Putin Hails Alternative To Western Financial System

Russian President Vladimir Putin is celebrating the emergence of an alternative to the U.S.-led global financial system. Speaking virtually at the BRICS annual summit on July 6, he boasted that the current system is “becoming obsolete” and will be replaced by one that serves the interests of Russia and its partners.

Putin’s speech comes as he is accelerating efforts to buffer Russia against existing sanctions, as well as new ones that President Donald Trump is threatening to impose on Moscow amid stalled peace negotiations with Ukraine.  

Rallying Partners Against U.S. Sanctions

Since the beginning of Putin’s assault on Ukraine in February 2022, the United States and the European Union have imposed sweeping sanctions on Russia’s financial, energy, and defense sectors. The cumulative effects have dealt a blow. Inflation is just under 10 percent, and the country is suffering labor shortages as its workforce is recruited into military service.  

Putin has found ways to mitigate the sanctions, including shifting oil exports — Russia’s most lucrative trade asset — from Western countries to countries like India and China that have joined Russia in creating BRICS as an economic counterweight to the United States and its allies. The bloc, named for founding members Brazil, Russia, India, China, and South Africa, now comprises 35 percent of the global economy, with a dozen “partner countries.”

BRICS nations have provided Russia with trade routes to evade sanctions. Last year, an Indian company sent hundreds of millions of dollars’ worth of advanced computer chips to Russia through Malaysia in violation of sanctions. The summit’s declaration condemned “unilateral economic sanctions and secondary sanctions,” implying its members intend to insulate each other from these measures.

Russia Doubles Down on BRICS

The Kremlin is on an unsustainable path — continuing massive military spending amid mounting economic pressure, which increases the risk of domestic unrest. Until now, Putin’s efforts to leverage BRICS have been piecemeal. Hunkering down for a protracted war, Moscow is seeking a comprehensive strategy to establish an alternative financial system, disentangled from the established order and less vulnerable to Western sanctions.

Putin celebrated that bloc members have de-dollarized their trade, using local currencies rather than U.S. dollars for the vast majority of transactions between members. He called this a step in the right direction toward “creating an independent payment and monetary system within BRICS.” To this end, since 2024, BRICS has discussed the potential of developing its own currency, in direct opposition to the dollar, as well as a “BRICS Bank.” At the July summit, participants affirmed the plan to create a cross-border payment system and a local currency bond fund.

Trump Exposes Putin’s Playbook, Warns Russia’s Teammates

Trump appears to understand Putin’s playbook and BRICS’s capacity to form a formidable threat to the prevailing dollar system. After stating that he was “very unhappy” with Putin amid Russia’s relentless attacks on Ukraine, Trump threatened on his social media site that “any country aligning themselves with the Anti-American policies of BRICS will be charged an ADDITIONAL 10% Tariff.” He further warned BRICS’s implementation of “the Unit” or any form of new currency would result in an additional 100 percent tariff. 

The Trump administration should further signal that countries that let Russia use their territory to evade sanctions, including China, India, Turkey, and the United Arab Emirates, will face additional tariffs and sanctions themselves. Aggressively calling out and punishing such actors can make it harder for Russia to sustain the war in Ukraine and rearm after the war ends. It can also caution other members of BRICS against launching their own military assaults on U.S. partners. In particular, the U.S. Treasury should designate financial institutions in any state abetting Russia in its sanctions evasion, as these institutions have proven key in crafting such schemes. Congress and the Commerce Department should also consider developing an authority to designate such countries as “Jurisdictions of Primary Diversion Concern.” Under this designation, Treasury and Commerce could send high-level delegates who have preapproved sanctions designation packages and export control restrictions to be implemented if such jurisdictions fail to commit to enforcing U.S. sanctions and export controls.

Emily Hester is a research analyst with FDD’s Center on Cyber and Technology Innovation and contributes to FDD’s Russia Program. For more analysis from the author and FDD, please subscribe HERE. Follow FDD on X @FDD and @FDD_CCTI. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.