Can BRICS Pay Uncloak the Weaponization of Dollar and SWIFT System?

The BRICS plus Summit of heads of state was held in Kazan, Russia, from October 22 to 24 of this. The Theme for this year is “Strengthening Multilateralism for Just Global Development and Security” This year is the first year following the expansion of BRICS, and the first post-expansion. Contemporaneously with the summit, the new payment system ‘BRICS Pay’ has snapped to attention, highlighting the strengthening of economic and trade ties among BRICS countries.

At present its member countries are Brazil, Russia, India, China, and South Africa. It has expanded member including the following countries-UAE, Iran, Egypt, Ethiopia, and Saudi Arabia effective from January 01, 2024.

Officially BRICS partner countries are Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Uzbekistan and Vietnam.

BRICS Matters:

The extended group has a combined population of about 3.5 billion, or 45.2% of the world's inhabitants which covering 33.9% entire world’s geographical area.

Collectively, members' economies are worth more than $28.5tn - about 28% of the global economy which encompasses the total world’s GDP 36.7%, 24.5 % of Export Volume, 39.3% of world Industrial Production and 44.7% of world wheat Production.

As a single country’s GPD of BRICS –China belongs USD 17.96tn, India USD 3.39tn, Russia USD 2.24tn, Brazil and Saudi Arabia USD 1.92tn each , United Arab Emirates (UAE) USD 0.51tn, Egypt USD 0.48tn, South Africa USD 0.41tn, Iran USD 0.39 and Ethiopia USD 0.31tn according to World Bank/OECD.

With Iran, Saudi Arabia and UAE as members, BRICS countries produce about 44% of the world's crude oil.

A major part of population of Middle East is in four countries -Iran, Saudi Arabia, Egypt and Turkiye. About 40 percent of total production in Gulf Countries comes from these four countries.

After joining these countries 60 percent of consumer market of the entire world will be controlled by BRICS.

Jim O'Neill is best known for coining BRICs. The Next Eleven (known also by the numberonym N-11) are the eleven countries –Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam – identified by Jim O'Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world's largest economies in the 21st century.

BRICS Pay:
In a crucial moment for the BRICS economic alliance, the “BRICS Pay” system was officially unveiled during the BRICS Business Forum held in Moscow, as part of the ongoing BRICS summit for 2024.In a symbolic gesture of the group’s commitment to launching the system, BRICS payment cards were distributed to participants at the forum. These promotional cards contained 500 Russian rubles, equivalent to approximately $5.20. BRICS Pay is a decentralized, independent payment messaging system under development by the BRICS member countries, comparable to Europe's SWIFT.
As early as 2019, BRICS countries have been working on establishing a unique payment system as part of a retail payment and remittance platform for member nations.

The idea in the back of this mechanism swirls around creating an enthusiastic platform based on digital currencies within the BRICS nations for payment settlements. This mechanism is equipoise to de-weaponize the “SWIFT” system’s monopoly on global financial transactions. I t particularizes a positive betterment for countries bowing to securitize their sovereignty and commercial and financial independence.

Why BRICS Pay Brainchild:

The invasion on Ukraine by Russia is not confined in wars on arms. The war has warped the economy of entire world magnificently. The big economic countries like US and allies have made many sanctions on Russian’s oil and gas companies. As a result, Russian economy has drastically fallen. About 40% of total revenue of Russia comes from exporting of oil and gas which is now under sanctions.

In the era of globalization, every country must keep themselves dependent on other countries to fill in the needs. In this situation, countries are reliable on everyone for export or import. As the export-import payment is settled through cross border systems. The most uttered and popular payment network system is known to us SWIFT. It is a unique and quick system and it is really swift. Although SWIFT is located in Brussels, Belgium a   European Union (EU) country but the maximum payments are settled via US dollars. Here, dollar plays a dominant currency. The sole controller of dollar is USA but the controllers of SWIFT are the national Bank of Belgium, the US Federal Reserve System, the European Central Bank and many more of G-10. It connects more than 11,000 financial institutions over 200 countries. The US has weaponized this controlling and development system of dollar and SWIFT.

The world has witnessed that the Payment system SWIFT expelled 30 Iranian Banks in March, 2012 from its messaging systems. As a result, Iran mislaid its 50% revenues from exporting oil and 30% of their foreign trade was wasted during the time. In 2019, SWIFT also cut off access all Iranian Banks. In response, Tehran connected its SEPAM domestic financial clearing system to Russia’s System for Transfer of Financial Messages (SPFS).

Around 300 Banks of Russia is involved with SWIFT systems. Even Russia has the users of SWIFT second largest after USA. Now the question is Russia has Kicked in the own foot invading on Ukraine whereas, Western and its allies have kicked out from SWIFT? Reality is that Russia has been preparing itself for the development of new alternative system of SWIFT after occupied of Crimea in 2014. Finally, the System for Transfer of Financial Message (SPFS) has been developed by the central bank of Russia in 2014. In total, 557 banks and companies are now connected to the SPFS, including 159 non-residents. The Putin’s government also has inspired the banks to join in the System for Transfer of Financial Message (SPFF). Currently around 160 banks in the world are connected to SPFS.

Another messaging network has been developed by China named Cross-Border Interbank Payment Systems (CIPS) in 2015 which has processed 80 trillion Yuan (12.80 trillion USD) in 2021 with 1280 financial institutions in 103 countries having connected to this system including 30 banks of Japan, 23 banks of Russia and 31 banks from African nations.

World also has witnessed that US seized there serve fund of Afghanistan and Russian export proceed payment. While seizing Afghan or Russian reserves might anticipate righteous and just, the immediate effect of such actions is to completely undermine the credibility of dollar debt as an international savings device. It was a great lesson to the other countries.

As result, many countries have been trying to find out alternative payment networks for foreign trade settlement and safe currency.

Eventually, BRICS Pay declaration has announced from Kazan, Russia.

The Demurral of BRICS Pay:

The number of SWIFT payments processed on a daily basis reached nearly 50 million messages by the end of 2022, although growth did slow down. Compared to December 2021, the average amount of messages processed on a daily basis in December was roughly two percent higher.

The US dollar continues to cede ground to nontraditional currencies in global foreign exchange reserves, but it remains the preeminent reserve currency.
Recent data from the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) point to an ongoing gradual decline in the dollar’s share of allocated foreign reserves of central banks and governments. Strikingly, the reduced role of the US dollar over the last two decades has not been matched by increases in the shares of the other “big four” currencies—the euro, yen, and pound. Rather, it has been accompanied by a rise in the share of what we have called nontraditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese Renminbi, South Korean won, Singaporean dollar, and the Nordic currencies.

Overall, BRICS Pay is a payment system will be a rival of SWIFT and erode the dollar dominance but it cannot be a sole payment messaging system until BRICS Nations can’t create a common or unique currency.

Common or unique currency would be impractical for BRICS nations because their economies are so different.


Md. Badrul Millat Ibne Hannan
is an official of Islami Bank
Bangladesh Bank PLC.