Sberbank analyst’s editorial looks at the “tremendous potential” of a BRICS reserve currency that would fuel de-dollarization

Russia’s central bank revealed two weeks ago that it was further distancing itself from dependence on the U.S. dollar by buying the Chinese yuan on foreign exchange markets. Around the same time, on December 21, 2022, Sberbank executive Yaroslav Lissovolik published an opinion piece that talks about exploring the path to a new BRICS reserve currency.

Russia’s central bank is looking to reduce its dependence on the U.S. dollar by buying Chinese yuan.

In July the BRICS nations had plans to create a new reserve currency after Russian President Vladimir Putin announced that Russia’s central bank had decided to buy Chinese yuan during the BRICS summit in June. Although the topic was in the news at the time, people stopped discussing the BRICS reserve currency for a while. A few months later, in October 2022, Robert Kiyosaki, addressed the topic and noted that the U.S. dollar was “toast.” Over the past 30 days, energy and commodity prices have lost value, but some economists expect oil prices to surge to $200 a barrel at some point in 2023.

Sberbank analyst's editorial looks at the
BRICS stands for the association comprising Brazil, Russia, India, China and South Africa. An article published in the International Journal of Innovation and Economic Development, entitled “The BRICS nations and their priorities“, indicates that the five nations have a combined nominal GDP of $16,039 billion.

While energy and commodity values have fallen, the Russian ruble has also fallen against the greenback. Statistics show that the ruble has lost 16.48% against the U.S. dollar in 30 days, but five-day measurements show that the ruble is up 1.72%. Year-to-date statistics show that the Russian currency has risen by 5.37%. over the past 12 months. Meanwhile, at the end of December 2022, Reuters reported that Russia will make purchases of Chinese yuan in the currency market in 2023. Journalist Elena Fabrichnaya said that Moscow’s decision was cited by two sources and opens a “new front in an accelerated de-dollarization aimed at reducing its dependence on Western finance.

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Sberbank analyst raises the possibility of a BRICS reserve currency to complement national currencies

The day before, on December 21, 2022, Yaroslav Lissovolik, a member of the Russian International Affairs Council (RIAC) and head of the analytical department of Sberbank, published an article on the possibility of creating a BRICS reserve currency to complement national currencies entitled “Exploring the Pathways“, which discusses the BRICS reserve currency proposal. Yaroslav Lissovolik stated that the “BRICS reserve currency has taken on particular importance in recent months“. The analyst points out that there has also been recent legislation and debate regarding “the advisability of creating a new reserve currency.

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Yaroslav Lissovolik cited the most recent discussion on the BRICS reserve currency at the eighth BRICS Parliamentary Forum. At the event, Federation Assembly Speaker Valentina Matvienko suggested that BRICS lawmakers begin to move forward on concrete measures that support the countries’ economies. Valentina Matvienko cited specific initiatives, including a new international reserve currency and the development of better settlement procedures within the BRICS nations. In his post, Yaroslav Lissovolik also compared the idea of the new BRICS reserve currency to the Valdai Club’s 2018 concept of the international reserve currency. R5 name that stands for the letter “R” for the five currencies: the real, ruble, rupee, renminbi and rand.

Yaroslav Lissovolik clarified that a new BRICS reserve currency will not be created to replace the national reserve currencies used by each nation, but rather to “complement these national currencies.“The Sberbank analyst said a brand new reserve currency could have a “transformative effect on the international financial system“, as he believes that there is a “significant shortage of reserve currencies” in the world economy.

It is important to note that the possibilities for the use of the new reserve currency in the world economy are considerable, given the enormous potential for de-dollarization“, concludes on his blog Yaroslav Lissovolik. “The new BRICS reserve currency can act in concert with the larger role played by BRICS national currencies to take a larger slice of the total currency transaction pie in the global economy.

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