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BRICS Development Bank important project for Russia

March 11, 2015, 13:51 UTC+3 Alexandrova Lyudmila
© EPA/Jarbas Oliveira

MOSCOW, March 10. /TASS/. The Development Bank of the BRICS group of nations (Brazil, Russia, India, China and South Africa) is an important and promising project for Russia, Russian experts believe. At the same time, they do not share the fears that China will seek to dominate in the Bank, although it will surely play the first role there but will undoubtedly take the interests of its partners into account.

Russian President Vladimir Putin on Monday signed a law on ratifying the Agreement on the BRICS Development Bank. The Bank will be established to finance infrastructure projects in the BRICS states and developing countries. The State Duma, the lower house of Russia’s parliament, ratified the Agreement on the establishment of the BRICS Bank on February 20.

Russia’s Finance Ministry believes the new Bank should start work before the end of 2015 but will reach full-scale operations only in a few years. The bank’s authorized capital is estimated at $100 billion, which will be distributed proportionately among its participants. Russian Finance Minister Anton Siluanov said earlier that China’s share would be $41 billion while the proportions of Brazil, India and Russia would amount to $18 billion each and South Africa would account for $5 billion.

Hi-tech companies may be the first to get financing from the BRICS Development Bank, Russian Deputy Finance Minister Sergey Storchak said. It is not ruled out that infrastructural and "nationwide projects" may also be financed by the BRICS Bank, he added.

"I believe the first projects will most likely come from hi-tech enterprises: the creation and completion of the first construction cycle plus the quick pay-back cycle. Most likely, these will be the first projects because there is consensus on them, considering mentality differences," Storchak said.

Experts say the Development Bank has strong potential and is very important for the BRICS countries.

"This is the first such large-scale bank that will be established on several continents at once — in Europe, Asia, Latin America and Africa, head of the department for Oriental studies at the Higher School of Economics Alexei Maslov told TASS. "To a certain extent, the idea of the BRICS Development Bank is the creation of an alternative to the World Bank to offer fairer loans and develop a different pool of creditors and borrowers," the expert said.

The BRICS Development Bank is Russia’s first participation in such a large-scale banking association in recent years, he said. Besides, many countries outside BRICS, first of all, in East and South-East Asia, have already expressed their readiness to participate in the project.

The BRICS Development Bank is a serious banking institution for creating a pool of reserve currencies so that trade among its participants should not be tied to settlements in US dollars, the expert said.

"The yuan will be the primary settlement currency. And China will play the first role in it because it will contribute the larger part of funds. The headquarters will also be located there, which has serious psychological significance," the expert said.

According to the expert, the proposal of establishing the BRICS Development Bank was painfully perceived in the United States, which originally tried to present the idea as "shallow." In East and South-East Asia and Latin America, on the contrary, the idea gained strong support. In any case, the creation of a transnational and at the same regional bank is very useful, the expert said.

The project’s weak side is that many want to participate in it in the hope of obtaining cheap loans, the expert said. Therefore, countries will inevitably be divided into creditors and borrowers, he added.

"For Russia, its participation in the project is important and promising both in geopolitical and economic terms," Pyotr Mozias, associate professor of the world economy department at the Higher School of Economics, told TASS.

"In the situation of bad relations with the West, we can see reorientation of political and economic ties to developing countries while the BRICS format is becoming an alternative to the G8 Group," he said.

The expert said he didn’t think the BRICS Development Bank was an alternative to the World Bank and the IMF. It may take up other niches, including the financing of BRICS projects and social programs, he added.

Speaking about China’s role in the BRICS Development Bank, the expert said that "China is getting stronger and this should be treated as a given objective reality." "But China does not display so far an expressed desire to dominate and it is ready to take its partners’ interests into account," the expert said.

 

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