New currency system, BRICS and SCO

This article belongs to my series of the articles regarding Ukraine crisis and its ramifications from different viewpoints. I have analyzed these topics of the headline in several articles on my website, like that of Nov 3, 2022, that of Oct 6, 2022, that of Sept 20, 2022, that of April 2, 2022, and that of March 21, 2022.  

Dollar collapse and other unbelievable trajectories, “The Great Financial Reset”

Ray Dalio, the founder and investor of the world’s largest hedge fund Bridgewater Associates, recently said the coming financial crisis will be “bigger than what happened in 2008” but that could prove to be far too optimistic. It is not just talking about a stock market crash or a currency collapse. It will be something much bigger with the potential to alter the fabric of society forever and usher in the largest wealth transfer in history.

On the macroeconomic and global geopolitical fronts, the rise of new trade blocks is seen. China, Russia, India, Turkey, Iran and other countries will intensify their cooperation. They are going to institute their own international settlement scheme equivalent to SWIFT. This will be very risky for the US dollar.

According to Dalio and other American big investors, other ominous trends worldwide are: Covid-pandemic 2020-2021 was a big turning point in the modern human history; global warming “hype” with “carbon hysteria” threats to destroy the whole industrial civilization; central banks are racing to impose CBDCs, while governments run multi-trillion dollar deficits and bailouts, doubling and tripling debt levels with little discussion; widespread acceptance of Wokism accelerates general collapse of traditional moral values. 

Meanwhile, the old alliance between the EU and the US is going to disintegrate. A lot of Europeans can see that the US was in back of the NordStream pipeline’s demolition. They see that the US would like to basically de-industrialize Europe so that the US can assert hegemony over it.

According to Ray Dalio, Warren Buffet, Jim Rogers, Doug Casey, Peter Schiff and many other American big investors, “The Great Financial Reset” would mean

  • A supranational digital currency (CBDC) replaces the US dollar
  • The end of paper currency (fiat money)
  • The birth of an Orwellian surveillance system that monitors and controls every penny you earn, save and spend

A necessary first step is to weaken the US dollar significantly and then offer the new system (CBDC) as a solution. It will be the biggest wealth transfer in history and those holding US dollars would be on the losing end. The primary weapon realizing this is the printing press of the Federal Reserve and other central banks (more QE measures). The US government has printed more money recently than it has for its entire existence. It’s the biggest monetary explosion that has ever occurred in the US.

The Congressional Budget Office estimates the total federal deficit for the next ten years to be over $15 trillion and that’s with the unrealistic assumption that there will never be a recession. In other words, unless Congress makes some politically impossible decisions to cut spending, the US government will have endless multitrillion-dollar deficits. The only entity capable to finance this utopia is the Federal Reserve’s printing presses.

Practically this means that the Congress spends trillions more than the federal government takes in from taxes. The Treasury issues debt to cover the difference. The Federal Reserve creates currency out of thin air to buy the debt. In other words, the US government couldn’t even dream of financing its budget deficits without printing money. This is what Modern Monetary Theory (MMT) is all about. It’s a policy of printing more and more money to finance growing multitrillion-dollar deficits forever. Ukraine crisis, where Russia will be the military winner crushing the Ukrainian armed forces, will be an inflection point, provoking all those financial atrocities.

Professor Nouriel Roubini (of New York University) notices a variety of mega-threats, which are imperiling our future.

The world has entered a geopolitical depression, with at least four dangerous revisionist powers  (China, Russia, Iran, and North Korea) challenging the economic, financial, security, and geopolitical order that the US and its allies created after WWII. There is a sharply rising risk not only of war among great powers but of a nuclear conflict. The new Sino-American cold war is becoming colder by the day but it could all too easily turn hot over the status of Taiwan. Geopolitical conflicts and national-security concerns will continue to fuel trade, financial, and technology wars, accelerating the deglobalization process.

