Trade Without Dollar Has Expanded Among the BRICS

As a reaction to the weaponization of the US dollar referred to by Jeffrey Sachs, BRICS member countries have increasingly shifted to financing bilateral trade in local currency, notably among the three largest: China, India and Russia. In a May 15 interview with Xinhua on the eve of his visit to China, Vladimir Putin pointed out that Russia-China turnover had doubled over the past five years, and that “More than 90% of settlements between our companies are made in national currencies”, rubles and yuan.

However, trade in local currencies has its limits. If bilateral trade is unbalanced (if one nation imports much more than it exports to the partner nation), unspent reserves in local currencies pile up, as was the case in Russia-India bilateral trade. Last October, India allowed banks in 22 partner countries, including Russia and the United Kingdom, to open “vostro” accounts to help facilitate trade in rupees. These are accounts that a domestic bank typically holds on behalf of a foreign bank, denominated in the currency of the former.

Until a few weeks ago, Russia had accumulated over $8 billion in its Vostro account, mostly in revenues from energy exports to India. Finally, it was reported May 10 that Moscow had spent half of that money to purchase military equipment from India. Trade would be facilitated if those exchanges were settled in a unit of account that could also be spent in other BRICS countries and beyond. Such a unit could be pegged to a basket of commodities in order to provide monetary stability, as suggested by Lyndon LaRouche, who however made it clear that real stability can be provided only by a mutual commitment by participating nations to the general welfare of their populations.