BRICS Coin II – To Kazan and Beyond – Blake Lovewell

BRICS+, a group of non-Western nations, are developing a parallel set of financial institutions. In response to Western sanctions and financial domination they have decided enough is enough, and that they will build their own monetary system, outside of dollar hegemony. This is the second part of my BRICS Coin series examining the many facets of the emerging BRICS currency trends. In it, we will look at the new institutions that have been announced and what we can expect going forward.

To Kazan

Russia is hosting the BRICS annual meeting this week. It takes place in Kazan, in Russia, and importantly in central Asia. The name Kazan comes from the name of a large cooking pot or cauldron used extensively in Central Asia, from Afghanistan to the Balkans. It is of cultural importance, a huge Kazan (or Qazan) is often the focal point of weddings where families come together to share from the communal pot. I think it is an apt metaphor for the emerging currency system that is being proposed ahead of the BRICS summit. All members are invited to create a central pot, whereby they can partake in the communal success of the bloc. One thing is for sure, America is not invited to the wedding.

De-Dollarisation

As I outlined in my prior article, BRICS coin – The Unit vs. The Dollar, there has been an excessive regime of sanctions levied against Russia and her compatriots by the USA and it’s quislings in Europe. This policy of sanctions, as well as the CIA coup in Ukraine, has pushed Russia away from the US’ hegemony. However the policy is a failure on the part of America, as it has pushed the BRICS bloc closer together. BRICS founders; Brazil, Russia, India, China and South Africa, as well as a large contingent of wannabe members, can all see the flouting of the rules based international order that the USA purports to follow.

Thus, they have begun the work in creating a payments system outside of Western control. For a century the US has dominated global finance, the US Dollar being the successor to the British Pound Sterling as global reserve currency. But it looks like BRICS is calling time on American dominance, and even the full might of the biggest army in the world cannot support it. I remind the reader that when asked, Paul Krugman, the leader of the US Federal Reserve let slip that “Fiat money is backed by guns”. The BRICS policy is not to ‘regime change’ to the next fiat currency, but to make the American fiat currency system obsolete by fostering its own institutions. I see this as a strong policy, whilst cautioning that diplomacy takes much longer than violence to achieve its end.

Russia

Russia is chair of the BRICS group for 2024. The BRICS+ (including Egypt, Ethiopia, UAE & Iran) is not a strict political institution, more often likened to a talking shop. However, in the last few years it has gained larger political caché and geopolitical importance. With the proposed accession of states like Nigeria and Saudi Arabia, BRICS+ will encompass a large share of global oil supply. With accession of NATO state Turkiye it will gain more importance to international relations. But the engine house of the BRICS movement is Asiatic, between Russia, India and China. Whilst no country rules the bloc – unlike ASEAN which China dominated – there is primacy among equals. I see Russia and China as dominant motivators among the group. Russia due to the sanctions regime and the hangover from the Cold War, and China as it has not been welcomed into the superpower fold by the USA and has pursued a route of diplomatic separation from the West. India is a reluctant yet energetic member of BRICS, still fostering ties with the West but playing on both fields at once. Brazil and South Africa are important but don’t have the clout of the former states.

That said; Russia, as chair of BRICS+, made clear that one of its key priorities would be economic integration of the member nations. Almost all of its priorities as chair emphasise the term ‘co-operation’. This is reflected in the nomenclature of the bloc when discussing institutions and agreements, that each is voluntary. To my eye this draws a distinction between BRICS integration and European Union integration. The EU seeks to tie its members in contractually and developed a European acquis or system of law. Witnessing the EU project struggle to keep balance with populism rising within, I believe the BRICS method is better suited towards their end of ensuring long-term stability of their new multipolar order.