The risk of an environmental apocalypse in the future is becoming increasingly serious, especially given that most of the talk about net-zero and ESG (environment, social, and governance) investing is just greenwashing – or greenwishing. The new “greenflation” is already in full swing, because it turns out that amassing the metals needed for the energy transition requires a lot of expensive energy.

There is also a growing risk of new pandemics that would be even worse than biblical plagues, owing to the link between environmental destruction and zoonotic diseases. Wildlife that carry dangerous pathogens are coming into closer and more frequent contact with humans and livestock. All the evidence suggests that this problem will become even worse in the future.

The economic situation is no better, we are facing high inflation and the prospect of a recession – stagflation. The coming recession will be long and severe, because we may also be facing the mother of all debt crises, owing to soaring private and public debt ratios over the last few decades. Low debt ratios spared us from that outcome in the 1970s and though we certainly had debt crises following the 2008 crash, we also had deflation. The problems were met with massive monetary, fiscal and credit easing.

Today, we are experiencing the worst elements of both the 1970s and 2008. Multiple, persistent negative supply shocks have coincided with debt ratios that are even higher than they were during the global financial crisis. As inflationary pressures force central banks to tighten monetary policy, the costs of debt service will skyrocket and aging people also implies massive unfunded public-sector liabilities that are as large as the explicit public debt. Everyone should be preparing for what may come to be remembered as the Great Stagflationary Debt Crisis.

Over time, advances in AI, robotics and automation will destroy more and more jobs, even if policymakers build higher protectionist walls in an effort to fight the last war. By restricting immigration and demanding more domestic production, aging advanced economies will create a stronger incentive for companies to adopt labor-saving technologies, which can increasingly perform not just routine but also cognitive and creative work.

These mega-threats will contribute further to rising income and wealth inequality, which has already been putting severe pressure on liberal democracies and fueling the rise of radical and aggressive populist regimes around the world. The present era is getting to look like the three decades between 1914 and 1945, finally culminating in WWII and the Holocaust.

De-dollarization and new reserve currency

The topic of dollar and de-dollarization has been thoroughly studied on my website, here and here. The cornerstones of the present worldwide currency system are Bretton Woods 1944 agreements, IMF and World Bank, petrodollar since 1971, the US Treasury bonds and SWIFT-system. The whole present systemic structure is fully managed and conducted by the US.

Russia and China have been accumulating and using gold to bypass various US financial sanctions. Their gold holdings could form the foundation of a new monetary system outside of the control of the US, which is very intensively discussed in the context of SCO and BRICS formats.

The issue of creating a new international reserve currency based on a basket of currencies of BRICS countries is being worked out. This currency basket, in turn, is based on relative weights of commodities in trade and obviously on gold holdings. Russia has been very active developer in this project, together with China. As known, Russia has been cut off from the SWIFT system but is now using the SPFS, the Russian equivalent of SWIFT, developed by the Central Bank of Russia since 2014.

The visit of Chinese Xi Jinping to Saudi Arabia in December, shows that the Saudis have sidelined American interests for its own and taken the first concrete step towards de-dollarization. Strengthening trade ties and regional security were prioritized during Xi’s visit to Saudi Arabia. Xi’s visit to Saudi Arabia is a continuation of a wider process stimulated by BRICS and the Shanghai Cooperation Organization (SCO), in which China and Russia are key countries.

BRICS and the SCO are increasingly attractive organizations for many countries as a framework, in which trade, development and cooperation is possible without pressure by the US, particularly in terms of US dollar. Avoiding the dollar as a means of payment removes the risk of great damage, if American sanctions are ever imposed.

BRICS is operationally working to create a concept that would reduce the importance and influence of the dollar in the world economy. More precisely, such an achievement would reduce the political and economic influence of the dollar, which is effectively the basis of US foreign policy. It is also for this reason that Saudi Arabia is positioning itself as a potential new member of the BRICS bloc. Within that, a whole series of countries in bilateral cooperation agree on payments in domestic currencies as the first step in the process of de-dollarizing the world economy.

