BRICS: Get Ready For Economic Bombshell Featuring Elon Musk - And Its Name... The Unit

Get ready for what could be the geo-economic time bomb of 2024: the advent of a decentralized monetary ecosystem.

The reason for The Unit, an idea that has already been discussed by the BRICS+ Business Council's Financial Services and Investments Working Group and aims to become an official policy of the bloc from 2025.

According to Alexey Subbotin, founder of Arkhangelsk Capital Management and one of the major architects of the project, this is a system that addresses the key geo-economic issue of these troubled times: the global crisis of confidence.

Subbotin knows everything firsthand: a seasoned professional with experience in investment banking, asset management and corporate affairs, he heads the Unit under the auspices of IRIAS, an international intergovernmental organization established in 1976 under the UN charter .

The "Global Majority" is fed up with the centrally controlled monetary framework put in place 80 years ago at Bretton Woods and its inherent flaws: chronic deficits fueling irresponsible military spending, profit bubbles, politically motivated and secondary sanctions, abuse of settlement and payment infrastructures, protection of domestic products, lack of fair arbitration.

Instead, Unit offers a reliable, fast and cost-effective solution for cross-border payments.

The unit of exchange, as a new form of international currency that can be issued in a decentralized manner and then recognized and regulated at the national level, is a game changer.

And it offers a unique solution to the bottlenecks in the global financial infrastructure: it is eligible for traditional banking as well as the newest forms of digital banking.

The Unit can also help reverse unfair pricing in commodity trading by creating a new – fair and efficient – Eurasian Commodity Exchange, where trading and settlement can be done in a new currency bridging trade flows and capital; thus paving the way for the development of new financial products for foreign direct investment (FDI).

The purpose of the Unit, conceptually, is to prevent direct dependence on the currency of other nations and to offer the Global Majority a new form of apolitical money - with enormous potential for fair trade and investment.

It is indeed a novel idea for an international currency, anchored in gold (40%) and BRICS+ currencies (60%).

It is neither a crypto nor a stablecoin…

The beauty...

The Global Majority will readily embrace the Unit's primary purpose: to harmonize trade and financial flows, keeping them free from political pressures or "regulations" that can be imposed at will.

What matters are independent monetary policies, which will focus on economic growth - an ecosystem that will provide an independent, complementary monetary infrastructure. And Unit offers this, hence it can be extended to willing partners in the collective West.

On a practical level, as Subbotin explains, the ecosystem can easily scale up because it comes from a fractal architecture supported by simple rules. According to the OHE Irias-approved playbook, its new hubs can be built either by states or by private agents.

The designers use a distributed ledger: a technology that ensures transparency, excluding capital controls or any manipulation of the exchange rate. This means that the connection is available on all open DEXs and digital platforms operated by commercial and central banks around the world.

Ultimately the point is that anyone, essentially, will be able to use Unit for bookkeeping, invoicing, settlement payments, saving and investing.

And now comes the kicker: the Unit has already received support from the BRICS Business Council and is on the agenda of the crucial ministerial meeting in Russia next month, which will work out the road map for next October's summit in Kazan. This means that it has what it takes to be on the table as a serious issue to be discussed by BRICS+ and finally adopted in 2025.

Will Musk be involved?

A priority for Unit designers is to inform the general public about the new system. The group is not at all interested in wading straight into the hot waters of politics or getting carried away by ideologically laden arguments.

References to inspirational but sometimes controversial concepts or writers like Zoltan Pozsar can pigeonhole the idea, limiting its power. In this regard, it is worth noting that the well-known billionaire owner of Tesla and SpaceX, Elon Musk, and the new BRICS Development Bank (NDB) may be involved in The Unit project.

However, The Unit should be considered a feasible, technical solution to the theoretically unsolvable problem: the existence of a globally recognized payment/commerce system, immune to political pressures. It is therefore our assessment that the New Development Bank (NDB) and BRICS+ will embrace the Unit and help it establish itself at the top of the new emerging global financial infrastructure, free from malign political interference.

A clear example of possible problem solving by the "Unit" concerns the trade relations between Russia and Iran, two leading members of the BRICS. Russian trade with Iran is unprofitable due to sanctions – both cannot make payments in US dollars or euros.

Russian companies suffer significant losses after switching to payments in national currencies. With each transfer, Russian businesses lose an average of up to 25% due to the difference between the market rate in Iran and the state rate.

