NEW DELHI: Prime Minister Narendra Modi on Wednesday addressed the Brics summit in Kazan where he called upon the countries to unite against terrorism and terror financing. He also stressed upon the need for reforms in global institutions like UN Security Council which has been facing backlash for its failure to stop the Israel-Gaza war.
“We all have to be united and cooperate strongly to deal with terrorism and terror financing.There is no place for double standards on such a serious issue. We should take active steps to prevent radicalization among the youth of our countries,” he said.
“We have to work together on the pending issue of the Comprehensive Convention on International Terrorism in the UN,” he added.
PM Modi reached Kazan on Tuesday to attend the 16th Brics summit. He held bilateral meeting with Russian President Putin where he said that India was ready to provide help to end the Russia-Ukraine war.

‘Reform not replace’: PM Modi on Brics role in global institutions

PM Modi said that the global institutions needed reforms and Brics should resort to bringing changes in these institutions rather than replacing them.
“We should move forward in a timely manner for reforms in global institutions like UN Security Council, Multilateral Development Banks, WTO.”
“While taking forward the efforts of Brics, we should keep in mind that the image of this organisation should not be such that we do not want to reform global institutions but want to replace them,” he added.

‘We support dialogue and diplomacy, not war’

At a time when West Asia, parts of Europe (Russia, Ukraine) and Africa is struggling with humanity crisis, PM Modi called upon the need for solution through dialogue and diplomacy instead of war.
“Our meeting is taking place at a time when the world is surrounded by many challenges like wars, conflicts, economic uncertainty, climate change, terrorism. There is talk of North-South and East-West divide in the world,” he said.
“We should give the message to the world that Brics is not a divisive but a public interest group,” he added.

India-China Row: After four years and multiple diplomatic and military talks to end the standoff since the India-China skirmishes began in 2020, External Affairs Minister S Jaishankar announced on Monday that ‘disengagement process with China has been completed’.

Jaishankar said, “…We can say that the disengagement process with China has been completed…We will be able to do the patrolling which we were doing in 2020. I think it’s a good development…”

Foreign Secretary Vikram Misri on Monday informed that New Delhi and Beijing military negotiators have reached an agreement on patrolling arrangement along Line of Actual Control (LAC).

“Over last few weeks, Indian and Chinese negotiators have been in touch.” 

The agreement likely pertains to patrolling in Depsang and Demchok areas.

Foreign Secretary Vikram Misri said, “..As a result of the discussions that have taken place over the last several weeks an agreement has been arrived at on patrolling arrangements along the line of actual control in the India-China border area and this is leading to dis-engagement and eventually a resolution of the issues that had arisen in these areas in 2020.”

The announcement of the pact arrives just before Prime Minister Narendra Modi’s upcoming visit to Russia for the BRICS summit, where he may engage in discussions with Chinese President Xi Jinping on the sidelines.

According to news agency PTI, Modi and Chinese President Xi Jinping are expected to hold a bilateral meeting on the sidelines of the BRICS Summit.

Relations between the two nuclear-capable nations have been tense since 2020, when violent clashes along their poorly defined border resulted in the deaths of 20 Indian soldiers and four from China.

Meanwhile, Beijing is yet to respond to the announcement of Jaishankar. 

India-China Border Dispute: A Longstanding Tension

The ongoing conflict between India and China stems from a poorly defined border that stretches approximately 3,440 kilometers (2,100 miles). Known as the Line of Actual Control, this disputed frontier has become a focal point for both nations as they compete to enhance infrastructure in the region.

India’s efforts to construct a new road leading to a high-altitude air base are viewed as significant provocations, contributing to the deadly clash between troops in 2020.

The Galwan Valley confrontation marked a grim milestone, being the first fatal encounter since 1975, where combatants used sticks and clubs instead of firearms. The altercation resulted in the deaths of at least 20 Indian soldiers and four Chinese soldiers.

De-escalation efforts have occurred since the intense fighting in June 2020, but tensions remain high. In December 2022, troops clashed once again near the Tawang sector of Arunachal Pradesh, resulting in minor injuries among some soldiers.

