Russia proposed making amendments to the cross-border payment systems between the BRICS countries (Brazil, Russia, India, China, and South Africa) with the aim of bypassing the global financial system dominated primarily by America and Europe.
This step comes within the framework of Russia’s efforts to protect its economy from the sanctions it faces as a result of the war in Ukraine.
The proposed alternatives, according to Bloomberg Economics, include developing a network of commercial banks that can conduct these transactions in local currencies, in addition to establishing direct links between central banks.
According to a report prepared by the Russian Ministry of Finance, the Bank of Russia and the Moscow-based consulting firm Yakov & Partners, this “multi-currency system” requires protecting its participants from any external pressures such as cross-border sanctions.
The plan also includes establishing centers for mutual trade in basic commodities such as oil, natural gas, grains, and gold.
In the context of these initiatives, Russia is seeking to reduce its dependence on the dollar after the United States and its allies imposed strict sanctions on the country following the invasion of Ukraine in February 2022. The sanctions included freezing Russian assets and expelling major Russian banks from the “SWIFT” financial messaging system.
On Thursday, Russian Presidential Assistant Yuri Ushakov announced the intention of the BRICS group to launch a unified financial platform for clearing and reinsurance, which would expand the scope of settlements in national currencies among member states.
He stressed that launching the aforementioned tools will lead to expanding settlements in national currencies and reducing the costs of intra-regional trade.
The report added: “American interests are not always aligned with the interests of other participants” in the global financial network.
Distributed Ledger Technology (DLT)
Bloomberg says that among the proposals, Russia pushed to use “distributed ledger technology” (DLT) or a new multinational platform to make settlements using digital tokens.
“The main advantage of the proposed settlement model is the elimination of credit risks” associated with the traditional banking system, the report stated.
The report also noted that the use of “distributed ledger technology” may reduce processing times and costs, because intermediary entities and compliance checks will become unnecessary.
The report’s authors confirmed that the countries participating in BRICS could save up to $15 billion annually if this technology was used in half of all cross-border transfers.
Although Russia faces challenges as a result of international sanctions, other BRICS countries that do not face the same complications still prioritize access to the dollar-based financial system. According to the Brookings Institution, the dollar represents 58% of international payments.
