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A year after the start of the special operation in Ukraine, Western financial sanctions are straining ties between BRICS. This is what emerged from the G20 in New Delhi and the Valdai conference in Moscow.
New sanctions against Russian banks
On the anniversary of the start of the special military operation in Ukraine, Western countries revealed new sanctions against Russia.
Although they are unlikely to cause economic turmoil, they will cause inflation and disrupt the industrial modernization of the country.
The United States allowed eleven twelfth tier banks. And especially Credit Bank of Moscow, the largest non-state bank in Russia. These eleven banks are now on OFAC’s blacklist and can no longer make dollar transfers.
The EU blocked Alfa-Bank, Rosbank and Tinkoff Bank. Compared to the size, all these banks have nevertheless played an important role since the disconnection of the seven largest banks in Russia from the SWIFT network.
For Ivan Timofeev, director of the program of the twelfth conference of the Valda club in Moscow, there is a continuation of increasing the sanctions against Russia. “inevitable” :
“This means that the priority for Russia is to develop payment methods with foreign countries that are independent of Western currencies. It will also involve substituting certain imports and establishing trading relationships with alternative suppliers in friendly countries. Solving this problem will be complicated by the significant role Western countries play in global finance and supply chains. But also maintaining close financial and commercial ties between friendly countries and Western promoters of the sanctions. »
An alternative to the SWIFT system
The sanctions cut off most of Russia’s banking network from the SWIFT system, but also nearly half of its foreign exchange reserves, which stood at more than $606.5 billion a year ago.
For the Russian Finance Minister, these sanctions destroy the foundation of the international monetary and financial system based on the American dollar. Anton Siluanov was very clear at the annual BRICS club meeting in April 2022:
“These sanctions force us to speed up work in the following areas: using national currencies for import-export operations, integration of payment systems and cards and our own financial messaging system. [équivalent au réseau SWIFT]. »
Russia already has its own version of the SWIFT network: the SPFS. This mechanism, along with the Russian Mir card payment system, was created specifically to circumvent sanctions.
However, most countries refuse to join, not for fear of America’s wrath. Turkey knows something about it.
In this regard, the Russian Foreign Minister Sergey Lavrov put the US pressure on the rest of the world during the G20 in New Delhi:
The punishments are not without pain. But how long will the United States be able to pressure Russia if China and India, among other major nations, are on its side?
BRICS, the anti-dollar club
Russian Foreign Minister Sergey Lavrov admitted late last year that at least a dozen countries want to join the BRICS. “The interest is very, very high and continues to grow. It only applies to Algeria, Argentina and Iran.”he declared.
“Since the applications are already officialswe believe that it will not take too long to work out the criteria and principles for admitting new members to BRICS”he sent.
Who are these countries in a hurry to leave the orbit of Western influence? Saudi Arabia, Turkey, Egypt, Afghanistan and Indonesia have already applied or are about to do so.
Some media reports suggest that Kazakhstan, Nicaragua, Nigeria, Senegal, Thailand and the United Arab Emirates (UAE) are also in the queue.
Among these various nations, Saudi Arabia is probably the most strategic addition. The deterioration of the relationship between the United Kingdom and the United States is a good indication of their integration into the club.
In fact, it is clear that one of the entry conditions is to pursue an independent policy in order to free oneself from the Western monetary system. What the Saudi energy minister declared in Davos is that he now accepts the euro and the yuan goes in this direction.
What are the BRICS preparing?
As of 2019, a single payment system, BRICS Pay, is being developed. It will aim to ditch the dollar by facilitating payments in national currency.
It will also reduce reliance on the SWIFT, Visa and Mastercard networks. Developed in South Africa since 2019, BRICS Pay is expected to be fully operational by 2025.
In addition, the issue of a new reserve currency for the BRICS will be on the table at the BRICS summit in August. The idea first created by the Valdai club in 2018 is to create a national currency basket.
However, this is easier said than done. China accounts for 72% of BRICS GDP. Therefore, the exchange of the dollar for a basket made up mostly of the yuan is probably not to everyone’s liking.
Gold and the resurrection of the Gold Standard certainly have more momentum. Unfortunately, it is not easy to make gold payments via the internet…
Bitcoin, on the other hand … And what makes its material volatility, which is only temporarily linked to its small size (~400 billion $). The most important thing is its real scarcity. The rest will be history.
Does the world need an international reserve currency, which cannot be evaluated and is guaranteed not to lose its value? It already exists. Bitcoin even has the good taste to be a currency at the same time as a payment system, on its way to the million dollars per bitcoin.
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Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.