The BRICS Bank Discusses New Financial Architecture

The New Development Bank, created in 2015 by the five BRICS nations (Brazil, Russia, India, China, South Africa), is holding its annual Board of Governors meeting on May 30-31 at the bank’s headquarters in Shanghai. This is the first such meeting chaired by Dilma Rousseff, former Brazilian President and a close ally of Lula da Silva, who was inaugurated just one month ago.

A major issue on the table is how the NDB can play an active role in shaping the new international financial system required to replace the collapsing transatlantic system. Until now, the NDB has been dependent on dollar-financing for its capital and constrained by limiting itself to issuing dollar-denominated loans to member nations. That means, for example, that funding for any new projects in Russia has been frozen since Western sanctions were imposed, a situation raised by Russian Prime Minister Mikhail Mishustin when he met on May 23 with chairwoman Rousseff.

That has Wall Street and London very worried, as reflected in an article in the May 28 Financial Times, reporting that Saudi Arabia is now considering joining the NDB. A statement from the bank received by the daily notes that “In the Middle East, we attach great importance to the Kingdom of Saudi Arabia and are currently engaged in a qualified dialogue with them.” Saudi resources could significantly increase the NDB’s funding possibilities, in particular when moving out of the dollar. Riyad has reportedly filed to join the BRICS group as well.

The Financial Times also regrets that the Saudis are “also pursuing closer relations with China”. Indeed, the negotiations between Riyad and Tehran brokered by China have seriously upset Anglo-American plans for the Middle East.

Another problem for London is that the NDB Board is set to discuss Lula’s request that the bank find ways to aid Argentina, which has applied for full membership in the BRICS and whose Finance Minister is attending the discussions as a special guest. The Board is made up of the Finance Ministers of the member countries, but it was announced late last week that Brazil’s Fernando Haddad, who was to play a leading role in those discussions, will not be able to attend in person, although he may participate virtually. The government is currently in a hard fight with Congress to pass important economic domestic legislation, which the minister is leading for the government.