Institution building

Ahead of the meeting in Kazan the Russian Central Bank and Ministry of Finance held a meeting. They put out a strikingly important document which tells us the mood and tempo of political change in BRICS+ and gives us insight into what might emerge from the Kazan summit. I will start with this excerpt which has Russia taking responsibility for re-shaping the global economy:

“We recognize  the  crucial  role  of  BRICS  in  the  process  of  improving  the  international monetary  and  financial  system,  with  a  view  to  making  it  more  responsive  to  the needs  of  all  countries  and  contribute  towards  sustainable  growth  of  the  global economy.”

Here we have a neat summation of the narrative which runs throughout BRICS policy. It includes encouragement of egalitarianism amongst states which casts shade on the Western dominated system – but without having to openly call it out. BRICS policy treads a line between obeying norms, and blazing a new trail. If it is too radical it will be shot down and fall victim to the status quo bias which demands continuity and stability. Yet that status quo is not serving BRICS+ members and necessitates change.

BRICS Cross-Border Payments Initiative

 We then learn through this document about the parallel international payments structure that is coalescing amongst BRICS+. In my view there is a parallel institution for most of the existing institutions – which are controlled largely by Western powers. Firstly of note we have BRICS Cross-Border Payments Initiative (BCBPI) – a multi-currency system for international settlement. This is a clear competitor to America’s SWIFT system of international payments. The SWIFT system as it stands does not allow Russia to partake in transactions, furthermore any transactions which can be linked to Russia may also be censored creating an unworkable minefield for the global South. They make this clear in defining the BCBPI:

“We recognize the widespread benefits of faster, low cost, more efficient, transparent, safe and inclusive cross-border payment instruments that are built around the principle of minimizing trade barriers and  non-discriminatory  access.”

BRICS Clear

The next proposal by the BRICS is a clearing house, independent of the West. Clearing is the process by which complex trades in stocks and bonds are unfurled, and settled. A clearing house is the middleman in the interaction, formalising and guaranteeing the settlement. They also decide which banks may interact. This creates difficulty when a clearing house is located in the West and cannot, due to sanctions, allow interaction with Russian banks for example. Globally the most pivotal is the London Clearing House. BRICS+ propose BRICS clear as an alternative:

“We agree to further discussion  on  the  feasibility  of  establishment  of  an  independent  cross-border settlement  and  depositary  infrastructure,  BRICS  Clear”

BRICS Rating Agency

Another vital institution to be built is that of ratings agencies. Currently financial products, banks and even countries are rated by a small group of agencies based in the USA. These credit ratings agencies decide if your bond is good value, if your stock portfolio is worthwhile and give ratings like double A. They came into disrepute in the 2008 Great Financial Crash as they rated bundles of mortgages as safe and worthwhile investments, when really they were reckless speculative gambles with no solid backing. Then when the mortgage derivatives market crashed the corruption was revealed. Yet the ratings agencies are allowed to carry on their criminal activity as it props up the global criminal cabal. However, once again Russia and China have found it hard to receive accurate ratings from Western agencies and have levied the claim that they have been subjected to unfair downgrading. No surprise then that they wish to pivot to a BRICS Credit Rating institution.

BRICS (Re)Insurance Company

Another key institution which is often relegated to the niche economists is insurance. Not the kind of domestic car insurance providers – here we are talking about insurers who back nation states, who back huge trade deals and financial markets. It is vital for high-finance to have these bodies to back their deals otherwise the risk of the deal failing would make a deal unaffordable. The BRICS already has their New Development Bank and its Contingent Reserve Arrangements (a competitor to the IMF) to help bail out economies in turmoil. Yet what they are proposing here is a much deeper and more integrated institution:

“Further deepening of integration processes within BRICS requires the formation of a sovereign financial system of the member countries. We agree  that  an  important  component  of  such  a  system  could  be  an  independent reinsurance  capacity.  We  agree  to  facilitate  discussion  to  explore  feasibility  of possible  solutions  in  this  area,  including  BRICS  (Re)Insurance  Company”

BRICS+: New names, same games

Now I have outlined a few limbs on this fledgling sapling of an alternative financial structure. But before we go too far down the narrative that BRICS is cleaving a continent off from the mainland, and setting sail into the sunset, I wish to caveat. I believe that there are, embedded in their fine print, many ties to a global financial superstructure. Whilst it may appear that there is a great divorce in progress, I hold the view that there are powerful forces behind global finance which seek continuity and their plans are echoed throughout BRICS publications. These are also worthy of note and description.

