There is a reason why good psychotherapists advise you to not take much emotional support during trauma. Trauma-driven response brings out the best in you. This is exactly what is happening to countries bitten by the United States’ flurry of betrayals. The recent developments indicate that they are working to end the menace of petrodollar itself.
Putin pitches new Currency for BRICS
During the recent BRICS summit, Putin stressed on the need for dissociating BRICS nations’ dependability on existing Global Financial system. Russian President pitched for a new global currency reserve. In the welcome address to BRICS Business Forum participants, Putin said, “The matter of creating the international reserve currency based on the basket of currencies of our countries is under review,”
Putin also took the stage to inform the world that business communities in BRICS are taking steps to develop transport infrastructure, readjusted logistical routes, and new production chains. Stressing on the fact that Russia is not going to be browbeaten by Western sanctions, Putin added, “I would like to stress that the Russian strategy does not change: while strengthening our economic, technological and scientific potential, we are ready to openly work with all fair partners on principles of respect to interests of each other, unconditional supremacy of international law, and equality of countries and peoples,…”
Read more: Why is Putin a cult figure in India?
The details are still awaiting, but preliminary analysis suggests that five currencies will be part of the new reserve. India’s Rupee, Russia’s Rouble, Brazil’s Real, South Africa’s Rand and China’s Renminbi will be part of it. The currency reserve is expected to reduce international financial system’s dependability on IMF’s reserve called as Special Drawing Rights (SDR) Reserve.
It can change the face of global trade
Frankly, the development did not come off as a surprise. For months now, Russia has been exploring various ways to reduce the importance of Dollar in bilateral trade. While, it was already trading with China in local currencies, the Rupee-Rouble trade is also being explored. Additionally, in the wake of sanctions, Russia is vouching for increasing FDI inside its territory. For this purpose, it has nudged India and other economically capable nations to invest in Russia. It is even working on streamlining the use of India’s UPI in Russia.
Read more: Why the world should move away from petrodollars and go back to the gold standards
If executed properly, the chances of Petrodollar getting phased out are huge. Let me explain. Currently, the GDP of only 5 nations of the group comprises 23 percent of global economy. 25 percent of global investments flows in and out of these countries. Even in global trade these countries have huge presence. 18 percent of global trade in goods is held by these countries. Other aspects of trade such as services, merchandise are also healthy among these countries.
Now, in spite of backing of this group, Putin-led country had to face sanctions from US and its allies. According to an estimate by Marco Fernandes, a Brazil researcher at the Tricontinental Institute for Social Research, USA and its allies confiscated about $300 billion of Russia’s reserves. Additionally, taking advantage of its strategic clout, USA is also forcing Russian ships to not engage in bilateral trade with India and other countries.
Read more: PM Modi is working on a plan to end the dominance of Petrodollar
Time to cut down the use of Petrodollar
No wonder, Russia is taking drastic measures to cut down on Petrodollar. It is the forced dependence on Dollar trade which put it into a disadvantageous situation. The dependence on Dollar as a Forex Reserve is exactly what forced India to change its economic policy in 1991. The same phenomenon coerced China to join the WTO.
While, each of the aforementioned changes may not always prove to be harmful for countries, they definitely have some long-term consequences. One of them being dependent on US’ economy and increased pressure to stay in US good books. If countries somehow try to take a different position than that of USA, it indulges in sanction war with them, as is happening with Russia since 2014.
If not for our aatmanirbharta, Biden administration could do the same with India as well. The same aatmanirbharta is being transferred to BRICS and henceforth globe as well.
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