Changing tides in trade and currency

More than 13 months since the Ukraine-Russia war began and an avalanche of sanctions and restrictions hit the Vladimir Putin-led country, it seems that Russia is taking its relationship with some allies to a new level.

The ties between Russia, China, India and other BRICS nations appear poised to go a step further with the formation of a new currency. BRICS includes Brazil, Russia, India, China, and South Africa. 

According to reports quoting Russian lawmaker Alexander Babakov, the BRICS nations are in the process of creating a new medium for payments – established on a strategy that “does not defend the dollar or euro”. 

Babakov, who is the deputy Chairman of Russia’s State Duma, reportedly indicated that the new currency would be secured by gold and other commodities such as rare-earth elements. The BRICS countries are working on creating a new form of currency with a plan to present its development at the BRICS leaders’ summit this year, he said on the sidelines of the India-Russia Business Forum in New Delhi last week.

While the claim is yet to be verified by other officials from the member nations, it came just a few days before South Africa sent senior officials to Russia to discuss the “recalibration of the global order” with President Vladimir Putin‘s party. South Africa is also slated to host a BRICS summit in August this year.

The new currency could reduce the world’s dependence on the US dollar and the Euro, according to reports from the Russian state-owned news agency Sputnik

Last week, Russian President Putin adopted a new foreign policy that put India and China at the forefront. The announcement also came mere days after Chinese Premier Xi Jinping visited Moscow to further cement the “no limits” partnership announced last year.

Furthermore, as per a Bloomberg report earlier today, China’s yuan has replaced the US dollar as the most traded currency in Russia. The yuan surpassed the dollar in monthly trading volume in February for the first time, and the difference became more pronounced in March, according to data compiled by Bloomberg based on daily transaction reports from the Moscow Exchange.

Before the invasion, the yuan’s trading volume on the Russian market was negligible.

Russia will continue to build up a particularly privileged strategic partnership with the Republic of India with a view to enhance and expand cooperation in all areas on a mutually beneficial basis and place special emphasis on increasing the volume of bilateral trade, strengthening investment and technological ties, and ensuring their resistance to destructive actions of unfriendly states and their alliances,” the statement said, as per the report.

It also announced its intention to prioritise and enhance its capacity and international role in groupings such as BRICS ‘to help adapt the world order to the realities of a multipolar world’.

Now, it remains to be seen whether BRICS nations verify this claim by the Russian lawmaker, and whether they bring more clarity regarding such currency being created, if any.