SWIFTly drifting away

Beijing and Moscow have clearly identified, how all economic interests – oil and other energy markets, global commodities markets – are tied to the role of the US dollar as reserve currency. That’s exactly, what are the EAEU discussions, the SCO discussions, from now on the BRICS+ discussions. Beijing and Moscow, within the BRICS framework and further on within the SCO and the EAEU, have been closely coordinating their strategy since the first sanctions on Russia post-Maidan 2014 and the de facto trade war against China unleashed in 2018.

Russia and China are working on a reciprocal opening of company accounts to avoid the use of SWIFT, Russian Deputy Prime Minister Alexander Novak said in late November. Novak recalled that payments under contracts for gas supplies from Russia to China are already switching to the national currencies of the two countries. Besides that, settlements for supplies of oil, petroleum products and coal are being actively transferred in rubles and yuan. Such work makes it possible to prevent risks and promote the transition of the ruble and yuan into the status of world reserve currencies. Central banks of Russia and China are working on the procedure of opening accounts for Russian companies in China, Chinese companies in Russia and creating a payment system without using SWIFT.

The whole Global South has realized the “lesson” of the collective West freezing and confiscating the foreign reserves of Russia (G20 member and a nuclear superpower). If that happened to Russia, it could happen to anyone. There are no “rules” anymore.

Russia since 2014 has been improving its SPFS payment system, in parallel with China’s CIPS, both bypassing the western-led SWIFT banking messaging system and increasingly used by Central Banks across Central Asia, Iran and India. All across Eurasia, more people are ditching Visa and Mastercard and using UnionPay and/or Mir cards as well as Chinese Alipay and WeChat Pay cards, both very popular across Southeast Asia.

The US dollar, still representing under 60 percent of global foreign exchange reserves, will not ride into marginal overnight but China’s agreement with Arabian states (from petrodollar to petroyuan) is just the latest chapter in a major shift now driven by a select group of states in the Global South. Trading in their own currencies and in a new, global alternative currency is right at the top of the priorities of that long list of nations eager to join BRICS+ or the SCO, from South America to Northern Africa and West Asia.

Russia is heading toward de-dollarization

As Western countries continue restrain Moscow from global financial markets, Russia’s raw material resources and China-Russia partnership may serve as a source of such pool, which is developing alternative financial systems to the dollar. This also enables Russia to survive over all the sanctions the West has imposed.

In late September, the European Commission received a joint letter from nine European steel companies warning of the “consequences of a potential import ban on Russian raw materials,” citing the lack of substitutes for Russia. While the EU pushed forward with the ban nonetheless, it is unlikely that it will last for long because, European industry once again made its voice heard in late October, when Washington proposed additional aluminum bans. Lack of energy and large variety of natural resources for European industries, previously supplied by Russia, will play ever more crucial role in Europe’s economic survival.

Russia and China recently committed to de-dollarize their transactions and establish a financial sphere immune to Western sanctions. Russia has no intention of reverting back to its participation in the US-led international finance system since it is convinced that China holds the future. Russia demanded that European companies pay for Russian oil and gas in rubles or gold at the beginning of the year, while China and Russia increase rubles or yuan in their mutual energy business. Russian banks have begun issuing checking and savings accounts in Chinese yuan.

Finance Minister Anton Siluanov said during an interview in September: “For us, these currencies (primarily dollars and euros) are toxic.” Russia has made trade on barter exchange with Afghanistan, India and Iran. All these countries avoid trading in their own currencies because of their volatility. Their main objective is to circumvent Western sanctions while gaining access to desirable products, until China establishes a robust financial system disconnected from Western oversight.

Russia’s economy is also structured to take advantage of the war over energy. When adjusted for purchasing power parity, Russia has the sixth-largest GDP behind Germany. Sectors matter more than size, however. In 2021, Russia’s economy was composed of the following main sectors: services (53 percent), agriculture (3.8 percent), industry (33 percent), and manufacturing (14 percent)—the total exceeds 100 percent because there is some overlap. These numbers explain Moscow’s weaponization of its natural resources.

