Russia: Dump Dollar as World Reserve Currency
Tuesday, June 16, 2009 8:19 AM
Russia will advocate a cautious approach to changing the system of global
Reserve Currencies, when the world's biggest emerging economies hold their
first formal Summit on Tuesday, the Kremlin's top economic aide said.
Brazil, Russia, India and China — which account for 15 % of the $60.7
trillion global economy — will focus on ways to reshape the financial system
after the economic crisis.
.
Russian President Dmitry Medvedev will raise the issue of a global reserve
currency at the meeting, top economic aide Arkady Dvorkovich, said.
"There is an understanding that the last thing we need now is turmoil on
financial markets," Dvorkovich told a news briefing. "No one wants to ruin
the dollar, including us." The meeting is scheduled to last about 2 hours.
Dvorkovich said BRIC leaders — who control nearly $3 trillion in foreign
currency reserves — would also discuss the idea of investing their reserves
in each other's currencies.
.
Before the BRIC meeting, Medvedev told the leaders of a summit of the
Shanghai Cooperation Organization (SCO) — which includes China — that the
grouping should think about using their national currencies for trade with
each other.
.
"We must strengthen the international currency system not only by
strengthening the position of the dollar, but also by creating new reserve
currencies and possibly ... the creation of supranational payment tender and
ways to make settlements."
.
Medvedev added that members should think about investing in each other's
financial instruments. Chinese officials have in recent days played down
talk of a discussion on a new supranational reserve currency to reduce
dependency on the U.S. dollar.
Goldman Sachs company of USA, which coined the BRIC term in 2001, now
predicts that in 20 years' time the four countries could together dwarf the
G7 and China's economy will overtake the United States in total size.
.
"These four countries are all quite influential in international economic
development, and I think if in the meeting they raise some proposals and
initiatives, that would be fair and reasonable," said Wu Hailong, a senior
Chinese Foreign Ministry official.
.
"Especially, some countries have proposed establishing a super-sovereign
currency, and I think their impetus is ensuring the security of each
country's foreign currency reserves."
Detractors say the idea overstates their potential and that the four BRIC
countries are as divided as they are united.
Immediate agreement on practical steps among the members of this loose and
untested bloc appears unlikely.
As part of proposals to rebuild the financial system, Medvedev has made
proposals on giving a greater role to the International Monetary Fund's
Special Drawing Rights that echo ideas from Chinese central bank chief Zhou
Xiaochuan.
.
Russia said it would reduce the share of U.S. Treasuries in its $400 billion
reserves and buy IMF bonds. China, Russia and Brazil have pledged to help
capitalize the IMF as they seek more influence at the fund.
A one-on-one meeting between Indian Prime Minister Manmohan Singh and
Pakistani President Asif Ali Zardari is planned on the sidelines of the SCO
summit and could help break the ice between the two nuclear-armed powers.
Iranian President Mahmoud Ahmadinejad arrived in Yekaterinburg on Tuesday,
defying protests in Tehran against his reelection in a disputed vote.
.
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expressly prohibited without the prior written consent of Reuters.*
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