Authored by Pepe Escobar,

With less than a month before the crucial BRICS annual summit in Kazan under the Russian presidency, serious informed discussions are raging in Moscow and other Eurasian capitals on what should be at the table in the de-dollarization and alternative payment system front.

Earlier this month Andrey Mikhailishin, head of the task force on financial services of the BRICS Business Council, detailed the list of top projects under consideration. They include:

• A common unit of account - as in The Unit, whose contours were first revealed exclusively by Sputnik.

• A platform for multilateral settlements and payments in BRICS digital currencies, connecting the financial markets of BRICS members: that’s BRICS Bridge, which bears similarities with the Bank of International Settlements-linked MBridge,  already in effect. That will complement intrabank systems already in action, as in Russia’s SPFS and Iran’s CPAM settling financial transactions – and 60% of their trade - in their own currencies.

• A blockchain-based payment system that entirely bypasses the US dollar: BRICS Pay. Arguably 159 participants may be ready to adopt this sanction-evading, similar-to-SWIFT mechanism right away.

• A settlement depository (Clear).

• An insurance system.

• And crucially a BRICS rating agency, independent from the Western giants.

What’s at stake is the extremely complex design of a brand-new financial system – decentralized and using digital technology. BRICS Clear, for instance, will be using blockchain to record securities and exchange them.

As for The Unit, the value of the common unit of account is pegged by 40% to gold and by 60% to a basket of BRICS member’s national currencies. The BRICS Business Council considers The Unit a “convenient and universal” instrument, since a unit can be converted into any national currency.

That would definitely solve the nagging problem of exchange rate volatility when cash balances accumulate from settlements in national currencies; for example, a mountain of Indian rupees used to pay for Russian energy.

Who Do I Call to Talk to BRICS?

I asked a very direct question to two Russian analysts, one of them a finance tech executive with vast experience across Europe, and the other the head of an investment fund with global reach. Considering the sensitivity of their posts, they prefer to remain anonymous.

The question: Is BRICS ready to become an actor in Kazan next month, and what should be on the table in terms of the strategy to establish an alternative payment system?

The Answers. Analyst 1:

“Time has come for BRICS to become a real actor. The world demands it. The leaders of BRICS countries clearly understand it. They have the moral power and the political will to set up an organization to provide a number for BRICS to be called in – that’s the best question for the upcoming summit.”

The analyst is referring to what could be dubbed “the Kissinger moment”, when Dr. K famously quipped, in the Cold War era, “when I want to talk to Europe, who do I call?”

Now to Analyst 2:

“For a BRICS agreement amongst countries to mean something, countries need to agree on a framework of action and that means accepting some responsibilities in exchange for certain rights. And it sounds there’s no better way to achieve that than to arrive at mutually agreed obligations on settlement of financial transactions.”

One of the analysts added a very important, specific point: “By now the situation is pretty clear, to properly address the issue of cross-border payments. The best mechanism should be based on the New Development Bank (NDB), given that Russia has a mandate to propose the new president of that organization. Whoever the candidate will be, cross-border payments should be at the top of his agenda.”

The NDB is the BRICS bank, based in Shanghai. The analyst hopes this decision on the future of the NDB will be made before the BRICS summit: “Given the diplomatic and political considerations, the candidate should be made known, formally or informally to the member countries.”

As it stands, the talk of the town in Moscow informed circles is that Alexey Mohzin, the IMF’s executive director for Russia, has a 60% chance to be appointed to the NDB. In parallel, Ksenia Yudaeva, a former G20 sherpa and former deputy of Russia Central Bank’s Elvira Nabiullina, may become the new representative with the IMF.

So what may be in the cards is a NDB/IMF reshuffle on the Russian front. The focus should be on the potential for future productive change – rather than missed opportunities; the NDB’s policies so far have not been exactly revolutionary - considering that the bank’s statutes are linked to the US dollar.

The new deal could place the NDB as leverage for a reform of the IMF, rather than an alternative to it.

The “Kissinger moment” does play a key role in this equation. It will highlight that until the moment turns into reality, the NDB should be the sole actor for effective changes in crucial matters like the stability of the financial infrastructure.

And from that perspective, as one of the analysts note, “The UNIT and all other similar projects may be presented as complementary risk management tools hedging against reckless monetary policies and Global Financial Crisis-2 risks.”

Time though is running out – fast. President Putin recently met with the Russian Union of Industrialists. They have sent a letter to the administration and the Russian Central Bank outlining what they consider the most promising ideas.

The Unit is one of them. Prime Minister Mishustin’s government is now on the final stages of deciding which projects to support: for the BRICS summit in Kazan, and one week before, for the annual summit of the BRICS Business Council in Moscow.

A BRICS Bretton Woods?

I posed the same BRICS question to the Russian analysts also to indispensable Prof. Michael Hudson – who actually provided a concise in-depth critique of what may be on the table, while offering a different solution.

For Prof. Hudson, “a new institution has to be created - a Central Bank empowered to issue credit to finance the trade and payments deficits of some countries, with an artificial bancor-type SDR [Special Drawing Rights].”

Prof. Hudson argues “this would be different (his italics) from a clearing house system for existing banks. It would be a BRICS' IMF. Its bancors credit or balance sheet would only be for settlements among governments, not a generally traded currency. Indeed, making the bancor widely traded as a speculative vehicle (such as the UNIT is) would introduce major instability and have nothing to do with the needed bank transfer balance sheet.”

A reformed NDB, possibly next year under a new Russian presidency, should have all it takes to become a “BRICS’ IMF.”

Prof. Hudson adds that “to succeed, the Kazan conference should be a full-fledged BRICS Bretton Woods. Maybe it is too soon to actually introduce a fait accompli. Perhaps it would be a venue to throw open a set of alternatives -- including what would happen by ‘doing nothing’ and going with the current IMF system. The fact that the IMF just cancelled its trip to analyze the Russian economy may be a catalyst.”

Prof. Hudson in fact refers directly to Executive Director for Russia, Alexey Mohzin, who confirmed that the IMF should have come to Russia for consultations, part of their annual review of the Russian economy, but cancelled it because of “technical unpreparedness”.

All that brings us once again to the “Kissinger moment”; it’s unclear whether Kazan will come up with a “BRICS number” anyone could call.

Prof. Hudson makes an essential last point on the Global South’s dollar debt: he stresses “how to handle BRICS members existing overhang of dollar debts” is a major problem.

What is clear is that “the BRICS bank [the NDB] should not finance deficits by member countries for such payments. In practice, there would have to be a moratorium on such payments - in view of the present weaponization of Western finance.”

Prof. Hudson recalls the chapter in his book Super Imperialism “on how the US moved against Britain in 1944 to get an agreement that it then presented as a pro-US fait accompli to Europe.” The book “reviews all the arguments that took place there.”

Prof. Hudson wishes he would be part of the new, ongoing process. Imagine if BRICS+ manages to pull it off: getting a Global Majority-approved agreement on a new, equitable, fair financial system then presented to the $35 trillion-indebted superpower as a fait accompli.