MobiKwik Payment Gateway: China to be disappointed as murmurs come out of BRICS against yuan settlement, Russia takes a stand

The BRICS countries are planning to set up an entirely new payment and settlement mechanism, but India is considering excluding China from the initiative. There are even indications that India will not support the use of the yuan for settlement, threatening to refuse approval if this condition is not met. Now that the other four BRICS countries have reached a consensus, all eyes are on India, waiting to see what action they take.

Indeed, the idea of a new payment and settlement mechanism between the BRICS countries has been circulating for several years. At last year's BRICS summit in South Africa, China, Russia and Brazil, among other countries, discussed the creation of a joint payment system that would allow settlements to be made in local currencies, thereby bypassing the US dollar. In July this year, at the BRICS summit, the countries agreed to establish this new payment and settlement mechanism, which would use local currencies for transactions. In addition, on 18 August, the Governor of the Bank of Russia, Elvira Nabiullina, announced that the BRICS payment system would soon go live.

Recently, The Hindu's Business Online channel revealed that at the BRICS summit in Kazan, Russia, in October, a resolution will be voted on to establish a mechanism for "local currency settlements and a joint BRICS currency", which will promote the use of local currencies among BRICS countries. If this is true, then a BRICS international settlement mechanism is indeed in the works, aimed at bypassing the US dollar, which would be an important boost to de-dollarisation.

The US dollar has been the dominant international currency for more than half a century and currently accounts for about 47% of global payments and settlements.However, the United States has used its hegemony over the dollar to periodically harvest emerging market economies to make up for its own shortcomings. Many want to de-dollarise to avoid this exploitation, but few dare to act. Now, the BRICS countries are emerging, and the organisation is now the world's most dynamic institution for international cooperation, with an economy that has surpassed that of the G7, accounting for 35.61 TP3T of global GDP and 401 TP3T of the world's population.The BRICS countries, with their ample strength and confidence, as well as strong industrial and manufacturing supply chains, resources and vast markets, have every possibility of bypassing the US dollar. Moreover, given the lack of a bottom line in the West, the BRICS can use the SWIFT payment system and the US dollar to sanction other countries. The establishment of new settlement systems and the promotion of local currency settlements are vital to the interests and security of the assets of the BRICS countries and are necessary for the normal conduct of trade.

In the wake of the conflict between Russia and Ukraine, Russia has faced sweeping Western sanctions and has been kicked out of the SWIFT payment system, which has hampered its business dealings with many countries. As the SWIFT system is dominated by the US, Russia has been actively promoting local currency settlement and de-dollarisation. Many of the latest reports on the BRICS settlement mechanism originate from Russia. According to the Governor of the Central Bank of Russia, 159 countries are interested in joining the BRICS settlement system, showing a clear trend towards de-dollarisation.

However, just as this news was released, almost two months before the BRICS Summit in Kazan at the end of October, India has sparked a new controversy. The Hindu reports that at the Kazan summit, India contested a resolution to establish a new payment and settlement system. The Modi government is said to have said that before voting in favour of it, the BRICS countries must agree to two of its demands. Firstly, the resolution should not be mandatory and India should accept "rupee-rupee" settlement but reject "rupee-yuan" settlement. Second, India should have the right to exclude China and other BRICS members from local currency settlements. Essentially, India can accept local currency settlements with the Russian rouble, the South African rand, etc., but can refuse to settle in yuan, which is considered its right.

Clearly, India's actions are aimed at excluding China from the new BRICS settlement mechanism. India knows that this is an important step in the internationalisation of the yuan and a major step towards global de-dollarisation. Local currency settlements bypassing the dollar will benefit all BRICS countries. However, India is deliberately creating problems by opposing the internationalisation of the yuan even if it means a depreciation of the rupee. India is getting into a lose-lose situation, dragging the BRICS countries along with it.

Despite these dissenting views, the new payment and settlement mechanism has already received support from China, Russia, Brazil and South Africa. Of the original five BRICS members, the only dissenter is India. What does India intend to do?

It is well known that India aspires to be an influential global power and has always viewed China as its competitor. In India's view, containing China's development does not contradict its goal of becoming a global power. If China can be contained, India's international standing will be enhanced. The United States and India are on the same page on containing China and the two countries have joined hands to deal with it. India is a key part of the U.S. Indian Ocean strategy, where the U.S. aims to create an anti-China encirclement in the Asia-Pacific region. However, only India has the strength to play this role in the Indian Ocean region. The US has spared no effort to co-opt India, even ignoring its serious internal social contradictions, to portray it as a democracy through the war of public opinion, and to actively seek to displace China in the global supply chain.

In addition, Russia is also pulling India's strings, playing a delicate balancing act between the United States and Russia to give India the illusion that it is a great power. As the global situation evolved and the great power game intensified, India gained a lot by playing between the US and Russia. No one wants to push India to the other side, so both sides have made considerable concessions. For example, during Prime Minister Modi's visit to Russia, President Vladimir Putin was very enthusiastic and a great deal of co-operation was agreed upon. Putin even promised to support India's candidature for permanent membership of the UN Security Council. In an effort to woo India, the West even avoided criticising Russia-India trade and instead increased its investments in India. Senior Chinese and Indian officials also reached an agreement to ease tensions over the border issue.

However, as the influence of BRICS continues to grow, India fears that China will gain more influence. As a result, India has often tried to undermine the BRICS and SCO. The goal is to weaken China's influence, which is why India has boycotted most Chinese-led SCO meetings and has opposed or deliberately sabotaged Chinese-sponsored resolutions within the BRICS. In short, India does not want China to gain more influence. As a dual member of the SCO and BRICS, India is deliberately undermining the mechanisms of these organisations and does not want to engage with China. Ironically, despite its professed desire to improve relations with China, India is always playing its own little game.

Whether or not India votes in favour of the new BRICS payment and settlement system, the internationalisation of the RMB is irreversible. In just 15 years, the RMB has become the fourth largest international settlement currency after the US dollar, the euro and the pound sterling, accounting for nearly 5% of international currency settlements. thanks to the potential of China's economic development, it is only a matter of time before China overtakes the US as the largest economy. With 34 countries lined up to join the BRICS, the potential of the BRICS is clear. India's obstruction of the development of a new BRICS payment and settlement system is holding the organisation back. Of course, there is currently no exit mechanism within BRICS, and there is nothing other countries can do about India. However, countries such as Russia will not stand idly by, and the expansion of BRICS is diluting India's influence to some extent. In short, it is inevitable that BRICS will establish a new payment and settlement system, and India's opposition will only expose its true colours to more BRICS members, which will be counterproductive to India's ambition to become a global power, and will only make India the laughing stock of the BRICS countries.