In a significant move to counteract international sanctions and reduce dependency on the global financial system Swift, Russia has called on BRICS nations to establish a new cross-border payments network, reported Bloomberg.
This initiative is aimed at facilitating transactions in local currencies and strengthening economic ties within the bloc.
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The Russian Finance Ministry, the Bank of Russia, and Yakov & Partners, a Moscow-based consultancy, have jointly prepared a report outlining a “multicurrency system” designed to shield BRICS countries from “external pressures such as extraterritorial sanctions.”
This report emphasises the need for financial autonomy, citing that US interests do not always align with those of other global financial network participants.
The proposed network would involve a consortium of commercial banks capable of executing transactions in the respective local currencies of BRICS countries. It also suggests the establishment of direct connections between central banks to further insulate the group from external financial systems.
This plan includes the creation of trading hubs for essential commodities like oil, natural gas, grain, and gold, aiming to enhance mutual trade within the BRICS nations.
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By GlobalDataThe US and its allies have imposed severe sanctions on Russia following its full-scale invasion of Ukraine in February 2022.
These measures included freezing Russian foreign assets and disconnecting major Russian banks from the SWIFT financial messaging system. As a countermeasure, Russia has been actively seeking ways to decrease its reliance on the US dollar.
Despite Russia’s sanctions-related challenges, other BRICS members have largely continued to engage with the dollar-dominated financial system.
According to the Brookings Institution, the dollar is involved in 58% of international payments outside the euro area and is used in 54% of foreign trade invoices as of 2022.
The timing of the report coincides with preparations for the annual BRICS summit, which President Vladimir Putin will host in Kazan from 22-24 October.
The BRICS group, which includes Brazil, Russia, India, China, and South Africa, expanded earlier this year to incorporate Iran, the United Arab Emirates, Ethiopia, and Egypt.
Among the innovative solutions proposed is the use of distributed ledger technology (DLT) or a new multinational platform for settlements with tokens. “The key advantage of utilising DLT settlement model is the elimination of the credit risk” associated with traditional banking systems, the report states.
The authors of the report suggest that DLT could also cut down on processing times and costs by eliminating the need for correspondent banks and compliance checks, potentially saving BRICS countries up to $15bn annually if half of all cross-border transfers employed such methods.
