The Creation of an historic alternative to an Anglo-American monetary & financial system
Future historians will mark the July 16-17 heads of state meeting of the five BRICS nations in Fortaleza Brazil as one of the major turning points in world history since the 1815 defeat of Napoleon at Waterloo and the rise of the British and then the American imperial domination of the world. Russian President Vladimir Putin is taking what is clearly the leading role in the creation of an historic alternative to an Anglo-American monetary and financial system through BRICS. The next months will be decisive in this history.
By far the most significant agreement of the meeting was an agreement to create what has been named the New Development Bank, with initial capital of $50 billion that could later reach $100 billion. As well BRICS agreed to a new $100 billion reserve pooling arrangement that will make a repeat of the 1997 Wall Street US financial attacks on Asian “Tiger” countries very difficult and costly.
The development bank would provide financing to BRICS and other emerging market and developing countries for infrastructure, industrialization and productive development. The reserve pool would allow BRICS and other nations to draw on pooled reserves in the event of balance of payments crises or threats to their currencies.[1]
The $100 billion crisis lending fund, called the Contingent Reserve Arrangement (CRA), was established. China, with the world’s largest currency reserves, will contribute the lion’s share, about $41 billion, Russia, Brazil and India will chip in $18 billion, and South Africa, the newest member of the economic bloc, will contribute $5 billion.[2]
In a shrewd move to defuse the idea that China or any one BRICS state garner too much power, the new bank will be based in Shanghai, China, and India will preside over its operations for the first six years, followed by five-year terms for Brazil and then Russia. That is a dramatic change from the iron rules of the US-dominated International Monetary Fund (IMF), where Washington has de facto held a controlling veto minority vote since 1944 despite the relative decline of the economic weight of the USA since. Through the veto Washington has until now managed to sabotage any efforts by developing nations to make the IMF and its sister the World Bank more representative of the needs of the rest of the world.
Ironically, BRICS was originally a created acronym by a Wall Street investment banker, Jim O’Niell, who wanted to encourage investors to invest in the fastest-growing large emerging economies. Despite that peculiar beginning, today BRICS includes Brazil, Russia, India, China and South Africa. It is significant geo-graphically as it encompasses the vast potential of Eurasia while including two crucial economies from Africa and South America. Thus it sets a frame to incorporate other suitable nations in the future as it develops.
Putin’s vision
In an extensive interview with Itar-Tass news service, President Putin laid out major aspects of what is developing strategy for the big five BRICS: “The modern world is indeed multipolar, complex, and dynamic – this is objective reality. Any attempts to create a model of international relations where all decisions are made within a single ‘pole’ are ineffective, malfunction regularly, and are ultimately set to fail,” the Russian leader declared.
Putin went on to indicate that the then-forthcoming BRICS meeting would take major steps, as it in fact did: “I believe it is time to raise the BRICS’ role to a new level and to make our association an unalienable part of the global management system for sustainable development.” [3]
Political alternative
In his remarks, Putin, who is clearly the driving force behind the enhanced international role of the BRICS, stated that the five nations, who together comprise two UN Security Council veto members and a combined population of almost 3 billion people, would move to speak with a single voice on principled issues of international affairs and of the UN Charter, a document that people in Washington and Brussels today seem to have forgotten even exists.
Putin called for BRICS to, “develop cooperation in the UN in every possible way, persistently counteract individual states’ attempts to impose on the international community the policy of displacing unwanted regimes and promoting unilateral solutions to crisis situations. We propose to create a mechanism of regular high level consultations between our foreign ministries on different regional conflicts to agree, where possible, on common positions and joint efforts to ensure their political and diplomatic settlement.” [4]
For anyone needing it, he was referring, diplomatically, to Washington and the EU.
The “Rio Consensus”
But the heart of the major expansion of the role of the five nation BRICS will be in the area of global monetary coordination and creation of an infrastructure development bank to finance major projects in the BRICS and even beyond. These are projects that the World Bank and IMF refuse to finance because they do not serve the agenda of US or EU multinationals like ExxonMobil or Monsanto.
Although he did not say so explicitly, Putin’s entire remarks were an assault on the de facto neo-colonial role of the IMF and World Bank with their “Washington Consensus” of imposing austerity, selloff of state companies and currency devaluation—policies which, conveniently, uniquely favor the financial and industrial interests of the advanced countries.
De facto, by creating a new BRICS’ New Development Bank with $50 billion capital, with its own control, its own rules, completely independent of IMF dictates, BRICS have done, for the first time in the postwar era, a revolution against the dollar system, a system that exercises until now a lock-grip on world development and directs it in a lopsided way to the benefit of the so-called rich nations. The unwritten rule there was that the head of the IMF is always a European and the World Bank chief is to be an American with both based in Washington D.C.
