Economist Glazyev Presents the Pathway, and Obstacles, to a BRICS-Centered Financial Architecture

Leading Russian economist Sergey Glazyev has called for the BRICS New Development Bank (NDB) to play the leading role in the establishment of a new currency to boost investments and trade by avoiding submission to the bankrupt, dollar-based international financial system. Economist Glazyev, Minister for Integration and Macroeconomics of the Eurasian Economic Commission (EEC), the policy arm of the Eurasian Economic Union (EAEU), was interviewed by journalist Pepe Escobar, who published the exchange in Sputnik on Feb. 28.

Glazyev stated that, although the process of de-dollarization and the shift to trade in national currencies has advanced substantially over the last 2-3 years, the central challenge remains how to construct a new financial architecture, including a new currency, which can function for trade, settlement of accounts, and most importantly productive investment on a global scale? For the currency, Glazyev proposes a “two basket” model linking stable pricing for major commodities based on long-term state-to-state contracts (not the speculative futures market), and a basket of participating currencies, such as those of the BRICS nations.

But, he elaborated, “you need someone who’s responsible. In BRICS there is such an organization- the NDB. If the heads of state decide to appoint the NDB as an institution which will elaborate the new model, the new currency, organize an international conference with the draft of an international treaty, this can work. The problem is that the NDB works according to the dollar charter. They have to reorganize this institution in order to make it workable. Now it works like an ordinary international development bank under the American framework.”

The Presidents of Russia, Brazil and South Africa have all stated that a new financial architecture needs to be constructed, but as Glazyev points out, the central banks of the BRICS nations are a major obstacle, as they insist that any arrangement has to maintain the central role of the dollar. For that reason, the discussion of his and similar proposals remains at the “technical” level, but has not yet been approved at the “political” level of heads of state and their Finance Ministers.

Escobar asked him directly how his proposal has been received, and what the roadblocks are. His answer was blunt: “We presented it to Chinese experts, our partners at Renmin University. We had good feedback – but I did not have the opportunity to present it on a political level. Here in Russia, we promote the discussion via papers, conferences, seminars, but there’s still no political decision on introducing this mechanism even on the BRICS agenda. The proposal by our team of experts is to include it in the agenda of the BRICS summit next October in Kazan. The problem is the Russian Central Bank is not enthusiastic.”

While President Putin understands how serious the issue is, Glazyev said, he’s not sure if the Ministry of Finance does. As for Dilma Rousseff, the current head of the NDB, she was “rather enthusiastic and invited us to come to the NDB. But afterwards there was no follow-up.”