Although the U.S. dollar (USD) has surged to over an 11 year high, there is bad news ahead for the future of the USD as emerging nations are progressively steering away from the “greenback” ahead of the launch of the new BRICS bank. agen bola
A multi-national currency deal between Russia and India is looking more likely to be when, versus if.
The deal between the powerful BRICS nations of Russia and India may happen as early as 2016, according to Russian Deputy Finance Minister Sergei Storchak, TASS reported on February 27 (in Russian).
“We will witness the transition into national currencies under particular contracts as early as next year,” the Minister said, according to TASS. “As for large-scale transition, at least bilateral trade volume should increase first. The more transactions will be, the more national currencies will be used,” according to the news agency.
Earlier in December, the first meeting of a Russia-India working group took place on the transition to national currencies in mutual trade settlements.
Also in December, China and Russia switched to domestic currencies in trading by using such financial tools as swaps and forwards.
In a joint statement by Indian Prime Minister Modi and Russian President Putin on December 11: “The parties shall encourage the use of national currencies in mutual settlements in bilateral trade.”
In January of this year, the Federation of Indian Export Organizations (FIEO) had introduced a plan that outlined a shift to mutual payments with Russia from dollars to rupees, according to the TASS report.
Last month, the IMF’s Deputy Managing Director Naoyuki Shinohara made a call for emerging Asian economies to actively engage in de-dollarization.
“In some cases, high dollarization can facilitate trade. But there are drawbacks, such as limiting exchange rate flexibility to mitigate against external shocks, and constraining the central bank’s ability to be the lender of last resort. Under such circumstances, consideration could be given to actively promote de-dollarization,” he said.
Russia, in recent months — facing western sanctions — has brushed off the “bad guy” image and instead has been reaching out to a broad range of peers in an effort to ramp up efforts to de-dollarize.
In January, Iran’s Ambassador to Russia announced that the two nations planned to create a joint bank for transactions in their national currencies.
In early February, Russia and Egypt announced their plans to use their national currencies to settle bilateral trade.
In recent months, India has been very vocal as it aims to set up a free trade zone with the Eurasian Economic Union (EEU) — with the nations of Russia, Belarus, Kazakhstan, Armenia.
The BRICS are growing closer together and they are reducing their reliance on the U.S. dollar.
As the U.S. and western nations continue to rally for more sanctions against Russia, China is ramping up cooperation with BRICS nations as part of its “One Belt and One Road” strategy that is starting to take shape.
Although the mighty U.S. Dollar marches on, time may not be on its side, as emerging and frontier market nations progressively partner up and discontinue using the once powerful “greenback”.
Perhaps not today, perhaps not tomorrow — but the time is coming: Beware of the BRICS.