Challenge to Dollar

The Russia-Ukraine war is going to reorient the existing global order and monetary system challenging the very dominance of dollar. The end of uni-polar world is in sight. The initiative began much before the start of the war under the leadership of Russia and China but the war has just expedited the process of an alternative arrangement to conduct bilateral and multilateral trades. Despite the united face of America and NATO in the context of anti-Russia coalition against the backdrop of Ukraine war the decline of Dollar seems irreversible.

The Eurasia Economic Union (EAEU) is speeding up its design of a common payment system, which has been closely discussed for nearly a year with the Chinese under the stewardship of Sergey Glazyev, the EAEU’s minister in charge of Integration and Macro-economy.

Through its regulatory body, the Eurasian Economic Commission (EEC), the EAEU has just extended a very serious proposal to the BRICS nations (Brazil, Russia, India, China and South Africa) which, crucially, are already on the way to turning into BRICS+: a sort of G20 of the Global South.

The system will include a single payment card—in direct competition with Visa and Master Card—merging the already existing Russian MIR, China’s Union Pay, India’s Ru Pay, Brazil’s Elo, and others.

That will represent a direct challenge to the western-designed (and enforced) monetary system, head on. And it comes on the heels of BRICS members already transacting their bilateral trade in local currencies, and bypassing the US dollar.

This EAEU-BRICS union was long in the making—and will now also move toward prefiguring a further geo-economic merger with the member nations of the Shanghai Cooperation Organisation (SCO).

The EAEU was established in 2015 as a customs union of Russia, Kazakhstan and Belarus, joined a year later by Armenia and Kyrgyzstan. Vietnam is already an EAEU free trade partner, and recently enshrined SCO member Iran is also clinching a deal.

The EAEU is designed to implement free movement of goods, services, capital, and workers between member countries. Ukraine would have been an EAEU member if not for the Maidan coup in 2014 masterminded by the Barack Obama administration.

The plan is to establish a joint financial market. Banking, Insurance and Stock Market will soon come under its ambit.

Meanwhile, trade and economic cooperation between the EAEU and BRICS have increased 1.5 times in the first half of 2022 alone.

“It is advisable to combine the potentials of the BRICS and EAEU macro-financial development institutions, in particular the BRICS New Development Bank, the Asian Infrastructure Investment Bank (AIIB), as well as national development institutions. This will make it possible to achieve a synergistic effect and ensure synchronous investments in sustainable infrastructure, innovative production, and renewable energy sources.”

 The possibility of advancing convergence of not only BRICS and EAEU but also the financial institutions deeply involved in projects under the China-led New Silk Roads, or Belt and Road Initiative (BRI) is very much there.

As if all that was not game-changing enough, Russian President Vladimir Putin is raising the stakes by calling for a new international payment system based on block-chain and digital currencies.

The project for such a system was recently presented at the 1st Eurasian Economic Forum in Bishkek.

At the forum, the EAEU approved a draft agreement on cross-border placement and circulation of securities in member states, and amended technical regulations.

All of these moves acquire even more importance as they connect to fast increasing, interlocking trade between Russia, China, India, and Iran: from Russia’s drive to build new pipelines serving its Chinese market—to Russia, Kazakhstan, and Uzbekistan discussing a gas union for both domestic supplies and exports, especially to main client China.

It remains to be seen whether the fractured world succeeds in  halting the America-centric Age of Plunder.

[Contributed]

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Frontier
Vol 55, No. 31, Jan 29 - Feb 4, 2023