Information Bulletin of the BRICS Trade Union Forum
Issue 23.2020
2020.06.01 — 2020.06.07
International relations
Foreign policy in the context of BRICS
India, Africa should accelerate UNSC reforms: South Africa's BRICS Sherpa (Индия и Африка должны ускорить реформы СБ ООН: южноафриканский шерпа БРИКС) / India, June, 2020
Keywords: expert_opinion, global_governance

India and Africa should renew their joint efforts to accelerate reform and expansion of the UN Security Council, said Anil Sooklal, South Africa's Sherpa for BRICS and G20, at a virtual conference held to mark the 2020 Africa Day.

"The attempts at the UN Security Council to put a halt to global conflicts during the pandemic have been unsuccessful. It shows how paralysed the UN system is. What is it that we are celebrating on its 75th anniversary of the UN?," Mr Sooklal said while responding to a question on what India and Africa can do to intensify reform of global governance institutions.

"You still have an Africa that is marginalised in the Security Council. How much did we progress in the UN reform process since it began some 20 years ago? So, Africa and India must push the reform agenda of the multilateral institutions, especially the UNSC, through their BRICS and IBSA platforms," said Mr Sooklal. "We need to collaborate and see how we create a more inclusive global society that does not marginalise Africa and other parts of the world," said Mr Sooklal, Deputy Director-General responsible for Asia and the Middle East in Department of International Relations and Cooperation (DIRCO), Republic of South Africa.

To mark the 2020 Africa Day, an International Webinar entitled "Mapping Next Steps in India-Africa Partnership: Pandemic & Beyond," was organised by the Delhi headquartered India Writes Network, a leading publishing and research organisation focused on global affairs and India and the World magazine. The Webinar brought together eminent diplomats, experts and thought leaders from India and over African and several European countries.

In his welcome remarks, Manish Chand, Founder-CEO of India Writes Network and India and the World, set out key themes of the conference. "Taking a long-range view, the virtual seminar will help map the future trajectory of the India-Africa partnership in accordance with 10 principles of the India-Africa partnership outlined by Prime Minister Narendra Modi in his defining speech to the Ugandan parliament in July 2018."

Global Supply Chains

Mr Sooklal, also South Africa's BRICS Sherpa, G20 Sherpa and IBSA (India-Brazil-South Africa) Sherpa and the IORA (Indian Ocean Rim Association for Regional Cooperation), also called for enhanced collaboration in shaping post-Covid global supply chains. "The faultlines exposed by the COVID-19 pandemic in the global supply chain offer an opportunity for India and Africa to build a robust system based on shared values that would withstand any future difficult situations," he said.

"The current global slowdown offers an opportunity for us to overcome the challenges, and it is fortuitous that we have put forward this template of the Continental Free Trade Agreement," Mr Sooklal said at the virtual seminar held to mark Africa Day. He was referring to the historic continent-wide deal that was scheduled to come into force on July 1 but could be postponed due to the pandemic.

Both India and Africa account for almost one-third of the global population, but in contrast, the combined share of global trade is less than 10%. "In this day and age, it is inconceivable, and so, we need to look at it again to ensure that Africa and India become part of the mainstream," he said.

At the 2015 India-Africa Forum Summit, Prime Minister Narendra Modi had outlined the guiding principles of this partnership, which he reaffirmed during his state visit to Uganda in an address to parliament. "What is needed now is to unpack these guiding principles and synergise it for Agenda 2063," Mr Sooklal said.

"The primary focus should be on how both can jointly produce for mutual benefit. There are tremendous opportunities but both sides have to look at the niche areas where they can add value to this relationship. Sectors such as pharmaceuticals, Information and Communication Technology, capacity and skill development, and agriculture could be significant areas for collaboration," Mr Sooklal said. "We need to relook the millennia model of value chain supply, of producing, using, and discarding. We need to collaborate and see how we can create a more inclusive global society that does not marginalise Africa and other parts of the world," he added.

Moderated by Manish Chand, the Webinar was addressed by eminent diplomats and experts. This included: Dr Anil Sooklal, Deputy Director General, DIRCO, South Africa; H.E. Mr. Alem Tsehaye Woldemariam, Ambassador of Eritrea in India and Dean of African Group Heads of Mission in India; David Rasquinha, MD, EXIM Bank; H.E. Ambassador of Uganda to India Grace Akello; H.E. Morocco's Ambassador to India Mohammed Maliki; H.E. Ambassador of Ethiopia to India Tizita Mulugeta; H.E. Sékou KASSÉ, Ambassador of Mali; Amb. Virendra Gupta, India's former high commissioner to South Africa; Prof. Rajan Harshe, academic and author; and Pranav Kumar, Head, International Trade (CII).
BRICS During COVID-19 (БРИКС во время COVID-19) / Russia, June, 2020
Keywords: expert_opinion, covid-19

Yana Grigoryeva, Intern at the Russian National Committee on BRICS Research - special for InfoBRICS

The BRICS countries adhere to the concept of a multipolar world, a just world order, civilizational diversity, and strengthening the role of developing countries in global governance.