Every one of the BRICS countries with the sole exception of China has been the recipient of IMF conditionalities and brutal demands and, more importantly, bitterly opposes them. After the US-fostered breakup of the Soviet Union in 1991 Washington forced all economic investment into Russia to be conditional on IMF approval. The US Treasury controlled the IMF. That enabled US multinationals and Wall Street to loot the wealth of Russia during the Yeltsin era. Similarly during the Third World debt crisis of the 1980’s Brazil and later South Africa were under the bloody thumb of the IMF dictates.
Now with these two new institutions as the “seed crystal” of a new just world economic system, the BRICS have the chance to formulate a “peoples’ consensus” or as some are already calling it, the “Rio Consensus” that would value rational national economic development, raising of the living standards of all, reduction of the power of corrupt oligarchs. All indications are that the Rio Consensus is already in draft preparation.
The New Development Bank will decide to fund infrastructure projects where members show a consensus, opposite IMF rules.
At its core is a commitment to financial stability and productive development in a manner that is inclusive, honors human rights and is environmentally sustainable. Organizations carrying out such a mission should also have a more equitable organizational structure with open and transparent rules. This crucially includes the mechanism for picking leaders and a more equal voting system for existing and new members. [5]
As Asia Times respected analyst, Pepe Escobar, himself a person with deep roots in the BRICS world, described the developments,
[T]he key member of Putin’s traveling party is Elvira Nabiulin, president of Russia’s Central Bank; she is pressing in South America the concept that all negotiations with the BRICS should bypass the US dollar.
Putin’s extremely powerful, symbolic meeting with Fidel Castro in Havana, as well as writing off $36 billion in Cuban debt could not have had a more meaningful impact all across Latin America. Compare it with the perennial embargo imposed by a vengeful Empire of Chaos.
In South America, Putin is meeting not only with Uruguay’s President Pepe Mujica – discussing, among other items, the construction of a deepwater port – but also with Venezuela’s Nicolas Maduro and Bolivia’s Evo Morales.
Xi Jinping is also on tour, visiting, apart from Brazil, Argentina, Cuba and Venezuela. What Beijing is saying (and doing) complements Moscow; Latin America is viewed as highly strategic. That should translate into more Chinese investment and increased South-South integration. [6]
Though Vladimir Putin indicated that admission of new members to BRICS must wait the consolidation of these new institutions, already Indonesia, Turkey and a number of other fast-growing developing countries are lining up at the BRICS door to be considered. That in turn is building a major counter-weight to Washington’s Sole Superpower world.
BRICS Energy Association
Russia is also pushing for creation of a BRICS energy association. The idea would be to create a fuel reserve, as well as an Institute for Energy Policy, according to Russian presidential aide Yuri Ushakov.
“Russia will propose a number of specific issues for consideration, including establishing a BRICS energy association aimed at ensuring the energy security of its member states, and to conduct integrated research and analysis of global hydrocarbon markets. It is suggested that a fuel reserve and an energy policy institute for the BRICS will be created within this association,” Ushakov told journalists in Brazil.
In addition, Russia suggested a network to link the leading universities of Russia, China, Brazil, India and South Africa that will specialize in economics and technology, TASS reports. [7]
Conclusion
Putin and leading Russians have often said all Russia seeks is to be accepted as a member of the family of leading nations, with a place at the table of leading nations. The problem with that particular family, as Putin and much of the world are learning, is that the parents are genuine psychopaths.
Now, Russia with Brazil, India, China with South Africa are forming a new family, one where reason and at least a modicum of feeling or empathy for the plight of others exists. BRICS states are not responsible for the fact that the leading circles in the US and G7 are psychopaths. The G7 is today a Club of Failed Economies—USA, Britain, Italy, France, Canada, Japan. The only member with a halfway functioning economy is Germany. It makes sense for Putin and the BRICS to look for a better family, their own.
Vladimir Putin and his BRICS colleagues now can move to create an alternative that will benefit the entire world family. Such is my personal hope and dream since decades.
# # # #
F. William Engdahl, BFP contributing Author & Analyst
William Engdahl is author of A Century of War: Anglo-American Oil Politics in the New World Order. He is a contributing author at BFP and may be contacted through his website at www.engdahl.oilgeopolitics.net where this article was originally published.
Endnotes:
[1] Kevin Gallagher, BRICS: Toward a Rio Consensus, Globalist, July 14, 2014, accessed in http://www.theglobalist.com/brics-toward-a-rio-consensus/
[2] RT.com, BRICS establish 100billion bank and currency pool to cut out Western dominance, July 15, 2014, accessed in
http://rt.com/business/173008-brics-bank-currency-pool/
[3] Itar-Tass, Vladimir Putin It is time to raise the BRICS role to a new level, July 15, 2014, accessed in
http://en.itar-tass.com/russia/740471
[4] Ibid.
[5] Kevin Gallaher, op. Cit.
[6]Pepe Escobar, BRICS against Washington consensus, Asia Times, 15 July 2014, accessed in www.atimes.com/atimes/World/WOR-01-150714.html
[7] RT.com, Russia pushes for BRICS energy association, RT.com, July 10, 2014, accessed in
http://rt.com/business/171768-russia-brics-energy-association/