“BRICS” attempt to bypass the US dollar / “BRICS bridge” plan came to the table today

Mehr News, International Group: At the recent BRICS summit in Kazan, Russia, the leaders of China, India, Iran and Russia to bypass the US dollar, set up a new payment system called ” presented the BRICS bridge, which is in direct opposition to the US dollar as the current dominant currency of the world. Since its establishment in 2006, BRICS has set its main goal to confront the dollar-oriented economic and financial system.

Why BRICS is trying to replace the dollar

BRICS’ rivalry with the dollar is due to its strengthening of the US. In fact, an important feature of the world economy after World War II is the international role of the dollar. The dollar is the most popular currency reserve in the world, and has the largest amount of exchanges in the world. Today, the dollar constitutes almost two-thirds of the foreign exchange reserves of the world’s central banks, and about two-thirds of international trade is also done with this currency.

Institutions such as the International Monetary Fund and the World Bank carry out their activities by relying on the dollar, and countries in their financial and monetary affairs such as loan repayments, commercial activities international and reserve their currencies in central banks, they rely on dollars. The international role of the dollar has helped to stabilize the global position of the United States in the economic and political arena. Variables such as economic strength and superiority, high political and military power, stable and trusted legal system have made the dollar’s tendency to be widespread at the global level despite the relatively low interest rate of the dollar.

Therefore, while having these features and unique market capacities, America has become a great center for attracting goods, services and capital from other countries. However, despite the emergence of the United States as the leader of the world’s monetary regime, it seems that this country is facing problems in maintaining its global position, one of which is the BRICS mechanism.

According to the data until 2019, about 44% of foreign currency circulation, 63% of foreign debts, 59% of international loan payments, 62% of foreign exchange reserves. the world and 40% of international payments have been made based on dollars. Also, in the foreign exchange market, the US dollar accounts for 44% of transactions; For example, in 2017, the share of the US dollar in foreign currency reserves was more than 60%, while the euro accounted for 20% of the reserves.

BRICS measures to replace the dollar

BRICS allows members to reduce reliance on the United States. In this way, this bloc can curb American unilateralism and strengthen South-South relations. For this purpose, BRICS is following various economic mechanisms to implement this initiative.

1. Creation of a new development bank

This bank was established with the aim of financing infrastructure projects in member countries by Brazil, Russia, India, China and South Africa. This bank is a key successor to the International Monetary Fund and the World Bank, enabling developing countries not to use the US dollar as their reserve currency.

2. Use of local currencies

The BRICS countries are trying to reduce the monopoly of the dollar as the world’s reserve currency, and in this regard, they have tried to use their local currencies in regional trade.

3. Currency swap

Currency swaps are a tool to defend against financial turmoil and allow a country facing a liquidity crisis Actually borrow money from others using your own currency. This instrument is a financial contract between two countries, based on which they agree to exchange a certain amount of different currencies with each other. The main purpose of this contract is to manage risks caused by exchange rate fluctuations. BRICS member countries have made currency swap agreements in the last decade to facilitate trade and investment and bypass the exchange with the dollar. In 2013, Brazil and China signed a $30 billion foreign exchange swap agreement that allowed direct exchange between the Brazilian real and the Chinese yuan without relying on the dollar as an intermediary currency. This move has promoted bilateral trade and reduced dependence on the dollar in BRICS economies.

4. Replacing dollar exchanges with gold

This action is related to oil purchase contracts of BRICS members. China’s action to buy oil with yuan, which is aligned with gold, along with Russia’s attempt to sell oil in exchange for other currencies, has caused commercial exchanges with gold to be noticed. In addition, China, Russia, South Africa and Brazil are major producers of gold. China and India are also the biggest consumers of gold. The gold trading system helps to strengthen the stability of the internal currency of the members and excludes the BRICS members from external pricing.

5. Creating systems other than Swift

Swift stands for (Society for Worldwide Interbank Financial Telecommunication) is a global interbank financial communication network that is used to transfer money and information related to financial transactions between banks and financial institutions around the world. will be The basis of this mechanism is the US dollar. China and Russia, as the two main BRICS members, created systems to replace SWIFT in 2012 and 2018. China launched The Cross-Border Interbank Payment System (CIPS) in 2012 and was able to register and pay about 13 trillion dollars in 2021 by expanding it to trading partners. Russia also has a system called System for Transfer of Financial Messages (SPFS) and by 2020, it has connected many of its business partners. Since 2022, efforts have been made to connect these systems and connect other BRICS members to them.

Putin and the BRICS mechanism

The United States has intensified sanctions against Iran, Russia and China in recent years. This requires BRICS members to put more efficient mechanisms on the agenda. America has forced some foreign banks to cut their connection with SWIFT in the last two decades. For example, in 2018 SWIFT stopped its communication with Iran. From 2022 also about 282 Billion dollars of Russian assets were blocked in the West and Russian banks were also removed from the SWIFT system. It was in this direction that Putin said at the recent BRICS summit: “We do not reject the dollar or fight against it, but what will we do if we are not given the opportunity to use it?” After that we have to look for alternatives.”

In this meeting, Putin proposed the BRICS bridge plan. This plan is based on digital currencies under the supervision of central banks and is able to reduce the transaction time from a few days to a few seconds and reduce its costs to zero.

Result

Since the beginning of the establishment of BRICS, replacing the financial and economic system of America and the West with the desired mechanisms of BRICS has been a priority. However, in recent years, when the US use of the sanctions system against competitors such as Iran, Russia and China has increased, these countries are also trying to use new technologies in addition to the previous BRICS initiatives and the use of domestic currencies in bilateral exchanges. means to benefit.