Kostin named priority tasks in the development of calculations in the global South

First of all, RUSSIA and the countries of the global South need to create an alternative to SWIFT, says VTB CEO Andrei Kostin. Secondly, establish digital calculations. Technically it’s not difficult, the question is political, he says

One of the most important tasks in the development of a system of financial settlements between the countries of the global South (plus Russia ) is the creation of a “unified open system” for the transmission of financial messages that could replace the popular Western SWIFT system, said the HEAD of VTB Bank Andrei Kostin in an interview with RBC.

“Today, payments in national currencies are limited by the availability of SWIFT, because the currencies seem to be national, but the data transmission systems are only Western. it is technically easy to replace SWIFT. All countries have their own systems for transmitting financial messages: Russia, CHINA, India, and the states of the Arab world. We need to sit down, agree and create a single open system,” Kostin said. “Much depends on how political negotiations on these issues go,” he added.

The Global South refers to many countries in Asia, Africa and Latin America, primarily China and the Gulf states.

SWIFT is an international network registered in Belgium that banks (more than 11 thousand in the world) use to quickly and securely transfer payment orders to each other. With the onset of tough sanctions in 2022, the European Union directly cut off ten Russian banks from SWIFT, including Sberbank, VTB, Otkritie, but difficulties with access to the system may also arise for other banks included in the sanctions lists. From October 1, 2023, Russian banks are prohibited from using SWIFT for domestic transfers. Russia, China , and India have their own systems for transmitting financial messages .

The second step is to develop digital payments, said the head of VTB. “We, China, and the Arab countries are technologically ready for this,” he said. In China, the digital yuan is already used in domestic retail payments: by mid-2023, the volume of transactions using e-CNY reached 1.8 trillion yuan ($249 billion), the Central Bank of China reported. The Bank of Russia launched testing of real digital rubles in mid-August.

Kostin expressed the opinion that within BRICS, a single currency for real payments “will not appear in the near future.” “But bilateral payments using the new financial infrastructure, which would make it possible to close this from unnecessary eyes, are possible,” he believes. At the moment, the project to create a single BRICS currency is a “utopia,” senior banker at VEB.RF Sergei Storchak recently said, and instead we need to focus on establishing multilateral settlements (clearing) in national currencies.

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Russia and China should take the lead in the development of alternative financial infrastructure, Kostin is sure. “I think that first of all we need to resolve this issue with China. If Russia and China start, then Arab countries, the states of South America, and Southeast Asia will definitely join. We are talking with them, they are ready,” said the head of VTB.

According to Kostin, if such a coalition becomes broad enough, the United States will no longer be able to use the DOLLAR and sanctions as a weapon.

“I tell our colleagues from China and other countries: “There is no need to be afraid.” More than 100 countries do not support sanctions. The Americans cannot take and apply, say, secondary sanctions against 100 countries of the world. This will completely undermine their position,” Kostin emphasized.

“We [VTB] are probably the first to voice the idea of ​​dedollarization. More than ten years have passed. But then this idea was not in demand, because the geopolitical situation was different, there were no such problems. Today, I think most of humanity understands the need for an alternative financial system,” Kostin emphasized.

Currently, the dollar occupies about 60% of all global foreign exchange reserves, about which it is known what currencies they are distributed among. The dollar also accounts for about half of all cross-border loans, international bonds and trade invoices. However, according to the Ministry of Economic Development, now almost 90% of Russia’s trade with China is in national currencies.