Analyzing the international role of BRICS in terms of globalizing political processes the development trends, we can say that this group of countries, which has significant integration potential, is an element of the new geopolitical landscape of the world, and the zone of combined influence of its member countries is gradually becoming a structure of global governance and collective global leadership, as well as a potential power center of the modern world.

Today, during the coronavirus epidemic of 2020, we are seeing coordination of actions of individual countries on the most important issues for the implementation of their national interests. The BRICS countries are interested in such coordination – in order to strengthen the positions of each member of the association, for the sake of their own stability in the growing chaos, as well as to strengthen the voice of developing countries in general. The main problem of such associations is the difference between theoretical and practical levels, i.e. the difference between the goals set, the opportunities of participants and the degree of their real influence on the development of world politics and economy.

Since the beginning of the second decade of the 21st century, it has become clear that it is becoming increasingly difficult for the world community to deal with transnational challenges without the direct participation of emerging new powers such as Brazil, China and India. However, these states were more preoccupied with problems of internal development and did not want to solve pressing issues on the world agenda.

The recent financial crisis and the collapse of the world market have caused a serious shock to the system of international relations. However, when the economic recovery began, the sense of danger in some countries was blunted. Meanwhile, Brazil, China, India and a number of other developing countries moved forward, ignoring the stalled economies of the developed world. After the 2008 financial crisis, it became clear that China and other major emerging economies had suffered less damage and would recover faster than the world's wealthiest nations. Chinese and Indian banks were the least affected by the failure of major financial institutions in the United States and Europe.

There are a number of problems and challenges that the BRICS countries are currently facing: additional responsibility of Russia as BRICS chair in 2020 and the need to update the strategy for economic partnership of the BRICS countries in the context of a pandemic, criticism and accusations against the participants of the association from the west, attempts to split the BRICS by external players.

The main goal of the Russian presidency is to contribute to improving the quality of life of the peoples of the countries of the association, and the motto of the presidency will be "BRICS Partnership for global stability, common security and innovative growth". This is especially relevant and timely in the context of the unfolding crisis against the background of COVID-19. During the presidency, our country will need to offer a high-quality and thoughtful update of the BRICS development strategy for the period up to 2025, which should undoubtedly take into account modern realities and present mechanisms for crisis management, including in order to combat the pandemic and help other countries.

During the pandemic crisis, the BRICS countries have not seen a single hostile action against each other. However, at the same time, the rivalry of the great powers is growing in the world, the US confrontation with China and Russia is becoming more acute, while competition with China is becoming one of the fundamental directions of US foreign policy and the central axis of international relations. This leads to a continued increase in conflict, turning the practice of sanctions and trade wars into a long-term norm. The BRICS countries are in any case cannot get involved in a confrontation "US – China" and "USA – Russia". The agenda should be unifying, not divisive.

On May 7, 2020, within the framework of the Russian BRICS presidency, a meeting of senior BRICS officials on health issues was held in the format of a videoconference. The BRICS countries raised issues of strengthening the control and diagnosis of the new COVID-19 coronavirus infection, as well as the search for effective treatment methods for patients with a confirmed diagnosis. The parties discussed the need to create a comprehensive early warning system for biological threats within the framework of BRICS. At the same time, it was determined the feasibility of using the potential of the New development Bank to financing joint projects to ensure the safety of the population of the countries with an emphasis on the prevention of significant biological threats and the need to eliminate their consequences.

During the discussions, the countries also agreed to continue to provide mutual support for the prevention and treatment of the new COVID-19 coronavirus infection, including the creation of favorable conditions for the supply of medicines and diagnostics, immunobiological drugs and medical equipment. The partners welcomed the proposal of the Russian side to create a review of advanced measures taken by the BRICS countries to counter the spread of COVID-19 for further use not only by the five countries, but also by specialists from other countries.

In addition, on April 28, an extraordinary meeting of the BRICS foreign Ministers was held under the chairmanship of Russian foreign Minister Sergey Lavrov. The Ministers exchanged views on the current situation in the context of the negative impact of the COVID-19 coronavirus outbreak on international relations and the world economy, and discussed ways to combine efforts to counter its spread and overcome the financial, trade, economic and social consequences of the pandemic. The Ministers stressed the importance of further deepening the BRICS strategic partnership and cooperation in three key areas: politics and security, economy and finance, as well as cultural and humanitarian contacts. In addition, 15 billion dollars will be allocated to financial projects to restore the economies of the BRICS countries after the coronavirus pandemic.