The US percent of GDP dedicated to agriculture barely exceeds 1 percent, with Germany’s at 0.8 percent and France’s at 1.63 percent, China’s percentage is at 7.3 percent. Russia’s comparative agricultural might reveals, that Russian citizens suffer less than their European neighbors in possible shortages of food and fertilizers but China is less likely to be affected by its own high production level.

Industry makes up one-third of Russia’s economy. Industry comprises notably less of the French (16.8 percent), American (18.5 percent) and German (26.6 percent) economies. Russia surprisingly exceeds even Germany in this metric. The winner of this bracket is, once again, China, at 39.5 percent. The use of these statistics underlines a trend: Russia’s priorities, financial ambitions and the organization of its economic sectors increasingly resemble China’s. De-dollarization signifies far more than alternatives to SWIFT—it is a comprehensive transformation process that involves profound financial restructuring and the enlistment of key allies.

Russia has developed the Mir payment system (bank card) to directly compete with Master Card and Visa. The US response has been threatening to impose economic sanctions and expulsion from SWIFT against any foreign financial institution using the Mir system. Russia is developing a bullion exchange, the Moscow World Standard, to end gold price manipulation by the LBMA and Comex bullion exchanges (derivatives trade only) and reveal the metal’s true market value.

Moscow has made its greatest strides toward de-dollarization domestically and this initiative is inextricable from its natural resource diplomacy. Major fuel and oil companies are increasing the use of the yuan in their operations. Nevertheless, Russia needs dollars since there are many dollar deposits inside the country and corporations have debts denominated in dollars. Russia will not give up totally the use of dollar but will instead dramatically reduce its shares.

According to Lavrov, in light of the collective West’s negative policy, Russia is no longer interested in engaging with the West. Organizations such as BRICS are becoming an alternative against the backdrop of the weakness of the EU. “We have real partners – BRICS, the SCO, the EAEU and the CSTO, regardless of what is written about it,” Lavrov stated.

Xi’s visit to Saudi Arabia, December 2022

China’s President Xi Jinping made an official state visit in Riyadh, Saudi Arabia, in early December, with a large Chinese delegation of officials and business leaders, meeting both with the top leadership of Saudi Arabia, headed by Crown Prince Mohammed bin Salman, and with the leaders of the Gulf Cooperation Council (GCC) to promote political relations and increased trade. The Saudis had organized three separate regional summits for Xi — aside the bilateral summit, a second summit with 21 Arab leaders and a third with seven rulers of GCC countries. 

This was a big signal that Saudi Arabia stands at the heart of China’s Arab world diplomacy. Indeed, the nearly three dozen energy and investment deals were signed during Xi’s visit. They encompass frontier areas such as information technology, green energy, cloud services, infrastructure and health and inject a greater sense of alignment between Riyadh’s economic diversification pivot (known as Vision 2030) and China’s Belt and Road Initiative (BRI). Clearly, the signing of a “harmonization plan” between Vision 2030 and the BRI is a game changer. Saudi Arabia’s membership in SCO and BRICS were also on the agenda.

When Xi was landing on Riyadh airport and was welcomed with great ceremonial arrangements, it could be seen as the dawn of the pertoyuan era. To avoid using the petrodollar, China has set up an energy trading platform, Shanghai International Energy Exchange to advance China’s goal of increasing the use of yuan for energy transactions. This platform is now being used to complete transactions for energy imports from Russia and Iran and in the future, with Saudi Arabia and other Gulf countries, reducing China’s reliance on the petrodollar.

Beijing’s green hydrogen and solar energy investments are expected to complement Riyadh’s clean energy push and together they “strengthen adaptive infrastructure in the Arab world. As Saudi Arabia synchronizes its priorities in the energy sector with China’s focus on bolstering supply chain resilience in the West Asian region, the kingdom is presenting itself as a regional center for the Chinese factories.

The first-ever China-GCC Summit and China-Arab League Summit stand out in the current international environment and create prospects of “collective cooperation” between China and Arab countries. The purpose is to strengthen strategic partnership relations between the GCC States and China, conclude a free trade agreement between the GCC and China and institutionalize the GCC-China Meeting of Ministers of Economy and Trade in a “6 + 1” format between GCC and China.

