Photo of BRICS leaders courtesy of Wikipedia under Creative Commons Attribution 2.0 Generic license.
State Duma Deputy Chairman Alexander Babakov said the BRICS alliance has a new cross-border trade settlement mechanism in the works, and it plans to present the working concept of it at the upcoming BRICS summit in South Africa later this year in August.
Speaking on the sidelines of the Russian-Indian Strategic Partnership for Development and Growth Business Forum, Babakov said, “The transition to settlements in national currencies is the first step. The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future. I think that at the BRICS [leaders’ summit], the readiness to realize this project will be announced, such works are underway.”
He did not dismiss the idea that what might emerge would be a single reserve currency for the BRICS alliance. He furthermore indicated that if there were a single currency, it would be backed not just by gold, but by other commodities as well, likely to include rare earth elements.
It is one more instance of the reduction in the dollar’s influence globally coming on the heels of China and Brazil reaching an agreement to eliminate the dollar in their bilateral trade transactions, as they seek to reduce investment costs and forge deeper economic ties between the two nations.
Meanwhile China just took receipt of the first shipment of liquified natural gas paid for in yuan, from the United Arab Emirates. Argentina and Brazil are hashing out a dollar-free means of settling their bilateral trade, and Iraq’s central bank has said publicly it would settle its trade with China in yuan.
All of which furthers a trend away from the dollar which was turbocharged following the Western imposition of sanctions against Russia, which involved measures such as the seizure of Russian dollar reserves and the denial of access to the SWIFT instant financial intra-bank messaging system to certain Russian banks.
After witnessing the West attempt to exclude Russia from international trade, many countries feared a political disagreement with the West could result in economic ruin, if they continued to remain reliant on Western means of cross-border trade settlements, such as the dollar. Between those fears, and the allure of access to cheap discounted Russian energy products, which could only be bought using non-Western trade settlement mechanisms, many nations found themselves developing alternative ways to settle their international obligations.