ISO 20022

Firstly here I will raise the concept of ISO 20022. This is the programming language which is being used throughout CBDC architecture the world over. Whether it’s Nigeria’s e-Naira, Sweden’s e-kroner or the future e-Dollar, they all will be using ISO 20022. I did a deep dive on ISO 20022 in my ‘7 pillars of a Global CBDC system’ article, describing how it is a vital plank of the effort to create a global system of surveilled digital currency. As it is so prevalent it should be no surprise to find that we find reference to it in the BRICS proposal document, falling under the remit of the so-called ‘BRICS Payments Task Force (BPTF)’. On this subject we await the announced research paper “Approaches to drafting uniform rules for the ISO 20022 messages in cross-border payments among the BRICS countries supported by alternative financial messaging channels”. And to those readers who have made it this far I appreciate your longevity. This subject is difficult to grasp at points and the verbiage of high-finance is often hard to penetrate. Yet to simplify the last point: BRICS+, whilst seeming to pull away from a global financial system, is really partaking in a higher level global financial system that isn’t very different.

Further to this point I will add the presence of UN sustainable development goals. Throughout BRICS work we have littered these commitments to the UN’s SDG agenda:

“We  encourage  progressing  the 2030  Agenda  for  Sustainable  Development  and  commit  to  achieve  stronger, greener, more sustainable and more balanced global development “.

Now for the regular citizen it might be nice to see that their globalised financial institutions, which have huge datacentres and fund war around the world, give a nod to the birds, bees and trees. However, throughout my research I have found that the SDGs have very little with helping nature, far more for taking nature from its rightful custodians and farming it off to financial speculators. Now here is not the time to discuss further this topic, I will point the reader to the incredible work of Whitney Webb and Iain Davis at Unlimited Hangout for a deep dive into the corruption. Suffice as to say that the BRICS rebel alliance has no intention of diverting from the global Agenda 2030.

Conclusion

And so, to Kazan.

We are at a critical juncture for the global economy. Global debt is tipping into the trillions. There is no obvious route for nation states to pay their debts, nor even to tend to them. I believe we are approaching a free-fall moment, a crash of sorts. I think, given the sums of debt and the globalised nature of the problem that it will be a much bigger wildfire than the 2008 crisis. Yet those big bankers have had over 15 years to re-arrange their plans and to foment their plots behind closed doors, and they are more ready than the regular people on Earth.

Central banks have been buying gold at a record pace. They are hoarding assets of real value in the face of the massive speculative bubbles of fake assets: paper gold, lent out to the tune of thousands of ounces for every one ounce of real gold, a bond market with no nation state able to back their bonds, not even the UK or US, among many other bubbles. Thus I look with trepidation at the best laid plans of Bankers and Billionaires.

On gold we must await the announcements of BRICS+ s to whether they will include gold in a new unit of account – The Unit (see my first BRICS Coin article for more). But we can expect the announcement of a tranche of alternative economic institutions. It will likely be these institutions which rise pyrrhic from the ashes of the next financial crash and begin rebuilding the world economy, in Russian, in Hindi, Mandarin, Portugese, Persian and Arabic. Yet for now it seems we must all wait with baited breath, and cling to our financial life rafts as the debt tsunami approaches.

