Tag Archives: BRICS

Russia Enlists Partners To Attack U.S. Dollar To Fund War in Ukraine

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Bank Saint Petersburg sanctioned by the U.S. and UK on 24 February, one of many Russian banks sanctioned in the days following Russia’s invasion of Ukraine.

“The document contains a list of friendly and neutral states whose credit institutions and brokers will be able to trade on the Russian market for currencies and asset liabilities.”

Russia seeks to make strategic advances in the economic war in which it finds itself as it struggles to gain an operational advantage on the battlefield in Ukraine. Russian moves to end the global dominance of the U.S. dollar have taken on new urgency as the war in Ukraine has exposed how reliant Russia and other nations are on the dollar for their national economies and settlement of global financial transactions.[i] According to the excerpted article from Russian financial news source RI-Centr.ru, Russian Prime Minister Mikhail Mishustin recently signed a resolution with “more than 30 friendly or neutral states,” including “all Central Asian states” to explore conducting financial settlements in national currencies rather than the dollar. The article acknowledged that the moves away from the dollar contained risks for banks and other financial institutions.

The article from the Russian news outlet политический калейдоскоп (Political Kaleidoscope) noted Indonesia, the world’s seventh-largest economy and fourth-most populous country, has also begun the process of transitioning from the dollar for global trade and financial transactions. According to the article, Jakarta has set up a “National Task Force that will support financial transactions in local currencies.” The article concludes by noting that “Indonesia has become the latest ‘heavyweight’ in the company of fighters against the dominance of the U.S. dollar in the global financial system” and that China, India, and Russia have agreed to switch to national currencies for mutual payments. Finally, the article noted that the BRICS nations[ii] are pursuing a dollar alternative and that Russian President Putin recently emphasized that “de-dollarization is an irreversible process that is gaining inertia.” While the U.S. dollar is still the preferred safe-haven currency worldwide, Russia’s (and China’s) efforts to reduce its dollar dependence would give Russia increased flexibility to conduct trade, especially for commodities such as oil—a tool for financing the war in Ukraine and potential wars elsewhere—without the threat of adverse financial conditions imposed on its economy by a dominant U.S. dollar.[iii]

Sources:

“УТВЕРЖДЁН СПИСОК СТРАН — ПАРТНЁРОВ ПО ВАЛЮТНОЙ ТОРГОВЛЕ (LIST OF CURRENCY TRADING PARTNERS HAS BEEN APPROVED),” RI-Centr.ru (Russian financial news outlet), 21 September 2023. https://ia-centr.ru/publications/utverzhdyen-spisok-stran-partnyerov-po-valyutnoy-torgovle/?utm_source=finobzor.ru

The corresponding order was signed by Russian Prime Minister Mikhail Mishustin.

The document contains a list of friendly and neutral states whose credit institutions and brokers will be able to trade on the Russian market for currencies and asset liabilities.

There are more than 30 countries on the list, including all Central Asian states. Approval of the list is part of the process of transition to settlements in national currencies.

The approval of the resolution was announced in July 2023. At that time, the list of partner states included 44 countries. In the current message on the government website, 32 countries are mentioned. Israel and Georgia, which were previously named as included in the list, are not among them. This is not the final version of the document.

Russia and the countries of the post-Soviet space are progressively engaged in financial integration. Thus, on April 28, the Eurasian Economic Union (EAEU) published a draft agreement that should simplify the admission of brokers from the union states to the exchanges of the participating countries. In addition, at the end of August, EEC members signed an agreement on bank guarantees in the field of public procurement.

Experts note that the proposed mechanisms do not yet fully solve the problem of risks for banks and other financial players.

Sergey Manukov, “К дедолларизации подключилась одна из крупнейших экономик планеты (One of the largest economies on the planet has joined dedollarization),” Political Kaleidoscope (политический калейдоскоп), 21 September 2023. https://k-politika.ru/k-dedollarizacii-podklyuchilas-odna-iz-krupnejshix-ekonomik-planety/?utm_source=finobzor.ru

There are new additions to the camp of fighters against the dominance of the dollar in the global financial system and trade. Moreover, it is very significant and noticeable. Indonesia has joined the dedollarization process. This, by the way, is the seventh economy in the world, which, without a doubt, in one or two decades will rise another couple of positions in the ranking. In addition, Indonesia ranks fourth in the world in terms of population – approx. 280 million people.

