Russia to persuade BRICS allies to end dollar dominance at upcoming summit

MOSCOW: Russia, facing Western sanctions, is expected to convince its allies at an upcoming BRICS summit to adopt an alternative to the dollar for global payments. 

The gathering of emerging economies will take place in the Russian city of Kazan from Tuesday (Oct 22) to Thursday. 

Russia is likely to show that it is immune from Western attempts to isolate it, and persuade other members in the grouping to overhaul the global financial system.

EXPANDING COUNTERWEIGHT BLOC

BRICS – established in 2009 – initially included Brazil, Russia, India, and China, while South Africa joined a year later. The bloc now has 10 members, with 34 others waiting in line.

Its member states account for almost 30 per cent of the global gross domestic product, and about 45 per cent of the world’s population.

As momentum builds to expand this so-called counterweight bloc, Russian President Vladimir Putin hopes he has the support to take on the West's dominance of the global economy.

“I am convinced that, by acting together in unity, we will be able to fulfil our countries’ potential in the economy, investment, technology, and human capital, to strengthen the positive impact of BRICS on global developments and make the world safer and more harmonious,” he said. 

His attempt to reduce Russian dependence on the dollar follows the imposition of wide-ranging curbs by Western countries after its invasion of Ukraine.

The sanctions, which include the freezing of foreign currency reserves and assets, have made it difficult to settle trade payments.

A REAL FORCE OR A TALKING SHOP? 

Moscow hopes its proposed alternative to a dollar-based financial system will solve these issues. 

But achieving a unified voice on most challenges remains elusive for a bloc with divergent interests, said observers. 

They added that it is unclear how many countries explicitly support the alternative. 

Associate Professor Kirill Koktsyh of MGIMO University’s political theory department noted that BRICS members have to find a common voice “with twice as many countries now present” on major issues, including on the alternative payment system. 

In case this option fails to garner support, Moscow has another plan. 

It has an interim proposal for a so-called bridging payment for digital transactions - set in individual national currencies - that would be immune from Western control.

This system hinges on linking commercial banks through the central banks of BRICS members, and involves transferring digital tokens backed by national currencies. 

The idea would guarantee the secure exchange of those currencies and circumvent the need for dollar backing. 

Some BRICS newcomers, such as Egypt, are exploring similar bilateral payment partnerships. 

“Some of the BRICS countries started such models of payment bilaterally,” said former Egyptian ambassador to China Magdy Amer, citing such Russia-China and Russia-India partnerships. 
 
“In Egypt, we are starting this with China as well. This is the trend now and this is an important step to be taken by the BRICS.”