Are US sanctions resulting in economic integration of the BRICS?

The growing resort to economic sanctions by the US may be producing an unintended consequence: strengthening incentives across the emerging world to create alternative channels of trade, finance, payments, and connectivity. There is already evidence of this process. Following the sanctions imposed on Russia, trade was substantially redirected towards emerging economies such as China, India and the UAE, creating new commercial relationships and requiring new mechanisms for payments, banking and logistics.The India-Russia trade provides a particularly striking example. Bilateral merchandise trade expanded from barely $13 billion in 2021–22 to nearly $69 billion in 2024–25, while recent estimates suggest that around 96% of bilateral trade is now settled in rupees and roubles.The phenomenon extends beyond trade. IMF research finds that geopolitical and sanctions risk has contributed to reserve diversification towards gold among emerging-market central banks, while empirical research on Russia suggests that BRICS economic cooperation and improved cross-border payment capacity have facilitated its trade restructuring under sanctions.This does not mean that BRICS is on the verge of constructing a parallel economic order. For India's 2026 BRICS presidency, the opportunity lies in advancing an architecture of economic resilience in which countries have more currencies in which to trade, more institutions from which to borrow, more payment channels through which to transact, and more trade and connectivity corridors through which to engage with the world. In short, this is about optionality rather than opposition. THE SANCTIONS PARADOXThe international economic architecture that has shaped globalisation for decades has been built around concentration: international transactions concentrate around a relatively small number of reserve currencies, finance around a small cohort of payment systems and financial institutions, and trade around a few economic corridors.The dollar remains at the centre of this architecture, comprising 56.77% of global foreign-exchange reserves at the end of 2025, compared with 20.25% for the euro and just 1.95% for the Chinese renminbi. But there is also a gradual diversification at the margins. The IMF's residual category of other currencies increased to 6.13% of global reserves by the fourth quarter of 2025 – more than doubling since 2021. This is precisely why the current debate on replacing the dollar with another dominant currency, or "de-dollarisation", is neither imminent nor necessarily desirable. The more important phenomenon is currency diversification.The increased deployment of financial sanctions adds another dimension to this process. While governments and businesses have so far hedged against credit, exchange-rate, market, and political risk, they now need to manage sanctions and financial-infrastructure risk. This brings us to the new economics of diversification. The alternative payment arrangements, currency-settlement mechanisms, or trade corridors that may once have appeared inefficient in a more globalising world now resemble insurance in an increasingly fragmented geopolitical environment.Sanctions can therefore be construed as an accelerator rather than the fundamental cause of BRICS economic cooperation. Emerging economies were already seeking greater voice in global economic governance, expanding South-South trade and experimenting with local-currency settlement. Sanctions have increased the economic value attached to these initiatives.BRICS: SCALE AND BUILT-IN HETEROGENEITYThe expansion of BRICS has dramatically altered the economic geography of the grouping. Its 11 members now include some of the world's largest consumer markets, major energy producers, commodity exporters and substantial pools of investment capital.India, China and Indonesia provide demographic and market scale. Russia, Brazil and Iran add enormous energy and commodity resources. Saudi Arabia and the UAE connect BRICS with some of the world's largest pools of sovereign capital, while South Africa and Ethiopia strengthen its African presence. Taken together, the expanded grouping accounts for roughly half of the world's population and around 40% of global GDP measured at purchasing-power parity.Yet this apparent scale can be misleading. Economic weight is not synonymous with economic integration. BRICS has no common market, common external tariff or unified regulatory framework. Its members vary enormously in income, economic structure and geopolitical orientation. Each member's relationships with the US and the dollar-based financial architecture also differ substantially.Therefore, BRICS integration is unlikely to resemble the European Union. A more plausible outcome is a network architecture in which multiple currencies, payment mechanisms, development finance institutions, and trade corridors are connected through increasingly interoperable arrangements. In this context, four components are particularly important.The first is local-currency settlement. Rather than pursuing the nebulous idea of a BRICS currency and monetary union, a more pragmatic objective is to make it progressively easier for businesses to invoice