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Sources:

Krugman: Fiat Money backed by guns

youtube : /watch?v=MJWi8VUHUzk

Blake Lovewell: BRICS Coin – the Unit vs. The Dollar

BRICS Coin – The Unit vs The Dollar

Russia – BRICS priorities

https://www.brics-russia2024.ru/en/russia-and-brics/priorities

Russia MinFin and Central Bank Joint Statement of BRICS plans : Full Document

https://cdn.brics-russia2024.ru/upload/docs/BRICS_FMCBG_Statement.pdf?1728665606116285

BCPI: BRICS Cross-border Payment Initiative

https://geopoliticaleconomy. com/2024/10/19/brics-russia-multi-currency-system-us-dollar/

Jerusalem Post: BRICS Credit Rating Agency

https://www.jpost.com/business-and-innovation/precious-metals/article-822549

Blake Lovewell: 7 Pillars of a Global CBDC System

The 7 Pillars of a Global CBDC System

Whitney Webb, Iain Davis: Sustainable Debt Slavery

Sustainable Debt Slavery

BRICS Coin – The Unit versus The Dollar

The next meeting of the BRICS group of nations is pivotal. Not only do Brazil, Russia, India, China and South Africa look to welcoming a new tranche of members into the club; but we also expect an announcement about a new currency regime. BRICS has grown from a talking house to a true international institution – and it is about to step out from the shadow of American hegemony.

In this article we will gain an overview of the key building blocks of the BRICS financial system including the proposed ‘Unit’. We will delve into the geopolitics that underlie the bloc’s metamorphosis and equivocate on the future of their evolution. Let us start with the geopolitics which have fertilised the fields for the growth of BRICS coin.

The BRICS vs. The West

The BRICS is made up of the aforementioned nations from their acronym, as well as Iran, Egypt, UAE and Ethiopia. It agglomerated in 2009 to form an alliance of non-Western states as a counterpoint to the domination by European, then American empires in the 20^th century. It emerged as little more than a talking shop modelled after the West’s G7 – where states would co-ordinate policy.

Yet as the 21^st century unfolded, the Western states acted increasingly belligerently. Through continuing wars in the Middle East, little thrift was given to non-Western states on the global stage. The USA in particular played a loose hand geopolitically – always preferring to force its own interests at the cost of diplomacy and trust. This accelerated and relations between the West and East deteriorated, pivoting over military tensions in Central Europe (Ukraine), and the West Pacific (Taiwan) in particular. Today we have the abhorrent prospect of violence and ‘hot’ war; the precursor was a decade of ‘cold’ economic warfare.

The USA engaged with Russia and China using the policy of sanctions. The USA would limit trade in certain fields which it deemed politically useful, for example in energy and technology. One example was the US Dept. Of Commerce declaring Huawei, a Chinese telecoms company, as harmful and banning its products from the USA. Yet America went further still against its perennial enemy: Russia. Since 2014, after the Maidan coup against Yanukovich in Ukraine by NATO, relations between the USA and Russia deteriorated. The USA and EU began breaking off relations, severing trade relationships and then commenced economic sanctions. These included banning goods produced in Russia, banning financial institutions as well as banning Russian media from the West. Russia responded with commensurate sanctions and the rift began to deepen. Other key sanctions were the removal of Russia from the SWIFT system of international transfer, and the theft of Russian assets held in Western banks. All of this poisoned the well of good will between states and harmed the USA’s reputation as a trade partner internationally.

After a decade long proxy conflict we now see that the sanctions, aimed at hobbling Russia, have really made Russia turn in and strengthen. Even British State media admits “Russia’s economy grew by 2.2% in 2023” despite over 16,500 individual sanctions. Similarly she has sought to foster and grow ties with China and the other BRICS member states.  The USA has abused its ‘exorbitant privilege’ of being the world’s reserve currency by using it as a weapon. Indian Exterior Ministe Jaishankar put it succinctly last week:

“Sometimes you make it difficult in the use of dollars. We have some trade partners with whom trade in dollars becomes difficult because of your policies. We have to look for workarounds.”

The Unit

The Unit is the proposed form of workaround that the BRICS are brewing. This ‘New Currency Unit’ (NCU) is to be the eponymous BRICS coin.

It has been floated and developed since at least 2019, when the Association of Russian Banks released a video of BRICS Pay – their payment app – in action.