Historically, Delhi and Beijing fought a single war in 1962, which ended in a significant defeat for India, adding to the complexity of their relationship and ongoing disputes over territorial claims.

Now in their 15th year together, the original BRICS (Brazil, Russia, India, China and South Africa) have achieved little. Yet at this summit Mr Putin hopes to give the bloc heft by getting it to build a new global financial-payments system to attack America’s dominance of global finance and shield Russia and its pals from sanctions. “Everyone understands that anyone may face US or other Western sanctions,” Sergei Lavrov, Russia’s foreign minister, said last month. A BRICS payments system would allow “economic operations without being dependent on those that decided to weaponise the dollar and the euro”. This system, which Russia calls “BRICS-Bridge”, is intended to be built within a year and would allow countries to conduct cross-border settlement using digital platforms run by their central banks. Controversially, it may borrow concepts from a different project called mBridge that is part-run by a bastion of the Western-led order, the Bank for International Settlements (BIS).

The talks will shine a light on the race to remake the world’s financial plumbing. China has long bet that payments technology—not a creditors’ rebellion or military conflict—will reduce the power that America gets from being at the centre of global finance. The BRICS plan could deliver cheaper and faster transactions. 

Those benefits may be enough to entice emerging economies. In a sign the scheme has genuine potential, Western officials are wary that it may be designed to evade sanctions. And some are frustrated by the unintended role of the BIS, a Swiss-based organisation known as the central bank for central banks.

America’s dominance of the global financial system has been a mainstay of the post-war order. It reflects its economic and military heft, but also the fact that dollar-denominated assets such as Treasuries are seen as safe from government confiscation and inflation and are easy to buy and sell. Though central banks have diversified their holdings, including into gold, around 58% of foreign-currency reserves are in dollars (see chart) and the network effects of the dollar put American banks at the centre of the world’s payments systems. Sending money around the globe is a bit like taking a long-haul flight; if two airports are not directly linked, passengers will need to change flights, ideally at a busy hub where lots of other planes connect. In the world of international payments the biggest hub is America, where many of the world’s banks swap foreign currencies from those making payments into dollars and then into the currencies in which the payments are received.

The centrality of the dollar provides what Henry Farrell and Abraham Newman, two scholars, call “panopticon” and “choke point” effects. Because almost all banks transacting in dollars have to do so through a correspondent bank in America, it is able to monitor flows for signs of terrorist financing and sanctions-evasion. 

That provides America’s leaders with an enormous lever of power—one that they have been keen to pull as an alternative to going to war. The number of people under American sanctions has exploded by more than 900% (to around 9,400) in the two decades to 2021. America has demanded that some foreign banks are disconnected from SWIFT, a Belgium-based messaging system used by some 11,000 banks in 200 countries to transfer funds across borders. In 2018 SWIFT cut off Iran.

All this paled in comparison with the ferocity of the financial attack on Russia after its invasion of Ukraine in 2022. The West froze $282bn of Russian assets held abroad, disconnected Russian banks from SWIFT and prevented them from processing payments through America’s banks. America has also threatened “secondary sanctions” on banks in other countries that support Russia’s war effort. Even European policymakers, who support sanctions, were alarmed at how fast Visa and MasterCard—two American firms that the euro zone relies on for retail payments—closed shop in Russia. 

And the tsunami crashing over Russia has prompted America’s adversaries to accelerate their efforts to move away from the dollar, and pushed many other governments to look at their dependence on American finance. China views it as one of its biggest vulnerabilities.

Mr Putin is hoping to capitalise on this dollar dissatisfaction at the BRICS summit. For him creating a new scheme is an urgent practical priority as well as a geopolitical strategy. Russia’s foreign-exchange markets now almost exclusively trade yuan, but because it cannot get enough of this currency to pay for all of its imports, it has been reduced to bartering. In October Russia agreed to buy mandarins (the citrus fruit) from Pakistan paid for with chickpeas and lentils. According to some reports these liquidity strains are growing.

