BRICS ordinary currency promotion plan: Where is India?

Story so far: To deepen relations in Asia and Africa, the heads of the BRICS countries (Brazil, Russia, India, China and South Africa) are scheduled to be held in Cape Town, South Africa from August 22 to 24 this year. The group is seen as a counterattack with the G7 and is also considering expansion.

Foreign Minister of BRICS countries is Cape Town June 2, 2023, to strengthen the influence of global groups. Ministers in Algeria, Argentina, Iran, Saudi Arabia, United Arab Emirates, Egypt and Kazakhstan also attended the meeting.

South African Foreign Minister Naledi Pandor said in a statement after the meeting that the Shanghai-based New Development Bank (NDB) introduced the BRICS countries to the possible use of alternative currencies to ensure that the group does not fall victim to sanctions that affect countries that do not participate in the original issue.

Foreign Minister S. Jaishankar, along with his peers, comes from Brazil, Russia, China and South Africa, following the meeting of BRICS Foreign Ministers in Cape Town, South Africa on Thursday, June 1, 2023. Image source: PTI

The group also published a entitled “The cloak of hope”, highlighting the use of local currencies in international trade and financial transactions between BRICS countries and their trading partners. The BRICS countries account for 41% of the global population, 24% of global GDP and 16% of global trade.

The origin of the common currency of the BRICS countries

Last year, shortly after the invasion of Ukraine, the Russian President Vladimir Putinthe idea of ​​an “alternative transfer mechanism” with BRICS partners and “international reserve currencies” was proposed. Speaking to the BRICS Business Forum via video link on June 22, 2022, Putin said Russia is actively redirecting its trade traffic and economic contracts to “reliable partners”, such as India, China and other BRICS countries, in response to the serious sanctions imposed by the EU, the United States, the United Kingdom and other Western powers.

Promoting independence from the dollar and the euro, Western sanctions have neglected the fundamental principles of market economy, free trade and private property inviolability as Russia is forced to seek new markets and strengthen its ties with Asian and African countries.

Russian President Vladimir Putin attended a BRICS summit at the BRICS summit through a video link in Moscow, Russia on June 24, 2022 | Photo source: Sputnik

The idea of ​​a universal BRICS currency is based on the group’s goal of re-ruling the geopolitical situation globally to suit the economic, geographical and demographic advantages of its member states. The Group was founded in 2009 and in 2015, the Multilateral New Development Bank (NDB) was established to mobilize resources for infrastructure and projects in emerging markets and developing countries. Through the NDB (formerly known as the BRICS Development Bank), the BRICS aims to deal with the West’s dominance in global financial institutions such as the World Bank or the International Monetary Fund.

BRICS expansion and economic impact

Over the years, several countries have expressed interest in joining the BRICS to resist Western alliances such as the G20, NATO and the EU. In the recently concluded BRICS external ministers gathered, more than 40 countries expressed interest in joining the group. Interested people include Iran, Saudi Arabia, the United Arab Emirates, Argentina, Cuba, the Democratic Republic of the Congo, Gabon, Kazakhstan and Algeria.

Before joining the group, many potential countries invested NDBthe latest is Algeria. Its chairman Abdelmadjid Tebboune said his country formally applied for a $1.5 billion donation to join NDB. Bangladesh and the United Arab Emirates joined the NDB in 2021, and Uruguay’s request was accepted. In March this year, Egypt became an investor in NDB.

Currently, Argentina, Saudi ArabiaZimbabwe is considering investment in NDB and seeking membership in the group. In May, Saudi Arabia expressed interest in investing in banks as it attempts to diversify its investment in Asia. To build closer ties with India and China, Saudi Arabia, the world’s largest oil exporter, sees it as an opportunity to expand its market.

The expansion of BRICS countries has been Sanctions Russia, a founding member, owns 18.98% of NDB for its invasion of Ukraine. In March 2022, NDB was forced to stop all new deals in Russia, citing “uncertainty and restrictions.” Several global banks and countries have stopped rapid transactions in Russia, freezing the assets of the Russian central bank and the assets of certain Russian individuals.

Shareholders of New Development Bank

BRICS countries’ expansion has also been stagnant India and Brazil Oppose China’s method of increasing the influence of the group. Brazil is concerned that the group’s expansion will attract countries that view BRICS countries as opposition forces to the EU and the United States, while India hopes to see countries as membership over time.

