Russia offers BRICS a new way to trade without Western inteference

The BRICS countries, led by Russia, are considering creating their own foreign trade settlement system based on blockchain. This could be economically profitable and politically safe, as it would make the BRICS countries less dependent on the decisions of Western politicians.
The BRICS countries should establish their own foreign trade settlement system that is profitable, inexpensive, and free from political influence. Anton Siluanov, the head of the Ministry of Finance of the Russian Federation, made this suggestion.

Russia, which currently chairs BRICS, has proposed creating an independent payment settlement system based on new principles. “These are principles of digital and blockchain technology that could be easily adopted by countries, cost-effective for making payments, and free from political influence,” he said.

After the first meeting of finance ministers and central bank governors of the BRICS countries in Sao Paulo, Brazil, the Russian Ministry of Finance and the Bank of Russia, along with their association partners, pledged to deliver a report to the BRICS leaders by year-end. The report will focus on enhancing the international monetary and financial system and will include a list of initiatives and recommendations. According to a statement by the Russian Ministry of Finance, studying the report will result in several practical initiatives, including the BRICS Bridge platform. This platform aims to create a multilateral digital settlement and payment system, bringing together the financial markets of the BRICS member countries and increasing mutual trade turnover.
In addition, BRICS places special emphasis on increasing the share of national currencies in mutual settlements and creating an independent, equally accessible financial infrastructure.

The report notes that the dollar as a reserve currency has already begun to lose its strength. "Just three years ago it seemed that the international trade system was unshakable." Many countries manipulate exchange rates to gain trade advantages. This situation benefited everyone, including the United States, as they had a reserve currency and managed its emission. However, sanctions against Russia weakened the dollar as a world currency,” recalls Yulia Khandoshko, CEO of the European broker Mind Money (formerly Zerich).
For instance, the oil trading system has undergone significant changes. Russia now trades oil without relying on the US futures price, European insurance, or carriers.Previously, trading oil required reliance on the US futures price, negotiation with the British for insurance, and payment in dollars. However, in practice, it became clear that these three conditions are not mandatory. They can be circumvented by coming up with an alternative payment system,” says Khandoshko.
The Western SWIFT system remains the primary settlement and payment platform, including for the BRICS countries. However, the BRICS countries trade among themselves using their national currencies and also use existing national analogues of SWIFT. For instance, trade with Russia is carried out through the Russian SPFS or the Chinese alternative to SWIFT - the CIPS payment system. Natalya Milchakova, a leading analyst at Freedom Finance Global, notes this.

The Eurasian Economic Commission had previously suggested the creation of a universal payment system for the EAEU and BRICS countries. This system was intended to unify the national payment systems of China (UnionPay), Brazil (Elo), India (RuPay), as well as the EAEU countries (Mir and Belkart). The proposed system was expected to serve as an alternative to Visa and Mastercard cards, as well as the SWIFT payment system. However, the creation of a unified payment system for Central Asia has been under discussion for several years. Unfortunately, this initiative has not made much practical progress, as noted by Alexander Potavin, an analyst at Finam Financial Group.

Meanwhile, non-Western countries recognise the risks of further cooperation with the Western SWIFT platform and the need to establish an independent settlement system. The question remains: which path should be taken for such a significant change in trade?
Yulia Khandoshko argues that there are three possible scenarios for trade between the BRICS countries. The first scenario involves classic bartering, similar to Russia's trade with Turkey. The second scenario involves a single currency or settlement system, with settlements typically made in a reserve currency such as the dollar on the SWIFT infrastructure. The third scenario involves a system of mutual loans where two countries have balances on central bank accounts in the currency of another country and build a complex system of short-term mutual loans. The expert suggests that the second option is the simplest.
The new BRICS settlement and payment system will be based on blockchain technology. This requires all transactions to be transparent to all participants.

The platform operates as follows: all countries contribute to a common Central Bank, which issues a unit of account based on the blockchain. This unit of account is not a currency in the traditional sense, but rather a means of measuring value that is secured by the balance sheet of a single Central Bank. According to the CEO of the European broker Mind Money (formerly Zerich), a common currency like the euro will not emerge in the near future.

However, she clarifies that this statement refers to the blockchain settlement mechanism, not the BRICS currency. It is worth noting that this mechanism is already operational, as evidenced by the fact that most Norilsk Nickel transactions on the international market are conducted through smart contracts using the blockchain. Yulia Khandoshko explains that the system has already been developed at the enterprise level, and its implementation on a larger scale is inevitable.

She suggests that a new payment and settlement system could be created using blockchain technology, allowing for digital payments in digital currencies. Such a system is technically feasible. The world already has a market for digital financial assets that enables the transfer of digital assets between countries in seconds.
However, the development of a universal payment and settlement system on the blockchain is hindered by the fact that not all countries, except China, are currently prepared to conduct transactions for imports and exports using digital currencies.

State digital currencies have not yet been introduced in all BRICS countries, with only China having successfully launched its own. However, if countries can integrate payments using different state digital currencies through a single platform, the system will work quickly,” according to Milchakova.

Nevertheless, launching this unified payment system is not an easy task. “In Russia, the legal framework already permits cross-border payments in digital assets. However, it remains uncertain whether other BRICS nations are prepared both legally and technologically to establish a unified digital supranational currency,” according to Milchakova.

Russia recently passed a law on digital financial assets, which allows for the use of digital assets as a means of payment in foreign trade transactions.

Yulia Khandoshko notes that for the new settlement mechanism to become established, there must be an increase in sanctions pressure. This will motivate the BRICS countries to switch to an internal settlement system as soon as possible.

Additionally, a coordinated legislative framework must be established.

If the blockchain-based settlement system does not work efficiently, the alternative is to create a single BRICS currency. Brazilian President Luiz Inácio Lula da Silva spoke about this last year, as noted by Milchakova. The Russian Ministry of Finance also suggested that the BRICS countries could have a digital single currency.