BRICS Bridge, free zones, NBR for $200 billion: trade promotion with BRICS
Russian businesses are waiting for the first testing of the payment system with the BRICS countries
“To be honest, I don’t believe in the likelihood of duty-free trade with India, since the authorities of this country adhere to a strict protectionist policy to protect the domestic market. We are more concerned about transfers, when you have to pay a 4% bank commission for converting the ruble into the Indian rupee,” says business ambassador of Business Russia in India Olga Kulikova about her expectations from the BRICS economic agenda in Kazan. The creation of a new payment system BRICS Bridge as an alternative to SWIFT will be one of the main topics of the international summit. “Here, it will become clear which BRICS countries and partners are ready to integrate their digital currency platforms, and therefore expand mutual trade,” believes founder of BRICS+ Analytics Yaroslav Lissovolik.
Southeast Asia, Eurasia, Africa — Russia's “belt of friends”
This week, preparations for the BRICS summit in Kazan — a contender for one of the main events on the international stage — are being completed. As assistant to the president and head of the organising committee for the BRICS Summit Yuri Ushakov recently stated, 32 of the 38 countries that were invited to participate in the forum have confirmed their participation. Later it became known that three more countries will join them and a total of 35 countries will take part in the forum. It is known that the leaders of 24 states, and, above all, the BRICS core, will arrive in Kazan. These are the heads of Brazil, Russia, India, China and South Africa, as well as the head of the United Arab Emirates Mohammed bin Zayed Al Nahyan and Turkish President Recep Erdoğan. Due to elections in the country, the new President of Argentina Javier Miley will not be able to come.
Eurasia will be represented by the leaders of CIS countries, all of whom have confirmed their participation, as well as the secretaries general of the Commonwealth of Independent States, the Eurasian Economic Union and the Union State. Head of Kazakhstan Tokayev will take part in the summit, but the country will refrain from applying for membership in BRICS. Moscow respected this decision. “BRICS is not, let's say, an association that is trying to replace the UN, but on the contrary, it is an association that complements the UN and in no way contradicts the nature of the United Nations,” commented spokesperson for the Russian president Dmitry Peskov. Kazan is expecting UN Secretary General Antonio Guterres, SCO Secretary General Zhang Ming and President of the BRICS New Development Bank Dilma Rousseff.
Why is BRICS partner status needed?
Russia is in favor of expanding the number of BRICS participants and, possibly, with a new status. As Yuri Ushakov reported, the creation of the category of “partner state” of BRICS was discussed. “You know, we believe that the formula of partner country is very suitable in this situation, when the number of BRICS countries increased sharply during the summit in South Africa, now there are already 10 countries,” he said. “At present, we believe that, of course, it would be more convenient to include new members through the category of partner state.”
Why is the BRICS partner status needed? First of all, this status can be used by countries that are part of Russia's “belt of friends” (Editor’s note: they did not support the sanctions against our country),” noted the founder of BRICS+ Analytics, Yaroslav Lissovolik.
Turkey that has applied to join BRICS is among them. Recently, the country's president, Recep Erdoğan, confirmed his participation in the summit in Kazan. According to experts, Turkey did not support Western sanctions against the Russian Federation and continues to trade with the BRICS countries.
Alternative to SWIFT and financial support for BRICS countries
The expansion of mutual trade should be facilitated by the creation of a new payment system BRICS Bridge as an alternative to SWIFT, says Yaroslav Lissovolik. “Here it will become clear to what extent the BRICS countries are ready to integrate their digital currency platforms, and therefore to expand mutual trade. We will most likely not see a ready-made solution, but the first contours will appear. It is important that the process of its creation will be launched,” he stressed.
On the other hand, independent international trade can be ensured by the BRICS New Development Bank, which has its own capital of $ 200 billion. “The NDB is ready to provide financial support in the form of loans, which is becoming one of the important incentives for joining BRICS,” the expert believes.
But for this, you need to have the appropriate rating. According to Lissovolik, the concept of creating a rating agency for the BRICS countries is currently being developed. Assigning a rating is necessary to signal the reliability and financial solvency of a partner. “Until now, the Russian economy has been oriented towards the Western business model, and there was no formal business model for working with the BRICS countries,” the speaker noted. Another factor in the expansion of BRICS is the formation of free trade zones. Currently, the countries of the Eurasian Economic Union (EAEU) are holding final negotiations on the creation of a free trade zone with the UAE for the BRICS Summit.
A 4% commission for ruble conversion is a lot
Representatives of business councils through which trade takes place look at these initiatives with cautious optimism. “To be honest, I don't believe in the possibility of duty-free trade with India, since the authorities of this country adhere to a strict protectionist policy to protect the domestic market,” says Olga Kulikova, business ambassador of Business Russia in India.
According to her, a significant part of the Indian economy is based on the work of small and medium-sized businesses, so the authorities will not want to simply open the gates to Russian business. India imports raw materials, energy resources, mineral fertilisers from Russia and supplies pharmaceuticals, machinery and technical products to our country. By 2030, trade and economic relations are to reach $ 100 billion.
In her opinion, the departure of Western pharmaceutical companies from the Russian market has opened new horizons for the Indian industry. Excess liquidity in rupees makes imports from India more profitable. “We are more concerned about transfers, when you have to pay a 4% bank commission to convert the ruble into the Indian rupee, and this is significant. I would like to see more financial channels for mutual settlements appear,” she complained.
“Russia, India, China are the core of BRICS. Even if the leaders of these countries are present, the summit will still be considered a breakthrough: India is the riskiest link here — I am sure that Modi is now under enormous pressure. I hope Moscow realises this and is taking countermeasures,” noted political scientist Nikolay Vavilov.