In mid-March the meeting "New phase of monetary, financial and economic cooperation between the Eurasian Economic Union (EEU) and the People's Republic of China" was held in Armenia, organized by the Eurasian Economic Commission and Renmin University of Beijing, with the aim of defining the contours of a new international monetary and financial system, at least as far as the eastern part of the world is concerned.
The EEU is the economic and commercial union in which Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia participate with a GDP of around 1,700 billion dollars. It is very much projected towards close collaboration with the Belt and Road Initiative, the new Silk Road desired by China. Already in 2020, Beijing had increased its trade turnover with the EU by around 20%, while the use of national currencies represented only 15% of total trade.
On the table is the creation of a "new currency" based on a basket of currencies, including the ruble and the yuan, also pegged to the value of certain strategic commodities, including gold.
To think that this is just a desperate reaction to the recent imposition of super sanctions against Russia would be a misleading assessment. Instead, it is a project that has been in the field for many, many years, both in Russia and China.
The project was made public as early as October 2020 by Russian economist Sergei Glazyev, a board member and minister in charge of Integration and Macroeconomics of the Eurasian Economic Commission. He had urged the creation of new national payment instruments to set aside the use of "third-country currencies," meaning of course primarily the dollar and euro, in trade and monetary transactions between Eurasian Union members and China.
Glazyev stated that the idea was a response "to the common challenges and risks associated with the global economic slowdown and restrictive measures against Eurasian Union states and China." It was a plan to overcome the unipolar dollar system, which was already in place after sanctions were imposed on Russia following its annexation of Crimea in 2014.
The Russian economist argued that the financial and payment infrastructure had already been created and it was necessary to develop a system of incentives to encourage its use in trade and economic relations.
The Minister of the Eurasian Economic Commission proposed: 1) developing mechanisms to stabilize the exchange rates of the national currencies of member countries, reducing bank fees and interest on loans; 2) creating mechanisms to determine the prices of goods in national currencies within the framework of agreements between the EU and the Belt and Road Initiative, later involving other countries, possibly those of the Shanghai Cooperation Organization (SCO) and those of Asean.
Of course, this process also includes Putin's recent request to demand payment in rubles for gas supplies, the contours of which have yet to be clarified.
Recognizing the inability of the dollar to support the entire global monetary and financial system, even before the great financial crisis of 2008 we had proposed the idea of creating, in a far-sighted and agreed upon way, a new international system based on a basket of major currencies, including the dollar, the euro, the yuan and the ruble. In a world mistakenly believed to be unipolar, unfortunately, nothing came of it. The dollar system, and the geo-economic interests associated with it, did not allow it.
The recent Russian-Chinese proposal to create their own new currency based on a basket of currencies and raw materials is a fact to be analyzed. We can only state that, in this separate way, unfortunately it will only deepen the division between East and West and further aggravate the current dangerous situation.
Heavy are the responsibilities of the competent international bodies, such as the G20, which have never wanted to address the issue with determination, despite the various financial crises and the requests made by many parties.
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