Russia and India don’t need the US dollar in trade, having turned to national currencies to conduct mutual settlements, BRICS International Forum President Purnima Anand told reporters.

The shift to national currencies in trade frees Russia and India from the U.S. dollar, the BRICS International Forum president said.

Russia, India No Longer Need US Dollar

The BRICS International Forum President Purnima Anand said Thursday, "We have implemented the mechanism of mutual settlements in rubles and rupees, and there is no need for our countries to use the dollar in mutual settlements." 

“That means that the BRICS countries are opening up to Russia, offering the opportunity for the country to overcome the consequences of sanctions,” Anand added, as quoted by RIA news agency.

The official also said that China is developing a similar mechanism of mutual settlements in rubles and yuan, which according to the BRICS president, constitutes a way for Russia to overcome sanctions.   

On mutual trade between India and Russia, Anand said there had been a five-fold increase over the last forty years, adding that Russian oil and Indian agricultural products, textiles, and medicines are among the goods traded between the two nations. 

The president also referred to the ongoing conflict in Ukraine, recognizing India's neutral status. Anand said that New Delhi will maintain cooperation with Moscow regardless of sanctions pressure.

“When Russia’s military operation in Ukraine began, naturally there was pressure on India to stop importing Russian oil. But the Ministry of Foreign Affairs had to reject this pressure. The Russian side was assured that supplies would not be stopped and the sanctions regime would in no way affect the relationship between our countries,” the forum head stressed.

BRICS is an international socio-economic and political forum incorporating five member nations: Brazil, Russia, India, China, and South Africa.

President of the BRICS international forum, Purnima Anand, affirms that Brazil, India, China, and South Africa are increasingly cooperating with Russia to overcome the consequences of Western sanctions and reduce the use of the dollar. And some still deny the New Multipolar World.   

According to Anand, the Indian Foreign Ministry has rejected pressure on the country to stop Russian oil imports. "India assured that supplies would not be stopped and the sanctions' regime would in no way affect the relationship between our countries."

BRICS is an international socioeconomic and political forum of rapidly developing countries that promotes dialogue and multilateral cooperation. The group comprises Brazil, Russia, India, China, and South Africa.

Russia has also increased its ties with India, as trade jumped fivefold over the past four decades, according to Anand. India has been importing more oil from Russia, while Moscow has stepped up purchases of agricultural products, textiles, and medicine.

India has resisted the pressure from the West to ban Russian oil. "When Russia's military operation in Ukraine began, naturally there was pressure on India to stop importing Russian oil. But the Ministry of Foreign Affairs had to reject this pressure. The Russian side was assured that supplies would not be stopped and the sanctions regime would in no way affect the relationship between our countries," Anand stated.

arlier this summer, Russian President Vladimir Putin said that Brazil, Russia, India, China, and South Africa (BRICS) are developing a new basket-based reserve currency. 

"The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out," Putin said at the BRICS business forum at the end of June. "We are ready to openly work with all fair partners."

The five countries are also trying to create an alternative mechanism for international payments, he added.

BRICS could also see its membership expand, with Turkey, Egypt, and Saudi Arabia considering joining the group.

Over the summer, India and Russia have held discussions to accept each other's local RuPay and Mir payment systems, according to the Deccan Herald.

Analysts see this new BRICS reserve currency proposal as an alternative to the U.S. dollar and the International Monetary Fund's (IMF) Special Drawing Rights (SDRs) currency.

"One can only think this is a move to address the perceived U.S.-hegemony of the IMF and will allow BRICS to build their own sphere of influence and unit of currency within that sphere," said ING global head of markets Chris Turner.

Russia's efforts to de-dollarize are far from new, but they accelerated following sanctions placed on Moscow after its invasion of Ukraine at the end of February. 

Putin's BRICS new currency could benefit gold and Bitcoin - analysts

With the global de-dollarization trend accelerating, the two assets that could stand to benefit are gold and the crypto space, according to analysts.

