Will Credit Finally Be Included in De-Dollarization Dialogue? / Paul Gallagher

May 25, 2023 (EIRNS)—Perhaps even more important than the plans for trade in national currencies, which continued around the Eurasian Economic Union (EAEU) meetings May 24-25, were the potential plans involving the New Development Bank of the BRICS nations and Brazil-Argentina trade.

A leader in the EAEU de-dollarization process, not as often recognized, is Belarusian President Aleksandr Lukashenko. The official Belarus website, BelTA, posted on May 24 a summary of Lukashenko’s calls to drop the U.S. dollar in trade as long as two years ago, which comes from a BelTA YouTube project “After The Fact: Lukashenko’s Decisions.”

BelTA writes that two years ago at the Shanghai Cooperation Organization summit, President Aleksandr Lukashenko cautioned that countries relying wholeheartedly on the U.S. dollar are becoming increasingly vulnerable. “This not only deprives us of competitive financial and economic advantages, but also threatens national security. All the more so because this leverage is increasingly being used as a weapon,” he said.

“And what do we see?” BelTA continued. “China is now actively developing its own interbank payment system. Brazil and Argentina have decided to create a common currency. South Korea and Indonesia, India and Malaysia have agreed to abandon the dollar in domestic payments. In the East the establishment of an Asian Monetary Fund is under consideration. Saudi Arabia has decided to abandon the U.S. dollar as the sole currency for oil trade. And this is just the beginning....

“Aleksandr Lukashenko believes that one of the primary objectives in the Eurasian Economic Union is the coordinated support of national currencies and security of payments,” explained BelTA. He recommended de-dollarization of domestic trade in hydrocarbons for the EAEU at a summit in 2021. At the EAEU summit on Dec. 9, 2022, Lukashenko stressed the necessity to revitalize the EAEU “circulatory system by all means.” President Lukashenko told his fellow heads of state: “I am talking about finance. Everyone understands already that the age of the U.S. dollar’s dominance is nearly over. The future belongs to trade blocs where transactions will rely on national currencies. Belarus and Russia have already stopped using U.S. dollars in main transactions. It is important for other partners to also get actively involved in this process.”

BelTA describes that how share of national currencies in mutual transactions in the EAEU increased from 63% in 2013 to 73.5% in 2020, whereas U.S. dollars dominated the structure of transactions with third countries. It concludes: “The Belarusian President believes that in the near future the world will have new powerful currency unions with a new reserve currency. The Russian ruble, the Chinese yuan, the Brazilian peso, or the Indian rupee? With what will countries start paying each other? There is no answer to this question yet. But one thing is clear: The era of the U.S. dollar is really coming to an end.” Lukashenko had earlier made himself clear: “And then China came along with its own currency, the yuan, and with the desire to be leaders.”

Two-way trade settlement in national currencies is difficult if the trade is extremely unbalanced. In a Sputnik interview published May 25 with an informed businessman, Chris Devonshire-Ellis, the chairman of Dezan Shira & Associates, who notes that a free trade agreement between India and the EAEU is under discussion. It is, Devonshire-Ellis says, a way of better balancing Russia-India trade, bringing Indian capital investment into projects on the International North-South Transport Corridor and in Russia’s Far East, and avoiding India’s fear of Chinese industrial companies outcompeting its own in India.

Trade in national currencies does not, however, mean credit for development issued in those currencies, the driving force of success of a new monetary system.

Very important board meetings of the BRICS New Development Bank (NDB) are set for May 30-31 under the bank’s new President, former Brazilian President Dilma Rousseff. The Argentine Economics Minister and Central Bank Governor are invited to the meeting in Shanghai and for an extended visit in China, as reported in this issue.

An April 24 article on CoinChapter set this up in “Another Blow to U.S. Dollar: BRICS New Development Bank Offers Loans in Local Currencies,” by Karen Mkrtchyan. He writes: “As confirmed by Dilma Rousseff, the new chief of NDB, the move is a step toward de-dollarization. As a result, as much as 30% or one-third of the total loan amount will not be in the greenback.”

While the amounts into which this translates make it a small step, it is nonetheless important in that the NDB’s practice in its eight years has been to lend with borrowed capital from international markets (thus in dollars), and, instead, to lend in BRICS national or other “local” currencies means that additional paid-in capital should come into the bank from the participating nations. This will expand its credit capacity as well.