By It was a powerful message from the Russian leader. While the United States is preoccupied with the duel between Kamala Harris and Donald Trump for the presidential throne, cooperation in the East is growing stronger. The founding states (Brazil, Russia, India, China, and South Africa) have brought together leaders from countries that are often absent from international discussions, including Iran, Egypt, Ethiopia, and the United Arab Emirates, with whom the BRICS+ are now formed. The Russian president had also scheduled talks with Turkish President Erdogan, whose country, though a member of NATO, has asked to join the group.
It must be said that this event is taking place despite Western sanctions against Russia. The attempt to isolate Russia has failed, as Russia has skillfully taken advantage of its pivot toward Asia. Xi Jinping praised the strength of bilateral ties between China and Russia, recalling the long history of cooperation between the two countries. For the record, the Soviet Union had helped Mao's Communist China to develop in the 1950s with the signing of a Sino-Soviet pact, before relations deteriorated in the 1960s and 1970s. The borders between the two countries were demarcated relatively late, in 1993. Dialogue and, above all, economic cooperation resumed in the 2000s, counterbalancing Western influence in favor of the "Global South."
So much for history. Let's turn now to the reshaping of the global financial system. Putin is said to have found a solution to US financial sanctions: a payment system between the BRICS. This system, which Russia calls the "BRICS Bridge," would make it possible to escape dependence on the euro and, above all, the dollar in the markets. It should be up and running within a year, enabling countries to make cross-border settlements using digital platforms managed by their central banks. Although central banks have diversified their holdings, including in gold, around 58% of foreign currency reserves are in dollars, and the dollar's network effects place US banks at the center of the world's payment systems.
Almost all banks carrying out transactions in dollars have to go through a correspondent bank in the USA, enabling the US to monitor money flows for suspicious activities such as terrorist financing or sanctions evasion. American leaders thus have a powerful lever at their disposal, which they have not hesitated to use as an alternative to military action. The USA has demanded that certain foreign banks be excluded from SWIFT, a Belgium-based financial messaging system used by some 11,000 banks in over 200 countries to transfer international funds. In 2022, the West froze $282 billion of Russian assets abroad, according to The Economist, and excluded Russian banks from SWIFT.
China, which arguably sees this as its greatest threat, has long been betting that payments technology will reduce the power the US derives from its position at the center of global finance. The BRICS plan could enable cheaper, faster transactions that might appeal to emerging economies. In addition, the leaders discussed the creation of a credit rating agency to compete with major Western agencies, as well as a reinsurance company to overcome restrictions imposed by Western companies that refuse to reinsure certain tankers carrying Russian oil. They also discussed setting up an alternative payment system to Visa and MasterCard.
Putin also stressed the importance of creating a common currency for the BRICS countries, based on a basket of gold and various currencies not pegged to the dollar. However, India has expressed reservations about this idea, preferring the more promising concept of a digital currency backed by traditional currencies. This concept is inspired by the "mBridge" project, developed in 2019 by the Bank for International Settlements (BIS) in collaboration with the central banks of China, Hong Kong, Thailand, and the United Arab Emirates, with the aim of centralizing transactions by eliminating the need for intermediary banks.
In this way, the BRICS+ could potentially adopt and adapt mBridge, whose design is mainly Chinese. The BIS, faced with geopolitical tensions and divergent objectives among its members, had slowed its development. However, the BRICS' alternative payment systems face challenges, notably in terms of liquidity and regulation, but interest in reforming the international payments system is gaining ground in the context of a challenge to the dominance of the US dollar.
Finally, Europe’s position is clear and much less finance-oriented: it expects the summit to call for an "immediate end to the war" in Ukraine, said a spokesperson for the EU’s diplomatic service. Beijing reiterated its call for peace talks and respect for the territorial integrity of all countries, including Ukraine, without ever condemning Moscow. India's Prime Minister Narendra Modi also called for a peaceful resolution to the conflict. It is also important to highlight the emergence of a new source of tension: North Korea has reportedly dispatched more than 3,000 soldiers to support the Russian armed forces, an action to which Kyiv is demanding an immediate withdrawal.
