The BRICS Currency and the Golden CryptoRuble

NEW – June 24, 2022

On June 22, on the eve of the online summit of the leaders of the five BRICS countries, Vladimir Putin said that within the framework of this structure, the issue of creating an international reserve currency based on a basket of currencies of the participating countries is being worked out, and reliable alternative mechanisms for international settlements are being developed, mentioning that the Russian Mir payment system is open for connecting the “five” banks to it. On the same day, from the State Corporation for the Development VEB.RF received a proposal to issue a “golden crypto ruble” — a stablecoin, unlike a “simple” digital ruble, tied to the value of the “royal metal” and focused not on internal, but on external calculations.

Both statements are not only extremely important — especially in the context of the events taking place on the world stage today — but they seem to be interconnected in a certain way. Having launched almost four months ago a special military operation to demilitarise and denazify Ukraine, Russia entered into an open conflict not so much with the “independent” quasi-state as with the collective West as a whole — in fact, it caused fire on itself, creating additional financial and economic difficulties for the United States and its allies and thereby significantly reducing the pressure of the leaders of the “alliance of democracies” on China, India and other developing countries.

Moreover, these countries were granted substantial preferences in exchange for their “friendly neutrality”: guaranteed supplies of Russian products, including energy, fertilisers, food, etc., often cheaper than the level of world prices. All this, along with the regime of “infernal sanctions” imposed against Russia, contributed to the collapse of the global market, including the financial market, accelerated the processes of de-dollarisation of the world economy and put on the agenda the loss of the American monetary unit of its long-standing status as the “number one currency”. The “empire of the dollar” is falling apart before the eyes of all mankind. But, as you know, a holy place is never empty. What is replacing it?

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According to the most widespread “world-economic” concept today, all models of human civilisation known over the past 500 years were built according to hierarchical laws and always had a control centre and a controlled periphery — only the location and size of this centre changed. At various times, such centres were Northern Italy, Holland, England, and finally the US, but now China is gradually becoming the centre of the “world economy”. And Russia’s conflict with the collective West, with the “alliance of democracies” led by the United States, is a conflict caused by the need to ensure the national security of our country, at the same time objectively corresponds to the interests of China.

The only problem is how ready China will be to take into account Russia’s interests, how multipolar the new version of the “world economy” will be in reality, to what extent its basic hierarchical model will be preserved. These problems are directly related to two Russian initiatives, dated — as it happened! — the 81st anniversary of the attack of Nazi Germany on the Soviet Union. Perhaps this coincidence is not accidental: our country, which played a leading role in the defeat of the Third Reich and the Japanese Empire, suffered countless victims in World War II, does not intend to repeat the tragic mistakes of the past.

In this case, we are talking, firstly, about new content: “Whose blood will flow in the veins of the world economy of the 21st century?”, and secondly, about a new configuration: “Through whose veins will the blood of the world economy of the 21st century flow?” — financial flows of the future. After all, today China, the first economy of our time, with a GDP PPP of $27.2 trillion by the end of 2021, almost twice exceeds the total corresponding figure of its main partners in the SCO and BRICS: India ($10.22 trillion) and Russia ($4.49 trillion), and within the framework of BRICS, that is, taking into account Brazil and South Africa, provides almost 60% of the joint GDP. Such a balance makes it quite likely that the Chinese yuan and the Chinese CIPS payment system will dominate directly or indirectly within the framework of a “non-Western” and de-dollarised economy.

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Now, in the conditions of the far from finished and still growing conflict of the “alliance of democracies” against Russia and China, this moment is not decisive, but it cannot be ignored, and one’s interests should be identified in advance and as clearly as possible — as is said, in order to avoid… This, it seems, is the meaning of the above-mentioned Russian initiatives: a “basket of currencies” as the basis of the BRICS monetary unit of account, an open network of payment systems including the Russian SPFS (the mandatory part of the discussion, voiced by the President of Russia), as well as a digital format backed by gold (the optional part, voiced through VEB).

We will inevitably learn something about the first results of these initiatives from tomorrow’s open part of the BRICS leaders’ summit. But not only that. Of no less interest is the reaction from the Group of Seven summits on June 26-28 in Germany and NATO on June 29-30 in Madrid.

Oleg Shchukin

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