Jakarta has created a National Task Force that will support financial transactions in local currencies (LCT). In Indonesia, remember, this is the Indonesian rupiah. In a statement, the head of the Indonesian central bank, Bank Indonesia, Perry Warjiyo, said that the transition to national currencies in settlements and trade with friendly countries will help not only strengthen the Indonesian financial market, but also stabilize the local rupiah.

“Increasing local currency transactions should help export-import activities, investments and cross-border payment transactions, including QRIS (Indonesia’s domestic settlement standard),” explains a top Indonesian banker.

Indonesia has become the latest “heavyweight” in the company of fighters against the dominance of the US dollar in the global financial system, consisting of China, India and Russia. Beijing, New Delhi and Moscow agreed to switch to national currencies for mutual payments. In addition, BRICS has not abandoned plans to introduce, if not a single currency of the organization, then at least a single payment mechanism. Indonesia has not yet joined BRICS, but its President Joko Widodo attended the group’s recent summit in South Africa as a guest. Speaking at the summit via video link, Russian President Vladimir Putin emphasized that dedollarization is an irreversible process that is gaining inertia.

Joko Widodo, by the way, not long ago called on local authorities to abandon foreign payment systems and switch to credit cards from local banks. True, he spoke not so much about dedollarization as about the possibility of banning such popular cards as Visa and Mastercard, following the example of what they did with Russia.

In the United States, the plans of China, Russia, India and other developing countries to deprive the dollar of the unofficial title of world currency are, at least outwardly, calmly and they claim that nothing can threaten the “green” in the foreseeable future, at least for several decades.Recently, by the way, Zimbabwe announced its desire to join the bank created by the BRICS countries. As a result, rumors spread that this southern African country also wants to join the de-dollarization. However, according to Zimbabwe’s former finance minister, abandoning the dollar could easily lead to economic disaster.

Notes:

[i] For a Russian perspective on the dollar shortly after its invasion of Ukraine see: Ilya Polonsky, “Россия способна поставить точку в эпохе гегемонии доллара (Russia is able to put an end to the era of dollar hegemony),” Economic Enrichment (экономическое обоэрение) (Russian financial news outlet), 18 March 2022. https://finobzor.ru/116153-rossija-sposobna-postavit-tochku-v-jepohe-gegemonii-dollara.html

[ii] The BRICS nations are Brazil, Russia, India, China, and South Africa. Coined in 2001, the term was originally BRIC and remained that way until the addition of South in 2010. Argentina, Egypt, Ethiopia, Saudi Arabia, and the United Arab Emirates are set to join the bloc and receive full membership on 1 January 2024.

[iii] Historically, when the cost of oil rises the dollar has depreciated. However, since 2022, roughly correlating with Russia’s invasion of Ukraine, the price of oil and the value of the dollar have moved in tandem. Therefore, high energy costs and a rising dollar have put additional pressure on economies like Russia’s and China’s. For an analysis of what is fueling the new connection between commodity prices and the strength of the U.S. dollar see: Boris Hofmann, Deniz Igan, and Daniel Rees, “The Changing Nexus Between Commodity Prices and the Dollar: Causes and Implications,” BIS Bulletin No. 74, (Switzerland based Bank for International Settlements), 13 April 2023. https://www.bis.org/publ/bisbull74.pdf

Image Information:

Image: Bank Saint Petersburg sanctioned by the U.S. and UK on 24 February, one of many Russian banks sanctioned in the days following Russia’s invasion of Ukraine.
Source: Combat Films and Research, Inc.
Attribution: Combat Films and Research, Inc. By permission

India’s Security Engagement With Egypt and Saudi Arabia Evolving

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Prime Minister Narendra Modi meeting Mohammad bin Salman, Deputy Crown Prince of Saudi Arabia (2016)

“The military-to-military ties are likely to develop further, with greater efforts toward interoperability and understanding each other’s security concerns…” 

