BRICS members mull future of the US dollar

  Russian experts have hailed the decision by BRICS countries to replace the US dollar by own currencies in mutual credit lines. 

An agreement to this effect is expected to be signed during a BRICS summit which is due to be held in New Delhi on March 29. Experts say that this agreement will mark an important stage in the development of the organisation which brings together Brazil, Russia, India, China and South Africa.

The proposal to move away from the use of the dollar had come from China, which is currently the world’s largest holder of dollar-denominated assets. Beijing has repeatedly declared its desire to reduce the risks associated with the current economic woes in the United States. With the US’ state debt already exceeding 15 trillion dollars, Beijing’s stance on the matter is understandable and consistent, Moscow-based economics expert Alexander Osin said in an interview with the Voice of Russia aired on Tuesday.

"China, in fact, declares that the US economy is currently inefficient and prone to risks, Osin says. China’s forex reserves now stand at three trillion dollars, and Beijing is loath to lose them without creating a security pillow. To this end, China is  creating a mechanism of interaction with alternative importers of its production, as well as those countries which supply raw materials to China, Osin concludes."

Last year saw the signing of a framework agreement between BRICS countries on a shift to the use of national currencies in mutual trade. China, in turn, signaled its readiness to allocate 10 billion yuan for a Special Foundation, of which Russia is also a member. Meanwhile, experts remain at odds over the possible repercussions in the wake of the 29 March agreement.  As far as Russia is concerned, the consequences will be unpredictable, believes Nikita Krichevsky, head of the Institute of National Strategy in Moscow.

"The dollar is still dominating the bulk of raw material markets, Krichevsky says, admonishing attempts to scrap the dollar as the main global reserve. Of course, he adds, Russia could use its national currency in mutual trade, but there is a big question mark over the feasibility of such a step."

In the meantime, Moscow and Beijing have said that the problem of BRICS countries’ currencies conversion may be resolved in the immediate future. Moscow-based finance expert Roman Andreyev, for his part, welcomes Russia’s and China’s drive for promoting their national currencies. The two countries are already using the ruble and the yuan in bilateral cross-border trade, Andreyev adds.

"That BRICS countries are reducing the use of the dollar is only natural, he says, adding that the move will contribute to a more stable world economy. BRICS’ national economies will also benefit from the step," Andreyev concludes.

In any case, it is too early to speak of a full-fledged switch to the use of national currencies, experts say, referring to BRICS countries’ current economic priorities. Traditionally, the US remains China’s main trade partner, while Russia mainly develops economic collaboration with the EU. The past few years have, however, seen Russia’s ever-increasing economic clout in the Asia-Pacific region – something that comes amid China’s drive to expand its economic foothold in Africa.