As russian propaganda insists, the BRICS summit, which is to be held in the South African Republic on August 22-24, will deal a fatal blow to the Western economy, after which the European Union and the United States will not be able to support Ukraine.
❗️The BRICS international association (Brazil, russia, India, the People’s Republic of China and South Africa) was created at the initiative of the kremlin in 2006 as a counterweight to the “aggressive economic policy of the developed countries of Europe and the USA.”
As August approaches, the kremlin increasingly emphasizes that the main issue of BRICS-2023 will be the launch of a new currency against the dollar. It is claimed that “de-dollarization” will be much more frightening for the Anglo-Saxons than “the failure of the NATO counteroffensive in Ukraine”, because it will no longer be possible to “finance US color revolutions through the printing press”.
Propagandists insist that a single BRICS currency will erode US dominance in Europe and destabilize the EU economy. It is emphasized that the summit will feature a presentation of a digital currency that is supposedly backed by gold and is capable of challenging the dominance of the US dollar. It is assumed that each of the BRICS members can issue conditional digital money, the amount of which is limited only by the amount of national gold reserves.
Several factors indicate the kremlin’s determination to strike at the international financial system.
First, in order to support the new currency, the BRICS countries dramatically increased their gold purchases. For interbank settlements, the New Development Bank was specially created in Shanghai, and russia developed a unified payment system BRICS Pay, which will unite the national payment systems of five countries.
Secondly, interest in this means of payment in the world is objectively growing. The Ministry of Foreign Affairs of Iran assured the support of the single currency by Iran and 41 other countries of the world. Also on the agenda is the expansion of BRICS to more than 20 members, in particular, it refers to Saudi Arabia and a number of other Arab countries.
Thirdly, it was putin at the Valdai Club in 2018 who first voiced the idea of a new BRICS reserve currency called R5, from the first letter of the names of the currencies of the BRICS countries – real, ruble, rupee, renminbi (yuan) and rand. The kremlin expects that expanding the volume of foreign trade at the expense of the BRICS countries will reduce the consequences of sanctions pressure and establish parallel imports, and the transition to trade in national currencies will ensure stable demand for the ruble and strengthen its exchange rate. The importance of promoting the new reserve currency for the kremlin is evidenced by putin’s personal participation in the summit. Despite the fact that South Africa is a signatory of the Rome Statute and, according to the warrant of the International Criminal Court, is obliged to arrest the head of the kremlin if he is on the territory of the state, the president of South Africa S. Ramaphosa confirmed putin’s presence at the summit. Moreover, so that putin can be guaranteed to be present at the event, it is assumed that the summit will be moved to China.
Could the BRICS currency displace the dollar from international reserves and trade settlements and wreak havoc on the US economy?
US Treasury Secretary J. Yellen is sure that the American currency will remain dominant in international trade. According to the ministry, the dollar plays a role in 88% of all global trade and there is no alternative that could change that in the foreseeable future.
In support of these judgments, we cite the opinions of the Western experts.
1. The prevalence of the US currency and the huge US capital market provide the dollar with stability, liquidity and convertibility without additional transaction costs. According to the Bank for International Settlements (BIS), out of 7.5 million daily foreign exchange transactions, in 6.6 million cases one or both participants in the transaction used dollars. It will be very difficult, and in some cases impossible, to convince trade participants to change the generally accepted currency to a new one. Thus, russia’s transition to payments with India in the national currency led to a financial collapse. Indian banks currently have about $250 billion worth of rupees stashed away for oil supplies that russian suppliers refuse to take because of the limited convertibility of the rupee at global banks.
So while not all BRICS members are interested in creating such a currency, this process may drag on indefinitely.
2. Currently, BRICS is nothing more than an artificial group of countries whose interests diverge in most political and economic problems and ways of solving them. Moreover, China and India remain rivals in the economic, military and humanitarian spheres, which puts into question the adoption of any important decisions.
! Time will tell whether the new single digital currency will be able to change the rules of the game in the global financial system and become an alternative to the US dollar. However, many factors indicate that in the struggle between the two financial systems, the dollar is most likely to destroy the hypothetical new currency, and with it the economies of the BRICS countries.
