BRICS is flexing its arms as its influence in the oil sector grows rapidly after the expansion in August. The induction of oil-producing countries like Saudi Arabia, the UAE, Egypt, Iran, and Ethiopia made the BRICS take a large share of the oil and gas markets. Argentina is the only new country in the bloc that does not produce and export oil to the West. The BRICS now control 42% of the global oil sector, and this development might put the US dollar in danger.
The US sanctions against Russia are working as the country’s economy is receiving lower revenues for goods. However, the move has a flip side, as it brought BRICS and other developing countries together.
BRICS: Oil Influence Grows, Local Currencies Could Be Accepted Instead of the US Dollar
BRICS members India and the UAE recently settled an oil deal by paying in Rupee and not the US dollar. Saudi Arabia also recently mentioned that the Kingdom is open to accepting local currencies for oil deals. This puts the US dollar on the back foot as BRICS countries could dictate the rules for future oil trade deals.
If BRICS slowly yet steadily reduces the US dollar for oil payments, the American economy could take a beating. Read here to know how many sectors in the US could be impacted if BRICS stops paying in the dollar.
Several oil executives believe that the US sanctions on Russia led to BRICS gaining influence in the oil sector. Russell Hardy, CEO of oil trading firm Vitol said that the sanctions made BRICS band together as a group. “Looking at the oil markets today, the Western sanctions on Russia are working. They’re working in the sense that they’re creating less or lower revenues, lower invoice prices for Russian goods.”
However, he said that on the flip side, the US dollar is losing as other countries want to divest from the currency. “The flip side of sanctions is that it is creating stronger bonds between BRICS countries, which in turn is a sort of an opposite force to Western politics,” he said.