One particular aspect of the agreement was a deal with the Chinese tech giant Huawei to supply the Saudis with cloud computing services and allow “high-tech” complexes to be built in Saudi cities, according to Saudi officials. Huawei has been designated a potential security threat by the US, with intelligence officials claiming that the company has close links to China’s ruling Communist Party and could be used to conduct spying operations.

That Riyadh is now moving away from its traditional alliance with the US and strengthening its ties with Beijing is a strategic disaster to the Biden administration, for which the president is personally to blame. Now, thanks to Biden’s incompetent management of the US-Saudi relationship, Riyadh is looking to China to protect its interests, a move that confirms the alarming decline in US influence in the region. However, Saudi Arabia has based its defense on American weapons and has immense financial ties with the US. De-dollarization is a process that will take many years but none-the-less, the Saudi reduction in cooperation and trade with the US will inevitably occur.

Awakening Global South

After seeing the US/EU/UK impose economic sanctions and freeze or seize financial assets and destroying infrastructure supplying energy to an “ally” (blowing up the Nord Stream pipelines), has made many countries in the Global South to ask a fundamental question: “Are we the next?”

No doubt, this is one of the reasons Saudi Arabia and other Gulf states are reexamining their relationship with the West and exploring closer relations with China and Russia. We are seeing the rapid expansion of BRICS and Shanghai Cooperation Organization (SCO), Saudi Arabia, Qatar and Egypt are considering joining the SCO. Both organizations are closely integrated with China’s Belt and Road Initiative (BRI) and EAEU led by Russia.

The serious fracture between Global North and Global South, so evident in Bali summit, had already been suggested in Phnom Penh, as Cambodia hosted the East Asia Summit. The 10 members of ASEAN had made it very clear they remain unwilling to follow the US and the G7 in their collective demonization of Russia and in many aspects China. The Southeast Asians are also not exactly excited by the US-concocted IPEF (Indo-Pacific Economic Framework), which will be irrelevant in terms of slowing down China’s extensive trade and connectivity across Southeast Asia.

The closing of G20 Summit (15-16. November) was a clear indication, which way the geopolitical winds are blowing. It seems quite sure that BRICS+ will be the way forward for Global South cooperation. That was encapsulated in the Summit’s two highlights: the China-US presidential meeting and the final G20 statement, which was the result of arduous compromise. The collective west (G7) was bent on including the Ukraine war and its “economic impacts” – especially the food and energy crisis – in the statement. The aim was to blame Russia for everything.

Jakarta and New Delhi worked extremely hard to find wording that would be acceptable to both Moscow and Beijing. It can be called “the Global South effect”. On point 3 out of 52, the statement “expresses its deepest regret over the aggression of the Russian Federation against Ukraine”, which is the standard NATO formulation.

As American economist and professor Michael Hudson has pointed out, the American economy has been transformed into post-industrial finance capitalism that seeks wealth primarily through the extraction of economic rent, not industrial capital formation. The US now confronts an increasingly assertive Russia-China-Iran axis, that has attained military and economic parity with the west and also unifying the Global South via BRICS and SCO, which threatens the dollars status as reserve currency and American global power.

Silk Roads and Security

Chinese BRI will get a serious boost by Beijing in 2023, with the return of the Belt and Road Forum. The first two forums took place in 2017 and 2019 but not in 2020 or in 2021 because of China’s strict zero-Covid policy. The year 2023 is relevant because BRI was first launched 10 years ago, in 2013, by Xi, first in Central Asia and then Southeast Asia. So, the 2023 Forum is expected to bring to the forefront a series of new and redesigned projects adapted to a post-Covid and debt-distressed world, in tense geopolitical and geoeconomic sphere.