Mr Putin hopes to make life outside the American system more bearable by laying some financial plumbing of his own. BRICS officials have held a flurry of meetings ahead of the summit in Kazan. They have discussed creating a credit-ratings agency to rival the main Western ones, which Russia sees as “susceptible to politicisation”. They also examined creating a reinsurance firm to sidestep Western ones that are blocked from reinsuring some tankers transporting Russian oil, and a payments system to replace Visa and MasterCard. Mr Putin has pushed for creating a common BRICS currency for pricing trade, based on a basket of gold and other non-dollar currencies, but Indian officials objected to this in recent weeks.

By far the most serious initiative is a plan to use digital money backed by fiat currencies. This would place central banks, not correspondent banks with access to the dollar clearing system in America, in the middle of cross-border transactions. In decentralising the financial system, the proposal would mean that no one country could disconnect another. Since commercial banks would transact through their own central banks, they would not need to maintain bilateral relationships with foreign banks, side-stepping the network effects of the current correspondent-banking system.

The “BRICS Bridge” plan was outlined in a report by the Russian finance ministry and central bank in October. Running to 48 pages it critiques Western finance and states that “a new multinational platform for the purposes of cross border settlement needs to be examined in further detail due to its novelty, associated risks, and, potentially, game-changing economics”. With its focus on digital currencies run by central banks it appears to be at least partially inspired by an experimental payments platform called mBridge, which was developed by the BIS alongside the central banks of China, Hong Kong, Thailand and the United Arab Emirates. Chinese state media say that the new BRICS plan “is likely to draw on the lessons learned” from the mBridge project by the BIS.

That BIS experiment was innocent in design and initiated in 2019, before Russia’s full-scale invasion. It has been stunningly successful, according to several people involved in the project. It could cut transaction times from days to seconds and transaction costs to almost nothing. In June the BIS said mBridge had reached “minimum viable product stage” and Saudi Arabia’s central bank joined as a fifth partner in the scheme. Some 31 other members are observers. By creating a system that could potentially be far more efficient than the current one—and which would weaken the dominance of the dollar—the BIS has unwittingly stepped into a geopolitical minefield.

“If someone is transacting outside of the dollar system for political reasons, you want that to be more expensive for them than the dollar system,” says Jay Shambaugh, a senior treasury department official. The efficiency gains of new kinds of digital money may erode the use of the dollar in cross-border trade, according to the Fed. Reciprocally they could boost China’s currency. Speaking to bankers and officials about mBridge in September, a Hong Kong official said it “provides another opportunity to allow the easier use of the renminbi in cross-border payment, and Hong Kong as an offshore hub stands to benefit”.

Is it possible that mBridge’s concepts and code may be replicated by the BRICS, China or Russia? The BIS doubtless views mBridge as a joint project and believes that it has the ultimate say over who can join. Yet some Western officials say that participants in the mBridge trial may be able to pass on the intellectual capital it involves to others, including participants in the BRICS Bridge. According to multiple sources China has taken a lead on the software and code behind the mBridge project. The People’s Bank of China, the central bank, leads the project’s technology subcommittee and, according to comments made by a BIS official in 2023, its digital ledger “was built by” the PBOC. Perhaps this technology and know-how could be used to build a parallel system beyond the reach of the BIS or its Western members. The BIS has declined to comment on any similarities between its experiment and Mr Putin’s plan.

The BRICS’s foray into the payments race reveals the new geopolitical challenges facing multilateral organisations. At a meeting of the G20 group of large economies in 2020, the BIS was given the job of both improving the existing system and, at China’s urging, of experimenting with digital currencies. Earlier this year Agustín Carstens, its boss, called for “entirely new architectures” and a “fundamental rethink of the financial system”. Yet as different members of the organisation have rival objectives, staying above the fray is getting harder. The world has become more difficult to navigate, acknowledges Cecilia Skingsley, the boss of the BIS Innovation Hub. But she says it still has a role to play in solving problems for all countries “almost independent of what other kind of agenda they might have”.

