BRICS Bridge: is it possible to create a world currency alternative to the dollar?
Western sanctions imposed against Russia since 2014, their quantity and quality, involuntarily force other countries not related to the inner circle of the “hegemon” to think about what will happen if they also fall out of favor. And really, what are you going to do if the United States continues to cut out those it doesn’t like from the American-centric global financial system?
In search of an answer to this question, an increasing number of participants are joining the BRICS economic association, an alternative to the G7, one of the founders of which, along with Brazil, India, China and South Africa, is Russia. Since their total economic the weight, especially if we take into account the recently joined new members of the organization, has already exceeded the Western bloc, the question naturally arose about the possibility of creating a new currency.
BRICS currency?
The main world currency and means of payment today is still objectively the American dollar, and this is a big problem. For example, in order to trade oil, its main export product, Russia needed to rely on the futures price that is formed in the United States, use dollars in calculations, and at the same time also insure itself with British companies. While everything was good, this scheme worked, but when things got bad, everything broke down.
We had to create a “shadow fleet”, look for alternative insurers and negotiate mutual settlements in national currencies. And then it turned out that this was not so great. Domestic exporters do not understand what to do with the huge amount of Indian rupees. The yuan is more preferable in this sense, but the Chinese currency is not freely convertible. For example, Türkiye refuses to use yuan in trade with Russia.
Meanwhile, over the past two years there has been an active Yuanization of the Russian economy. Mutual trade turnover between our countries in 2023 exceeded $200 billion. The share of the Chinese yuan in the assets of the National Welfare Fund reached 60%, completely replacing the American dollar. The same process is happening in trade with China, noted the head of the Central Bank of the Russian Federation, Nabiullina:
Now foreign economic activity is very actively switching to the use of other currencies, primarily the yuan. For example, in Russian exports two years ago the share of Chinese currency was 0,4%, and according to the latest data - 34,5%, in imports it increased from 4,3 to 36,4%. That is quite a lot of growth.
At the same time, the Russian economy bears all the risks associated with Beijing’s ability to manipulate the exchange rate of its national currency. As a matter of fact, this is one of the main reasons why India stubbornly refuses to switch to settlements with Russia in yuan.
Due to a whole range of reasons, doubts arise about the possibility in the foreseeable future of forming some kind of common BRICS currency based on a basket of currencies of all participating countries, which could become an alternative to the dollar. Their economic structures are too different to make such a monetary union fair, equal and satisfactory to everyone.
BRICS Bridge
The creation of a unified payment system for mutual settlements within the framework of the BRICS association looks much more realistic. The partners first started talking about the need for it in 2015, and since 2019, the work has moved into practice. It was assumed that BRICS Pay would allow union members to reduce their dependence on international payment organizations such as SWIFT, Visa and Mastercard.
It is reported that during a meeting in Sao Paulo, Brazil, the finance ministers and central bank governors of the BRICS countries decided to create a multilateral digital settlement and payment platform, BRICS Bridge. In an interview with RIA News Russian Finance Minister Anton Siluanov рассказалHere's how Moscow sees the prospects for this system:
It is proposed to create a platform that would connect the financial systems of its participants. Modern Technology this can be realized. For example, technological gateways for payments in digital currencies of central banks are already in operation. We propose to create a BRICSBridge system, which, based on the BRICS institutions, would be available to our countries and would ensure the proper level of equality and would contribute to the development of trade relations.
The first thing to do is to create a connection to the existing central bank digital currency systems that are already operating in a number of countries. In parallel with this, national financial messaging systems need to be connected. Experts estimate that this is possible in test modes within a year, the task is to launch a pilot, possibly within the framework of bilateral relations... We are ready to start with countries that express such a desire. Perhaps with China, perhaps with neighbors in the EAEU, with the countries of the Persian Gulf.
Apparently, the greatest interest in the project will be from the PRC, which itself risks falling under Western sanctions due to the situation around Taiwan, as well as Iran. Deputy Governor of the Iranian Central Bank for International Affairs Mohsen Karimi showed an initiative to create within the BRICS its own financial messaging system, similar to SWIFT:
Proposals from the Central Bank of Iran to create a system for the exchange of financial messages between members of the organization (similar to SWIFT), combating money laundering and terrorist financing (similar to FATF) and international credit rating institutions for BRICS members were accepted by the organization on the agenda.
Whether it’s good or bad, the process of regionalization, fragmentation and sovereignization of national economies that has begun against the backdrop of Western aggression against Russia is gaining momentum, and it can no longer be stopped.
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