YEKATERINBURG, Russia (Reuters) - Russia will advocate a cautious approach to changing the system of global reserve currencies when the world’s biggest emerging economies hold their first formal summit on Tuesday, the Kremlin’s top economic aide said.
Brazil, Russia, India and China — which account for 15 percent of the $60.7 trillion global economy — will focus on ways to reshape the financial system after the economic crisis.
Russian President Dmitry Medvedev will raise the issue of a global reserve currency at the meeting, top economic aide Arkady Dvorkovich, said.
“There is an understanding that the last thing we need now is turmoil on financial markets,” Dvorkovich told a news briefing. “No one wants to ruin the dollar, including us.”
The meeting is scheduled to last about 2 hours.
Dvorkovich said BRIC leaders — who control nearly $3 trillion in foreign currency reserves — would also discuss the idea of investing their reserves in each other’s currencies.
Before the BRIC meeting, Medvedev told the leaders of a summit of the Shanghai Cooperation Organisation (SCO) — which includes China — that the grouping should think about using their national currencies for trade with each other.
“We must strengthen the international currency system not only by strengthening the position of the dollar, but also by creating new reserve currencies and possibly ... the creation of supranational payment tender and ways to make settlements.”
Medvedev added that members should think about investing in each other’s financial instruments.
Chinese officials have in recent days played down talk of a discussion on a new supranational reserve currency to reduce dependency on the U.S. dollar.
Goldman Sachs, which coined the BRIC term in 2001, now predicts that in 20 years’ time the four countries could together dwarf the G7 and China’s economy will overtake the United States in total size.
“These four countries are all quite influential in international economic development, and I think if in the meeting they raise some proposals and initiatives, that would be fair and reasonable,” said Wu Hailong, a senior Chinese Foreign Ministry official.
“Especially, some countries have proposed establishing a super-sovereign currency, and I think their impetus is ensuring the security of each country’s foreign currency reserves.”
Detractors say the idea overstates their potential and that the four BRIC countries are as divided as they are united. Immediate agreement on practical steps among the members of this loose and untested bloc appears unlikely.
As part of proposals to rebuild the financial system, Medvedev has made proposals on giving a greater role to the International Monetary Fund’s Special Drawing Rights that echo ideas from Chinese central bank chief Zhou Xiaochuan.
Russia said it would reduce the share of U.S. Treasuries in its $400 billion reserves and buy IMF bonds. China, Russia and Brazil have pledged to help capitalise the IMF as they seek more influence at the fund.
A one-on-one meeting between Indian Prime Minister Manmohan Singh and Pakistani President Asif Ali Zardari is planned on the sidelines of the SCO summit and could help break the ice between the two nuclear-armed powers.
Iranian President Mahmoud Ahmadinejad arrived in Yekaterinburg on Tuesday, defying protests in Tehran against his reelection in a disputed vote.