Also significantly, Xi’s visit in Arabia in December followed Xi’s visit in Samarkand in September for the SCO summit, in which Iran officially joined as a full member. China and Iran in 2021 signed a 25-year strategic partnership deal worth a potential $400 billion in investments. That’s the other key point of China’s two-pronged West Asia strategy.

The nine permanent SCO members now represent 40 percent of the world’s population. One of their key decisions in Samarkand was to increase bilateral trade and overall trade, in their own currencies.

In early December, in Bishkek, Kyrgyzstan, in full synchronicity with Riyadh meeting, there was the meeting of the Supreme Eurasia Economic Council, the policy implementation arm of the Eurasia Economic Union (EAEU). President Putin could not have been more straightforward: “The work has accelerated in the transition to national currencies in mutual settlements… The process of creating a common payment infrastructure and integrating national systems for the transmission of financial information has begun.”

The next Supreme Eurasian Economic Council will take place in Russia in May 2023, ahead of the Belt and Road Forum. Putting them all together, creates the geoeconomic road map ahead, which the head of the EAEU’s macroeconomic policy, Dr. Sergey Glazyev, has been designing, side by side with Chinese specialists, for years. The drive towards the petroyuan, proceeding in parallel to the drive towards a “new common payment infrastructure”, means a new alternative currency bypassing the US dollar.

Because the move towards the petroyuan will cause geoeconomic tenses, Beijing and the GCC will adopt the petroyuan slowly but surely and certainly with zero fanfare. The heart of the matter is their mutual exposure to the Western financial casino. The US dollar, backed by nothing but the colossal federal debt, as the ultimate hegemonic weapon, complete with an array of sanctions over 30 nations who dare to disobey the unilaterally imposed “rules-based international order”.

In the Chinese case, what to do with those about $ 900 billion in US Treasury bonds, large-scale sales of bonds will skyrocket interest rates and collapse the dollar. In the Saudi case, it’s hard to think about “strategic autonomy”, when the petrodollar is a staple of the Western financial system. Global Financial War may be lurking just around the corner.

 BRICS expansion, BRICS+ and other multidimensional / multilayered formations

The quintet of BRICS economies (Brazil, Russia, India, China and South Africa) may turn into an organization of 15-17 countries, if all the states wishing to join it are granted membership, Russian Foreign Minister Sergey Lavrov told at the Primakov Readings Forum in early December

The RIC format (Russia, India, China) paved the way for the BRICS Five, which currently enjoys great publicity and many countries line up seeking a full-fledged membership. Lavrov stressed that the RIC remains an operational format and not only foreign ministers, but ministers of economy, energy and economic development as well, are meeting within the framework of this format.

BRICS can provide countries with an alternate partnership path to the economic integration than the EU. The group is now developing along two avenues: by admitting new members and by strengthening cooperation.

Iran, Argentina, and Algeria have formally applied to join BRICS. Turkey, Saudi Arabia, Egypt, and Afghanistan are very interested in becoming members. Indonesia just applied, in Bali and then there’s the next wave: Kazakhstan, UAE, Thailand, Nigeria, Senegal, and Nicaragua. It’s crucial to note that all of the above sent their Finance Ministers to a BRICS Expansion dialogue in May. Lavrov himself noted that it will take time for the current five BRICS to analyze the immense geopolitical and geoeconomic implications of expanding to the point of virtually reaching the size of the G20 and without the collective west.

What unites the candidates above all is the possession of massive natural resources: oil and gas, precious metals, rare earths, rare minerals, coal, solar power, timber, agricultural land, fisheries, and fresh water. That’s the imperative, when it comes to designing a new resource-based reserve currency to bypass the US dollar. The combined GDP – in today’s figures – would be roughly $29.5 trillion; much larger than the US ($23 trillion) and at least double the EU ($14.5 trillion, and falling). As it stands, BRICS account for 40 percent of the global population and 25 percent of GDP. BRICS+ would congregate 4.257 billion people, over 50 percent of the total global population as it stands.

South African President Cyril Ramposa said during his visit to Riyadh in October 2022 that Crown Prince Mohammed bin Salman expressed Saudi Arabia’s desire to join BRICS. Discussions on the expansion of the BRICS bloc are scheduled to take place in South Africa, when it takes over the presidency in 2023.

