Meeting at a summit in the Russian city of Kazan on Wednesday, BRICS members adopted a joint declaration calling for the creation of an independent payment system based on their national currencies, a move in response to what they consider such as illegal sanctions that harm the economy. global economy.
BRICS member countries, which represent about 35 percent of the global economy, issued the Kazan Declaration, which calls for the “elimination” of “unilateral economic sanctions and secondary sanctions contrary to international law.”
BRICS membership includes the original five – Brazil, Russia, India, China and South Africa – and expanded when several countries joined this year, including Egypt, Ethiopia , Iran, Saudi Arabia and the United Arab Emirates.
Expressing concerns over “unilateral coercive” sanctions which have “disruptive effects” on the global economy, BRICS members agreed to examine “the establishment of an independent cross-border settlement and deposit infrastructure, BRICS Clear”.
By supporting “inclusive cross-border payment instruments,” they encouraged “the use of local currencies in financial transactions between BRICS countries and their trading partners.”
Edward Fishman, a senior fellow at Columbia University and author of the forthcoming book “Chokepoints: American Power in the Age of Economic Warfare,” said: “BRICS ultimately found a unifying mission: circumventing American financial dominance. »
“For BRICS members subject to US sanctions, namely Russia and Iran, this mission is already a major national priority,” he said. “Others, like China, see it as a practical way to protect themselves against possible sanctions in the future.”
Fishman said the United States should take the BRICS initiatives “seriously and work to further consolidate the dollar’s advantages” because they “may well bear fruit over the next decade,” even though “it is “It is unlikely that any of these initiatives will undermine the global value of the dollar.” role in the near future.”
Circumvent the US dollar
In his summit speech on Wednesday, Chinese President Xi Jinping said “Reform of the international financial architecture” is “urgent,” and he called for “connectivity” of financial infrastructure among BRICS members and expansion of the New Development Bank, or NDB.
Headquartered in Shanghai, the NDB was established by the original five BRICS members in 2015. It serves as an alternative financial institution to the World Bank and the International Monetary Fund.
Tom Keatinge, founding director of the Center for Finance and Security at the Royal United Services Institute, said China would be inclined to join the new financial system advocated by Russia.
Beijing’s reasons, he said, are twofold: “to influence its design to ensure it can benefit” and “to add to its desire to provide a counterbalance to the historically unipolar financial system dominated by the United States.”
Keatinge added, however, that the new infrastructure would not be able to easily replicate the “stability, liquidity and convertibility of the US dollar” experienced by a number of other existing bilateral and multilateral payment systems.
VOA asked the Chinese Embassy in Washington if and why Beijing wanted to join and use the financial system offered by BRICS, but did not get a response.
Citing anonymous experts, The Chinese state-run Global Times On Oct. 17, he said an alternative payment system “could help reduce overreliance on the U.S. dollar.”
Evasion of sanctions
BRICS efforts to increase the use of local currencies are seen as an attempt to challenge the global financial system dominated by the U.S. dollar, which accounts for 90% of all currency trading and more than half of international payments.
At the summit, Russian President Vladimir Putin said: “The dollar is being used as a weapon.” He also said that increased use of BRICS national currencies for transactions would “minimize geopolitical risks.”
In a meeting with Putin at Tuesday’s summit, NDB President Dilma Rousseff said the bank was committed to financing southern countries in their national currencies.
Russian state development corporation and investment company VER.RF have signed agreements with China and South Africa to expand their credit lines in national currencies, according to Russian news agency TASS. reported Wednesday.
BRICS Clear, the international payment and deposit platform intended to ensure increased circulation of national currencies, was proposed by Russia before the summit.
The Russian Ministry of Finance, the central bank and the consulting firm Yakov and Partners published a document proposing BRICS Clear as a platform that would use national filing systems “independently of third party influence.”
Also ahead of the summit, a new cross-border payment system called BRICS Pay was presented at the BRICS Business Forum held in Moscow on October 17-18.
A press release published On Tuesday, the American Action Forum, citing an analysis by Jacob Jensen, a data analyst at the think tank, said there were concerns that BRICS Pay would allow participating countries to “bypass the USD as a payment intermediary replacing it with blockchain technology and an alternative.” to the SWIFT financial payment system.”
Several Russian banks have been banned from SWIFT messaging which facilitates global financial transfers shortly after Russia’s invasion of Ukraine in February 2022.
Kremlin spokesman Dmitry Peskovsaid Wednesday that BRICS are not trying to create an alternative system to SWIFT, according to Russian TASS.
Despite BRICS efforts, no country using an alternative system like BRICS Pay will be safe from sanctions, as such a payment system may be subject to sanctions, said David Asher, a senior fellow at the Hudson Institute who advised the U.S. government for several years on sanctions. escape ploys.
Ultimately, Asher said, national and digital currencies will end up being exchanged for U.S. dollars through the Clearing House’s Hong Kong-based automated transfer system, which he said should be sanctioned.
