- Goldman Sachs warns that rising tensions between BRICS and the US could push oil prices higher.
- Trump has strongly opposed BRICS’ move to reduce reliance on the US dollar, increasing geopolitical risks.
In the light of the current geopolitical tensions, Goldman Sachs has issued a warning that the standoff between the BRICS economic alliance and the United States could significantly impact global oil prices. Sanctions along with de-dollarization may cause an economic pressure with effects all over the world.
The United States of America’s president-elect, Donald Trump, has never been a fan of the BRICS countries’ alliance that comprises Brazil, Russia, India, China, and South Africa. Trump’s stance has not softened since his comeback to politics either. He stated that the United States would not allow the BRICS countries to try to dethrone the US dollar from the world market.
Trump has been clear in his messaging, stating that the BRICS countries should not shift away from the US dollar. In fact, he said last year, “BRICS countries moving away from the dollar while we stand by and watch is OVER.” This move by Trump shows the growing tension between the US and the BRICS alliance. These tensions were likely to have an impact on the world economy as well as the oil sector.
Impact on Oil Prices
Goldman Sachs has opined that the geopolitical tension could push up oil prices. According to the bank, Brent crude prices may hover between $70 and $85 a barrel and may soar to nearly $90 because of the sanctions on Iran and the turmoil in Russia’s oil supply. The absence of Russian oil supply is expected to diminish the market surplus and thereby lead to higher prices.
Analysts also point out that the lack of a clear vision of Trump’s foreign policies may lead to further aggravation of the situation on the global markets. There is still much uncertainty, but as the experience of the past has shown, geopolitical tensions usually result in an increase in oil prices. With the BRICS countries still striving to reduce their reliance on the dollar and facing more and more restrictions from the US, oil prices can be one of the first assets to respond.
BRICS Faces Internal Challenges
BRICS nations have made strides to reduce their reliance on the US dollar, but the alliance has internal issues. China has an economic problem, Russia is in a military and economic confrontation with Ukraine, Brazil has problems in the market, and India has a slow growth rate. These economic barriers make it challenging for BRICS to align themselves against the US.
However, BRICS has persisted in advocating for using local currency in trades to demystify the dollar. However, in the light of Trump’s presidency, the chances of the alliance achieving its goals remain questionable. As reported by CNF earlier, the U.S. government has already threatened to impose tariffs to counter the actions made by the bloc.
The current rising tensions in the US- BRICS trade relations have become a breaking point for world trade. The IMF’s chief, Kristalina Georgieva, announced that the threat of tariffs has already led to the increase of the long-term borrowing costs in the world. The measures planned by the new US administration are likely to create new challenges for BRICS economies, which are already coping with the shifting patterns of the world economy.