As current BRICS represents more than 40 percent of the global population and nearly a quarter of the world’s GDP, Saudi Arabia is interested in gaining further independence by joining the bloc. Joining the bloc also means closer relations with China, something that Saudi Arabia is now pursuing despite Western criticism.

When BRICS becomes BRICS+ (expansion), the bloc will be striving towards interconnection with plenty of institutions, from which the most important are the Shanghai Cooperation Organization (SCO), strategic OPEC+ (de facto led by Russia and Saudi Arabia) and the Belt and Road Initiative (BRI), China’s overarching trade and foreign policy framework for the 21st century. It is worth pointing out that all crucial Asian players have joined the BRI.

Then there are the close links of BRICS with a plethora of regional trade blocs: ASEAN, Mercosur, GCC (Gulf Cooperation Council), Eurasia Economic Union (EAEU), Arab Trade Zone, African Continental Free Trade Area, ALBA, SAARC and last but not least the Regional Comprehensive Economic Partnership (RCEP), the largest trade deal in the world, which includes a majority of BRI partners.

BRICS+ and Chinese BRI are the perfect match from West and Central Asia to the Southeast Asians (especially Indonesia and Thailand). BRI members will be inevitably attracting more candidates for BRICS+. This will inevitably lead to a second wave of BRICS+ hopefuls including, most certainly, Azerbaijan, Mongolia, three more Central Asians (Uzbekistan, Tajikistan, and gas republic Turkmenistan), Pakistan, Vietnam, and Sri Lanka, and in Latin America featuring Chile, Cuba, Ecuador, Peru, Uruguay, Bolivia, and Venezuela.

Meanwhile, the role of the BRICS’s New Development Bank (NDB) as well as the China-led Asia Infrastructure Investment Bank (AIIB) will be enhanced – coordinating infrastructure loans across the spectrum, as BRICS+ will be increasingly shunning dictates imposed by the US-dominated IMF and the World Bank.

All of the above barely sketches the width and depth of the geopolitical and geoeconomic realignments further on down the road – affecting every network of global trade and supply chains. The G7’s obsession in isolating and/or containing China and Russia, is turning on itself in the framework of the G20. In the end, it’s the G7 that may be isolated by the BRICS+.

Iran’s strengthening position

At the recent Conference on Interaction and Confidence Building Measures in Asia (CICA) summit in Astana, Kazakhstan, Iranian President Raisi forcefully proposed that a successful “new Asia” must necessarily develop an endogenous model for independent states. As an SCO member and playing a very important role, alongside Russia and India, in the International North-South Transportation Corridor (INSTC), Raisi is positioning Iran in a key vector of multilateralism.

Since Tehran entered the SCO, cooperation with both Russia and China is on overdrive. Tehran is leaving behind decades of “Iranophobia” and American “maximum pressure” to dynamically connect across Eurasia. At the recent SCO summit in Samarkand, both Russia and China made it clear, especially for the collective west, that Iran is no longer going to be treated as a pariah state.

Iran is a key BRI partner for China’s grand infrastructure project to connect Eurasia via road, sea, and train. In parallel, the multimodal Russian-led INSTC is essential to promote trade between the Indian subcontinent and Central Asia – at the same time solidifying Russia’s presence in the South Caucasus and the Caspian Sea region. Iran and India have committed to offer part of Chabahar port in Iran to Central Asian nations, complete with access to exclusive economic zones.

Iran is entering a new business era with all members of the SCO under the sign of an emerging financial order being designed mostly by Russia, China and India. As far as strategic partnerships go, the ties between Russia and India (President Narendra Modi called it an unbreakable friendship) are as strong as those between Russia and China and when it comes to Russia, that’s what Iran is aiming at. Iran as a close ally is an unparalleled strategic asset for Russia in the drive towards multipolarity.