Earlier this summer, Russian President Vladimir Putin said that Brazil, Russia, India, China, and South Africa (BRICS) are developing a new basket-based reserve currency.

"The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out," Putin said at the BRICS business forum at the end of June. "We are ready to openly work with all fair partners."

The five countries are also trying to create an alternative mechanism for international payments, he added.

BRICS could also see its membership expand, with Turkey, Egypt, and Saudi Arabia considering joining the group.

This is not the first time something like this has been mentioned, with the BRICS countries already starting to incorporate more local currencies for payments in mutual trades. Over the summer, India and Russia have been holding discussions to accept each other's local RuPay and Mir payment systems, according to the Deccan Herald.

Analysts see this new BRICS reserve currency proposal as an alternative to the U.S. dollar and the International Monetary Fund's (IMF) Special Drawing Rights (SDRs) currency.

"One can only think this is a move to address the perceived U.S.-hegemony of the IMF and will allow BRICS to build their own sphere of influence and unit of currency within that sphere," said ING global head of markets Chris Turner.

Russia's efforts to de-dollarize are far from new, but they have been accelerated following Western sanctions placed on Russia after its invasion of Ukraine at the end of February.

"The speed with which western nations and its allies sanctioned Russian FX reserves (freezing around half) no doubt shocked Russian authorities. The Central Bank of Russia effectively admitted as much and no doubt some BRICS nations – especially China – took notice of the speed and stealth at which the U.S. Treasury moved," Turner pointed out. "BRICS nations may therefore feel they need an alternative reserve currency to match something like the IMF's SDR."

IMF's SDR is not a currency in itself. Instead, it is a basket of claims on top reserve currencies such as the dollar, the euro, the pound, the yen, and the renminbi, Turner explained.

Safety, liquidity and return make a great reserve currency, which is why BRICS could potentially look toward gold, he added. "We doubt the mercantilist nations involved in BRICS would want to transfer valuable FX reserves into this more local sphere of influence. If they are worried about the path of sanctions and the increasing weaponization of the dollar, they, like Russia, might prefer to move into gold," Turner said.

Another asset that could benefit from a bigger de-dollarization move is Bitcoin, said Wells Fargo's real asset strategy head John LaForge.

"If it works and you look 20 years from now, you'd have Western dollar-euro influence. And on the other side, you'd have China's yuan-Russia's ruble, or whatever that combination would be. And then you'd have the third option called Bitcoin, which is the middle one that is not based on countries but based on individuals saying that they don't want to vote with a particular bloc, preferring a global currency that is not controlled by anybody," he told Kitco News. "These two blocs fighting could open up opportunities for something else [like Bitcoin] to pop up later on."

Impact on the dollar

In the meantime, the greenback has been surging, with the U.S. dollar index trading near 20-year highs ahead of the highly anticipated Jackson Hole symposium.

Over the summer, the dollar has become the popular safe-haven play as other economies struggle with more problematic inflation and growth concerns. And the U.S. dollar could hold on to its strength for the next six months, according to LaForge.

"Our base case is that the U.S. will enter a recession somewhere in October or November, which will last until the middle of next year. Typically the dollar loses strength when signals say the U.S. is coming out of recession. So, if our base case is correct, you could see the dollar start acting weaker in Q1 of next year in anticipation of that," he described.

Until then, the dollar will keep acting as that defensive asset.

Also, the BRICS' proposal to create their own reserve currency should have a limited impact on the U.S. dollar in the short term. However, if the de-dollarization trend continues to accelerate, it would leave a mark on the greenback, LaForge said.

"If you look at the dollar FX reserves being held by central banks globally, that is shrinking a bit. They are starting to pick up more of the alternative currencies. That's been going on for the last 15 years — the slow wind away from the dollar," he pointed out. "The impact longer term is not a major thing. But this combination of [big players like] China and Russia getting together to form their new currency block is real."

References:

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