and settle bilateral transactions in national currencies whenever commercially viable. While its existing strategy envisages 30% of financing in local currencies, the India-Russia trade experience demonstrates that local-currency settlement can move from political rhetoric towards commercial practice.The second is payment interoperability. Rather than constructing a centrally controlled BRICS payment system, members could make their national payment infrastructures increasingly interoperable while remaining subject to domestic regulatory, cybersecurity, and data governance requirements.The third is trade finance. Payment systems alone do not create commerce. Export credit, currency swaps, guarantees, insurance, liquidity facilities, and correspondent banking relationships are necessary if alternative trading arrangements are to achieve commercial scale.The fourth is development finance, in which BRICS already has a functioning institution, the New Development Bank (NDB). The question here is: can the NDB move from billions to trillions? While the NDB has approved 139 projects spanning transport, clean energy, water, urban development, and other sustainable development infrastructure, the $43 billion in approvals reveals the limits of what has been achieved. The infrastructure, climate transition, adaptation, and development finance requirements of emerging and developing economies amount to trillions of dollars. The NDB's present scale is therefore modest relative to the financing gap it was created to address.CONNECTIVITY IS THE MISSING ECONOMIC LINKThe geography of the expanded BRICS spans Asia, Africa, Eurasia, Latin America, and the Middle East. It encompasses major energy and commodity producers alongside some of the world's fastest-growing consumer markets. But these economies need to be connected.This requires a broader understanding of connectivity encompassing physical, digital, financial, regulatory and institutional connectivity. Ports and railways need to be complemented by efficient customs procedures. Trade corridors need financing and insurance. Digital payment systems require regulatory interoperability. Local-currency settlement requires adequate liquidity and hedging instruments.INDIA'S BRICS PRESIDENCY: DIVERSIFICATION WITHOUT DECOUPLINGThe next phase of BRICS, therefore, needs to be based upon additionality rather than substitution, i.e. offering more options to the developing world. Rather than redirecting trade away from the US, the objective should be to create a diversified portfolio of trade routes and supply chains so that economies are not excessively dependent on individual markets, maritime chokepoints, payment systems, or financing channels. Similarly, on the financing side, the developing world should not have to choose among the World Bank, regional development banks, the NDB, and private capital. They need more sources of finance, greater competition among lenders and instruments better adapted to their development circumstances.India is particularly well positioned to articulate this agenda because its own conception of strategic autonomy is not based upon economic disengagement. India simultaneously trades and invests with the US and Europe while maintaining deep relationships with Russia, the Gulf, Africa, East Asia and the wider Global South. Its economic interest lies neither in preserving excessive dependence upon existing structures nor in replacing one dependency with another.India's proposition for BRICS can therefore rest on three principles. Diversification and not decoupling; additionality and not substitution; and democratisation, not dewesternisation.This could translate into five practical priorities during India's presidency. First is pushing the NDB towards substantially greater local-currency financing. Second is greater interoperability among payment mechanisms. Third is trade and MSME financing through export credit, guarantees, insurance and liquidity facilities. Fourth is the creation of a coherent connectivity agenda encompassing physical corridors, ports, logistics, digital infrastructure and regulatory interoperability. Fifth is a push for greater representation of emerging economies within existing institutions such as the IMF, the World Bank, and the WTO.TO CONCLUDEWhile sanctions may consequently accelerate integration among BRICS economies, the grouping should resist turning that process into the construction of another closed bloc.A more ambitious vision is a plural global economic order in which countries possess overlapping economic relationships, those being multiple development banks, multiple trade corridors, multiple currencies for settlement, multiple sources of capital and multiple economic partnerships.That should be India's proposition for BRICS in 2026. That would represent a far more consequential transformation. From BRICS as an expression of political dissatisfaction with the international order to BRICS as a provider of global economic public goods.(Nilanjan Ghosh heads Development Studies at the Observer Research Foundation and serves as the operational and executive head of ORF's Kolkata Centre)- Ends(Views expressed in the piece are those of the author)Published By: Shounak SanyalPublished On: Sep 9, 2026 11:09 IST