Authored by Pepe Escobar,

The oligarchy that really controls the Empire of Chaos has hit the panic button, as the structural contours of Hegemony seriously wobble.

The petrodollar is one of the key features of this Hegemony: a recycling machine channeling non-stop buying of US Treasuries then spent on Forever Wars. Any player even thinking of diversifying from this infernal machine is met with asset freezes, sanctions – or worse.

At the same time, the Empire of Chaos cannot demonstrate raw power by bleeding itself dry in the black soil of Novorossiya. Dominance requires ever-expanding – plundered – resources, side by side with that non-stop printing of US dollars as a reserve currency to pay for astronomic bills. Additionally, borrowing from the world works as imperial financial containment of rivals.

But now a choice becomes imperative – an inescapable structural constraint. Either keep astronomical spending on military dominance (enter Trump’s proposed $1.5 trillion budget for the Department of War.) Or keep ruling the international financial system.

The Empire of Chaos cannot do both.

And that’s why, when the math was done, Ukraine became expendable. At least in theory.

Against the weaponization of the US Treasury bond system – de facto monetary imperialism – BRICS incarnate the strategic choice of the Global South, coordinating a drive towards alternative payment systems.

The straw that broke the steppe camel’s back was the freezing – actually stealing – of Russian assets after the expulsion of a nuclear/hypersonic power, Russia, from SWIFT. Now it’s clear that Central Banks everywhere are going for gold, bilateral deals and considering alternative payment systems.

As the first serious structural shock to the system since the end of WWII, BRICS is not overtly trying to overturn the system – but to build a viable alternative, complete with large-scale infrastructure financing bypassing the US dollar.

Venezuela now illustrates a critical case: Can a major oil producer survive outside of the US dollar system – without being destroyed?

The Empire of Chaos has ruled, “No”. The Global South must prove it wrong. Venezuela was not that critical on the geopolitical chessboard as it represented just 4% of China’s oil imports. Iran in fact is the crucial case, as 95% of its oil is sold to China and settled in yuan, not US dollars.

Iran though is not Venezuela. The latest coordinated intel op/terror attacks/regime change attempt on Iran – complete with a pathetic mini-Shah refugee in Maryland – miserably failed. The threat of war, though, remains.

BRICS Pay, The Unit, or CIPS?

The US dollar now represents less than 40% of global currency reserves – the lowest in at least 20 years. Gold now accounts for more global foreign exchange reserves than the euro, the yen and the pound combined. Central Banks are stockpiling gold like crazy, while BRICS accelerates the test of alternative payment systems in what I previously defined as “the BRICS lab”.

One of the scenarios being directly proposed to BRICS, and designed as an alternative to cumbersome SWIFT, which does at least $1 trillion in transactions a day, features the introduction of a non-sovereign, blockchain-based trade token.

That’s The Unit.

The Unit, correctly described as “apolitical money”, is not a currency, but a unit of account used for settlement in trade and finance between participating countries. The token could be pegged to a commodity basket or a neutral index to prevent domination by any single country. In this case it would work like the IMF’s Special Drawing Rights (SDRs), but within a BRICS framework.

Then there’s mBridge – not part of the “BRICS lab” – which features a multi-central bank digital currency (CBDC) shared among participating central banks and commercial banks. mBridge includes only five members, but that includes powerful players such as the Digital Currency Institute of the People’s Bank of China and the Hong Kong Monetary Authority. Other 30 countries are interested to join.

mBridge tough was the inspiration behind BRICS Bridge, still being tested, which aims to speed up a range of international payment mechanisms: money transfers, payment processing, account management.

It’s a very simple mechanism: instead of converting currencies into US dollars for international trade, BRICS countries exchange their currencies directly.

The New Development Bank (NDB), or the BRICS bank, established in Shanghai in 2015, should be the key connectivity node of BRICS Bridge.

But that, for the moment, is on hold – because all the NDB’s statutes are linked to the US dollar, and that must be reassessed. With the NDB integrated into the broader financial infrastructure of BRICS member-nations, the bank should be able to handle currency conversion, clearing, and settlement under BRICS Bridge. But we’re still very far away from that.

BRICS Pay is a different animal: a strategic infrastructure for building a self-described “decentralized, sustainable, and inclusive” financial system across BRICS+ nations and partners.

BRICS Pay is on pilot mode all the way to 2027. By then the member-nations should start discussing a deal to set up a settlement unit for intra-BRICS trade no later than 2030.

Once again, that will not be a global reserve currency; but a mechanism offering a “parallel, compatible option” to SWIFT within the BRICS ecosystem.

BRICS Pay, for the moment, is also a very simple system: for instance, tourists and business travelers may use it without opening a local bank account or exchanging currency. They simply link their Visa or Mastercard to the BRICS Pay app and use it to pay via QR code.

