BRICS Bloc Pilots Digital Settlement Unit for Energy Trade in the Gulf

On a trading screen in Abu Dhabi last Tuesday, an oil cargo bound for Gujarat was priced, invoiced, and settled without a single reference to the U.S. dollar.

According to statements from three participating central banks, the transaction used “The Unit”  a new blockchain-based settlement asset developed by the BRICS+ group  marking the first live test of a system designed to allow member states to trade energy in a shared accounting unit rather than a third-party reserve currency.

The pilot, confirmed by the central banks of the United Arab Emirates and Russia and by the New Development Bank (NDB) in Shanghai, is small in scale and explicitly described as experimental. But its political signal is large: after more than a decade of discussion about reducing dollar dependence, the expanded BRICS bloc has moved from communiqués to code.

For global energy markets, the question is no longer whether an alternative to dollar settlement is being attempted, but whether it can be made to work at scale.

From Idea to Infrastructure

The concept of a BRICS settlement unit is not new. Since the 2008 global financial crisis, economists within the bloc have argued that emerging economies remain disproportionately exposed to U.S. monetary policy and to the reach of U.S. sanctions that leverage dollar clearing.

That rhetoric accelerated after 2022, when the freezing of Russian central bank reserves and its partial removal from SWIFT prompted Moscow and Beijing to accelerate bilateral settlement in yuan and rubles. It gained further traction with the expansion of BRICS at the 2023 Johannesburg summit to include major energy producers and importers: Iran, Egypt, Ethiopia, and the United Arab Emirates, with Saudi Arabia participating as an invited member.

What has been missing until now is a common instrument. Unlike the euro, The Unit is not intended to be a currency for citizens to hold or use at shops. According to a technical paper released by the NDB in July, it is a digital accounting unit for settlement between central and commercial banks on a permissioned distributed ledger. Its proposed valuation is linked to a basket: 40 percent to gold and 60 percent to a weighted basket of BRICS+ currencies, with the exact weighting mechanism still under discussion.

Under the pilot design, an importer’s bank deposits local currency with its central bank, which issues Units on the ledger. The exporter’s bank receives the Units and can redeem them for local currency, gold, or hold them for future intra-bloc trade. The system is designed to net transactions and minimize the need for cross-border dollar liquidity.

“This is not a new currency in the classic sense,” said Paulo Nogueira Batista Jr., former Vice President of the NDB. “It is closer to the IMF’s Special Drawing Rights  an accounting tool to facilitate settlement  but built on distributed ledger technology that allows for instant settlement without correspondent banks in New York.”

Why the Gulf, Why Oil

The choice to begin with oil in the Gulf states is deliberate.

About 42 percent of the world’s seaborne crude oil exports now originate from BRICS+ members or invited states, according to the Energy Institute. At the same time, India and China are the world’s second and third-largest crude importers. A significant portion of the physical flow of oil already occurs within the bloc; the financial flow, however, still largely runs through dollars.

The UAE, a regional financial hub with sophisticated fintech infrastructure, has positioned itself as a test bed. The Central Bank of the UAE has been developing its Digital Dirham and has participated in the mBridge project, a separate cross-border CBDC experiment with China, Thailand and Saudi Arabia under the Bank for International Settlements. Officials in Abu Dhabi describe the new BRICS pilot as complementary, not competitive.

In a statement, the Central Bank of the UAE said the pilot would involve “a limited number of commercial banks and energy firms on a voluntary basis” and is intended to “explore technical feasibility and regulatory considerations for cross-border settlement in local currencies.”

For Russia, under extensive financial sanctions, the incentive is clear: a settlement channel outside the dollar system that cannot be blocked by Western clearing banks. For Gulf producers, the calculus is different and more hedging-oriented.

“The Gulf states are not abandoning the dollar. The vast majority of their sovereign assets, their pegs, and their oil pricing remain dollar-based,” said Ziad Daoud, chief emerging markets economist at Bloomberg Economics. “What they are doing is buying an option  building infrastructure so that if they need to trade with China, India, or Russia without friction in the future, they have the plumbing.”

The Dollar’s Enduring Weight and the Hurdles Ahead

Despite the symbolism, analysts caution against overstating the immediate impact on dollar dominance.

The dollar accounted for 58 percent of global foreign exchange reserves in late 2024, down from 72 percent in 2000 but still far ahead of the euro at 20 percent, according to IMF COFER data. More importantly, about 88 percent of all foreign exchange transactions involve the dollar on one side, a share that has barely changed in a decade. The dollar’s dominance in commodities, debt issuance, and global trade invoicing gives it a network effect that is difficult to replicate.

The Unit faces three substantial challenges.

First is trust and convertibility. A settlement unit backed by a basket of currencies is only as credible as the participants’ willingness to allow conversion and to maintain the value of their own contributions. China maintains capital controls; India is cautious about internationalization of the rupee; and Russia’s ruble is not freely convertible. Negotiating a rules-based mechanism for adjusting the basket, managing imbalances, and providing a lender of last resort will require a level of central bank coordination the bloc has not previously achieved.

Second is liquidity. For a settlement system to be attractive, banks must be able to use accumulated Units easily. If an exporter accumulates large balances in Units that cannot be readily converted into usable currencies or gold, the system will be seen as a way to force trade surpluses into illiquid holdings.

Third is politics. BRICS+ is a diverse group, not a monetary union. Members have competing interests  India and China have border disputes and trade deficits; Brazil and the UAE have close security and financial ties to the United States; and Saudi Arabia has stated publicly that it remains committed to dollar-based oil pricing. Achieving consensus on governance of the ledger, dispute resolution, and data privacy will be complex.

In Washington, the official response has been measured. A spokesperson for the U.S. Treasury Department said the department “monitors developments in cross-border payment innovation” and noted that “competition in payment systems can contribute to efficiency, provided it meets robust standards for transparency, anti-money laundering, and financial stability.” Privately, former U.S. officials have expressed less concern about the technology than about the precedent of sanctioned and non-sanctioned systems running in parallel.

A System Designed for a Fragmented World

The pilot is expected to run for six to twelve months with a small volume  reportedly less than $2 billion equivalent in notional transactions, according to two people briefed on the design. No timeline has been set for a wider rollout.

What matters more than volume is architecture. If the system proves technically reliable, it could be expanded to other commodities  grain, fertilizers, liquefied natural gas  and to other members. The NDB has already suggested The Unit could be used to denominate loans for infrastructure projects, which would address one of the key limitations of local-currency lending: exchange rate risk for the lender.

For now, The Unit is best understood not as the end of dollar dominance, but as a reflection of a broader shift in the global financial system toward fragmentation and redundancy. Central banks worldwide, including the Federal Reserve and the European Central Bank, are building their own instant settlement systems and exploring digital currencies. The BRICS effort is one piece of that larger mosaic.

The age of a single, unchallenged settlement currency may not be over. But the age in which no alternatives are even attempted appears to have ended.