The meeting discussed the issue of joint work on the development of a coronavirus vaccine. The BRICS countries clearly have an interest in establishing a mechanism for the development and use of a coronavirus vaccine as soon as possible, in accordance with the decisions of the Ufa (2015) and Johannesburg (2018) summits.


Number of cases as a percentage of the global total:
USA - 32%
EU - 26,4%
BRICS - 13,5%
Great Britain - 5,3%
ASEAN - 1,4%

Number of deaths as a percentage of the global total:
USA - 28%
EU - 40,7%
BRICS - 7,3%
Great Britain - 11,2%
ASEAN - 0,7%
At this stage, the human capital of developing countries, led by BRICS and ASEAN, has suffered less in comparison with developed countries, led by the EU and the US, and it will take less time to make up for it and return to the usual rhythm of economic, political and social life.

The long-term outlook promises a more positive picture of the world. In the future, there will be a structural restructuring of the world economy, and globalization will change qualitatively, transforming into a form of "closed globalization" based on political and economic independence. At the same time, the demand for cooperation in the fields of health, ecology and climate will increase. And this multiplies the importance of strengthening cooperation within the BRICS framework.

Pakistan's Role in Russia's Greater Eurasian Partnership (Роль Пакистана в Большом Евразийском партнерстве России) / Russia, June, 2020
Keywords: expert_opinion, global_governance

Russia's Greater Eurasian Partnership (GEP) is envisaged to become an important component of its contemporary foreign policy. President V. Putin simplified this grand strategic vision as "[being formed] on the basis of the Eurasian Economic Union (EAEU) and China's Belt and Road initiative (BRI)" in an article published before the APEC Summit in November 2017. He added that "this is a flexible modern project open to other participants." Building upon this concept, the Russian leader observed during the second BRI Forum in April 2019 that this Chinese-led project "rimes with Russia's idea to establish a Greater Eurasian Partnership" and announced that "The five EAEU member states have unanimously supported the idea of pairing the EAEU development and the Chinese Silk Road Economic Belt project". Seeing as how the China-Pakistan Economic Corridor (CPEC) is one of BRI's flagship projects as described by Pakistani Foreign Minister Qureshi in November 2019, with $13 billion worth of projects completed in January 2020 out of an expected eventual total investment of $60 billion (thus making it China's largest BRI infrastructure investment anywhere in the world), it's inevitable that Russia will have to improve its connectivity with Pakistan in order to fulfill V. Putin's vision of bringing the EAEU and BRI closer together to form the GEP.

Practically nothing has been written about the role that Pakistan is poised to play in the GEP despite it being an extremely important one by virtue of hosting CPEC, which functions as China's only reliable non-Malacca access route to the Indian Ocean Region, the nearby energy-rich Middle Eastern one, and the rapidly growing continent of Africa where the People's Republic has recently become its top trade partner in aggregate. It should be pointed out that the official CPEC website of the Pakistani government states that the project has already secured at least $46 billion in "commitment of investment and concessional loans", thus, making it a promising economic opportunity that Russia certainly can't ignore. The pivotal geopolitical location of the South Asian host state at the confluence of its home region, West Asia, Central Asia, China, and the Indian Ocean also makes it an extremely strategic gateway to each of them, which complements the connectivity vision that Russia set out to achieve through the GEP. This makes it all the more perplexing that Pakistan and CPEC aren't included in the academic literature written about this topic, something that the authors aim to rectify through the present research. As such, Pakistan and CPEC are regularly referenced throughout the work in order to highlight their relevant significances to everything being discussed.

The article begins by analyzing the Russian Foreign Policy Concept of 2016 that established the guidelines for conducting the country's relations with other states. This section serves to explain the policymaking formulations behind the GEP, as well as make the case that Pakistan and CPEC are pertinent to it. The second part then elaborates on the EAEU that's expected to form the core of this connectivity vision. Once that's done, the research segues into a discussion of Russia's trans-regional integration plans while explaining the relevance of Pakistan as appropriate. The reader should by then have a more solid understanding of the role that the country is expected to play in the GEP, after which the work will conclude with several policy recommendations for facilitating its integration into this supercontinental structure. It's hoped that the research will prove itself useful for other academics to eventually build upon in exploring the opportunities for further improving Russian-Pakistani relations in view of this vision.

