The summer-long border dispute between India and China in Doklam/Donglang threatened to upstage the BRICS summit, with some even speculating that Indian Prime Minister Narendra Modi would back out of the summit at the last minute.
Instead, the dispute thawed at the last minute, with both sides making vague but hopeful pledges to engage in direct dialogue in order to avoid such flare-ups in the future. It is anyone’s guess how long this placidity will last, but the epic divide between Modi and Chinese President Xi Jinping that many had expected – and that those who wish failure upon the BRICS hoped for – didn’t amount to a ton of bricks.
Ultimately, there were no breakthroughs between the two sides but nor were there open disagreements. By agreeing to name several groups based in Pakistan as terrorists, China even threw Modi a proverbial bone that he can chew on for long enough to realize that progress on the China-Pakistan Economic Corridor is only going to intensify.
Not to be outdone by Narendra Modi, Kim Jong-un’s subterranean detonation of what many believe to be a hydrogen bomb threatened to steal the show, but in fact, it only served to test the strength of the joint Chinese/Russian position on Korea.
In the end China’s and Russia’s resolve only became firmer, and the test led US President Donald Trump to produce one of his most absurd tweets to date when he threatened to break off trade ties with every nation that does any level of business with Pyongyang. The only question from there on in would be, whom should he break off trade ties with first, Saudi Arabia, Germany, France, Egypt or India?
A BRIC worth its weight in gold
Days before the official beginning of the summit, China announced that it was launching a crude-oil futures contract that will be priced in gold-backed yuan that can be easily converted to gold at the exchanges in Shanghai and Hong Kong.
The “Cold War for Oil” is officially on, and the seemingly unassailable Brent crude futures are now in for serious competition.
In 2000, Iraq began exporting oil in euros, while Libya was aiming to create a pan-African gold-backed dinar just prior to the 2011 NATO invasion that turned the country into Europe’s most silently feared failed state. Subsequent WikiLeaks releases of Hillary Clinton e-mails revealed that the United States had a clear aim of disrupting Muammar Gaddafi’s golden years with the years of hell, which Libya is still very much in the midst of.
With China developing its own proverbial “black gold” program, things will not be so easy in terms of disruption, but the panic is already palpable.
In May, China and Russia agreed to begin extending bilateral trade in local currencies, while Turkey and Russia expressed a commitment to work toward a similar goal.
With the BRICS bloc’s New Development Bank, the ability to buy and sell energy in a gold-backed Asian currency and now the possibility of a BRICS-wide cryptocurrency, the eastward expansion of the US dollar looks to be in serious jeopardy.
Special Drawing Might
The former head of the International Monetary Fund, Dominique Strauss-Kahn, was a known advocate for Special Drawing Rights. SDR is a means of exchange employing a polling of the value of the US dollar, euro, British pound and Japanese yen.
Strauss-Kahn, who was once a favorite for the presidency of France, had his career ruined when arrested and jailed in New York for allegedly assaulting a hotel maid. The charges were later dropped, but not before the crown prince of SDR was forced out of power at the IMF without any real chance of becoming the president of France.
While Special Drawing Rights include a dollar value, a future model of pooled currencies may not.
With further cooperation among BRICS countries in the realm of trading in local currencies, creating a unique cryptocurrency and with China offering gold-backed oil futures contracts, the next logical step might very well be a kind of formal BRICS means of exchange modeled on SDR.
A BRICS version of Special Drawing Rights could ostensibly combine the value of existing currencies among BRICS members (Brazil, Russia, India, China and South Africa) with the possible added benefit of a metallic standard to create instant de facto confidence in such a means of exchange.
Many means to one end
The possibilities for the BRICS or various members of the bloc creating a new currency or otherwise using existing currencies to dump the dollar is one that is not only real, it is happening now.
It is no longer a question of when or if, but how. Whether it’s a cashless mega-crypto, a gold-backed super-yuan or a combination of some or all of the above, the dollar is being isolated, which is the only kind of isolation that the United States ultimately fears.
While Donald Trump’s threats to isolate his country from global trade, this time with North Korea as the excuse of the week, the fact is that the US markets are only as isolated as US purchasing power. This is broadly an internal US issue, but the power of the dollar and the importance this holds to America’s economic might and geopolitical prestige has the potential to unleash a more powerful earthquake than the one that just rocked the soil beneath the Democratic People’s Republic of Korea.
Money transcends borders and border disputes
The border disputes between China and India, disputes that date back to 19th-century British imperial rule in South Asia, were never going to be solved in one summit, and they may not even be solved any time soon.
The ability of the BRICS bloc to create and put serious weight behind a new monetary mechanism of world trade will inevitably draw the interest of the rising and developing economies of the wider global East and South. This is something that will move even quicker than China’s internal economic growth since Deng Xiaoping’s revolutionary reforms of 1978.
In this sense, India’s lack of enthusiasm for cooperation with China will doubtlessly be tempered by the draw of a monetary-cooperation scheme that could help solve India’s monetary problems, which have been exacerbated under the Modi premiership.
Far from being dis-unified in the areas that matter, the BRICS are quietly building a monetary edifice that, along with the physical infrastructure of One Belt, One Road, will expose the cracks and insufficiencies of the dollar economy and all it has come to stand and fall for.