BRICS New Development Bank: Economic or Political Initiative?

• 07.01.2015, 18:30
•  World,  Info

The Standing Committee of the National People's Congress, the top legislature body of China ratified an agreement between Brazil, Russia, India, China and South Africa to found the BRICS New Development Bank (NDB), which will fund infrastructure projects in the bloc and other developing economies, the chinadailyasia.com reports.

The New Development Bank, also known as the BRICS Bank, is one of two international development multilateral banks that China is promoting as an alternative to western institutions such as the World Bank.

It will enter into force only when all BRICS countries have deposited instruments of acceptance, ratification or approval. So far, the agreement over the Shanghai-based bank had been ratified by India and Russia. The first chairman of the bank's board of governors will be Russian Finance Minister Anton Siluanov, and the first president will be Indian banker Kundapur Vaman Kamath, formerly of the Asian Development Bank.
Chinese Foreign Ministry spokeswoman Hua Chunying said that there would be a meeting in Moscow next week to confirm its new leadership and map out the bank's first five years.

China has also led the creation of a new Asian development bank, known as the Asian Infrastructure Investment Bank, which counts among its 57 member countries nations such as Britain and Germany,  dailymail.co.uk reports.

Hua said that the two banks would complement each other.

"We think this will help increase the influence and right to speak of the BRICS countries on issues of international finance," the spokeswoman tells.

In an interview with RIA Novosti on Tuesday, in the course of this week's Civil BRICS Forum in Moscow, Chinese ambassador to Russia Li Hui explained that the bank's formation "is of great strategic importance for the construction of cooperative structures by BRICS countries."

"The formation of the bank not only helps to solve the problem of a lack of financing for infrastructure and similar projects within the framework of BRICS, but also aids developing economies to withstand the volatility and unpredictability of the world system of finance, and also plays an important role in the stable development of the world economy," the ambassador said.

Russia’s cooperation with the BRICS members is developing at an enormous pace, particularly in the areas affected by anti-Russian sanctions.

"These institutions will help Russia to avoid isolation, give us a source of external financing, which we will certainly use," the head of the department of International Economic Organizations at the Russian Institute for Strategic Studies Center for Economic Studies Vyacheslav Kholodkov said, adding: "The BRICS member-countries thus prevented Russia’s international isolation," tass.ru reports.
Another senior researcher at the RISS Center for Economic Studies Yekaterina Sharova drew attention to the fact that the BRICS member-countries had repeatedly spoken out in favor of reducing the dependence of the global financial system on the US dollar and increasing the use of national currencies. "Russia and China have made especially good progress in this respect signing an agreement on settling bilateral trade in ruble and yuan,'' the researcher noted.

It is not only Russia that can avoid the isolation with the help of the New Development Bank, but also Greece the speculations over whose potential accession to the Bank have been circulating over the past few weeks. But the most interesting thing is that it was Russia that suggested Greece to become a member of the BRICS bank. The international experts, especially the European ones, do not think that either Russia or the BRICS decided to save Greece from collapsing or to enhance the Eurozone’s sustainability.

The new Greek government, however, in a desperate economic and political situation, interprets this invitation as an alternative source of economic assistance to avoid bankruptcy or at least as leverage to maximize its chances for a gainful deal in the bargain with the EU and the IMF.

Though the New Development Bank, according to Greek researchers, is created certainly not to fund a country to the extent that it avoids bankruptcy.

Thus, Russia seems to take advantage of the "western camp’s" fragility and by following the example that the US has set for many decades, aims to use this economic assistance as a means of political influence.