When the President of Brazil announced Indonesia as a new official member of BRICS on January 7, 2025, public considered it as a bright hope for the domestic economy. Like many other countries, foreign trade is a significant source of income, so BRICS membership is expected to expand the market for Indonesia's export commodities.
According to some experts, BRICS, which is dominated by China as the country with the largest GDP among the other 4 members, is trying to emulate the G7 group of countries in Europe. This is implied in the main mission of BRICS which aims to reform financial institutions to improve the global economic situation.
More precisely, the BRIC nations considered that a new, more stable global currency with a less erratic exchange rate was essential. The goal of challenging the US dollar's supremacy was not clearly defined in the official declaration released in 2009, however, the USD exchange rate had dropped sharply soon after.
Photo: Illustration
Ambitions that ended in losses
In recent years, China and Indonesia have been using local currency (also known as local currency settlement, or LCS) in their bilateral trade. This method aims to reduce reliance on the dollar and make Indonesian exports more competitive in the global trade arena, according to a press release issued by the Indonesian Ministry of Trade on August 5, 2021.
The United States dollar flows in large amounts to the Middle East as a settlement for oil commodity payments, popularly known as petrodollars. The exchange rate is influenced by market dynamics, so no one can influence the dollar exchange rate to be higher or lower than the national currency.
The use of local currencies was once touted as a solution, because the exchange rate of local currencies is more predictable, less volatile, and can be intervened by their respective governments. This method is also seen as safer, more efficient, and a win-win solution because it is influenced by the economic situation in the country of origin of such local currency.
Nevertheless, the optimism that followed this mechanism slowly faded after the new leadership of the United States under Donald Trump threatened to impose a 100% rate increase on all BRICS countries that tried to shift the dominance of the US dollar.
USA, the new Russia's ally?
Since his campaign until his revote as US president, Donald Trump has rarely made public statements that are offensive or threatening to Russia. Whenever he talks about the war in Ukraine, Trump tends to side with Russia and strongly criticizes Ukrainian President Volodymyr Zelensky, of which according to Trump, has embezzled $500 billion in aid from the United States.
The meeting between the US delegation led by Secretary of State Marco Rubio and the Russian delegation under Foreign Minister Sergey Lavrov in Saudi Arabia in mid-February 2025 was the first held since the war in Ukraine. Reported by AP Press, the meeting discussed about what should be done to end the Ukrainian war and restore the number of staff working at each embassy.
The next development was unexpected, as the United States has been getting closer to Russia since then. The UK and the European Union are enraged by this circumstance. Especially after Secretary of State Rubio harshly criticized that Europe was no longer implementing democratic principles, while highlighting the case of the cancellation of the Romanian election results and the implementation of social media content censorship in a number of European countries.
BRICS' opportunities
India is the only BRICS nation outside of Russia that seems to be actively lobbying Donald Trump. Since Trump was elected, Indian Prime Minister Narendra Modi has made multiple trips to Washington. Given India's impressive export value to the US—87.4 trillion dollars in 2024, Modi takes Trump's intention to raise import duties seriously,
What about Indonesia? Given Indonesia's longstanding positive relations with the United States, we undoubtedly hope that President Prabowo Subianto will act quickly to address this development by lobbying intensively in Washington. Additionally, Indonesia benefits greatly from the flow of U.S. aid funds that are routed through USAID.
Numerous parties are impacted by the decision to freeze the aid program that intended to improve Indonesia's health and education systems. Nonetheless, it is still possible for the Indonesian government to engage in a ftriendly dialogue with the United States for the short and long-term benefit of the country.
