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Global South Spawns Game Changing Payments System

Global South Spawns

New Payment System

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Map of Eurasian Economic Union
Image - Wikipedia / Leftcry / CC BY-SA 4.0
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Reprinted w/ Permission

Challenging the western monetary system, the Eurasia Economic Union (EAEU) is leading the Global South toward a new common payment system that bypasses the USD…in this report, Pepe Escobar discusses recent progress toward a non-USD based trading system and the impact of such a system on the global economy.
Pepe Escobar
www.thecradle.co
@RealPepeEscobar
2022-12-06
Game Changing Payments System - Intro

EAEU – Challenging the Western Monetary System

Game-Changing Payments System

The Eurasia Economic Union (EAEU) is speeding up its design of a common payment system, which has been closely discussed for nearly a year with the Chinese under the stewardship of Sergei Glazyev, the EAEU’s minister in charge of Integration and Macro-economy.

Through its regulatory body, the Eurasian Economic Commission (EEC), the EAEU has just extended a very serious proposal to the BRICS nations (Brazil, Russia, India, China and South Africa) which, crucially, are already on the way to turning into BRICS+: a sort of G20 of the Global South.

The system will include a single payment card – in direct competition with Visa and Mastercard – merging the already existing Russian MIR, China’s UnionPay, India’s RuPay, Brazil’s Elo, and others.

That will represent a direct challenge to the western-designed (and enforced) monetary system, head on. And it comes on the heels of BRICS members already transacting their bilateral trade in local currencies, and bypassing the US dollar.

This EAEU-BRICS union was long in the making – and will now also move toward prefiguring a further geoeconomic merger with the member nations of the Shanghai Cooperation Organization (SCO).

The EAEU was established in 2015 as a customs union of Russia, Kazakhstan and Belarus, joined a year later by Armenia and Kyrgyzstan. Vietnam is already an EAEU free trade partner, and recently enshrined SCO member Iran is also clinching a deal.

The EAEU is designed to implement free movement of goods, services, capital, and workers between member countries. Ukraine would have been an EAEU member if not for the Maidan coup in 2014 masterminded by the Barack Obama administration.

Vladimir Kovalyov, adviser to the chairman of the EEC, summed it all up to Russian newspaper Izvestia. The focus is to establish a joint financial market, and the priority is to develop a common “exchange space:” “We’ve made substantial progress and now the work is focused on such sectors as banking, insurance, and the stock market.”

A new regulatory body for the proposed joint EEU-BRICS financial system will soon be established.

Meanwhile, trade and economic cooperation between the EAEU and BRICS have increased 1.5 times in the first half of 2022 alone.

The BRICS share in the total external trade turnover of the EAEU has reached 30 percent, Kovalyov revealed at the BRICS International Business Forum this past Monday in Moscow:

“It is advisable to combine the potentials of the BRICS and EAEU macro-financial development institutions, in particular the BRICS New Development Bank, the Asian Infrastructure Investment Bank (AIIB), as well as national development institutions. This will make it possible to achieve a synergistic effect and ensure synchronous investments in sustainable infrastructure, innovative production, and renewable energy sources.”

Here we once again see the advancing convergence of not only BRICS and EAEU but also the financial institutions deeply involved in projects under the China-led New Silk Roads, or Belt and Road Initiative (BRI).

Halting the Age of Plunder

As if all that was not game-changing enough, Russian President Vladimir Putin is raising the stakes by calling for a new international payment system based on blockchain and digital currencies.

The project for such a system was recently presented at the 1st Eurasian Economic Forum in Bishkek.

At the forum, the EAEU approved a draft agreement on cross-border placement and circulation of securities in member states, and amended technical regulations.

The next big step is to organize the agenda of a crucial meeting of the Supreme Eurasian Economic Council on 14 December in Moscow. Putin will be there – in person. And there’s nothing he would love more than to make a game-changing announcement.

All of these moves acquire even more importance as they connect to fast increasing, interlocking trade between Russia, China, India, and Iran: from Russia’s drive to build new pipelines serving its Chinese market – to Russia, Kazakhstan, and Uzbekistan discussing a gas union for both domestic supplies and exports, especially to main client China.

Slowly but surely, what is emerging is the Big Picture of an irretrievably fractured world featuring a dual trade/circulation system: one will be revolving around the remnants of the dollar system, the other is being built centered on the association of BRICS, EAEU, and SCO.

Pushing further on down the road, the recent pathetic metaphor coined by a tawdry Eurocrat boss: the “jungle” is breaking away from the “garden” with a vengeance. May the fracture persist, as a new international payment system – and then a new currency – will aim to halt for good the western-centric Age of Plunder.

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About the Author

Pepe Escobar is a columnist at The Cradle, editor-at-large at Asia Times, and an independent geopolitical analyst focused on Eurasia. Since the mid-1980s he has lived and worked as a foreign correspondent in London, Paris, Milan, Los Angeles, Singapore, and Bangkok. He is the author of countless books; his latest is Raging Twenties.

