An in-depth analysis of the historical dynamics indicated BRICS, an informal association consisting Brazil, Russia, India, China and South Africa plus its newly-incorporated four members, are gearing to launch its own payment system, definitely dealing a hypersonic blow to over-dependence on the American currency, the dollar. The BRICS payment system has been in the works since the New Development Bank (NDB) was established in 2015. Noticeably BRICS, with most of its development and financial initiatives, its operations and collective activities are characterized by policy rhetoric of geopolitical confrontation. As the geopolitical tension heightens, BRICS is increasingly becoming serious with its decades-old original initiatives.
With Russia in the helm of BRICS one-year-rotating affairs this 2024, and Russia under sanctions due to its invasion in Ukraine since February 2022, Moscow and Kremlin have been pushing hard to de-dollarize the global system and further design a make-up of economic architecture away from the United States and Europe. Russia’s approach to multipolar means ‘confrontation’ while its members, China and India, encourage and emphasize ‘cooperation’ within the framework of expected reforms. In particular, China’s vision for a multipolar world, can simply be likened to cooperating with regions such as Africa, Latin America, and Asia together to have equally influence. China has consistently been arguing for a collaborative global economy where no single region dominates, while Russia the only member who always postures for confrontation, and as a result, rapidly creating a fragmented world.
For sure many experts have acknowledged in reports, and provided valuable insights into an economic diplomacy coinciding with China’s position on global development. That is why China strongly believes that cooperation is essential for addressing challenges like climate change, poverty, and inequality. China, indiscriminately, believes that developing regions such as Africa, with its vast potential, should be an integral part to this cooperative efforts under BRICS and through other international organizations. China advocates for mutually beneficial cooperation with external countries.
Payment system
Nevertheless, looking ahead to the forthcoming BRICS Summit planned for October 2024 in Kazan, capital of the Republic of Tatarstan, BRICS members under Russia’s directorship will continue, steadily and strategically, navigating the complex dynamics of globalization, the unfolding geopolitical processes with the endearing initiative to launch the BRICS payment system and raise the numerical strength of the association. In fact, many developing countries are looking forward, with keen interest, to joining the informal association. For now these interested potential members will be grouped only as ‘partner members’ in the association, making a new distinctive shift in the structure. China, being a pragmatic member, has long insisted at eliminating the root cause of conflicts, partly caused by under-development. It therefore has one of its four major initiatives embodied the global development initiative, and that is largely complemented by enhancing global security governance through collective security measures.
At moment as part of BRICS task, economic measures relating to world-wide ‘de-dollarizing’ are also of great significance to broadening trade partnership across the world. That makes creating a new system of payment, encouraging payment in local currencies. But this could be facilitated if ‘rules and regulations’ are made flexible and transparent to encourage trade between members. That depends largely on the effectiveness of trade without promoting bilateral and multilateral trade, and multi-sectoral services. In that case, the payment system becomes potent and ineffective.
Nature of expansion
At the sixth BRICS International Municipal Forum held from August 27 to 29, which brought together about 5,000 participants from 500 cities, concrete information emerged that each current BRICS member must provide a list of 10 countries requesting to join the BRICS. That is the condition of aligning with BRICS. The principle is that the 10 common countries can become ‘BRICS partner’ group. As clearly explained, the ‘BRICS partner status’ allows these states to take part in all bodies and discussions within the association, but without a voting power. The expansion of the BRICS will be limited, and the association has to decide on the size – number of partners and their status. This reinforcement would significantly, by the BRICS principle, actively advocate for the reform of the United Nations Security Council and the abandonment of the imperial currency: the dollar.
Joining the BRICS therefore means accepting currencies other than the dollar and connecting to new international payment systems. It is about “addressing what we consider an unjust and costly payment system,” South Africa’s Minister of Foreign Affairs, Grace Naledi Mandisa Pandor, indicated earlier this year. She was very contradictory during her time. Pandor and the Department of International Relations and Cooperation were initially critical of the invasion and released a statement, in which they called on Russia to withdraw its forces in Ukraine immediately. President Cyril Ramaphosa was reportedly unhappy with Pandor and the department’s statement, because it contradicted South Africa’s position that negotiation was needed to end the war. She, along the line, indicated South Africa would exit BRICS.
A decade of BRICS bank
As monitored in late August 2024, the BRICS New Development Bank, hosted its ninth annual meeting in Cape Town, South Africa under the theme “Investing in a Sustainable Future” and exhaustively review multiple questions, the most important task its rivalry position to multinational financial organizations including the International Monetary Fund, IMF, and/or the World Bank. By an agreement for establishment signed during the sixth BRICS Summit in Fortaleza, Brazil, on July 7, 2015, it had as an authorized capital of US$100 billion, of which US$50 billion has been subscribed equally by the five founding members. The Bank’s initial subscribed capital comprised of paid-in capital of US$10 billion and callable capital of US$40 billion.