And here is the solution: BRICS+ as well as the Global Majority can only be strengthened by developing closer geo-economic ties. The removal of Western profit-making capital will free up local trade and allow the pooling of investment capital for sustainable development. To unlock the dynamics of states, the "Unit" may well be the key.

Expansion of the BRICS-Alternative or Stronghold?

De-dollarization is the main topic on the agenda…

The expansion of the BRICS is expected to change the global economy, putting the dollar at immediate risk. In particular, in October 2024 the 16th summit of the bloc will be held in the Kazan region of Russia, where new members are expected to be announced, including the United Arab Emirates, Egypt, Iran and Ethiopia.

Ideas to prioritize local currencies in cross-border transactions over the dollar will also be discussed. As you can easily see, the main topic on the agenda is de-dollarization.

More than 40 developing countries have officially expressed their interest in joining the alliance. Therefore, the 10-member bloc will decide on BRICS expansion again at the October summit in Russia.

The expansion is based on consensus and all members will decide together who is allowed in and which country should be rejected. In any case, BRICS expansion will be problematic for the dollar.

The 2024 expansion could cause big problems for the US, the West and the dollar. Admittedly, the BRICS expansion will bring several changes to the way trade payments are run and settled.

The dollar will clearly be the first casualty when it comes to cross-border payments, with most countries ending their reliance on the currency. Undoubtedly, the expansion of BRICS will lead to changes in geopolitics and economics as the world continues to be further divided into two poles. Moreover, the influence of this group could make it problematic for some countries, closely aligned with the West, to build further relations with it. Therefore, the battle for economic supremacy could begin after the BRICS 2024 summit in October this year.

While developing countries remain on one side of the geopolitical spectrum, the US and other Western allies will be on the opposite side.

Probably a stronghold and not an alternative

The BRICS group of states is no longer an alternative to other international associations, but the bastion of global politics, said India's Foreign Minister Subrahmanyam Jaishankar.

"BRICS is no longer an 'alternative', it is an established feature of the new global landscape.

The message of reform embodied by the BRICS must permeate the multilateral world," the top diplomat wrote on his Twitter page. "BRICS friends strongly support the reform of the UN Security Council," continued Subrahmanyam Jaishankar.

According to the Indian foreign minister, "BRICS is not only an expression of multipolarity but of the many and different ways of dealing with international challenges". The BRICS seek to build "a fairer - inclusive - open international architecture with sustainable development at its core," he noted. "Building resilient and reliable supply chains is vital to ensure that no one is left behind," India's foreign minister stressed.

Parallel economy

How Russia is defying the West's boycott

When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin's full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment's delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

"In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports," Zoya, who asked to be only referred to by her first name, told Al Jazeera.

"I thought it was much easier to buy online than searching for a store in an unfamiliar country."

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow's military aggression against Ukraine.

But two years after the invasion, many of these companies' products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government's legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

Russia's full-scale invasion of Ukraine prompted an international backlash that, by some estimates, resulted in the country becoming the most sanctioned in the world.

Russia also experienced a huge voluntary exodus of brands, comparable in scale only to the boycott of South Africa that was credited with hastening the fall of apartheid.

More than 1,300 companies announced they would exit Russia or curtail their operations there, according to a tally by the Yale School of Management.

Russia's economy, however, has weathered the pressure campaign better than expected and there is a growing acknowledgement that the expectations sanctions would bring Moscow to heel were misplaced.

Russia's gross domestic product (GDP) declined by only 2.1 percent in the first year of the war, according to the International Monetary Fund (IMF) – compared with a predicted 8.5 percent contraction – and has been growing ever since.

Russians' real disposable income decreased by just 1 percent compared with 2021, according to an analysis by the Brussel-based think tank Bruegel, less than the decline seen during the COVID-19 pandemic.

At least initially, imports took a considerable hit.

According to estimates by Brugel, the value of all imported goods fell by half in the first four months after the invasion compared with the four months prior.

But since then, imports have made up much of that lost ground. For all of 2022, imports fell by only 8 percent, according to Russia's central bank, although independent researchers have estimated a sharper decline of 15-16 percent.

In 2023, imports reached 99.7 percent of pre-war levels, according to the Russian central bank.

