BRICS Common Currency Stalls Amid Russian Rate Hikes

Russia and BRICS: The Common Currency Still Has to Wait

The idea of a dedicated BRICS currency resurfaces at every summit. And every summit ends without it. Debate on the matter has peine strongly: some assume the bloc will eventually issue a strong currency, backed by commodities and gold, destined to become the new safe haven. Others remind us that among the partners themselves there are cross-interests with the United States and the European Union that make the project impossible in the short term. Distrust between countries when giving up their national currency remains the main wall.

What is actually being discussed

The initial misunderstanding is confusing a common currency with a single currency. No one proposes that the yuan, ruble, or rupee disappear. What is on the table is an accounting unit for trade between partners and, above all, a payment and transfer system that allows bypassing the dollar and the SWIFT network. That is the priority attributed to China, more than the currency itself.

The European precedent helps calibrate the timing. The ECU concept was conceived in March 1979 as a simple basket of currencies for internal accounting. The euro did not arrive until 1999. Twenty years. Anyone expecting China, Russia, and India to share a currency in four or five years is confusing a wish with a calendar.

Challenges hindering the project

The first obstacle is mutual distrust. There are countries in the bloc with deep economic interests in the United States and the EU, and this limits how far they are willing to go. Some analyses argue that there are partners acting as an internal brake; others point directly to India as the partner least willing to cede monetary sovereignty. Russia also generates doubts.

The second obstacle is the very nature of the bloc. BRICS is not an economic union in the European style, but a heterogeneous group of countries with very different levels of development, political regimes, and trade priorities. Brazil, India, Indonesia, Iran, Turkey, or Mauritania do not play in the same league nor have the same clients.

What they would gain and lose

Proponents of the project emphasize that the bloc concentrates commodities, labor, gold, and low debt. An alternative payment system would allow sanctioning without depending on Washington, lending money without going through the IMF, and setting commodity prices outside Western markets. In the most optimistic scenario, this would divide the world into two financial planets.

Skeptics respond with an uncomfortable question: if half the planet stops accepting the dollar game, how do countries with gigantic poverty rates and colossal imbalances survive without access to Western financing? Dollar hegemony is sustained not only by the printing press, but by control of international institutions. And that is not replaced by a communiqué.

The factor no one wants to look at: China

China is the engine of the project and, at the same time, its greatest contradiction. It is the country with the most dollar and euro interests in the bloc, and also the one most eager to exit the system. Its economy carries notable internal imbalances: provinces with subsistence agriculture dependent on subsidies, monumental works with maintenance problems, and a real estate bubble that does not fully deflate.

Added to this is the demographic factor. The Chinese population pyramid and the European one are nothing alike, and domestic consumption cannot always replace exports when they fail. Chinese industrial competitiveness is real —European tariffs on automobiles demonstrate this—, but that does not solve the monetary problem.

Context: High rates and ruble under pressure

While the future currency is debated, the present one is not having its best moment. The Russian central bank has raised the official interest rate to 21%, from 19% the previous month, 16% in July, 12% in August, and 7.5% in July 2023. Fifteen months. Meanwhile, the ruble remains under pressure.

This data disrupts any triumphalist narrative. A currency aspiring to be a refuge is not built with emergency interest rates. And it explains why many analyses call for patience: the steps being taken are small, but they move in a direction that seemed unthinkable a decade ago.

---

The discussion will continue. What does not change is the starting point: without resolving distrust between partners and without an operational payment mechanism, the BRICS common currency will remain a summit headline. And Russian rates, a reminder that the road is longer than some want to admit.