The fracturing of the global economy and de-dollarization appear to be full-steam ahead.
Brazil, Russia, India, China, and South Africa, simplified as BRICS, are five emerging national economies that are developing a new universal payment system to challenge the US’ SWIFT international payment network, a Russian official was quoted by Reuters on Thursday.
Russia’s de-dollarization effort has gained momentum in the last several years, in line with President Putin’s commitment to reduce the country’s vulnerability to the continuing threat of US sanctions. But it’s not just Russia who wants to lessen their dependence on dollars for trade, it’s the entire economic bloc.
Kirill Dmitriev, the head of the Russian Direct Investment Fund (RDIF), said, “increasing non-market risks of the global payment infrastructure” is behind the push to develop a new international payment system for BRICS peers.
“An efficient BRICS payment system can encourage payments in national currencies and ensure sustainable payments and investments among our countries, which make up over 20% of the global inflow of foreign direct investment,” Dmitriev said.
Dmitriev said BRICS peers have also been discussing a new common cryptocurrency for mutual payments as another workaround to the dollar.
He said Russia had made a considerable effort over the last several years to reduce dollars in foreign trade. In the last several years, Russian foreign trade payments in dollars have dropped to 50% from 92%, while rouble transactions have jumped from14% to 3%, he added.
On Wednesday, Russian Deputy Finance Minister Vladimir Kolychev was quoted by Reuters as saying the Russian sovereign wealth fund will reduce US Dollars and is studying whether it should add Chinese yuan.
Last month, Russian Economy Minister Maxim Oreshkin told the Financial Times that the country would continue down the path of de-dollarization and begin trading some oil transactions in Euros and roubles.
Russia’s desire to abandon the dollar is a trend that continues to flourish — now it appears BRICS peers could be following down the same path. This will certainly irritate Washington.