India’s military influence activities continue to increase in key Arab countries Egypt and Saudi Arabia.[i] In May 2023, the commanders of the Indian and Egyptian armies met in Cairo to discuss deepening bilateral military cooperation, as reported in the first accompanying excerpt, from the Twitter account of the Indian Embassy in Cairo. The meeting follows up on earlier high-level engagements discussing defense cooperation, most notably Egyptian President Sisi’s January 2023 visit to India. Their armies conducted a bilateral exercise in Egypt in January, and earlier in May, the Indian and Egyptian air forces also conducted joint training, as mentioned in the second accompanying excerpt from the Egyptian defense ministry website. Egypt is seen as a possible gateway for Indian weapons sales to Africawith rumors of looming weapons sales and possible joint production agreements between the two countries.

The Indian military has also increasingly engaged with their Saudi counterparts. Indian and Saudi naval forces held a training exercise in the Persian Gulf in May, concurrent with a 3-week training program for around 50 Saudi naval personnel in India. India-Saudi military ties “are likely to develop further, with greater efforts toward interoperability and understanding each other’s security concerns,” according to an Indian defense expert cited in the excerpt from the Saudi English-language daily Arab News. The two countries’ heads of state spoke in June on deepening relations in several areas, including defense.[ii] Saudi Arabia remains among the top global arms importers and an attractive potential customer for the Indian weapons industry. Saudi media is enamored of the narrative of multipolarity but rarely considers India as part of the great power competition discussion. India’s strategic importance is evaluated through the lens of its membership in non-Western multilateral organizations such as BRICS and the Shanghai Cooperation Organization (SCO). Both Saudi Arabia and Egypt recently became SCO dialogue partners and have moved toward greater involvement in BRICS institutions.[iii] India’s growing security involvement in the Arab world bears watching even though it remains overshadowed by the specter of growing Russian and Chinese influence in the region.

Sources:

@indembcairo. Twitter, 15 May 2023. https://twitter.com/indembcairo/status/1658039664345858049 

Indian Army Chief General Manoj Pande proceeded on a three-day visit to Egypt. The visit will provide an opportunity to enhance bilateral #DefenceCooperation and strengthen cooperation in areas of mutual interest.

“The Egyptian And The Indian Air Forces Carry Out A Joint Air Training At An Egyptian Air Base,” Egyptian Ministry of Defense Website, 8 March 2023. https://www.mod.gov.eg/ModWebSite/NewsDetails.aspx?id=42648

Within the framework of supporting and strengthening military cooperation relations with friendly and brotherly countries, the Egyptian and Indian Air Forces carried out a joint air exercise at an Egyptian air base. The training included implementation of a number of joint drills, including training on aerial refueling, which contributes to the exchange of training experiences between the elements participating from both sides

“Indian navy chief welcomes Saudi cadets during first joint training,” Arab News (English-language Saudi daily), 2 June 2023. https://www.arabnews.com/node/2314776/saudi-arabia  

Muddassir Quamar, a Middle East expert and associate professor at Jawaharlal Nehru University in New Delhi, said there have also been efforts to develop cooperation in nonconventional defense areas, as well as the defense industry. “The military-to-military ties are likely to develop further, with greater efforts toward interoperability and understanding each other’s security concerns,” he told Arab News.

Notes:

[i] For background see: “India-Egypt Ties: Sharply Rising Graph of Engagement,” Bharatshakti (Indian defense publication), 12 December 2022. https://bharatshakti.in/india-egypt-ties-sharply-rising-graph-of-engagement/ and “How India-Saudi Arabia Strategic Ties Are Deepening, And Will Help The Defence Industry,” ABP News (Indian news network), 28 May 2023. https://news.abplive.com/india-at-2047/how-india-saudi-arabia-strategic-ties-are-deepening-and-will-help-the-defence-industry-1605245

[ii] “PM Modi, Saudi Crown Prince review ties with focus on connectivity and defence,” Hindustan Times (Indian daily), 9 June 2023. https://www.hindustantimes.com/india-news/pm-saudi-crown-prince-review-ties-with-focus-on-connectivity-and-defence-101686249683889.html

[iii] Egypt recently became an official member of the New Development Bank, sometimes referred to as the “BRICS bank,” and Saudi Arabia is reportedly in talks to join. Saudi Arabia and Egypt have also both expressed interest in BRICS membership and are considered potential candidates were the group to expand.

