Research & Insights #49

BRICS countries plan to create a payment system based on blockchain

The BRICS group is to work on creating an independent payment system based on digital technologies and blockchain, Kremlin aide Yury Ushakov said recently. The aim is to expand the role of BRICS in the international monetary and financial system, by increasing settlement in national currencies and strengthening correspondent banking networks to secure international transactions. “The idea is not to create a financial and monetary alliance, but to create payment and settlement systems that do not depend upon whims of the West,” explained Deputy Foreign Minister Sergei Ryabkov. Russia took over the group’s presidency on January 1, 2024 and will host the BRICS summit in October 2024 in Kazan, Tatarstan, in Russia’s Volga region.

Moscow’s reaction to the confiscation of its assets could lead to systemic risks

Russian sovereign assets frozen in the EU could yield up to €20 billion by 2027, some of which will probably be transferred to Kyiv on a regular basis, a senior EU official told Reuters. However, some of these funds may have to be provisioned in Europe in anticipation of massive claims against the clearing house, Euroclear. According to the EU source, Russia’s central bank is likely to get its hands on Euroclear’s 33 billion euros of money located in Moscow. In addition, it could take legal action to seize Euroclear’s money in the securities depositories in Hong Kong and Dubai, and in a worst-case scenario, the European depositary could run out of capital and have its licence withdrawn, which could lead to a global financial crisis, given that Euroclear’s total assets amount to over 37 trillion euros.

Data suggests that less than 10% of Western companies have left Russia

According to calculations by the Kyiv School of Economics, only 373 of the 3,756 foreign companies working in Russia before the outbreak of war have completely withdrawn from the country. This is partly due to the fact that leaving companies have to sell their assets at half their market value, much to the delight of businessmen loyal to the Kremlin. Of the companies that remain in Russia, some are private, but others are publicly traded and could, in theory, come under pressure from their shareholders to divest from Russia. In fact, according to a study by the company Caliber, very few American and European consumers know which global brands have left Russia and which have stayed. According to Dirk van der Put, director of Chicago-based Mondelez, which produces Milka chocolate, “from a moral point of view, investors don’t care” whether companies operate in Russia.

The US warns Austrian bank Raiffeisen about its relations with Russia

The US has threatened Austria’s leading bank with sanctions for its activities in Russia. The US Treasury warned Raiffeisen Bank International (RBI) that it risked “being excluded from the US financial system” if it helped finance the Russian military. Raiffeisenbank, the Russian subsidiary of RBI, is the largest Western bank in the country. It ranks tenth among Russian credit institutions in terms of asset size. Despite RBI’s willingness to sell its Russian operations after coming under pressure from international regulators, the company continues to operate in the Russian market, providing payment facilities to hundreds of companies in the country. In 2023, RBI made a profit of 2.4 billion euros, including 1.3 billion euros in Russia, where it employs 9,942 people in 490 retail branches.

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