It shows a portly wealthy Russian purchasing a bottle of Wine from a high-end Muscovite boutique. Perhaps one could levy the claim that it is not in-touch with the average citizen who will be using the payment rail, but it works to show the political class how the app works. Something I will describe here:

The app allows the vendor to access funds in their own national currency from their national bank. That national bank then makes a demand from their central bank. That central bank builds up a balance of trade (for example 100 Indian transactions in Russia). The central bank of Russia then settles with the central bank of India using a token (clumsily nick-named NSRB : New Silk Road BRICS token), India will have debited the BRICS pay account of the buyer at the point of sale, via an Indian bank, and the transaction is paid for and settled in seconds using a web of high speed computer networks. This is better than the current system where Russia could end up with an excess of Rupees, as happened in a 2023 oil trade.

To clarify: this system has a number of important innovations. Firstly the use of blockchains. The NSRB token will be run on a blockchain. It isn’t bitcoin or even really a cryptocurrency – we must be clear in our thinking to not be befuddled by preconceptions. Even though their flashy website has a ‘whitepaper’ and looks every bit the cryptocurrency project, it is centrally managed by nation states. We will see if The Unit Foundation, the group behind The Unit will keep their promise of creating ‘apolitical money’. Nevertheless the blockchain is used here to keep a ledger of every transaction, including a mass of data on the users, location, time and amount etc.

Second is the use of CBDC: Central Bank Digital Currencies. I have written extensively on the topic and suffice as to say I believe these are the end of financial freedom – a gilded cage. Here they are to be used at the settlement layer that is to be the interlocutor between national currencies, Rubles Rupees and Yuan, and the NSRB token. This echoes the BIS’ mBridge system – but as Russia is currently excluded from the BIS they are forming their own mBridge. Each nation will have control over its CBDC and monetary policy, the CBDC will feed down to national banks who will do the dirty work of managing people’s accounts day to day. So for the user, there will not be a great difference between a bank account of today and a BRICS pay account. They will still earn and pay in their local currency. But the cloud of transaction above them will be markedly different.

The third innovation, which is most important geopolitically, is the re-introduction of gold into the currency. The BRICS coin – my name, or to use their nomenclature New Unit of Currency (NUC), New Unit of Account (NUA) and New Silk Road BRICS token, will be backed by gold. Something we have not had internationally since the 1970s when Nixon put the final nail in the coffin of the Gold Standard when he ‘temporarily’ closed the US gold window – meaning US treasuries could no longer be redeemed for American gold. We then had an era where the USA printed inordinate amounts of paper money and inflated the value out of the world’s economy. Gold is an anchor in physical reality and a constraint in monetary policy. Thus when BRICS+ create The Unit, backed 40% by gold, 60% by BRICS currencies, we know they mean business.

Lastly we must highlight the NDB – New Development Bank. This was created in 2015 and was the first body that the bloc instantiated. It began as a small (in terms of the global economy) investment bank. BRICS nations would but money into a pool and the NDB would distribute it to projects within BRICS nations deemed important. This usually meant infrastructure like dams, highways, water supplies and so on. Yet over the last few years as the BRICS coin snowball has picked up pace – the NDB has become the lightning rod for financial innovation. It is now touted as an alternative for the IMF. The BRICS NUA will even mirror the IMF’s SDR basket of currencies.

The International Monetary Fund is not popular in the global South. It often saddles small nations with huge debt burdens and forces then to adopt neoliberal policies to allow vulture capitalists to hoover up resources – neo-colonialism. Perhaps the NDB, allowing preferential access to Russia, China, India and more, with a gold-backed Unit in tow will be a much more attractive partner for these states as time goes on.

A la Kazan!

