BRICS: The Move to a New Currency Unit Progressing

An important step on the road to a BRICS trade currency unit, which Russian President Putin referred to at the St. Petersburg International Economic Forum (see SAS 24/24), was a meeting between BRICS Bank (NDB) President Dilma Rousseff and prominent Russian economist Sergey Glazyev, on the sidelines of the forum. Although details of the discussion are not available, the fact that it lasted more than one hour instead of the scheduled half-hour indicates that it was productive. A follow-up meeting has been planned.

Glazyev is among the few economists in the world who understand the central issue of credit in monetary matters. Indeed, his idea of a currency unit that is pegged to gold, a basket of commodities and member countries’ currencies, would be instrumental in both facilitating trade and creating a source of credit in the new currency unit. So far, in fact, the activity of the New Development Bank has been limited by its exclusive use of dollars to issue credit.

Sergey Glazyev’s views, as he has publicly stated, have been shaped significantly by his friendship over decades with U.S. economist Lyndon LaRouche (cf. LaRouche’s essay Trade without Currency). In an interview published in Sputnik last February, Glazyev summarized his view of the new currency unit as follows: “The idea of the currency is that there are two baskets: one basket is national currencies of all countries involved in the process, like the SDR, but with more clear, understandable criteria. The second basket are commodities. If you have two baskets, and we create the new currency as an index of commodities and national currencies, and we have a mechanism for reserves, according to the mathematical model that will be very stable. Stable and convenient.”

Then it’s up to feasibility: “To introduce this currency as an instrument for transactions would not be too difficult. With good infrastructure, and all Central Banks approving it, then it’s up to businesses to use this currency. It should be in digital form – which means it can be used without the banking system, so it will be at least ten times cheaper than present transactions through banks and currency exchanges.”

In addition, the Russian economist noted, the question of pricing of commodities has to be taken up. “For the moment price is determined by Western speculation. (…) Price formation with this new currency should get rid of Western exchanges of commodities.” Glazyev’s team is working to have the BRICS put the issue on the agenda at their meeting in October.

On June 12, as the deadline for expiration of the “petrodollar” deal came and went, apparently with neither Saudi Arabia or the USA renewing the agreement, Glazyev commented on his Telegram channel: “The foundation of Pax Americana is eroding”. Indeed, the agreement signed between the United States and Saudi Arabia 50 years ago obligated the Kingdom to trade oil exclusively in U.S. dollars in exchange for receiving aid from the U.S., primarily military assistance.

If this information is confirmed, it means that Saudi Arabia is moving ahead with a decoupling from the dollar that had already started with the settlement of the Saudi-China oil deal in yuan. It does not necessarily mean that it will drop dollar assets tomorrow, but it will certainly diversify its foreign reserves in proportion to the evolution of its trade flows.