The BRIC Summit is understood to have discussed the need for an alternative monetary trading system to save their earnings getting devalued due to the likely US dollar slide in the market triggered by over printing of the greenbacks. In a last week’s address, Russian President Dmitry Medvedev proposed that countries must begin to encourage a mix of currencies in bilateral trade to reduce over-dependence on US dollar.

Medvedev had also proposed to give greater emphasis on the IMF’s Special Drawing Rights. Russia further indicated that $400bn in the US Treasury would be relocated to the IMF. Reserve rich nations including China and Russia have huge holdings in the US Treasury.

BRIC member states hold a total of $2.8 trillion in international reserve assets excluding gold, 42 percent of the world’s total. BRIC nations also account for 15 percent of the $60.7 trillion global economy.

Last month, China and Brazil have signed an agreement to integrate respective currencies in their bilateral trade to reduce transaction costs incurred while currency exchange. It should be recalled that China’s central bank governor Zhou Xiaochuan had had suggested few months ago to dump US dollar as the global reserve currency and replace it with a different standard run by the IMF.

The summit is learned to have discussed various global issues including climate change and economic crisis besides the reliance on USD. Though it is unlikely to seal a concrete deal on the use of local currencies in bilateral trade, the member nations are expected to reach a tacit understanding in phasing out USD from future trade.

Toboc Trade News

The proposal broadly aims at managing grain reserves and prices; and also to improve necessary infrastructure including developing rail network and port capacity through creation of a pool. The Ukrainian Agriculture Policy Minister Yuriy Melnik and the Kazakh Deputy Agriculture Minister Arman Yevniyev welcomed Russia’s proposal during the first such forum.

The US has already come out with a statement saying a cartel in the line of OPEC would only delay Russia’s decade-old ambition of joining the 153-member WTO. Michael Michener from the US Department of Agriculture said Russia the third largest wheat exporter was jeopardizing its chances of becoming the WTO member since such a formation is against the WTO guidelines.

Russia is planning to bring more land under grain cultivation in the coming years as they have 10 percent of world’s arable land that has turned fallow after the collapse of the former Soviet Union. Russia has millions of hectares of chernozem (black earth), an ideal soil for agricultural purposes which are formed by partially decomposed organic matter.

If the new grain union takes shape, it would become the largest exporter and producer of global grain market. In the next 10 to 15 years, Russia plans to produce up to 135mn tons of wheat annually and export 40 to 50mn tons of it, Skrynnik later added. Last year’s bumper harvest made Russia the fourth largest grain producer in the world.

While food prices skyrocketed, Medvedev first proposed such an idea last July to augment food security. It should be noted that a report from London-based think-tank Chatham House early this year stated the climate change, water scarcity and competition for land would make it hard to meet an expected 50 percent rise in demand for food by 2030. Deputy Prime Minister Viktor Zubkov told that some of Russia’s 9.6mn tons of grain stockpiles would be set aside to provide humanitarian aid through the UN World Food Program to countries facing starvation as the fallout of global economic crises.

Toboc Trade News