government has said it will sanction third countries that facilitate Russia’s war in Ukraine. That can include facilitating some types of trade that have been sanctioned by Western powers.

Finally, the BRICS countries hope to create a more cohesive organization that might eventually challenge the dominance of the G7. The BRICS countries account for a bit more than one-third of global GDP and a larger share of trade in certain commodities. For example, President Putin said, “BRICS countries are among the world's largest producers of grains, legumes, and oilseeds. In this regard, we proposed opening a BRICS grain exchange.” Yet the problem is that the BRICS countries have little in common with one another in terms of income levels, political systems, economic structures, and geopolitical alliances. This is very different from the G7, which is a highly cohesive group. Thus, the potential for cooperative behavior is limited, especially as many BRICS countries remain heavily reliant on G7 countries for trade and investment.