One option for America and its allies is to try to hobble new payment systems that compete with the dollar. Western officials have warned the BIS that the project could be misused by countries with malign motives. The BIS has since slowed down its work on mBridge, according to some former staff and advisers, and is unlikely to admit any new members to the project. Another option is to improve the dollar-based system so that it is as efficient as new rivals. America is already gearing up to compete. 

In April the New York Fed joined six other central banks in a BIS project aimed at making the existing system faster and cheaper. The Federal Reserve may also link its domestic instant-payments system with those in other countries. SWIFT said this month that it plans to conduct trials of digital transactions next year, leveraging some of its incumbent advantages including strong network effects and trust, says Tom Zschach, its innovation chief.

Any rival BRICS payments system will still face huge challenges. Guaranteeing liquidity will be difficult or require large implicit government subsidies. If the underlying flows of capital and trade between two countries are imbalanced, which they usually are, they will have to accumulate assets or liabilities in each others’ currencies, which may be unappealing. Distrust of China runs deep in India, a key BRICS member. And to scale a digital-currency system, countries must agree on complex rules to govern settlement and financial crime. Such unanimity is unlikely to win the day in Kazan.

Yet, for all that, the BRICS scheme may have momentum. There is a broad consensus that the current cross-border-payments system is too slow and expensive. While rich countries tend to focus on making it quicker, many others want to overturn the current system entirely. 

At least 134 central banks are experimenting with digital money, mostly for domestic purposes, reckons the Atlantic Council, a think-tank. The number working on such currencies for cross-border transactions has doubled to 13 since Russia’s invasion of Ukraine. This week’s BRICS summit is no Bretton Woods. All that Russia and its pals have to do is move a relatively small number of sanctions-related transactions beyond America’s reach. Still, many are aiming higher. 

Next year the BRICS summit will be held in Brazil, chaired by its president Luiz Inácio Lula da Silva, who fulminates over the power of the greenback. “Every night I ask myself why all countries have to base their trade on the dollar,” he said last year. “Who was it that decided?”

© 2024, The Economist Newspaper Ltd. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com

NEW DELHI: PM Narendra Modi will visit Russia on Oct 22-23 at the invitation of Russian President Vladimir Putin to attend the 16th Brics Summit in Kazan under the chairmanship of Russia, the govt announced on Friday.
While Modi will have a bilateral meeting with Putin on Oct 22, official sources did not confirm if he will also have a bilateral with Chinese President Xi Jinping, who will also attend the event.The Indian announcement didn’t name any country but said Modi is also expected to hold bilateral meetings with his counterparts from Brics member countries and other invited leaders.
Modi and Xi had an “informal” meeting at the last Brics summit in 2023 in Johannesburg. There was no joint statement and both sides differed on who proposed the meeting.
The Kazan summit, themed ‘Strengthening Multilateralism for Just Global Development and Security’, will provide an important platform for leaders to discuss key global issues, said govt. The Gaza situation is expected to figure prominently in the agenda. Putin has invited Palestinian President Mahmoud Abbas for the summit and has said the Gaza conflict will be discussed in the meetings.
“The summit will offer a valuable opportunity to assess the progress of initiatives launched by Brics and to identify potential areas for future collaboration,” said govt.
Ahead of the summit, Russian ambassador Denis Alipov said that after Brics membership doubled last year, the group will move towards the establishment of a partner-country category to enable interested states to join practical cooperation.
“We think we must satisfy their expectations that would consolidate Brics potential as a dedicated mechanism to promote the agenda of the Global South. I would not prejudge who exactly will be invited, and what are the criteria, but certainly, those countries should be economically ambitious and oppose illegitimate sanctions against member-states,” said Alipov, speaking in an online conference organised by the Centre for Global India Insights.
A Russian minister was quoted as saying in Islamabad earlier this year that Moscow will back Pakistan’s membership bid.
“I presume we are all against the phantom itching for dictating and restricting cooperation with other nations. The case in point is that geopolitical and practical relevance of Brics is growing not only despite uncertainties but because of them reflecting the demand for a more equitable cooperation in a multipolar environment,” added Alipov.