BRICS summit to focus on growing trade war with US
India has floated the idea of a BRICS rating agency at the 10th BRICS summit in Johannesburg held on July 25-27, South Africa, Secretary Economic Relations in MEA, TS Tirumurti, told an Indian daily. BRICS is an acronym for Brazil, Russia, India, China and South Africa.
Published: July 26, 2018, 8:45 am
India already pressed BRICS nations to set up an independent rating agency during the first meeting of the BRICS finance ministers and Central bank governors in April this year, on the sidelines of the IMF/World Bank meetings, First Post reported.
Russian Foreign Minister Sergei Lavrov told the South African magazine Ubuntu on occasion of the summit that BRICS countries will hold a dialogue on mutual payments in national currencies, sidelining the US dollar.
A key goal for BRICS remains a global financial system, independent from the current institutions relying on the dollar through the creation of the BRICS New Development Bank (NDB) and the Contingent Reserve Arrangement, Lavrov said.
“Among other economic achievements of the five BRICS countries, it is worth mentioning the establishment of the mechanism of the BRICS Contingent Reserve Arrangement (CRA) and the launch of a practical dialogue on mutual payments in national currencies,” Lavrov said. It would offer an alternative development notion to the current American one, he added.
Russian economy minister Maxim Oreshkin said ahead of the meeting that discussions would focus on what is happening between the United States and China. “This is a trade war, so leaders’ discussions are particularly important in coordinating our positions,” Oreshkin said.
The five nations hit out against US president Donald Trump’s protectionist trade policies, a Business Standard report said. At the BRICS finance ministers meeting earlier in 2018, the BRICS nations had agreed to “fight against trade protectionism together”.
Russia has since liquidated a half of its US Treasury holdings, which declined by $47.4 billion to just $48.7 billion – the lowest since 2008 – from $96 billion in March. This is over $100 billion since the start of the year.
Last month, the Yuan-denominated oil futures were launched. Zero Hedge has speculated that the dumping of US Treasuries by Russia may have been a “dress-rehearsal, carefully coordinated with Beijing to field test what would happen if/when China also starts to liquidate its own US Treasury holdings”.
South African President Cyril Ramaphosa meanwhile hosted Xi Jinping, the president of the People’s Republic of China, ahead of the BRICS meet on Wednesday. The Chinese leader began his state visit at the Union Buildings in Pretoria announcing a fix to South Africa’s debt-ridden state power utility Eskom.
According to Bloomberg, Eskom had R399 billion of debt at the end of March, and flagged by ratings agencies as a key risk to South Africa’s economy.
Eskom announced on Tuesday that it had secured a $2.5 billion long-term loan facility from China Development Bank. An hour later, a top official in the ruling African National Congress told reporters the Public Investment Corporation was in talks about converting part of the debt it is owed by the state power utility into equity.
The CDB loan was announced as part of a series of investments by China in South Africa after Ramaphosa and Xi Jinping’s meeting in Pretoria.
Eskom’s debt is projected to increase to R600 billion within four years, the company said on Monday. It reported a loss of R2.3 billion for the year through March and said it discovered R19.6 billion in irregular costs. The company has been mired in allegations of corruption and nepotism.
President Xi on Wednesday urged “all parties to fully observe collectively adopted international rules, and we should treat all countries as equals regardless of their size”. Xi said mediation efforts for resolving geopolitical issues.
“It is important for us to firmly support the multilateral trading regime, advance global economic governance reform and increase the representation and voice of emerging markets and developing countries,” Xi said, according to Xinhua.
Security at the summit was tight, with FWM journalists unable to get a glimpse of the world leaders attending, including Russian President Vladimir Putin.
A significant additional feature to this year’s summit is the participation of Turkey. Turkish President Recep Tayyip Erdogan held a press conference at the Ankara airport before leaving for Johannesburg, noting that the BRICS member countries have contributed in the last decade to 50 percent of the global economic growth.
Even though Turkey is not a member of the BRICS, Erdogan will attend a special session of the event in his capacity as the current chair of the Organization of Islamic Cooperation, Xinhua reported.
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