SINOLOGIX Analysis

Relative GDP - US, G7 vs BRICS

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Relative GDP - US, G7 vs BRICS (2021)

Data Source – World Bank

Relative GDP - Top 7 Economies

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Relative GDP - US, G7 vs BRICS (2021)

Data Source – World Bank

BRICS and SCO Alliances

Mr. Escobar has frequently discussed the emerging so-called Global South and the coalescing of the countries in the EAEU, BRICS, and SCO alliances into a single, unified alliance. The notion of a BRICS+ alliance provides the clearest roadmap for what this larger alliance might look like.

BRICS+ Expansion

BRICS is a quasi-intergovernmental organization that represents the five leading emerging economies: Brazil, Russia, India, China and South Africa. Together, these countries comprise:

  • 40.9% of the world’s population
  • 25.7% of the world’s total GDP (50% by 2030)
  • 26.7% of the world’s land surface

 

The so-called BRICS+ alliance would include the current five members, plus: Nicaragua, Argentina, Senegal, Algeria, Nigeria, Egypt, Saudi Arabia, the UAE, Iran, Afghanistan, Kazakhstan, and Indonesia.

BRICS+ will have a materially larger economic and political footprint – if all the collective applicants are approved, the alliance would immediately grow to:

  • 50% of the world’s population
  • 29.9%  of the world’s total GDP
  • 60.1% of the world’s gas reserves

Takeaways

The inclusion of Nigeria, Saudi Arabia, the UAE, Iran and Kazakhstan means that a bloc of the world’s largest energy exporters would be aligned with the world’s largest energy importer – China. This fact alone changes the US’ economic and political leverage over the collective LDC’s.

The BRICS’ New Development Bank and China’s Asian Infrastructure Invest Bank, both capitalized at $100B, directly challenge the roles of the World Bank and the IMF, which represent US interests.

Perhaps more important than the new payment card described by Mr. Escobar is Vladimir Putin’s proposed alternative to SWIFT, and even more important than that is the rapidly developing agreement by Russia, China and their partners to settle international trade in local currencies.

Notes

References and Disclaimers

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References

Devonshire-Ellis, C. (2022) The New Candidate Countries for BRICS expansion, Silk Road Briefing. Available at: https://www.silkroadbriefing.com/news/2022/11/09/the-new-candidate-countries-for-brics-expansion/ (Accessed: December 8, 2022).

 

Escobar, P. (2022) The Global South Births a new game-changing payment system    , The Cradle. Available at: https://thecradle.co/Article/Columns/18975 (Accessed: December 8, 2022).

 

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"Things change gradually at first...

...then all at once..."

China GDP vs UST Holdings (2010-22) (billions)

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China GDP vs UST Holdings (2010-22) (billions)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

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Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Global FX Exchange Reserves (2001-22) (% of total)

(click/tap legend to filter data)
Global FX Exchange Reserves (2001-22) (% of total)

Data Source – World Bank

Western media is starting to pay attention to China’s efforts to influence members of the so-called Global South, or more specifically the BRICS+ and Shanghai Cooperation Organization (with substantially overlapping membership), to denominate international trade in the Chinese Renminbi (RMB), aks the Chinese Yuan (CNY) and/or other local currencies. For very different reasons, Russia has promoted the idea of an entirely new currency for trade settlement. This is an accelerating trend among countries that have formed close economic and political relationships with China.

Coincident with the pivot to the RMB for trade settlement is a growing sentiment among the BRICS+ and SCO members that holding USD as their primary reserve currency poses a risk in the event the US declares sanctions and/or freezes a country’s assets, as happened with Russia and Belarus in 2022.  

The combined effect of these two trends should be observable in a country’s US Treasuries holdings, and that’s exactly what we’re seeing in the chart above – China’s USD and Treasuries holdings peaked at $1.277 trillion in 2013 and declined by more than 32% in 2022.

Things change “slowly at first, then all at once”...

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ABOUT THE AUTHOR

Pepe Escobar

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Photo - The Cradle

Pepe Escobar is a columnist at The Cradle, editor-at-large at Asia Times and an independent geopolitical analyst focused on Eurasia. Since the mid-1980s he has lived and worked as a foreign correspondent in London, Paris, Milan, Los Angeles, Singapore and Bangkok. He is the author of countless books; his latest one is Raging Twenties.

Pepe Escobar
www.thecradle.co
@RealPepeEscobar

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From time to time, SINOLOGIX offers third-party content that complements our core focus. The authors we endorse are subject matter experts and thought leaders in their respective fields. We strive to offer a diverse range of perspectives on any given topic and these contributors help us achieve that objective.

From time to time, SINOLOGIX offers third-party content that complements our core focus. The authors we endorse are subject matter experts and thought leaders in their respective fields. We strive to offer a diverse range of perspectives on any given topic and these contributors help us achieve that objective.