And so, to Kazan. This year, 2024, the BRICS+ bloc will meet in Russia, in the city of Kazan for their annual meeting. It is touted as one of the most important yet. We have the applications of over 40 nations to consider, including gulf states and NATO member Turkey. We have the BRICS+ Business Council issuing decisions about The Unit and perhaps announcing the creation of a new economic order. Plus we expect some declarations about the continuing escalation of violence in Ukraine and the Middle East, onto which Western states seem to be pouring petrol rather than seeking diplomacy. I see it as the necessary emergence of a multipolar global order as the USA’s hegemony reaches the end of its 100-year reign. Particlurlarly China and Russia do not want to see one country dominate through imperialism, rather a system of multicurrency mercantilism, to borrow the term of Kathleen Tyson.

We also reach a pivotal time for gold in the golabal economy. It is reaching all-time-highs in all currencies – indicating the value of sed currencies evaporating away. People are flocking to gold as a safe harbour for value. This will benefit the bigger holders of gold proportionately more. China holds an estimated 25,000 tons but has also disbursed a similar amount to its citizens through sales at the Shanghai Gold Exchange. This marks a pivot away from the historical center of gold dealing: the London Bullion Market Association (LBMA) which was created by the Bank of England to throttle the gold market. The UK for comparison holds just of 310 tonnes of gold.

Whilst the gold bugs are chomping at the bit for the announcement of a gold-backed BRICS coin, and the geopolitical order in the world island of Asia-Europe certainly needs stabilising. I have a cooler prediction for Kazan. I believe that the BRICS+ will continue to expand, and continue to grow its projects in the financial sphere. But I don’t believe they will rush out The Unit this year. China, Russia, India and other big nations are looking at the centuries long timeline and they cannot afford to slip up. Their bloc is not a political union like the EU but more a diplomatic center. Thus there requires a longer lead time of deliberation. Furthermore, the announcement of a competitor for the dollar might just be too much for the deathly-ill American system. Already a cornered beast – with no active president at the helm, unpopular wars abroad and multifarious economic woes at home, it would be ill advised to poke this beast. Rather I believe the BRICS will take a Confucian policy, or perhaps the Tsu-ian route and let its enemies die by their own mistakes. But we will certainly gain some clarity this October and see if BRICS+ can conjour up monetary magic a la Kazan.

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Sources:

Huawei banned from USA in 2019

https://2017-2021.commerce.gov/news/press-releases/2019/05/department-commerce-announces-addition-huawei-technologies-co-ltd.html

Timeline of US-Russia sanctions from 2014

https://www.rferl.org/a/russia-sanctions-timeline/29477179.html

BBC admits Sanctions haven’t stopped Russian growth

https://www.bbc.co.uk/news/world-europe-60125659

BRICS-pay system

https://brics-pay.com

Russia-India oil trade generates excess Rupees

https://www.reuters.com/markets/currency-clashes-sour-russias-oil-trade-with-asia-2023-11-27

Universa: the BRICS choice of blockchain

https://medium.com/universablockchain/brics-digital-bank-will-use-universa-blockchain-technologies-8f3034edb325

The Unit Foundation’s flashy website

https://unitfoundation.org

Blake Lovewell: 7 pillars of a Global CBDC system

The 7 Pillars of a Global CBDC System

BRICS New Independent Payment System demonstration

https://digitalbankbrics.com/media/NIPS_Presentation_EN.pdf

BIS mBridge system of CBDC exchange

https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm

Sputnik: De-dollarization bombshell, BRICS decentralised monetary ecosystem

https://sputnikglobe.com/20240513/de-dollarization-bombshell-the-coming-of-brics-decentralized-monetary-ecosystem-1118409748.html

Escobar: BRICS Bretton Woods in Kazan

https://www.zerohedge.com/geopolitical/escobar-will-brics-bretton-woods-take-place-kazan

Turkey’s accession to BRICS

https://sputnikglobe.com/20230904/grain-deal-gas-hub–de-dollarization-what-signal-do-putin-erdogan-talks-send-to-west-1113117752.html

Multicurrency Mercantilism: Kathleen Tyson

https://www.pacemaker.global