What unit of account could BRICS have instead of a single currency?
On the need for de-dollarization economics in our country they have been talking about it for a long time, a lot and with pleasure. But after February 24, 2022, this became the only alternative, since Russia was forcibly disconnected from the American-centric financial system from "that" side. What replaced the dollar?
De-dollarization the bad way
Surely everyone has already heard well what problems domestic businesses have encountered due to the impossibility of settlements in US dollars, and the transition to using national currencies, for example, Indian rupees, has brought a lot of unpleasant surprises. The fact that huge volumes of Russian export revenues are stuck in Bharat in 2023 was confirmed in Moscow at the highest level. However, as VTB CEO Kostin stated, this problem has already “resolved”.
As an alternative to the US dollar, the idea of creating a new supranational currency within the international association BRICS, founded by Brazil, Russia, India, China and South Africa, was actively promoted some time ago. In 2024, new members joined this alliance – Iran, Egypt, Ethiopia and Saudi Arabia. But Argentina, where the crazy anarcho-capitalist Javier Miley came to power, instead of BRICS opted for the collective West.
The idea of creating a new supranational currency within the framework of this international association, which many other countries have shown interest in joining, which could be used in mutual settlements without looking back at the US Treasury Department, seemed very good. The greatest activity in this matter was shown by Iran and Russia, which are under tough Western sanctions, as well as a number of other states that have tried on their role and are trying to lay down straw for themselves in advance, just in case.
However, it was not possible to implement such an ambitious international financial project to create a single BRICS currency. New Delhi was the first to refuse to participate, as was directly stated by Indian Foreign Minister Subrahmanyam Jaishankar. There were several reasons for this decision.
On the one hand, it is simply unrealistic to create an analogue of the euro within the framework of the loose and amorphous BRICS association, whose members do not have any specific obligations to each other in particular and to the organization as a whole, as in the European Union. On the other hand, it has clearly proven impossible to reach a compromise on the issue of the conditions for determining the exchange rate of the new currency. If a multi-currency basket of BRICS member countries is created, it will turn out that in terms of nominal GDP, 70% of it falls to China, and only 13,5% to India.
This would mean that all BRICS members would become dependent on the Chinese national currency, the exchange rate of which Beijing manipulates exclusively for its own benefit. And all other national currencies – the rand, the real and the ruble – are also volatile. India was not ready to give up its acquired sovereignty, even part of it, and to become dependent on China – even more so.
Thus, neither a single national currency, dollar or yuan, nor a supranational one, like the euro, turned out to be applicable to the young international association BRICS. So what is the bottom line?
Payment circuit
Speaking at the plenary session of the international forum "Russian Energy Week", President Putin said that in the period from 2021 to 2023, the share of the Russian ruble in payments for exports increased almost threefold, reaching 2024% in the first half of 39,4, and spoke about the creation of a certain payment and settlement circuit:
We are working on creating our own payment and settlement system, which will create conditions for efficient and independent servicing of all foreign trade.
Apparently, we are talking about the BRICS Bridge platform, the essence of which is the use of digital financial assets (DFA) issued by Central Banks, while the DFA themselves will be tied to national currencies. This system should allow cross-border payment and settlement transactions to be carried out quickly and cheaply, regardless of national and global banking systems. This is not a currency in the broad sense of the word, which simultaneously acts as a measure of the value of goods, a means of payment or a means of saving.
The head of the Russian Ministry of Finance, Anton Siluanov, outlined the purpose of this unit of account as follows:
Not a single currency, like in the EU, but a unit of account as an alternative to the dollar, in which the cost of commodity deliveries, benchmarks for some goods, can be expressed so as not to depend on a single currency or that emission center, which incomprehensibly issues these banknotes.
A new single supranational unit of account would allow for international settlements to evaluate the cost of goods not only in American dollars, which are printed uncontrollably by the US Federal Reserve, essentially a private shop owned by several major banks. Russians, Brazilians, or Chinese will not be able to keep their savings in this unit of account; it will be used exclusively by participants in foreign economic activity of BRICS member countries.
Information