Russia and China are preparing to establish a new monetary reserve to challenge the US dollar’s supremacy. This will be done in partnership with other BRICS countries such as India, Brazil, and South Africa. According to Russia’s president, Vladimir Putin, the new currency will include the currencies of all these partner countries. In his own words, Russian President Vladimir Putin stated in a BRICS Business Forum report that the decision to develop a new international reserve currency is already in the works and that they will gladly include any interested and accessible partners.
The International Monetary Fund recently released a paper detailing how the dollar, the world’s greatest and oldest currency reserve, is now losing its clout in international currency reserves. This occurs as central banks diversify and invest in new currencies such as the yuan and conventional currencies such as Sweden’s krona and South Korea’s won.
ING’s Chris Turner said that the move aimed to undercut the dollar’s monopoly status. It will allow the BRICS to project their power beyond the US currency.
Sanctions Against Russia Drive the Need for a New Reserve Currency
After multiple sanctions were placed on Russia, prohibiting them from accessing their foreign reserves, restricting their access to the global financial system, and severely straining the economy, Russian and Chinese authorities started adopting this action. According to Chris Turner, this surprised even Russia, and other BRICS partners—including China—took note. As a result, Russia and China began to consider alternatives to the International Monetary Fund reserve asset due to the sanctions.
The SDR is something that already exists, even if it is not a reserve currency. A basket of currencies, including the US dollar, the yuan, the euro, the yen, and the pound sterling, serves as its foundation.
When the BRICS establish their reserve currency, every member nation is expected to invest in it. Influence may extend beyond the member nations to other countries within their spheres of power, such as those in the Middle East and South Asia.
The Russian ruble, which plunged sharply when the Ukraine crisis began, has climbed to 1.87 cents, which is a 15.2 percent increase, while the yuan has now steadied at approximately $0.15.
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