BRICS Bridge: How Russia evades international sanctions

The Bank for International Settlements (BIS) is considering the possibility of closing the mBridge pilot project, a cross-border payments platform that Russian President Vladimir Putin considers a solution to circumvent international sanctions imposed by the United States after the outbreak of the war in Ukraine and reduce dependence on the US dollar, according to an article published two days ago by Bloomberg.

According to the cited source, Putin brought up the development of a similar platform, dubbed "BRICS Bridge," at the recent summit in Kazan, suggesting an alternative system aimed at supporting BRICS economies and challenging the dominance of the dollar in the international market.

Originally developed by the central banks of China, Thailand, Hong Kong and the United Arab Emirates, the mBridge platform recently reached a testing stage and demonstrated concrete capabilities through a major transaction in digital dirhams by the central bank of the United Arab Emirates in June 2024. The project allows international transfers of funds without going through US banks, an aspect that makes it attractive to states that want to avoid the dollar-dominated financial system. However, China's involvement in mBridge development has raised concerns among Western officials, who view the project as a potential way to circumvent US sanctions.

In addition to mBridge, in September 2024 another system called Agora was launched as a Western alternative, supported by major central banks and 40 commercial banks in the G7, including the Federal Reserve and the central banks of Europe, Korea and Japan. Agora is designed to improve the speed and efficiency of cross-border payments and is the West's response to similar BRICS initiatives.

The BRICS summit held on October 22-24 culminated in the adoption of a manifesto through which the group formally declared its intention to reduce dependence on the dollar. He promoted the concept of "BRICS-Pay," an initiative aimed at facilitating transactions between BRICS members through their own currencies without the involvement of the dollar. Even though the "BRICS Bridge" was not explicitly mentioned, this theme of de-dollarization generated general support, although some member countries, such as India and South Africa, remained reserved in the face of a rapid transition away from the dollar.

According to the quoted source, Agustin Carstens, general manager of the BIS, recently stated that the banking institution will not support projects that have direct links to sanctioned countries. He made it clear that the BIS "cannot operate with countries subject to sanctions," indicating that political pressure from the West is intensifying. In this context, closing mBridge is an option under discussion at the BIS, as sanctions imposed on Russia by the US and NATO allies have led to increased interest in dollar-independent alternatives.

However, the decision to close mBridge may not end the project, as participating countries may continue to develop it independently, according to industry sources. For BRICS states that want to protect sensitive transactions from Western surveillance, alternative payment platforms such as mBridge or BRICS Bridge represent strategic opportunities, although there are still differences among members. India, South Africa and the United Arab Emirates, countries that are not affected by American sanctions, show caution in adopting measures that could cause tensions with the West.

Even though mBridge or BRICS Bridge could provide technical viability and flexibility in international transactions, developing financial instruments with the potential to change the global economic balance remains a challenge for BRICS. In the face of these pressures, the BIS and other global actors are forced to reassess their strategies, and the evolution of de-dollarization and financial independence initiatives will depend on the internal unity of the BRICS and the reaction of the international community.