At the recent Cape Town meeting, Indian Minister of External Affairs S Jaishankar called the expansion “work ongoing”. He said it was necessary to see how the BRICS countries stayed in touch with non-brain countries and a proper format for possible expansion of the group. Brazil agrees with India’s Foreign Minister Mauro Vieira, said the BRICS is a brand that must be taken care of because it represents a lot. By contrast, China’s Deputy Minister Ma Zhaoxu said that his proposed BRICS+ is developing “very fast”.

Promote local currency use

In order to attract more countries to the group, the BRICS countries have promoted the use of bilateral trade in member states’ local currencies, which was also reiterated in a joint statement in Cape Town.

Although the statement did not directly mention sanctions against Russia, the group noted that “unilateral economic mandatory measures such as sanctions, boycotts, embargoes and blockades” called for a peaceful resolution of the situation in Ukraine through dialogue and diplomacy.

Initially, when Russia was sanctioned, India’s rupee – a revival of the double trade agreement – ​​an alternative payment mechanism that was to settle in the case of rupee rather than the dollar or the euro. But Moscow refused to keep its rupee surplus as traders found currency conversions expensive, with its reserves of $40 billion. It used the Chinese yuan to pay a portion of the oil imported from Russia, avoiding Western sanctions.

Images of this lecture notation provided by the UAE’s Presidential Affairs Department show that UAE President Sheikh Mohammed bin Zaid Nahan (R) welcomed Indian Prime Minister Narendra Modi at the official reception in Abu Dhabi on July 15, 2023. Image source: AFP

Recently, India signed a Rupee-Dirham deal during Prime Minister Narendra Modi’s visit to Abu Dhabi. Although UAE Ambassador to India Abdulnasser Alshaali said the deal was not a measure to make the global economy pay, the deal was intended to connect the payment and messaging systems of the two countries and increase the circulation of rupees in the Gulf of Mexico. As of now, the Reserve Bank of India has allowed banks from 18 countries to trade at a price of rupee – Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, New Zealand, Oman, Russia, Russia, Sayer, Singapore, Singapore, Sri Lanka, tanzania, tanzania, tanzania, tanzania, tanzania, uganda, uganda, unuganda.

India’s BRICS partner China has traded with more than 120 countries using RMB. The push to reach local currency transactions between the group and the global exchange rate is seen as the group’s move to claim its economic potential and closer to the EU-like ordinary currency.

BRICS countries’ wages and ordinary currencies

Promote easier deals among black brick countries, the group launches BRICS countries pay Under the leadership of the Project Committee in 2018, digital payments will be implemented without converting to their respective local currencies. The payment mechanism will combine central bank digital currency (CBDC) and decentralized currencies (i.e. cryptocurrencies). It is still in the discussion phase.

Currencies like the EU have driven support from two member states – Russia and Brazil. When Mr. Putin was the first to make a suggestion, Brazil’s new president Luiz Inacio Lula Da Silva is also a voice supporter of ordinary currencies. He claimed that such a move would help developing countries reduce their dependence on the dollar.

The logo of the recommended BRICS compensation system

However, NDB’s Chief Financial Officer (CFO) Leslie Maasdorp Any plans to launch the BRICS common currency immediately were excluded. Despite the growing economic influence of the group, Mr. Masdorp believes that even the Chinese yuan cannot achieve its status as a reserve currency. Similarly, South Africa and India All denied any negotiations on the currency of the BRICS countries. India asserts that its focus is on strengthening its country’s currencies and promoting trade among all global powers.

At the upcoming BRICS summit, which will be held from August 22 to 24 this year, at the Thornton Convention Center in Johannesburg, South Africa, Mr. Putin, the biggest advocate of the BRICS, will not be present as he faces allegedly arrest warrants (ICC) issued by the International Criminal Court (ICC) in Ukraine. The summit will see both Russia and China push for expansion as India and South Africa remain vigilant.

• Foreign ministers of the BRICS countries met in Cape Town on June 2, 2023 to strengthen the influence of the global group.

• The group also issued a joint statement called the Cape of Good Hope, highlighting the use of local currencies in international trade and financial transactions between international engineers and their trading partners.

• Over the years, several countries have expressed interest in joining the BRICS countries to resist Western alliances such as the G20, NATO, the EU, etc.