Russia holds the key to a BRICS Currency

By Rhod Mackenzie

The upcoming leader of the new BRICS Development Bank will serve a five-year term representing Russia. Within this period, a major decision  must be made which will have worldwidet reprecussions,this is regarding the creating of a financial instrument or currency. The quandary of whether a BRICS single currency is required created heated debate during a recent Valdai Discussion Club meeting.

The session’s moderator, Fyodor Voitolovsky, a Corresponding Member of the Russian Academy of Sciences and Director of the Institute of World Economy and International Relations named after E. M. Primakov (IMEMO RAS), previewed the discussion and proposed the hypothesis that the world economy is embarking on a tectonic shift. The G-7’s role as a global regulator is slipping as 11 BRICS countries dominate the world economy. BRICS account for 44% of the world’s oil and 36% of planetary gas production, 70% of steel production, and 57% of food sold on world markets. BRICS are also emerging as major players in high-tech markets, producing 48% of the world’s cars. Non-Western global banks have also emerged. The moderator invited participants to discuss the future of BRICS.

The issue of a single currency arose in various contexts

Ilter Turan, a professor at Istanbul University,is an outside observer at BRICS and gives his external perspective as Turkey is not a member of the group.

Turan commented, “It remains unclear what kind of structure BRICS is.” – The group consists of countries with varying lifestyles, ideologies, and economic developments, some practicing market economies, while others have state economies. Certain nations have multi-party systems, while others have one-party systems. The G7 constitutes a group of nations that bear many similarities in their structures, making their unanimity comprehensible. Conversely, the BRICS lack unanimity except for their shared objective of establishing a fresh balanced influence hub. There is however a global demand for an alternative to the Western-dominated system, with many turning to BRICS as a potential solution. However, at present, BRICS is not technically an organisation, but rather a diplomatic forum. To date, the meetings has implemented only one key initiative: the establishment of the New Development Bank (NDB). Yet, the bank’s activities remain relatively obscure. So my response to the question is straightforward – BRICS has not yet been able to create a new world order or serve as an alternative to the current system. A set of shared values must be developed to achieve this, alongside a payment system that is not heavily reliant on Western infrastructure.

Another representative from a non-BRICS country, Dr Phan Lan Dung, who is the Rector of the Diplomatic Academy of Vietnam, suggests that the admittance of six additional countries into BRICS in the summer of 2023; and the aspiration of approximately 20 more countries to join this group, is a decisive indication of the emergence of a new pole.

“For the economic growth and stability of BRICS financial systems, particularly in the context of countries currently under sanctions, Dr Fan recommends the creation of a reserve currency pool, or opting for a unified payment unit.

This move towards de-dollarisation can be a significant step forward.”

Dr Paolo Batista Nogueira,a former Managing Director of the IMF and Vice-President of the New Development Bank from Brazil, provided the session participants with a critical analysis of the current state of the BRICS financial architecture. “We established the NDB and the BRICS Reserve Currency Pool (which we refer to as the Fund) in 2015, but the progress of building financial mechanisms has been sluggish, resulting in the absence of substantial achievements. The central banks of five countries limited the Fund’s size. It is necessary to expand and admit new participants. However, all central banks are resistant, except for the Chinese, and the Brazilian central bank is the most resistant of all. Brazil aims to issue a new monetary unit rather than accumulating reserve currencies.
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