Russian President Vladimir Putin said the multinational group Brazil, Russia, India, China and South Africa (BRICS) should explore a SWIFT-like cross-border payment system immune to Western sanctions, as well as use national digital currencies to finance investment projects to end the dominance of the US dollar.
Ahead of the 16th annual summit of BRICS leaders, to be hosted by Russia, Mr Putin also said the time was not yet for a common BRICS currency, but added that the 10-nation bloc was exploring the use of digital currencies for which his country is working with India and other nations.
Russia, which has been slapped with broad sanctions by the US and its allies since the February 2022 conflict with Ukraine, wants to circumvent the global financial system by creating a new payment system based on a network of commercial banks linked to each other through central banks of BRICS.
“Assuming a cautious approach to the creation of a new reserve currency due to the differences in the structure and quality of the economies of the BRICS member countries,” Mr Putin said those countries should focus on the use of national currencies, new financial instruments and creating an analogue of SWIFT.
Prime Minister Narendra Modi is scheduled to attend the summit in the Tatarstan city of Kazan on October 22 and 23.
It will also be the group’s first summit since its expansion to include Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE). Brazil, Russia, India, China and South Africa are the original BRICS members.
“At this point, it (a BRICS currency) is a long-term prospect. Not under review. BRICS will be cautious and act gradually, move slowly. The time has not yet come,” Mr Putin told a select group of senior editors from the BRICS member states during a media interaction on Friday at his official residence in Novo-Ogarevo, about 50 km from Moscow.
The Russian strongman’s remarks came in response to a question about plans by BRICS – a grouping conceived as a geopolitical and geoeconomic counterweight to the West – to create a reserve currency.
Responding to a question, Mr Putin said BRICS was now exploring the possibility of expanding the use of national currencies and creating tools to make such work safe. In particular, the BRICS countries were considering the possibility of using electronic tools, he added.
“We are looking at the possibility of expanding the use of national currencies and settlements, and we want to create the instruments that would make this sufficiently safe and secure.” Mr. Putin said the group would have to come up with a toolkit that would be overseen by relevant BRICS institutions.
“This could be another very good step in the development of the Global South with our direct active involvement. We will talk about this during the summit (Kazan). We are already in consultation with the Chinese and Indian friends with the Brazilians. We also held a round of consultations with South Africa.
On a potential BRICS reserve currency, Mr Putin said member states should work gradually without rushing.
“Given their populations, the BRICS economies in terms of structure should be comparable and more or less the same. Otherwise, we will face even bigger problems than those that arose in the European Union (EU), for example, when a single currency was introduced for countries whose economies were not comparable and unequal. So it’s a long-term perspective,” he said.
The Russian president also emphasized the need to establish relations between central banks and ensure a reliable exchange of financial information, which is independent of those international instruments for the international exchange of information that introduce “certain restrictions for political reasons and violate the principles of the global economy.” .
He said he was referring to the formation in BRICS of an analogue of SWIFT, something that “ensures international settlements”. SWIFT provides the main messaging network through which international payments are initiated.
Mr. Putin mentioned that Russia, along with other BRICS members, is already working on a SWIFT-like financial messaging system and the use of national digital currencies in financing high-growth investment projects.
Along with digital currencies, the BRICS bloc is preparing to launch the BRICS Pay platform, a blockchain-based payment system aimed at facilitating cross-border transactions within the alliance. Noting that digital currencies could benefit both BRICS members and developing economies, Mr Putin highlighted the group’s broader strategy to reduce dependence on the US dollar and assert greater economic independence.
“I think the United States should reflect that they have damaged their relationship with Russia by imposing continuous sanctions and that ultimately has a negative impact on them. So the whole world is thinking whether it is worth using a dollar,” he said.
“Now the volume of the dollar is decreasing, both in settlements and in reserves. Even traditional US allies are reducing their dollar reserves,” Mr Putin said.
He also said that 95% of all Russian foreign trade is denominated in national currencies. The BRICS countries, among other things, are pushing for a reform of global governance, creating parallel institutions to compete with established ones and challenge the role of the dollar.
While countries such as Russia and China are seeking to create an alternative global financial and technological system to circumvent the dominance of the US dollar as part of what is known as a de-dollarization program, India’s position is that it will not target the US dollar.
India has made it clear that it has no plans to end its reliance on the US dollar. External Affairs Minister S Jaishankar recently said that India is not interested in the de-dollarization program and will use the US dollar wherever it is accepted as a form of payment.
He also made it clear that “there is no malicious intent towards the US dollar.”
“We have never actively targeted the US dollar. It is not part of our economic, political or strategic policy. Some others (BRICS members) may have done this (de-dollarization). We have a natural concern. We often have trading partners that lack transaction dollars,” he said at a recent event.
With the entry of the five new members to form BRICS Plus (BRICS+), the grouping has become a formidable economic bloc. It now accounts for half of the world’s population, 38% of world GDP and 40% of world trade, according to available data.
Published – 19 October 2024, 21:17 IST
