Putin and the BRICS want to create a new currency
by Mario Lettieri and Paolo Raimondi
At the 14th BRICS summit, Putin said the group plans to create an international reserve currency. All the details in the article by Mario Lettieri and Paolo Raimondi
On the occasion of the 14th Summit of the BRICS (Brazil, Russia, India, China, South Africa), organized in Beijing at the end of June, Russian President Vladimir Putin announced that member countries are preparing to create an international reserve currency.
Speaking electronically at the BRICS Business Forum, he said: "The Russian financial messaging system is open for connection with banks, thus projecting the need for a BRICS reserve currency. The Russian Mir payment system is expanding its presence. We are exploring the possibility of creating an international reserve currency based on the basket of currencies of the BRICS countries."
After the sanctions imposed by the West against Russia following the war in Ukraine, it is an almost inevitable move, awaited by those who analyze political processes with a scientific and realistic approach without ideological dictates or prejudices of any kind.
Among the various sanctioning measures, Russian banks were excluded from the Swift system of international payments. There are, however, other bilateral or multilateral global settlement systems for cross-border financial services, such as the Chinese CIPS system. In 2021, the CIPS processed about 80 trillion yuan ($11.91 trillion), an increase of more than 75% year-on-year. According to Swift data, in April the yuan maintained its position as the fifth most active currency for global payments, with a share of 2.14% of the total.
For quite some time, the BRICS have been intensifying cooperation in investment and financing of major sectors such as emerging strategic industries and digital innovation in an effort to increase the use of local currencies in trade and payments, so as to bypass the dollar. Keep in mind that the sanctions against Russia were not supported by the other BRICS countries which they interpreted as the transformation of the dollar into a weapon of war.
Europe continues to underestimate the economic and political role of the BRICS, to ignore them as a potential coordinated system and to consider them, instead, only individually. The blockade of these countries, however, accounts for 18% of trade in goods and 25% of foreign investment globally. Despite the impact of the pandemic, in 2021 the total volume of trade in goods of the BRICS reached almost 8,550 billion dollars, an increase of 33.4% on an annual basis.
It is certainly true that they are not comparable to the European Union, but to think that they are a group without a future is a political short-sightedness, a vision that is not at all realistic and certainly not intelligent. It would be enough to take note that 14 other nations were invited to the recent "Plus" Summit: Algeria, Argentina, Cambodia, Egypt, Ethiopia, Fiji, Indonesia, Iran, Kazakhstan, Malaysia, Nigeria, Senegal, Thailand and Uzbekistan. We note that there is a part of the world, the majority of the countries of the planet, that is often not in tune with the West and that has different interests, priorities and projects. Ignoring them may be in someone's interest, but not Europe's!
It should also be borne in mind that the New Development Bank, the BRICS bank, which works very efficiently to finance concrete development projects and promote the use of local currencies in trade, has recently included among its members 4 other countries, Egypt, Bangladesh, the United Arab Emirates and Uruguay.
The final declaration of the Beijing Summit, in addition to detailing the various aspects of the BRICS program for a Global Development Partnership, announced its intention to include other countries. Along with China's perspective of a Global Development Initiative, this was a central point of President Xi Jinping's intervention.
Even if the alternative "basket of currencies" does not appear in the final declaration, it will certainly be one of the crucial aspects of future work. This is understandable by seeing the emphasis placed on the importance of the Payments Task Force, the platform for cooperation in payments between central banks, on the realization of the Trade in Services Network, the use of innovative financial instruments in trade, and on the strengthening and improvement of the mechanism known as the Contingent Reserve Arrangement, that is the BRICS network of global financial and monetary security.