And that’s exactly the crucial problem: how to circumvent Visa and Mastercard, under US financial system vigilance, and incorporate BRICS members cards such as Union Pay (China) and Mir (Russia).

Overall, for bigger and more complex transactions, the problem of bypassing SWIFT persists. All these “BRICS lab” tests need to solve two key problems: messaging interoperability – via secure, standardized data formats; and processing the actual settlement, as in how funds move via Central Bank accounts bypassing the inevitable threat of sanctions.

Internalization of The Yuan, Or a New Reserve Currency?

The inestimable Prof. Michael Hudson is on the global forefront of studying solutions to minimize US dollar hegemony. He is adamant that “the line of least resistance is to follow the already-in-place Chinese system.” That means CIPS – the China International Payment System, or Cross-Border Interbank Payment System, yuan-based, and already extremely popular, used by participants in 124 nations across the Global Majority.

Prof. Hudson insists “it’s very hard to create an alternative. The Unit’s principle (his emphasis), reported to be 40% gold and the rest in member currencies is fine. But this is best done through a new Keynes-style central bank to denominate debts and claims for payment to settle imbalances among member countries – along the lines of the Bancor.”

The Bancor was proposed by Keynes in Bretton Woods in 1944 – to prevent serious discrepancies in external balances, protectionism, tariffs and the scam of nations built up as tax havens. It’s no wonder the hyper-Hegemonic US at the end of WWII vetoed it.

In a new paper on the Weaponization of Oil Trade as the Bedrock of the US World Order, first published at democracycollaborative.org, Prof. Hudson clarifies how “Russian and Venezuelan freedom to export oil has weakened the ability of US officials to use oil as a weapon to squeeze other economies by threatening them with the same withdrawal of energy that has wrecked German industry and price levels. This supply of oil not under US control thus was held to be an infringement of the US rules-based order.”

And that brings us to one of the key reasons for the BRICS drive towards alternative payment systems: “The US foreign policy of creating choke points to keep other countries dependent on oil under US control, not oil supplied by Russia, Iran or Venezuela, is one of America’s key means of making other countries insecure.”

Prof. Hudson succinctly lines up the five imperatives for the Empire of Chaos: “control of the world’s oil trade is to remain a US privilege”; “oil trade must be priced and paid for in US dollars”; the petrodollar must rule, as “international oil-export earnings are to be lent to, or invested in, the United States, preferably in the form of US Treasury securities, corporate bonds and bank deposits”; “green energy alternatives to oil are to be discouraged”; and “no laws apply to or limit US rules or policies.”

Paulo Nogueira Batista Jr, one of the co-founders of the NDB, and its vice-president during 2015-2017, advances in parallel with Prof. Hudson, designing a viable path towards a new international currency in a paper that he is currently finalizing.

Considering that the US dollar system is “inefficient, unreliable and even dangerous”, and has become “an instrument of blackmail and sanctions”, Batista Jr cuts to the chase along the same lines of Prof. Hudson, arguing that “the only scenario that may present some viability would be the large-scale internationalization of the Chinese currency (…) But there is a long way to go before it can replace the dollar in a significant way. And the Chinese are reluctant to try.”

Batista Jr then proposes a solution similar to Prof. Hudson’s: “A group of countries in the Global South, something like 15 to 20 countries, which would include most of the BRICS and other emerging middle-income nations”, could be at the forefront of creating a new currency.

Yet “a new international financial institution would therefore have to be created – an issuing bank, whose sole and exclusive function would be to issue and put into circulation the new currency.”

That sounds very much like Bancor: “This issuing bank would not replace the national central banks and its currency would circulate in parallel with the other national and regional currencies existing in the world. It would be restricted to international transactions, with no domestic role.”

Batista Jr clarifies that “the currency would be based on a weighted basket of the currencies of the participating countries and would therefore fluctuate on the basis of changes in these

currencies. Since all currencies in the basket would be floating or flexible, the new currency would also be a floating currency. The weights in the basket would be given by the share of each country’s PPP GDP in the total GDP.”

Inevitably, “the high weight of the Chinese currency, issued by a country with a solid economy, would favor confidence in the backing and in the new reserve currency.”

Batista Jr is fully aware of “the risk that the initiative will provoke negative reactions from the West, which would resort to threats and sanctions against the countries involved.”

Yet the time for action is pressing: “Will we gather economic, political and intellectual efforts to get out of this trap?

The costs of maintaining Hegemony are becoming prohibitive. BRICS, gathering forces for the annual summit later this year in India, must capitalize on the fact that we are fast approaching the structural change moment when the Empire of Chaos loses the ability to unilaterally enforce its will – except via all-out war.