Image Information:

Image:  Prime Minister Narendra Modi meeting Mohammad bin Salman, Deputy Crown Prince of Saudi Arabia (2016) 
Source: Prime Minister’s Office, Government of India, via Wikimedia Commons https://commons.wikimedia.org/wiki/File:Prime_Minister_Narendra_Modi_meeting_Mohammad_bin_Salman,_Deputy_Crown_Prince_of_Saudi_Arabia.jpg    
Attribution: CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0 

Honduran Presidential Visit Kicks Off New Relations With China

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President Xiomara Castro meets with a representative of Taiwan on her inauguration day in 2022

“Castro opened the visit… in Shanghai; starting the agenda in that important metropolis illustrates the interest in strengthening commercial ties.”

Honduran President Xiomara Castro campaigned on a diplomatic switch from her country’s recognition of Taiwan, recognized since 1949, to that of the People’s Republic of China (PRC). Talk of abandoning Taiwan subsided after her election. However, she announced in March 2023 that the country would switch diplomatic recognition from Taiwan to the PRC in an effort to gain financing for a hydroelectric dam project and to lower its external debt burden.[i] President Castro made a weeklong visit to mainland China to inaugurate these new relations, where Honduras opened its first embassy and officially acceded to the Belt and Road Initiative, according to Prensa Latina, a Cuban government outlet. Castro visited the New Development Bank—commonly known as the BRICS Bank—and requested membership for Honduras, according to Prensa Latina. Castro followed that visit with a stop at Huawei headquarters.

Castro also secured a bilateral meeting with President Xi Jinping, according to La Prensa, a Honduran newspaper. He praised her courage, promised to negotiate a free trade agreement with Honduras, and agreed to promote the entrance of Honduran agricultural goods into the Chinese market. The outlet reported that Honduras will present China with a list of infrastructure projects for financing, likely focusing on ports. Honduras’ diplomatic switch to the PRC leaves Taiwan with just 13 remaining countries who recognize its sovereignty, seven of which are in Latin America and the Caribbean.[ii] The Western Hemisphere will remain the epicenter of the PRC’s efforts to isolate Taiwan diplomatically, with Central America and the Caribbean likely to be its principal focus.[iii]

Sources:

“Honduras abre su embajada en China (Honduras opens its embassy in China),” Prensa Latina (Cuban government outlet that covers issues of importance to its allies), 11 June 2023. https://www.prensa-latina.cu/2023/06/11/honduras-abre-su-embajada-en-china

Honduras inaugurated its embassy, after China did so last week in its capital…Castro opened the visit…in Shanghai; and starting the agenda in that important metropolis illustrates the interest in strengthening commercial ties. In fact, she requested the country’s accession to the New Development Bank, popularly called the BRICS Bank, during a meeting with the president of the entity, the Brazilian Dilma Rousseff, and later spoke with executives of the Huawei technology company.

“Gobierno de Honduras pedirá el apoyo a China para puertos (Government of Honduras Will Ask China for Support for Ports),” La Prensa (Honduran newspaper based in the business capital of San Pedro Sula), 15 June 2023. https://www.laprensa.hn/honduras/politica-gobierno-honduras-pedira-apoyo-china-para-puertos-KI13931748

Several projects have been discussed since it was necessary to pass this phase of the president’s visit to go into specific issues…Naturally, infrastructure issues are a priority…Honduras and China recently signed 22 documents in Beijing and next week it is expected that Honduran products such as coffee and bananas will begin to reach China.

