Russia takes over presidency of BRICS group

File Photo of Flags of BRICS Nations and BRICS Logo from Past Summit

(Business New Europe – bne.eu – bne IntelliNews- April 3, 2015)

Founding a $100bn currency reserve pool, launching the New Development Bank, and progress toward the peaceful settlement of world conflicts should be the hallmarks of Russia’s presidency of the BRICS grouping of emerging powers, the country’s leadership pledged after taking the helm on April 1.

“The Russian presidency will be oriented toward the most efficient use of the possibilities of the five [countries] for strengthening security and stability in the world,” President Vladimir Putin said.

The Russian leader said the BRICS members – Brazil, Russia, India, China and South Africa – account for almost a half of the world’s population and around 30% of its global gross domestic product.

An agreement on establishing the reserve fund will be signed in the near future and Russia “will most likely be the first country to do this,” TASS quoted the Russian Foreign Ministry’s ambassador-at-large Vadim Lukov as saying on April 3.

According to Lukov, South Africa will contribute $5bn to the pool, Russia, India and Brazil will allocate $18bn each, and China will provide the rest of the sum. The currency pool will help BRICS members in case of liquidity shortage. Russia, India and Brazil may take out 100% of the pool if needed, South Africa is entitled to 150%, and China 50%.

Parrying West’s clout

The New Development Bank with a capital of $100bn will focus on funding infrastructural and development projects in the five member countries. The institution is expected to start work by the end of 2015 and reach full-scale operations in four to five years.

The bank is expected to offset the influence of Western-dominated financial institutions, say its founders, which see it as an alternative to the Western-led World Bank and the International Monetary Fund. Loans will initially be made in US dollars. Russian Finance Minister Anton Siluanov has been named as the likely candidate to head up the bank.

The establishment of a BRICS rating agency is also on the agenda, Lukov said, with a nod to negative ratings accorded by the current top agencies to Russia and Russian businesses since the outbreak of tensions with the West over Ukraine.

“After well-known events when the big three rating agencies issued politicised and intentionally biased ratings on the state and prospects of the Russian economy, this issue becomes especially important,” the Russian envoy told TASS.

But Lukov added: “It is important to ensure that the agency’s establishment should not be perceived as a political counterbalance to the agencies that already exist because in this case its ratings would be perceived by opponents as politicised and deserving no attention.”

The organisation is due to hold its first summit under the new presidency in the Russian city of Ufa in early July. The first summit of BRIC (without South Africa, which joined in 2010) also took place in Russia, in the city of Yekaterinburg in 2009.