force anymore, the reserves of the central banks of the world remain comprised of a

few currencies which are generally the USD and the Euro (Krugman and Obstfeld,

2003). Besides, being the currencies of the two major economic blocks, these

currencies are perceived as stable and secure, and hence used as vehicle currencies for

international transactions by most countries in the world. As the bulk of BRICS trade

is conducted in USD, the BRICS have accumulated dollar reserves such that in 2011,

these countries held 40% of the World’s currency reserves (Sule, 2011). However,

due to the large US trade and budget deficits, the USD has been losing some of its

prominence as a stable and strong currency. In efforts to stimulate the economy

during the most recent economic recession of 2007-8, the United States Federal

Reserve (FED) used three rounds of quantitative easing (QE) which presumably

added extra volatility to the USD. With the weakening of the USD it became less

attractive for foreign investors and central banks to invest in US assets that were

declining in value. This USD instability is an issue of continuing concern for the

leaders of the BRICS who consider that extra volatility has negatively impacted their

exports, one of the engines of their economic growth. The EUR was considered as a

future replacement to the USD and the BRICS increased the proportion of their

reserves in this currency. However with the Greek debt crisis of 2010, the

vulnerability of the EUR was exposed due to a potential break of the indebted state

from the Euro-Zone, and created concerns about the future of the EUR as well. At the

2012 fourth BRICS summit in New Delhi, India, these factors motivated BRICS’

leaders to take a series of steps towards a gradual move away from the use of the

USD as vehicle currency. One piece of evidence for this move is the proposal drafted