The North-South divide is increasing, and the conflict of West vs rest is rising. Although the era of Cold War has ended but the global leadership must find a way for a multipolar homogeneous world for peace and prosperity by saving mother earth from the vagaries of climate change and for sustainable development. — Dr. Dhanpat Ram Agarwal

The recently held XVI conference of BRICS countries at Kazan, Russian Federation on 22-24 October is considered to be unification of the forces of the emerging economies from the three continents of global south namely Latin America, Africa and Asia. The Kazan Summit was a “BRICS Plus” Dialogue with participation of EMDCs from Africa, Asia, Europe, Latin America and Middle East under the motto: “BRICS and Global South: Building a Better World Together.”

The Kazan Declaration is the reflection of the solidarity of the developing countries and demands reforms and democratisation of the Bretton Woods System. There has been changes in the demography and the share in the global income of the major constituents of the member countries since after the establishment of the World Bank and IMF in 1944 and therefore the hegemony of the West and specially of United States cannot be allowed indefinitely. The New Development Bank for the BRICS countries is gaining parallel strength over the years. The salient features of the Kazan declaration were inter alia to the use of national currency in the bilateral trade instead of US Dollar. India and Russia have been doing bilateral trade in Rupee as well as in Rouble and similarly China Russia trade is happening in Chinese Yuan. Both China and India are increasing the use of their respective local currencies in financial transactions between BRICS countries and their trading partners including settlements in local currencies in line with BRICS Cross-Border Payments Initiative (BCBPI). Inter-BRICS trade has increased by 65% between 2017 and 2022 and has reached to US$ 614.8 billion. Almost 90% of trade between Russia and China is in Yuan. Saudi Arabia and UAE are gradually phasing out petrodollar and are working out payments with China, India and others in national currencies. Africa has made the Pan-Africa payment and settlement system (PAPSS), Mercosur countries are also looking for trade in their own currencies under the leadership of Brazil . Asian has also announced recently in May 2023 to trade in local currencies. Therefore a change is taking place to replace US dollar as a currency of international trade but it will take time much longer than expected to find a common currency for international trade as a substitute for US dollar. However there is a silver lining.

There were also discussions on the unilateral economic sanctions by US and specially for freezing of Russian Forex Reserve of US$ 300 Billion. It may be important to know that the International Emergency Economic Power Act (IEEPA) 1977, grants US President powers to regulate commerce after declaring national emergency and allows freezing of assets through’ Office of Foreign Assets Control (OFAC), a division of US Treasury Department, to impose sanctions on States, individuals or entities involved in terrorism, cybercrimes or threats to US foreign policy. 

The Kazan Declaration has therefore taken deep concern about the disruptive effects of unlawful unilateral coercive measures including illegal sanctions on the world economy, international trade and the achievement of the sustainable goals. Such measures undermine the UN Charter, the multilateral trading system the multilateral agreements on sustainable development and on environment. These sanctions also negatively impact economic growth, energy and food security exacerbating poverty and health related challenges.

The Kazan Declaration has also emphasised for the reform of the Bretton Woods Institutions which includes increased representation of developing countries including a merit-based inclusive and equitable selection process for the top positions at IMF and the World Bank. 

The global economic system and the financial architecture is in the process of a transition from a bipolar heterogeneous world of Cold War era to a multipolar homogeneous world with a short term stop gap of unipolar liberal capitalism. It was thought that globalisation and market capitalism will remain under the domain of US and the West but today the situation is changing with European economy under deep recession coupled with inflation or stagflation with the exception of Spain and Greece. 

The US is under huge debt burden. According to the latest published data of US Treasury department on its website www.federal data.treasury.gov, the US national debt is US$ 35.46 trillion which is 123% of its GDP of US$28.82 trillion as on October 2024. The global economy is also carrying an all-time high debt burden which is US$ 313 trillion almost three times of the global GDP of US$ 105 trillion as per the global debt monitor published by Institute of International Finance (IIF). 

Under such a situation the question is about the intrinsic worth of US dollar particularly when it is no longer pegged with gold since 1973 when President Nixon openly announced its withdrawal from the commitments made in 1944 that it would return one ounce of gold against a parity of US$35. Today the gold is ruling at US$ 2655 per ounce and therefore it’s validity as international currency of reserve has lost and there is a need to redefine the international financial system. 

In the recently held BRICS summit the members have discussed about the way out for an alternate currency. China’s Cross-Border Interbank Payment System (CIPS) is already an attempt for the SWIFT system for the banking transactions. President elect Trump has issued warning for a differential high tariff for imports from a country which opposes the supremacy ofUS dollar. Although US dollar occupies 58% of the forex reserve but its importance as a currency for international transactions is still above 88 per cent. (see Chart)

To conclude it may be said that the time has come for an introspection by the global community to look for the challenges of sustainable development in the light of global warming, growing inequality, increasing global debt along with the acute problems of poverty, unemployment, cybercrime, terrorism and the geopolitical disturbances around the World. The root cause is the greed for money and the thrust for economic power through illegitimate way of exploitation of the natural resources and unbridled consumption. The North-South divide is increasing, and the conflict of West vs rest is rising. Although the era of Cold War has ended but the global leadership must find a way for a multipolar homogeneous world for peace and prosperity by saving mother earth from the vagaries of climate change and for sustainable development.