The Russian economy's unexpected resilience has been due, in part, to alternative supply chains.

In late March 2022, as the scale of the corporate exodus from Russia became clear, Moscow legalised parallel imports - the import of products without the permission of the trademark owner.

Parallel imports are not banned under international law and are allowed by some countries for certain goods, including Japan and the United Kingdom.

"More commonly, it is used to ensure supply of essential medicines but here, Russia has expanded its lists to more commonplace consumer goods", Justine Nolan, the director of the Australian Human Rights Institute at UNSW Sydney.

The case of Apple, whose products in many cases fall under Western sanctions, provides a typical example of how Russia's parallel imports regime works in practice.

Russia's largest retailer of Apple products, re:Store, closed for several months "to assess the situation" following the tech giant's exit.

When re:Store reopened in September 2022, the retailer had changed its name to Restore: and expanded its range, selling not only Apple products but also hairdryers, gaming consoles and smart home appliances from other manufacturers.

Yandex.Market, where Zoya bought her Apple Watch, lists hundreds of iPhones being sold by numerous registered retailers, some of whom promise to deliver orders in as little as two hours.

Zoya bought her watch from a company called IDstore, which offers a wide variety of Apple goods, including computers, smartphones, watches and cables, for sale.

IDstore was registered in November 2022 and has a single employee, according to Rusprofile, a website that aggregates data from official registries.

On WhatsApp, an IDstore representative told that the company delivers goods to Russia from India, Malaysia, the United Arab Emirates, the United States and Europe, but declined to elaborate further.

Customs records show how new players emerged to supply customer-facing businesses after official distribution channels shut down.

Before the war, Russian subsidiaries of Apple, Samsung and Electrolux were almost exclusively responsible for importing their products.

But since February 2022, only about 1 percent of shipments have gone through these official channels, according to customs data.

Instead, the vast majority of Samsung, Apple and Electrolux products have been imported by dozens of little-known Russian companies and individual entrepreneurs.

Most of the shippers named in Russian import data are incorporated in jurisdictions that have not joined sanctions against Moscow, including the UAE, China and Hong Kong.

In Russian supermarkets, popular food brands such as Coca-Cola, Lipton, Lindt, Geisha, Tchibo and Pringles are still displayed on shelves despite officially exiting the country.

Russian shoppers can still clean their toilets with Bref and wash their clothes with Persil detergent.

L'Occitane cosmetics are being sold under a new Cyrillic name at the French brand's former stores in Russia, which were sold to a local buyer after the invasion.

Other popular beauty brands such as Syoss, Schwarzkopf and Chanel - all of which officially pulled out of Russia - are sold openly in major cosmetics chain stores.

While less prominent in customs records, firms incorporated in the European Union, which imposed some of the toughest sanctions on Russia, are also among the suppliers of goods.

Businesses outside Russia willing to supply sanctioned goods directly to Russian customers are not difficult to find.

Customs data shows that products are being imported into Russia through unofficial channels on a large scale.

Russian businesses are trying hard to get the market share left by Western companies, and in many segments, [the] Chinese are the real beneficiaries.  

Indian rupee's colpo grosso against the dollar – Coordinated intervention against devaluation trend

The dollar hit the Indian rupee in the week ended 4/19, pushing the Indian currency to an all-time low of $83.61.

However, the rupee managed to reverse its decline after a brief rally against the US dollar to touch the $83.50 level.

Currency market insiders argue that the appreciation of the rupee is not normal and some "players" may have been involved in it to prevent it from falling.

It is possible that the Reserve Bank of India (RBI) was one of those "players" that helped keep the rupee from collapsing against the dollar.

BRICS countries intervened in the foreign exchange market by selling dollars to support their local currencies.

The Reserve Bank of India is likely to have sold dollars in the foreign exchange market to stem the fall in the rupee.

An unnamed forex analyst who spoke to Reuters confirmed that the RBI may have intervened to support the rupee against the dollar.

The Indian rupee faced stiff competition from the appreciating dollar, driving the local currency to new lows.

This decline in local currencies comes as the BRICS seek to end their dependence on the dollar.

Despite the trend towards de-dollarization by the BRICS countries, the US dollar remains strong against all local currencies.

The Indian rupee, Chinese yuan and Japanese yen are struggling to weaken the US dollar in the foreign exchange market.