BRICS countries strike fatal blow on US dollar supremacy

The United States has declared a war of sanctions on Russia and continues putting trade pressure on China. It is not ruled out that the USA will restrict supplies of steel products from China. In return, Moscow and Beijing intend to abolish the US dollar in mutual settlements within the scope of the BRICS organization. The move will mark the end of the era of the undivided financial domination of the United States of America in the world.

As soon as the US Congress adopted a package of new sanctions against Russia, Deputy Foreign Minister of the Russian Federation Sergei Ryabkov issued a formidable warning to Washington. "US sanctions against Russia will only encourage Russia to create an alternative economic system, in which dollars will not be needed," the Russian diplomat said.

Interestingly, the statement was made on the eve of the two-day summit of BRICS trade ministers, which opened on August 1, 2017 in Shanghai. This organization, which includes Brazil, Russia, India, China and South Africa, becomes a powerful counterweight to the Group of Seven.

Today, the BRICS countries account for 26% of the Earth's territory, 42% of the world's population (almost three billion people) and 27% of world GDP. According to experts' forecasts, the share of BRICS countries will account for more than 40% of world GDP by 2050.

However, BRICS trade ministers chose not to put the horse before the cart.

Russia's Minister for Economic Development Maxim Oreshkin stated that BRICS countries, in particular Russia and China, may switch to settlements in national currencies already in the near future. The minister also said that the trade turnover between Russia and China may reach $200 billion by 2020.

Meanwhile, on the sidelines of the Shanghai summit, the ministers discussed opportunities for the creation of a new monetary system to exclude the use of the US dollar. In 2015, President Vladimir Putin said that Russia was opting for settlements in national currencies and created currency pools with several countries.

Today, not only does Russia need to abjure the dollar - the country needs to ensure financial independence from the West. The BRICS countries have coordinated basic principles of the work of the New Development Bank, which is seen as a counterbalance to the World Bank, in which it is the Americans who set the rules of the game.

In addition, Russia considers a possibility to set up a separate payment system similar to SWIFT.

More than 300 Russian banks have switched to an alternative to SWIFT - the system known as SPFS (System for Transfer of Financial Messages). Elvira Nabiullina, Chairwoman of the Central Bank of Russia, said: "Threats were voiced that Russia could be cut off from SWIFT. We have completed the work on our own payment system, and if something happens, all operations in SWIFT format will work inside the country."

One of the main conditions for switching to settlements in national currencies is the stability of the national currencies of the BRICS members. The Russian ruble exchange rate may decrease due to relatively low world oil prices (within $52 per barrel).

Unstable exchange rates of national currencies is not the only obstacle to abjure the US dollar in mutual settlements. BRICS countries account for only 10% of global trade. Therefore, the alliance needs to increase indicators of mutual trade.

Moscow and Beijing have already introduced mutual settlements in yuans. Russia's Central Bank has opened its first foreign office in Beijing.

Thus, the war of sanctions against Russia consolidates and boosts relations between Russia, China and other BRICS members.
Aydin Mehtiyev

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Author`s name Dmitry Sudakov