Notes:

[i] To read more about potential lessons for Taiwan and its presence in Latin America and the Caribbean, see: Ryan Berg and Leland Lazarus, “What Taiwan Can Learn from Honduras’s Switch to China,” Foreign Policy, 31 March 2023. https://foreignpolicy.com/2023/03/31/latin-america-taiwan-china-honduras-united-states-diplomacy-tsai/

[ii] OE Watch has covered China’s expanding influence in Latin America, with a particular emphasis on Central America, where Taiwan is losing formal diplomatic allies. For example, see: Catalina Wedman, “China’s Growing Influence on the Latin American Economy,” OE Watch, October 2018, https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-singular-format/266517

[iii] For more on Taiwan’s future in the Western Hemisphere and its difficulty maintaining allies, see: Ryan Berg and Wazim Mowla, “Taiwan’s Future in Latin America and the Caribbean,” The Diplomat, 1 September 2022. https://thediplomat.com/2022/09/taiwans-future-in-latin-america-and-the-caribbean/

Image Information:

Image: President Xiomara Castro meets with a representative of Taiwan on her inauguration day in 2022
Source: https://commons.wikimedia.org/wiki/File:01.27_%E3%80%8C%E5%89%AF%E7%B8%BD%E7%B5%B1%E7%8E%87%E5%9C%98%E5%87%BA%E5%B8%AD%E5%AE%8F%E9%83%BD%E6%8B%89%E6%96%AF%E5%85%B1%E5%92%8C%E5%9C%8B%E7%B8%BD%E7%B5%B1%E5%8D%A1%E8%95%AC%E6%A5%9A%E5%B0%B1%E8%81%B7%E5%85%B8%E7%A6%AE%E3%80%8D%E5%90%91%E5%8D%A1%E8%95%AC%E6%A5%9A%E7%B8%BD%E7%B5%B1%E7%95%B6%E9%81%B8%E4%BA%BA%E8%87%B4%E6%84%8F%E4%B8%A6%E5%91%88%E9%81%9E%E7%89%B9%E4%BD%BF%E5%9C%8B%E6%9B%B8_-_51845921976.jpg
Attribution: Wikimedia, CC-BY 2.0

South African Army Chief Visits Russia To Discuss Arms Amid U.S. Tensions

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Vladimir Putin arrives in South Africa for the 10th BRICS Summit in 2018.

Vladimir Putin arrives in South Africa for the 10th BRICS Summit in 2018.

“The timing, if not the mission of Mbatha’s visit, seems likely to blow another hole in Pretoria’s claim to be non-aligned in the stand-off between Russia and the West over Russia’s invasion of Ukraine.”

Calling into question its self-proclaimed non-aligned status in the Russia-Ukraine war, South Africa’s army chief recently took a trip to Russia to discuss arms trade, following a diplomatic row with the U.S. Ambassador to South Africa. According to the Johannesburg-based The Daily Maverick, the head of the South African army, Lieutenant General Lawrence Mbatha, traveled to Russia in mid-May to discuss “issues relating to military cooperation and interaction aimed at the implementation of projects aimed at improving the combat readiness of the armed forces of both countries.” The visit is being read by many, including the author of the accompanying article, as coming in response to recent accusations by the U.S. Ambassador to South Africa that South Africa had loaded weapons and ammunition onto the Russian ship Lady R, when it docked in the country in December 2022. South Africa has denied the allegations. However, further reporting shows that South Africa’s National Conventional Arms Control Committee , the overseeing authority for such transfers, had indeed approved exports from South Africa to Russia prior to the start of the Russia-Ukraine war, some of which may have been delivered many years late. For its part, the South African National Defense Forces emphasized that Lt. Gen. Mbatha’s visit to Moscow had previously been scheduled before the U.S. Ambassador’s accusations. The opposition Democratic Alliance party has described the visit undertaken by members of the ruling African National Congress party to Russia as “shameful” and decried that “this unsolicited visit is the latest incident in a string where the South African government clearly and unashamedly demonstrates its support for Russia.” Long a reliable partner of the United States, South Africa has been taking the approach of many African states to the war in Ukraine.[i] It officially has a policy of non-alignment, which in practical terms, means active engagement with both Russia, on the one hand, and Ukraine and its NATO allies on the other. For its part, Russia is waging an all-out charm offensive in much of Africa, [ii] which is broadly proving to be successful.[iii] Just how sustainable this sort of status quo is for any of the parties—South Africa, the United States, or Russia—remains to be seen.

