Russia is seeking to challenge the dominance of the U.S. dollar as the world’s de facto currency by urging countries in the BRICS alliance to explore the creation of their own trade currency.
State Duma Deputy Chairman Alexander Babakov made the disclosure in India at the two-day St. Petersburg International Economic Forum. Speaking with attendees of the conference, Babakov stated that India and Russia should take the lead in forming a financial relationship to ultimately create a new common currency.
“Our goal should be focused on writing new rules in the financial sphere in order to enable the use of an already common currency,” said Babakov. “It doesn’t matter whether it’s a digital ruble, a digital rupee, a digital yuan, or some other currency. But this currency must follow the laws of our respective nations.”
Babakov pointed out that the U.S. dollar does not benefit the shared objectives of both countries, noting that reliance on the currency gives the U.S. an unfair advantage in the grand scheme of things. The Russian official added that the proposed currency will be backed by gold or other rare-earth elements.
Russia’s plan for a new currency outside the dollar appears to be fueled by the economic sanctions imposed by Western powers following its invasion of Ukraine in February 2022. It was reported that the sanctions wiped off nearly 5% from Russia’s GDP as commercial banks struggled to settle international transactions after SWIFT shut them out of its settlement platform.
In the search for alternatives, Russia has turned to stablecoins and a central bank digital currency (CBDC) which experts believe will have cross-border payment functionalities. In October 2024, it was widely reported that Russia was exploring the use of its digital ruble for international trade with China.
Originally intended to be launched in 2024, Russia’s central bank says the digital rupee would be unveiled to the public before the end of the year. However, plans for the retail pilot were postponed from April 1, 2023, over the failure of the country to pass a legal framework to give validity to the experiment.
Plans are already underway
Early in the week, China and Brazil entered into a bilateral contract that will see both countries trade in their own currencies to the exclusion of the U.S. dollar. Under the terms of the agreement, China’s yuan would be directly exchanged for Brazil’s real as the Asian country plots to rival the U.S. in economic hegemony.
Ex-Goldman Sachs chief economist Jim O’Neill has drummed up support for other countries to foster trade using their own currencies on grounds that the dollar’s supremacy is often inimical to the monetary stability of other nations.
“The U.S. dollar plays a far too dominant role in global finance,” wrote O’Neill. “Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequence on the value of the dollar and the knock-on effects have been dramatic.”
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