The objective indelible fact is that the financial base of the NDB is just too small to seriously rival the IMF or the World Bank. And in practical terms, the IMF or the World Bank operate in Asia, Africa, Latin America, Central Asia including former Soviet republics. That compared, the NDB has its Shanghai Headquarters in China. So far it has representative offices with skeleton staff in South Africa and Russia. Aside the founding members, the NDB now has Algeria (latest member in late August 2024), Bangladesh, Egypt, Uruguay and the United Arab Emirates as NDB financial contributing members. Potential countries expressing desire to join BRICS, and ready to work in the BRICS supporting ‘partner group’ obviously have complicated precarious position as debtors of the IMF. Egypt and Ethiopia and South Africa (BRICS members) are heavily connected to IMF and the World Bank.
The NDB may play a very positive role in financing infrastructural development in many BRICS countries, and in financing other sustainable development projects within the BRICS countries; the relatively very small NDB financial base poses absolutely no serious threat to the dominance of the IMF and the World Bank on global finance.
Discussions by academic researchers, analysts and experts back-and-forth on the alternative payment systems and the new currency these several months clear showed high expectations for developing both BRICS currency and the financial payment system. This decision, though fraught with technical challenges, is unchangeable, it enjoys massive support from potential strategic group referred to as ‘partners’ awaiting ascension. Foreign Minister Sergey Lavrov offered the guarantee that “the modalities of ascension have to be collectively discussed” at further summits, possibly at the forthcoming October 2024 summit in Kazan, Russia.
Chairman of an expert council tasked with running Russia’s presidency; Viktoria Panova claimed that the upcoming summit—the final one under Russia’s BRICS leadership—would mostly concentrate on establishing a unified payment system. There are present projects to create a financial payment system to help the BRICS countries cooperate while maintaining their freedom in trade and economic ties.
President Vladimir Putin said at the plenary session of the Eastern Economic Forum (EEF), held on September 5 in Vladivostok, that Russia was not pursuing a de-dollarization policy: “We did not refuse to settle accounts in dollars. We were denied settlements, and we just have to look for other opportunities. Priorities in the use of certain currencies are naturally changing as well. That’s all.” Putin further noted that BRICS member-countries of the Global South account for more than half of global GDP, while BRICS countries account for a third.
A bit of concrete information emerged at the session of the NBD Board of Governors in Cape Town, South Africa late August 2024, to review activities and challenges of the bank during the last decade and its successes. One of key tasks was the revision of the entire international monetary and financial system and the entire financial architecture. Russian Deputy Finance Minister Ivan Chebeskov strongly noted that the bank faces the unprecedented geopolitical fragmentation, and that most of entire financial infrastructure is owned and controlled by Western countries.
NDB’s primary tasks
The bank’s President Dilma Rousseff, in her contribution, noted pointed out that (i) the bank is exploring the possibility of creating digital platforms for mutual payments between various countries, (ii) strengthen and contribute to the overall stabilization of the global financial market, (iii) work consistently toward reforms in the global financial system, (iv) advocate for reducing the debt levels of several developing countries and redirecting new resources toward establishing a new industrial base, scientific research and innovation.
While noting the increasing role of the bank over the past decade (2014 to 2024), Deputy Head of the Russian Presidential Administration, Maxim Oreshkin, underlined the fact that in the process of transforming and modifying the existing financial system, the bank maintains its apolitical status, and BRICS as a collective association would not, at this time, advocate for its single currency. The discussions on BRICS currency reached it accumulative point during “Russia – Islamic World: Kazan Forum” where participating BRICS representatives issued statements that work was at the final stage to create a single currency for the association.
Reiterating at the end of the discussion here that the New Development Bank (NDB), which its members established in 2015 to rival the current international financial institutions, has a long way to travel and multiple tasks to implement to catch up to its destination. Unlike the obvious multilateral financial institutions, the World Bank and the International Monetary Fund, little is known about NDB and its skeletal organizational structure and limited investment profile. Over time, however with optimism and enthusiasm, the NDB’s operations would increase, its worldwide visibility and presence become noticeable as it consistently seeks out new approaches to advance a broader agenda—in terms of membership growth, regional offices, outreach, and partnerships, especially in Asian-Pacific and Africa in the Global South
With an enormous task to BRICS realize its primary goals of raising the level of concrete development and a new model of economic architecture, with its vast untapped resources both natural and human (demography), BRICS has achieved globally recognized for its symbolism and for building a world-wide force to counteract western hegemony and unipolar. For now, BRICS has a virtually operated secretariat. BRICS is “an informal association” created by geographically diverse countries, with very little ideological commonalities. The five original countries of BRICS are Brazil, Russia, India, China and South Africa.