BRICS’ de-dollarization agenda has a long way to go

New Delhi — BRICS leaders, including Russian President Vladimir Putin and Chinese leader Xi Jinping, have publicly voiced their commitment to jointly introduce an alternative payment system that would not be dependent on the U.S. dollar. Independent analysts, however, question the feasibility of implementing the idea anytime soon. The recently concluded meeting of BRICS -- Brazil, Russia, India. China and South Africa -- discussed ways to establish an alternative to SWIFT, the international payment system. Russia was removed from the SWIFT system after the start of Ukraine war in 2022 and has been particularly keen to find an alternative. “We are looking into the possibility of expanding the use of national currencies and settlements and want to establish the tools that would make this safe and secure enough,” Putin said. BRICS will work out a payment arrangement with the cooperation of central banks affiliated with the group’s member countries, he said. Analysts assert this is easier said than done. But some experts, like Gregory Zerzan, former deputy assistant secretary of the U.S. Treasury Department, have warned about the danger of ignoring the BRICS’ efforts. He said that’s because its members, some of whom are less friendly toward the U.S., appear determined to achieve their goal. “There is still a long way to go before BRICS will ever launch a payment system that could be treated as a serious alternative to the SWIFT,” Eva Seiwert, analyst at the Berlin-based Mercator Institute for China Studies, told VOA. She pointed out that the Kazan Declaration, which was adopted after the two-day BRICS meeting this week, was vague about even the milder version called the BRICS Cross-Border Payments Initiative, or BCBPI, which is supposed to strengthen corresponding banking networks within BRICS and enable settlements in local currencies of BRICS members. The declaration said that participation by member countries in BCBPI would be “voluntary and non-binding.” The BRICS plan is taken seriously in some quarters because China and India have shown it is possible to defy the economic sanctions and buy Russian oil using local currencies. Some analysts think that provision may be extended to oil-rich Iran, which has joined the BRICS club. At the same time, bankers are not convinced that BRICS has been able to come up with a technical support system for creating and sustaining an alternative to the SWIFT system. “How do you account for currency fluctuations if the alternative payment system is established?” asked Gopal Tripathy, head of Treasury at Jana Small Finance Bank based in Bengaluru, India. “They might use the USD [U.S. dollar] as a reference currency. In that case, the whole purpose of moving away from the dollar is lost.” Companies in India, China, South Africa and Brazil may find it difficult to make and receive payments with business partners in countries outside the BRICS club. “There is no moving away from the U.S. dollar unless you can create a parallel ecosystem,” he said. Though the BRICS do not appear ready with the mechanism to implement the idea, there are concerns in Washington about the de-dollarization campaign launched by some countries. Speaking with the House Financial Services Committee in July, Treasury Secretary Janet Yellen said the U.S. economic sanctions have led to BRICS trying to kickstart the de-dollarization agenda. “The more sanctions the U.S. imposes, the more countries [BRICS] will seek financial transaction methods that do not involve the U.S. dollar,” she said. Washington appears to have amended its view on the subject since July 2023, when Yellen said there was not much to worry about. “We have deep liquid open financial markets, strong rule of law and an absence of capital controls that no country is able to replicate,” she said at that time. Brazil, one of the group’s members, has gone a step further, suggesting that a BRICS currency should be released into the market. But this suggestion has not been widely accepted by other members of the group. “A BRICS currency would require major political compromises, including a banking union, a fiscal union and general macroeconomic convergence … many experts doubt that a new BRICS reserve currency would be stable or reliable enough to be widely trusted for global transactions,” the New York-based Council on Foreign Relations said in an October 18 article on its website.