– What kind of currency does our president propose to create?
— We are talking about creating a new instrument of international settlements, convenient for all BRICS countries, which may be joined by other players, such as Turkey or Iran. One can draw analogies with the currency of the Council for Mutual Economic Assistance under the USSR (CMEA): this organization had the so-called transferable ruble as its official currency, which was sometimes called the Sev ruble in semi-professional circles. The CMEA existed from 1949 to 1991. This organization was created by decision of the economic meeting of representatives of Albania, Bulgaria, Hungary, Poland, Romania, the USSR and Czechoslovakia. The headquarters of the CMEA was in Moscow. All economic international projects of the countries that were members of this organization were carried out in the SEV ruble. The BRICS currency can become a similar solution for the countries of the bloc, and it can be used much more widely, for example, in order to insure against all the risks that are associated with the dollar and the euro today: from sanctions, from blocking money in accounts, from thoughtless emission these currencies by central banks… After the arrest of Russia’s assets abroad, it became obvious that the dollar and the euro are no longer quite reserve currencies – they are toxic, it is dangerous to carry out calculations in them for “undesirables”.
– This is not the first time that Russia has offered the BRICS countries to create their own reserve currency, but things are still there. How realistic is it now to implement the initiative of our president?
– There is really nothing new in Putin’s idea. Russia and China have been actively engaged in this project since 2014, when the risks of sanctions pressure became obvious to all major countries. At the same time, India is generally positive about this idea: it was not ready to offer something itself, but considered the possibility of using the solution proposed within the BRICS framework. And Brazil, I would say, looked rather negatively at the prospects for creating a separate currency for this bloc. But now the situation is changing rapidly. Geopolitical contradictions have escalated, so there is every chance that the project will come true.
– Is the world looking for protection from the risks associated with the dollar and the euro?
— We are now approaching the period of the planet’s disintegration into currency zones. The emergence of the territory of influence of the yuan is possible, as well as the emergence of the “Eurasian euro”, about which the President of Belarus Alexander Lukashenko spoke. The idea of a single Eurasian currency was first voiced by the first president of Kazakhstan back in 1994, and already in the 21st century it even got a name (which, by the way, was first proposed by your humble servant) – Altyn. Moreover, neighboring countries can also join the Eurasian currency. For example, Turkey, since its own lira has been collapsing for several years. Or, say, Azerbaijan with its own manat, which will be harmonious and logical for the “Eurasian euro” bloc.
– Therefore, BRICS will become one of the currency blocs into which the world is falling apart?
– It is quite possible, but there will be more political problems there than in the usual currency area. In itself, the creation of a currency for supranational payments is a fairly simple idea. Here BRICS is somewhat following the path of the euro. Let me remind you that when the euro first appeared in January 1999, the zone of influence of this currency included much fewer countries than now, and cash was only issued for the first time in 2002. You can use the experience of the euro area as a model for creating a new supranational currency – BRICS or Eurasian: the main thing is that it be strong. The strength of the Eurasian currency will be based on the ruble, of course. And behind the ruble is oil, gas, weapons, grain. And, perhaps, the fact that the ruble is now so strong is just a step towards a common currency, but the authorities have not yet told us about this. Wait and see.
— And what are the difficulties for the BRICS currency?
— If within the framework of the Eurasian Union it is easy to create a currency, then for the BRICS it is largely a political decision, and there we will talk about the contribution of each of the existing currencies of the countries of this bloc to creating the weight of a new currency. China’s economy is much larger than Russia’s, but at the same time, our country has a number of unique characteristics that none of the bloc’s states has. Russia has a developed industrial economy with a large amount of resources that everyone needs, and without this it is very difficult to live, as we all see. It turns out that our percentage of GDP is more important than the same indicator of China or the United States, with all due respect to the level of development of the service sector and other indicators. And the second point is the reserves. The Bank of Russia owns more significant gold reserves than many countries in the world. So the power of the BRICS currency will also be based on the ruble. It will be difficult to agree on the strength of influence in this aspect. I understand that China is interested in the yuan zone. India wants to be on its own, while Brazil is interested in creating a currency for Latin American countries. Putin knows how to negotiate, and the advantages of the emergence of such a supranational instrument – the absence of sanctions risks, increased sovereignty and direct financial benefits – may outweigh the disadvantages.
– Will the new currency be able to protect the BRICS countries from inflation caused by the “printing” of dollars and euros, which are carried out on a large scale by the US Federal Reserve System and the European Central Bank?
– Games with the “printing press” end badly. They threw a lot of empty dollars and euros into the pandemic – they got inflation. If the central bank that issues the BRICS currency pursues a restrained conservative policy, then all countries of this bloc can be fully protected from world inflation, which was provoked by printed dollars and euros. Vladimir Putin, ever since his premierships in 1999, has always pursued a moderately conservative policy. Any sane financier adheres to just such a strategy. If inflation is under control, then society as a whole does not suffer. Therefore, it can be predicted with high probability that the BRICS currency will be able to protect the countries of the bloc from inflation caused by the ill-conceived policy of the US and eurozone authorities.
– The creation of a new reserve currency will require investments at least for the creation of IT infrastructure and software. How quickly will this project pay off?
— Yes, we are already spending a lot on the economic security of settlements and emissions, so on a BRICS scale, this will be a small expense. In addition, non-cash payments now account for the bulk of the volume, and most of the infrastructure for them has already been created. For example, in China there is a digital yuan, in Russia the digital ruble is already at the last stage of testing, in Kazakhstan the digital tenge is on the way. We can assume that the main part of the necessary IT infrastructure is already working. So the costs for creating a Eurasian currency will be minimal, and at the BRICS level it will not require any serious expenses.
– Can the currency of one of the major economies of the bloc, for example, the yuan, act as a new BRICS reserve currency? Or ruble?
— No, because it can lead to the loss of sovereignty of other countries. It is clear that from the point of view of the power of the economy, the yuan can claim dominance, but Moscow will never agree to this.
— Is there a risk that the new BRICS currency will at some point displace the ruble from domestic settlements?
– I believe that the ruble can only replace the “Eurasian euro”, and the BRICS currency is unlikely, because this will mean the renunciation of sovereignty, which is unacceptable for Putin. However, I believe that in 50-100 years the ruble may well be replaced by a new generation currency. Then, perhaps, there will even be a single currency for the entire Earth, or for a large number of countries on the planet. In the future, there will be 2-3 currencies for several key blocks, in which countries will unite. An example here is the eurozone. We remember how the European Union fought to prevent Greece from leaving the euro zone in the 2010s, because despite all the problems of this country, its accession to the bloc was a boon for the euro as a currency, strengthening its influence. In the future, this will be the case with currencies and other blocks.
Source From: MK