YEKATERINBURG, Russia (AP) - The leaders of four major emerging
economies - Russia, China, Brazil and India - apparently failed
Tuesday to reach consensus on reducing the dominance of the U.S.
dollar despite growing calls for an alternative global reserve
The four, seeking a greater role in global financial
institutions, held the first summit of the so-called BRIC grouping
after two days of meetings of the Shanghai Cooperation
Organization, another group that Russia has sought to use to
reassert its role on the global stage.
Moscow tried to mount a new challenge to the U.S. dollar as the
world's reserve currency and Russian President Dmitry Medvedev
pushed his call for more global reserve currencies.
"No currency system can be successful if we have financial
instruments denominated in just one currency," Medvedev said. "We
must strengthen the international financial system not only by
making the dollar strong, but also by creating other reserve
He said that new ones will take long time to emerge, but that
"The main reserve currency, the dollar, has failed to serve its
Later, Medvedev and the other BRIC leaders issued a statement
that called for a more diversified international monetary system
and a greater role for their four nations in making major global
A reformed financial and economic architecture should be based
on a "democratic and transparent decision-making and
implementation process at the international financial
organizations," the statement said.
Notably, however, the statement made no explicit criticism of
the dollar, and contained no reference to developing new reserve
The cautious wording appeared to reflect China's concerns that
any anti-dollar statements could erode the value of its currency
Analysts said the BRIC proposals were premature and could
exacerbate the global crisis.
The BRIC statement does not pose any real threat to the dollar,
said Brian Dolan, chief currency strategist at Forex, since it
"did not propose any concrete steps toward diversifying away from
Michael Woolfolk, senior currency strategist at the Bank of New
York Mellon, said the world will naturally become less dependent on
the greenback as the global economy becomes less dependent on the
U.S. economy. But, he said, the dollar is just too dominant for the
"The BRICs cannot expect to have their cake and eat it too,"
he said in a research note.
While BRIC members share a desire to play a bigger role in
creating a new financial order and counterbalancing the West and
Japan, their often contradictory interests would make forging a
common policy a difficult task.
China and India have sizable labor resources, while Russia and
Brazil are rich in natural resources. China is a major consumer of
natural resources, unlike Russia and Brazil, which are top
producers. While China wants lower oil prices, Russia and Brazil
would seek higher oil prices.
China and Russia are increasingly in competition for clout and
access in strategic regions - most significantly, ex-Soviet Central
Asia, the strategically located region that has vast oil and gas
reserves and faces a growing threat from Islamic radicals.
Moscow and Beijing dominate the Shanghai grouping, which was set
up ostensibly to counterbalance U.S. presence in Central Asia, but
also to keep an eye on one another.
China announced Tuesday it was offering $10 billion in loans to
the largely poor region, adding muscle to Beijing's role in the
grouping, which includes Kazakhstan, Kyrgyzstan, Tajikistan and
Medvedev's economic adviser Arkady Dvorkovich said Russia may
diversify its currency reserves investments by buying bonds issued
by Brazil, China and India. He told a briefing that Russia could
make the move if the other three BRIC members reciprocate.
Dvorkovich also proposed revising the way the International
Monetary Fund's obligations are valued. He said the ruble, the yuan
and gold should be part of a revised basket of currencies to form
the valuation of the IMF's special drawing rights - international
reserve assets that supplement countries' existing official
Dvorkovich also denied any rift on the issue with Russian
Finance Minister Alexei Kudrin, who helped the dollar rebound in
value this week by saying over the weekend that the dollar's status
as the world's main reserve currency wasn't likely to change soon.
"No one wants to bring the dollar down," he said.
Other observers said Medvedev's speech in Yekaterinburg on
Tuesday was more of a political declaration than a call for action.
"Medvedev is trying to give an impetus to a discussion which
may take quite a long time - and give no result," said Vladimir
Tikhomirov, chief economist at Moscow-based UralSib bank.
The talk about global reserve currencies has been prompted by
concerns in China and Russia that soaring U.S. budget deficits
could spur inflation and weaken the dollar, debasing the value of
Officials from Russia, China and Brazil have said in recent
weeks that they would invest in bonds issued by the International
Monetary Fund to diversify their dollar-heavy currency reserves.
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