Source:

“SA army chief visits Moscow for talks about military cooperation,” The Daily Maverick (centrist newspaper from Johannesburg, South Africa), 15 May 2023. https://www.dailymaverick.co.za/article/2023-05-15-sa-army-chief-visits-moscow-for-talks-about-military-cooperation/

Lieutenant-General Lawrence Mbatha is meeting, among others, his Russian counterpart Colonel-General Oleg Salyukov. The timing, if not the mission of Mbatha’s visit, seems likely to blow another hole in Pretoria’s claim to be non-aligned in the stand-off between Russia and the West over Russia’s invasion of Ukraine.

The two military chiefs discussed “issues relating to military cooperation and interaction aimed at the implementation of projects aimed at improving the combat readiness of the armed forces of both countries,” TASS quoted Russia’s Defence Ministry as saying.

The Russians appeared to be maximising the strategic character of the visit, possibly to embarrass the US and the West. The SANDF, by contrast, tried to play down the significance – and the timing – of what it called a “goodwill” visit, saying it was a “long standing arrangement… planned well in advance.”

It said Mbatha would visit the “higher combined Army Academy and the Artillery Military Academy” and would have staff talks with military officials. “It must be noted that South Africa has Military to Military bilateral relations with various countries in the continent and beyond,” the SANDF said….

The visit comes just days after a major diplomatic row erupted between South Africa and the US when US ambassador to SA, Reuben Brigety, told journalists he was confident South Africa had loaded weapons and ammunition bound for Russia on to a US-sanctioned Russian cargo ship, the Lady R, in Simon’s Town naval base in December 2022….

DA defence spokesperson Kobus Marais said Mbatha’s mission to Moscow “once again demonstrates the ANC government’s callousness and insensitivity to our diplomatic and trade dilemma. This unsolicited visit is the latest incident in a string where the South African government clearly and unashamedly demonstrates its support for Russia.

“Even after the collapse of the rand and the call from the United States to honour relationships they still went ahead and conducted this visit. It is shameful,” he said in a statement….

The government has insisted that it did not authorise any arms sales to Russia, meaning that the National Conventional Arms Control Committee (NCACC) had not approved any exports. This appeared to leave open the possibility that arms might have been loaded on to the Lady R in a rogue operation.

However, the records of the NCACC do in fact indicate that some exports of arms to Russia have been approved by the NCACC.

Replying to questions in Parliament from DA leader John Steenhuisen in November last year, Mondli Gungubele, the minister in the presidency who also chairs the NCACC said:“The National Conventional Arms Control Committee has not received any request from any South African arms manufacturers for permission to export to the Russian Federation and/or Belarus arms, munitions, propellants and/or technology that may be used in the manufacture of the specified products since 24 February 2022.”

Notes:

[i] For more on African diplomatic approaches to the Russia-Ukraine conflict, see: Jason Warner, “African Stances on the Russia-Ukraine War Demonstrate Reliance on, Antipathy Toward West,” OE Watch, 09-2022. https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-2-singular-format/425767

[ii] For more on Russia’s long-term attempts to garner African allies, see: Jason Warner, “Russia Laying Groundwork Ahead of July 2023 Russia-Africa Summit,” OE Watch, 01-2023. https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-2-singular-format/434265

[iii] For more on Russian and the Wagner Group’s successful attempts to garner African allies, see: Jason Warner, “Top Ugandan General Adds to List of Growing Pro-Russian African Military Personnel” OE Watch,05-2023; Jason Warner, “Mali Defends Reliance on Russian Counterterrorism Assistance,” OE Watch, 03-2023. https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-2-singular-format/437332; Jason Warner, “Burkina Faso Fights Terrorism With Recruits and Russia,” OE Watch, 02-2023. https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-2-singular-format/436264; Jason Warner, “Russia-Supported Military Leaders in Mali, Burkina, and Guinea Continue To Deepen Ties,” OE Watch, 04-2023. https://fmso.tradoc.army.mil/2023/russia-supported-military-rulers-in-mali-burkina-faso-and-guinea-continue-to-deepen-ties/

Image Information:

Image: Vladimir Putin arrives in South Africa for the 10th BRICS Summit in 2018.
Source: https://commons.wikimedia.org/wiki/File:Vladimir_Putin_arrived_in_South_Africa_(2).jpg
Attribution: BY-SA 4.0