Brics currency branded ‘fantasy’ as Trump threatens tariffs

• UAE joined Brics in January
• Talk of challenging dollar
• Sanctions could be sidestepped

Suggestions that the UAE would drop its dollar peg in favour of a Brics currency have been described as “fantasy” by the head economist at Standard Chartered bank.

The UAE, along with Iran, Egypt and Ethiopia, joined the non-Western-aligned Brics group – named for its earliest members Brazil, Russia, India, China and South Africa – in January this year.

Saudi Arabia and Argentina were invited to join the global economic co-operation organisation at the same time as the UAE, but have yet to do so.

A Brics currency was first suggested after the 2008-9 financial crisis as a challenge to the dollar, the global reserve currency used for almost 80 percent of trade worldwide.

The idea gained more prominence after the US and European Union imposed sanctions on Russia over its invasion of Ukraine in 2022.

But earlier this month the US president-elect, Donald Trump, said Brics nations would be hit with 100 percent tariffs should any plans for a currency go ahead.

Eric Robertsen, managing director, global head of research and chief strategist at Standard Chartered, said: “When people talk about Brics, there’s this rush to assume that it means that people are going to abandon their currency or abandon the dollar for something different.

“I think it’s a bit of a fantasy.”

The Gulf’s currencies have been linked to the dollar for decades: the Omani riyal since the 1970s, the Qatari riyal since mid-2001 and the Bahraini dinar and the UAE dirham officially since early 2002. The latter three have effectively been linked to the dollar since the 1980s, as has the Saudi riyal.

Creating a euro-style Brics currency would be complicated, particularly to marry the varying political and economic systems of members to one form of payment.

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“No country that has a freely floating, free-trading currency is going to exchange that for a Brics currency unit which is going to be illiquid, non-convertible, virtually useless in the global economy and will be backed by two currencies that are incredibly weak, Brazil and China,” Robertsen said.

Saudi Arabia, the UAE and Iraq have previously looked into potential alternatives to the dollar for non-oil global trade, and the UAE has worked with India on boosting non-oil commerce in rupees. 

At the same time, China has promoted the yuan with major energy and commodity exporters, including Saudi Arabia.

Scott Livermore, chief economist for the Middle East at Oxford Economics, said: “You could well see greater use of individual currencies for some bilateral transactions, but the countries that form the Brics are so varied that it is unlikely a common currency would be introduced. The US dollar is likely to remain the dominant currency for trade and finance.”