Putin’s alternative to dollar fails to excite Brics partners - FT
Kyiv • UNN
Russia presented the BRICS Bridge project as an alternative to SWIFT at the Kazan summit. China, India, and other BRICS countries show little practical interest amid the risk of secondary U.S. sanctions.
Russian dictator Vladimir Putin this week touted a new international payment system to world leaders gathered in Russia, seeking to show how he is ignoring Western sanctions and challenging the U.S.-dominated global financial order, but few practical steps have been taken toward the proposed payment system, the Financial Times reports, according to UNN.
Details
Putin accused Western powers of “using the dollar as a weapon,” saying in a speech at the BRICS summit in Kazan that sanctions against Russia after its full-scale invasion of Ukraine “undermine confidence in this currency and reduce its capabilities.
The main item on the agenda of the summit, which was attended by the leaders of China, India, Iran and other countries, was a Russian proposal to bypass the US dollar by creating a new payment and messaging system known as the BRICS Bridge. It was presented in Russia as an alternative to SWIFT.
Financial sanctions against Russia following its invasion of Ukraine in 2022 have hurt its foreign trade and international financial transactions. Other summit participants, including China and Iran, are also outraged by Western financial dominance and often discuss alternatives, the newspaper writes.
The proposal for a BRICS currency was presented at last year's summit in South Africa, and prototype banknotes were first shown on Russian television on Wednesday, although it is unclear how they will be used.
“However, despite the goodwill, few practical steps have been taken toward the proposed payment system,” the publication points out.
Earlier this month, the finance ministers of China, India and South Africa skipped the BRICS finance ministers' meeting, a sign that they showed little interest in the proposals, the newspaper said. Aleksandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin, said that this year's delegations to the summit were large, but mostly focused on doing bilateral business with each other and not on the overall BRICS agenda.
“They nod, they listen politely to Russia. But so far there are no signs that this initiative will go viral and be implemented in real life,” she said.
The main problem with the proposal, as indicated, is that the US has made it clear to third countries that cooperation with the Russian war machine will cost them access to the dollar, complicating the Kremlin's efforts to create a sanction-proof payment network.
The effect, as noted, has been particularly noticeable since December last year, when the United States issued an executive order threatening secondary sanctions against organizations involved in financing and supplying Russia's war effort.
This prompted banks in countries such as Turkey and China to drastically reduce transactions with Russian counterparties that go far beyond the decree.
This year, while enthusiasm for toppling the dollar remains high among countries, including China, analysts say practical proposals are unworkable.
Nevertheless, central bank officials attending the IMF and World Bank meetings in Washington this week took the Russian proposal seriously, saying there is a long-term risk that the global payment system could become fragmented due to geopolitical tensions.
“You're already seeing Russia and China looking at ways to do more payments between them, avoiding the dollar entirely,” said one senior Western central bank official. - “So we need to accelerate the work we're doing to improve cross-border payments.
Russia uses non-Western currencies for about 80 percent of its cross-border trade, up from 20 percent before its full-scale invasion of Ukraine in early 2022, said Agathe Demare, senior policy fellow at the European Council on Foreign Relations.
“In the long run, there is no doubt that mechanisms such as the BRICS Bridge could be useful for China, Russia and others to hide sensitive transactions from Western authorities - for example, Chinese shipments of dual-use goods to Russia,” Demare said.
But she added: “At this stage, it is difficult to imagine the widespread development and implementation of BRICS financial instruments around the world.
