The BRICS Consider a New Payments System Protected from Sanctions and Currency Warfare
The meeting of the Finance Ministers and Central Bank Governors of the BRICS took place in Moscow on Oct. 10-11, to prepare the group’s summit to take place next week in Kazan, under the chairmanship this year of Russia. Participants received a proposal from Moscow for a new cross-border payments system that focuses on a new platform linking together the central banks of the participating nations. The goal is both straightforward and urgent: to avoid the sanctions as well as the economic and currency warfare coming from the West.
On his return from the meeting, the Governor of Iran’s Central Bank, Mohammad Reza Farzin, confirmed that this new system includes developing a network of commercial banks that can conduct banking transactions in local currencies, as well as establishing direct links among central banks.
The report presented by Russian Finance Minister Anton Siluanov, titled BRICS Chairmanship Research: Improvement of the International Monetary and Financial System, states that a new payments system could be protected from sanctions and seizures by “putting central banks in the middle of transactions”, by creating or using BRICS exchanges for trade in key commodities including gold, oil, wheat, strategic metals and making payments among the BRICS central banks in tokens (distributed ledger digital currencies). Presumably the central banks will make equivalent national currencies available to the banks of the respective trade partners.
This issue has been given the highest priority by the Russian chairmanship. However, the report also refers briefly to the issue of credit for emerging markets and developing economies (EMDEs). The crushing debt burden now loaded on the developing countries is mentioned in Point 12:
“Developing regions are continuing to borrow at rates that are significantly higher than those of developed countries — even if factual risk profiles are at comparable levels”, it says. As a result, the costs of servicing the interest are soaring. Thus, “net interest payments in developing countries, on average, accounted for 7.8% of government revenues in 2023 (up from 4.2% in 2010)”. It also notes the additional risk of depreciation of their national currency for developing countries that borrow in dollars or euros.
The former Vice President of the BRICS New Development Bank, Paulo Nogueira Batista, Jr., is convinced of the need to find an alternative to the current “dollar-centered, dangerous, unbalanced system”. In a statement issued from Moscow on Oct. 13, he called the current international monetary and financial system controlled by the West “unreformable”. The SWIFT payments system “will basically continue to be a weapon used by the West and the United States and its allies to punish and restrict access to international banking”.Therefore, Nogueira wrote, the BRICS need to construct an alternative system, as well as a new unit of account, and a reserve currency to be used as a means of settlement between central banks.
