On June 26 in Moscow, the Valdai Discussion Club hosted a presentation of the report titled “A Path to a New Reserve Currency”. Discussion moderator Oleg Barabanov called the report “provocative in a good sense,” noting that it describes step-by-step one of the most realistic scenarios for creating a new reserve currency. He emphasised that the proposed new reserve currency would not replace the currencies of the countries participating in the process, but would be used exclusively for international settlements. According to Barabanov, the key issue here is whether countries in the Global South should have the political will and readiness for such an ambitious project.
The report’s author, Paulo Nogueira Batista Jr., Executive Director for Brazil and other countries in the International Monetary Fund (IMF) from 2007 to 2015, called the issue of international financial reform very important for Russia. Now, with confidence in the dollar undermined by its weaponisation and mounting problems in the American economy, many policymakers are asking what alternatives are available. None of the existing currencies—neither the euro, nor the yen, nor the yuan, nor the ruble—can provide a solution. Therefore, a new approach is needed: a currency issued by a group of countries—some BRICS members and possibly other countries in the Global South—that would exist alongside national currencies and used exclusively for international settlements. Issuing such a currency would require the creation of a new international bank. How could credibility be ensured? Nogueira Batista Jr. proposed stabilising it by linking it to a currency basket with the yuan as the leading currency. The issuing bank would also have to commit not to use it as a weapon or a tool for sanctions. The bank’s autonomy would be guaranteed, but a ceiling would be set on its issuance.
Radhika Desai, Professor at the Department of Political Studies and Director, Geopolitical Economy Research Group, University of Manitoba, noted that the difficulties associated with implementing this proposal would primarily be political. She recalled similar proposals by John Maynard Keynes, which failed to materialise primarily for political reasons. She also noted that the world’s leading economies, including those in the BRICS countries, remain tied to the dollar-based system, and their willingness to abandon the dollar remains questionable. “However, we may simply have no choice,” Desai believes. Moreover, this isn’t just a question of weaponising the US currency. The dollar-based system currently faces both external challenges and internal contradictions that could lead to its collapse. In that case, the dollar will cease to be a universally accepted currency. Speaking about specific implementation mechanisms, Desai opposed the idea of autonomy for the currency-issuing bank and favoured collective control over it.
Igor Makarov, Head of the School of World Economy and Laboratory for Economics of Climate Change at the Moscow-based Higher School of Economics, emphasised that the idea formulated in the report had evolved from a BRICS reserve currency into a reserve currency for the Global South and for the entire world. Initially, the BRICS group, as a ready-made platform for discussion and decision-making, seemed the most convenient place to discuss such issues. Moreover, there are currently no suitable alternative platforms in the world. However, BRICS has its limitations: in particular, not all countries in the group are interested in change. As a result, the lack of a platform for dialogue in the Global South outside of BRICS becomes a serious obstacle in this case. Discussing the reasons for the need for de-dollarisation in the context of the Global South, Makarov pointed out that moving away from the dollar’s special role is, among other things, a development issue. The achievement of the Sustainable Development Goals depends on it, and it must help the South catch up with the North. Financial flows must be redirected from developed to developing countries, which is impossible within the dollar system, he believes. “Moving away from this system—including for development purposes—is an important argument in favour of alternatives,” the economist stated. In addition to the ideas outlined in the report, Makarov proposed considering changing the rules of the game per se, based on digital technologies, which could lead to a reconsideration of the very concept of a reserve currency.
Wang Yiwei, Jean Monnet Chair Professor, Professor of School of International Studies, Vice President of Academy of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, analysed the Chinese perspective on the issue, primarily from a political perspective. He believes that this is essentially a competition between Chinese and American worldviews. China is more focused on domestic policy, adhering to the principles of peace and development, and placing particular emphasis on the development of artificial intelligence. Internationally, it is actively building bilateral relations based on the Belt and Road Initiative. In the United States, meanwhile, a “bubble” generated by the dollar’s international role can be observed, the growth of which carries serious risks. Against this backdrop, many are considering a more complex global currency structure and the use of various supranational instruments, perhaps more regional in nature. “The United States should not remain a hegemon and impose its policies on other countries,” Wang Yiwei said. However, he sees currency not as an independent factor, but rather as a kind of “soft power” that will likely follow the “hard power” of manufacturing, leading to a gradual shift away from hegemony.
“For the US, losing dollar hegemony would be the equivalent of losing a world war,” noted Marco Fernandes, Brazilian Representative at the BRICS Civil Council, Geopolitical Analyst at the online media Brasil de Fato, and editor of Wenhua Zongheng International magazine. The US is at war with the entire world, and therefore any alternative that can combat dollar hegemony is important, he added. Hedging risks is also essential. Many countries are increasingly turning to gold because they see the US on the brink of financial collapse, which could severely harm other countries, including China. Fernandez sees China’s tendency to focus more on bilateral cooperation than multilateralism as a major obstacle to the project presented in the report. This will seriously complicate the project’s progress within BRICS, he argued.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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