Last Friday, President Putin ruled out a new BRICS currency for now saying that it is not under consideration, promoting trade settlement in national currencies instead.
The idea of a common BRICS gold-backed currency was first mooted over a year ago, with the Russian embassy in Nairobi leaking that it would be on the Johannesburg summit agenda in August 2023. It didn’t make it, with India firmly opposed, and China seemingly lukewarm. Clearly, disagreements have continued through the Russian presidency. And the larger BRICS becomes, the less likely a currency will be agreed upon.
But then, why is the gold price still rising? I’ll come to that later.
I think we can now rule out a BRICS trade settlement currency. Putin’s follow-up statement about exploring the use of digital currencies in mutual trade and investments is utterly meaningless. A currency is a currency digital in form already. It is credit which can be created by any bank, so long as it has access to an interbank settlement facility to keep its books balanced. Central banks already issue it to commercial banks, and the idea that central banks should issue it to invest and finance commercial enterprises as the Bank for International Settlements proposes, with or without a blockchain, is not just inflationary but preposterous.
Instead, Putin confirmed that BRICS nations would continue to use national currencies to settle trade. This is inevitable while India says that it is not interested in the de-dollarisation agenda and will continue to use dollars as it sees fit. It highlights a reality, that the diversity of national agendas under the BRICS umbrella makes agreement on virtually anything other than access to markets increasingly difficult as the membership expands. For this reason, it seems sensible to introduce a class of associate membership, or partnerships, for the 30-odd nations seeking to join, only offering them full membership in due course when circumstances and opportunities permit.
In his statement, Putin didn’t rule out a trade settlement currency entirely — only that it was premature. The mood music out of Moscow tells us that he is in favour of it with gold backing, perhaps for political reasons. He surely understands that to return gold backing to any currency is a frontal attack on the dollar and by crippling the US’s financing machinery it could call a halt to attacks on Russia.
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