Iran and the Eurasian Economic Union (EAEU) are already negotiating a Free Trade Agreement (FTA) in parallel to those swaps involving Russian oil. The west’s reliance on the SWIFT banking messaging system hardly makes any difference to Russia and Iran. The Global South is watching it closely, especially in Iran’s neighborhood where oil is commonly traded in US dollars.

It is becoming clear to anyone in the west that the Joint Comprehensive Plan of Action (JCPOA, or Iran nuclear deal), does not matter anymore. Iran’s future is directly connected to the success of three of the BRICS: Russia, China and India. Iran itself may soon become a BRICS+ member.

The Quartet That Really Matters: Russia, India, China, Iran

Mid December showed a concrete proof, once again, that the geopolitical and geoeconomic center of gravity has shifted to Asia. There were three important summits: Association of South East Asian Nations (ASEAN) summit in Phnom Penh, the Group of Twenty (G20) summit in Bali and the Asia-Pacific Economic Cooperation (APEC) summit in Bangkok. ASEAN has ten members, while China and Russia have a Dialogue Partner status since 1996. APEC as well as Group of Twenty have 20 members including all three great powers (the US, China and Russia).

Russian Foreign Minister Sergey Lavrov expressed, what was really significant at the end of the ASEAN summit. While praising the “inclusive, open, equal structure of security and cooperation at ASEAN”, Lavrov stressed how Europe and NATO “want to militarize the region in order to contain Russia and China’s interests in the Indo-Pacific.” A manifestation of this policy is how “AUKUS is openly aiming at confrontation in the South China Sea,” he said. “NATO is moving their line of defense to the South China Sea” and Lavrov added Beijing holds the same assessment.

Russia’s top security official Nikolai Patrushev and his Iranian counterpart Ali Shamkhani had the meeting in Tehran, early December. They discussed not only security matters but also some big business issues. The National Iranian Oil Company (NIOC) will sign a $40 billion deal with Gazprom in January, bypassing US sanctions and encompassing the development of two gas fields and six oilfields, swaps in natural gas and oil products, LNG projects, and the construction of gas pipelines.

Iran and the EAEU are negotiating a Free Trade Agreement (FTA) in parallel to the swap deals with Russian oil. Soon, SWIFT will be completely bypassed and the whole Global South is watching. Moscow and Tehran are developing a joint strategy to defeat the weaponization of sanctions by the collective West. So, Tehran may now plan to develop its massive economic potential within the framework of BRI, SCO, INSTC, the Eurasia Economic Union (EAEU), and the Russian-led Greater Eurasia Partnership.

During the SCO summit in Samarkand last September, Chinese President Xi Jinping presented China and Russia, together, as the top “responsible global powers” bent on securing the emergence of multipolarity. Samarkand also reaffirmed the strategic political partnership between Russia and India (Indian Prime Minister Narendra Modi called it an unbreakable friendship). Lavrov praised the strategic partnership in every crucial area – politics, trade and economics, investment, and technology, as well as “closely coordinated actions” at the UN Security Council, BRICS, SCO and the G20.

What if?

As in the six previous articles of this series, from November 30, 2022 on, I am sketching some obvious trajectories and main consequences, in the case Russia is winning in the Ukrainian war.

In this article, the focus is on economic prospects and political-economic issues, derived from the Ukraine crisis, in the context of great power relations.

The question is, what will happen to the economic positions of great powers and international relevant economic networks around?

The above text disclosed very clearly that Russia and China are not at all “contained, encircled, left alone, sided into marginal”. On the contrary, Russia has managed to create, in a short period, worldwide and growing network of cooperation in trade and economy, business, politics and military affairs.

The world is much wider than looking only from European perspective. The great majority of the humankind live today outside Europe… and the US.

Russia’s victory in the Ukraine war will massively strengthen the political, economic and military position of Russia and China worldwide but especially in Asia, Africa and Latin America. On the other hand, the process of dollar collapse, mentioned above, will accelerate, when the Russian military victory is materialized.


the next update article will study military situation in Ukraine crisis, mid-January 2023. Please, stay with.