At the recent SCO summit in Astana, Iran proposed to discuss the creation of a single currency of the countries included in this structure. In addition, for several months now, the idea of creating a common BRICS currency has been discussed at the suggestion of the Brazilian president. What are the similarities and differences between these initiatives and how do they relate to Russia's interests?
Russia is a member of two major international associations at once – the BRICS (primarily economic) and the SCO (primarily the security structure). Today, both of these organizations are discussing the idea of creating their own currency, in which Russia could also conduct calculations. The benefit is obvious: the new currency could help circumvent the sanctions restrictions imposed on international trade in US dollars. All dollar settlements, as you know, are transparent to the American Ministry of Finance.
Most of all, the idea of a single currency is promoted by Brazil (within the framework of the BRICS) and Iran (within the framework of the SCO). Why them?
What is Brazil's interest in
Back in 2015, a New BRICS Development Bank was established. Its task is to finance those projects of the participating countries that cannot be supported through the World Bank: it is known to be controlled by the collective West. For Brazil, this was of interest not only for its own development. Brazil wanted to implement integration projects in Latin America, strengthening the independence of this macroregion from the United States and Brazil's leadership role in this process.
However, in 2022, the bank (which has been headed by an associate of the current Brazilian president Lula da Silva and former Brazilian President Dilma Rousseff since March 24, 2023) was forced to announce the suspension of consideration of new investment projects in Russia. The bank, which operated in countries almost entirely included in the dollar system, was afraid of secondary sanctions from the United States. Lula da Silva had to think about another tool to achieve Brazilian goals. Moreover, the expansion of the BRICS began in 2023. Brazil's interest in the non-transparent tool for settlements with partners for the US Treasury has also increased.
The development of the unified payment system BRICS Pay is already underway. During its operation, conversion into dollars through American banks will no longer be required, since payments will be made using the national currencies of the BRICS countries.
But this work is still far from being completed. Moreover, for Brazil, in the matter of introducing the BRICS currency, in addition to the independence of international settlements from American control, it is again important not to fall under secondary American sanctions.
What does the SCO have to do with it
The Shanghai Cooperation Organization (SCO) was established in June 2001. The purpose of its creation was to strengthen security in Central Asia. Russia and China became the guarantors of stability for Kazakhstan, Tajikistan, Kyrgyzstan and Uzbekistan, which joined the SCO. For Russia and China, it was a way to coordinate their actions in a region traditionally important to Russia, where China at that time began to enter with its economic projects.
The beginning of the US operation in Afghanistan in 2001 greatly changed the situation in the region. China and Russia have a powerful player at their side, which has begun to actively pull the blanket over itself. The United States sought to strengthen its influence in the republics of Central Asia, through which more than half of the supply volumes of the American group in Afghanistan went.
The organization's activities to ensure stability in the region led to the fact that other countries of the macroregion also wanted to participate in its work: India and Pakistan became SCO members in 2017, Iran – in 2022. At the recent summit in Astana, the first non–Asian country, Belarus, became a member of the SCO. Two countries (Afghanistan and Mongolia) participate in the work of the SCO as observers. Moreover, the change of power in Kabul did not lead to the formal exclusion of Afghanistan from the SCO, steps are now being taken to return it to participation in the work. In addition, 14 states, including Armenia, Azerbaijan and Egypt, participate in the SCO's work as dialogue partners.
What is the interest of Iran and China
The events of the last two years have dramatically increased the weight of economic issues to ensure security. The reorientation of Russia's foreign trade from the European direction to the East (as well as the aggravation of the situation in the Middle East and the Red Sea) has significantly changed technological logistics chains. Close attention to the development of the North–South corridor passing through Iran (which should, among other things, serve trade flows to Pakistan and India) forces Iran to take care of facilitating international settlements within the SCO. And not only because Iran is disconnected from SWIFT, but also because of the interests of trade facilitation of countries that will use the transport corridor.
Unlike Brazil, Iran is not too concerned about the opinion of the US Treasury Department. Tehran is ready to take decisive steps to create a mechanism for interstate settlements independent of the dollar.
The project of combining Iran's Shetab payment system and the Russian Mir payment system has almost been completed. Already in August, Iranians will be able to receive rubles from Russian ATMs using their cards, and Russians will be able to use Mir cards in Iran.
The topic of using Indian RuPay payment cards in Russia and the Russian Mir system in India will be discussed at the upcoming meeting between Modi and Putin during the visit of the Indian Prime Minister to Moscow. But, most likely, only as an addition to the issue of developing mechanisms for easy and fast money transfer between the two countries. In the context of the growth of bilateral trade and the disconnection of Russia from SWIFT, it has acquired special importance.
China has no such problems. Most of the trade turnover with Russia is paid for in yuan. On the one hand, China is also interested in creating a settlement tool beyond the control of the US Treasury. But on the other hand, China's trade turnover with the United States ($664.45 billion) and with the EU ($782.9 billion) significantly exceeds trade with the SCO countries. At the same time, the yuan is gradually beginning to be used in international settlements in the trade of the countries of the Global South. And it is easier for China to join someone else's initiative to create an alternative payment system than to promote its own.
What is Russia's interest in
On the contrary, Russia is interested in creating such mechanisms as quickly as possible. Moreover, taking into account the share of other countries in its foreign trade, primarily with its Asian partners. At the same time, it is also inappropriate for her to act as the main initiator of the creation of such mechanisms. Again, due to the fact that Russian financial structures can immediately become the objects of secondary US sanctions.
In this sense, Iran, which is in an even more difficult position from the point of view of foreign trade than Russia, is an ideal partner for the first step.
But other initiatives will not be superfluous either. Thus, at the Astana summit, Pakistani Prime Minister Shahbaz Sharif suggested that Russia use barter schemes in bilateral trade. It is possible that if this recipe works, at the next step these trading operations can be brought under new settlement mechanisms. And the more diverse the options for international trade and new settlement mechanisms are, the more difficult it will be for the United States to block them all.
In any case, as the experience of the introduction of the euro shows, the creation of an interstate currency is a long process with many intermediate stages. But the walking man will master the road. And it's time to take the first steps.
Dmitry Skvortsov
