Chris Devonshire-Ellis Sputnik Interview About Russia Sanctions And A New BRICS Currency Concept

Discussions about the role of a proposed BRICS currency and impact on global trade 

Chris Devonshire-Ellis, the Chairman of Dezan Shira & Associates has been interviewed by Sputnik Global concerning the BRICS New Development Bank plans to look at a new alternative BRICS currency and the regional and global trade implications. His remarks were not published in full, with the complete Q&A reproduced below:

Sputnik: “The BRICS nations asked the bloc’s specially created bank to provide guidance on how a potential new shared currency might work, including how it could shield other member countries from the impact of Western sanctions such as those imposed on Russia. How do you find the idea of introducing a new currency for minimisation of the Western sanctions?”

CDE: “This seems a logical response. The main drivers are to do with an overall belief that the United States has become both unreliable and overbearing in its foreign policy. Unreliability such as issues concerning the recent US debt ceiling – which has only been pushed back to the end of next year – and the risks of sanctions. Overbearing in that it has used international mechanisms to punish countries it doesn’t agree with (cutting countries off SWIFT) and has appeared to use the G7 as an economic ‘gang’ to support and justify what it does elsewhere.

Other countries are starting to become concerned at this type of behaviour: unsustainable debt levels and the imposition of a ‘rules based order’ and global economics that only appear to service the US and its immediate allis – at the expense of everybody else. Simply put, numerous global leaders from Africa, Latin America, Central Asia and the Middle East, as well as China and Russia have stopped believing in the United States as a responsible global leader.

Consequently, they are looking for a global trade alternative that can function without Western based politics or trade systems such as the US dollar, SWIFT or be subject to US sanctions or tariffs impositions. Western media suggests otherwise but outside of this, people are losing confidence in the entire US based trade, finance and involvement in international institutions. They feel a re-balancing is necessary and are instigating this to change the global structure to a more sustainable model. This includes the development and subsequent introduction of an alternative currency that can be used when not trading with the United States – or its immediate allies.”

Sputnik: “What important steps do the BRICS countries need to take to make this idea a reality and effectively operationalize the currency?”

CDE: “There appears to be broad acceptance that the concept is sound. However, the make-up of any new currency needs to be worked out – should it be a basket of BRICS currencies? Or another makeup? That needs to be assessed together with current trade trends, respective currency values and have some type of built-in protections as the US will certainly attempt to financially attack such a currency to devalue it. All these issues need to be worked out and this will take time.”

Sputnik: “What are the prospects of the BRICS currency in the global market?”

CDE: “I think initially limited to the BRICS themselves – although this bloc is also growing with many other countries having applied to join. The sensible thing to do to begin with is limit it to regional trade, understand operational issues, and then perhaps gradually roll it out to a wider audience. As the BRICS is expanding anyway this seems a tandem development.”

Sputnik: “How could such a currency compete with the US dollar?”

CDE: “It won’t compete with the dollar, that’s the point. It will be an alternative to the dollar. It is crucial to understand the difference. Competing suggests it has a relationship with the US dollar and the concept of this currency is to offer an unrelated alternative that operates without US dollar or economic pressures. The US will try and manipulate circumstances so there is a direct relationship but this will be avoided.”

Sputnik: “How will a new currency affect the world’s economy?”

CDE: “The initial global impact will be minimal as most countries still use the US dollar in trade. But there will be a regional change. It depends on what percentage of intra-BRICS trade is conducted by any new currency. It won’t initially be huge as part of the total. Intra-BRICS trade is roughly about 20% of global GDP. I would imagine the initial usage of any new currency would perhaps be about 10% of that, so 2% of the global total. But this will increase over time.

Today, about 50% of China-Russia trade is conducted in Roubles or RMB Yuan. Getting to that level with a new currency will take time. However, the important thing is that is begins, and after that, confidence in the new currency can start to develop. A developing picture will take over a decade to realise. But a lot could happen to the US dollar in that time frame as well.”

Chris Devonshire-Ellis can be reached via asia@dezshira.com

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