The Russian Foreign Policy Concept of 2016

The practice of Russian foreign policy is determined by the Ministry of Foreign Affairs' concept paper approved by President Putin at the end of 2016. As can be implied by its name, this document contains the primary guidelines that influence Russian foreign policy, and thus, it also relates to many other issues connected to International Relations in general. Only those that are pertinent to the research topic, however, will be referenced in this article. The first part of the document is about the General Provisions, which concentrate on the need "to create a favorable external environment that would allow Russia's economy to grow steadily and become more competitive" in parallel with "[consolidating] the Russian Federation's position as a center of influence in today's world". When combined, it can be understood that one of the most important objectives of Russia's foreign policy is to expand the state's international influence in order to improve its economic growth. Of topical interest, the expansion of Russian influence in South Asia could lead to Moscow reaping some of the economic benefits of CPEC.

There are some formidable challenges that stand in the way of achieving this general objective, whether in South Asia or elsewhere. The concept paper considers the contemporary international environment to be characterized by worsening tensions and expresses concern at the increasingly popular trend of using force to resolve international disputes. Its authors also believe that "global power and development potential is becoming decentralized, and is shifting towards the Asia-Pacific Region, eroding the global economic and political dominance of the traditional western powers". This is leading to a new phase in International Relations, which while promising, is also fraught with many risks of conflict unless future threats are adequately managed. They also note how the trend of connectivity is spurring regional integration processes. It's here where Russia can play a special role since its concept paper says that the country's foreign policy "is characterized by consistency and continuity and reflects the unique role Russia has played for centuries as a counterbalance in international affairs and the development of global civilization." From this position, it can be said that the EAEU could eventually fulfill that role, with the GEP taking it a step further throughout the rest of Eurasia with time.

To that end, Russia considers the overarching goal of its foreign policy to be "shaping a fair and sustainable world order". The concept paper suggests that Russia can do this by "expanding its ties with its partners within the Group of Twenty, BRICS (Brazil, Russia, India, China and the Republic of South Africa), the SCO (Shanghai Cooperation Organization), RIC (Russia, India and China) alongside other organizations and dialogue platforms". Pakistan is one of the two newest members of the SCO alongside India, which makes it an unstated party to this proposed policy. In addition, Pakistan is China's top BRI partner, and China is a leading player in all four of the aforementioned structures. It therefore follows that improving connectivity with Pakistan would add yet another layer to Russia's strategic partnership with China, especially considering that President Putin's proposed pairing of the EAEU and BRI could naturally see the two Great Powers collaborating on joint projects in CPEC as one of its many outcomes.

Recalling what was written earlier, Russia's foreign policy concept intends to improve the country's economic standing. Its authors say that Russia "contributes to the efficiency of the multilateral trade system with the WTO at its core, and promotes regional economic integration in line with its priorities", and also "creates favorable conditions for expanding Russia's presence on global markets, primarily by diversifying its exports, and specifically by increasing the volume of non-resource-based exports, and expanding the geography of foreign economic ties". Specific attention should be drawn to the part saying that the state also "provides governmental support to Russian organizations seeking to tap new markets and gain a larger foothold in traditional ones, while countering discrimination against Russian investors and exporters". With these guidelines in mind, it's sensible for Russia to economically engage Pakistan.

CPEC is one of BRI's flagship projects, and Russia's hitherto lack of participation in it is a conspicuous absence in light of its strategic partnership with China and President Putin's proposal to pair the EAEU with BRI. The only explanation is that Russia is deferring involvement out of respect for India's sensitivities since New Delhi is fiercely opposed to CPEC because it regards it as traversing through Pakistani-controlled territory that it claims as its own per its maximalist approach to the Kashmir conflict. Even so, it can be argued that Russia shouldn't sacrifice its national economic interests just to avoid o ending one of its partners (India), especially when the one that it's closest to (China) is the chief investor in the said project. It isn't possible for Russia to accomplish the previously mentioned economic tasks if it doesn't participate in some capacity or another in CPEC. Nor, for that matter, can it entirely succeed with the concept paper's plan for Russia to "establish a common, open and non-discriminatory economic partnership and joint development space for ASEAN, SCO and EAEU members with a view to ensuring that integration processes in Asia-Pacific and Eurasia are complementary" since Pakistan is the third most populous member of the SCO.

The Eurasian Economic Union

The GEP has no practical standing without the EAEU as its core, so Russia must first concentrate on succeeding with its regional integration plans through this comparatively smaller structure and then transition to trans-regional integration afterwards. Unlike what some critics have claimed, the EAEU isn't being created to advance national prestige or out of nostalgia for the Soviet-era past. Instead, the main purpose is to enable Russia to better compete with the countries of the Asia-Pacific region, as well as to cooperate with them on a more equal footing. Russia needs their assistance for developing the Siberian and Far Eastern regions that have been neglected for decades, though without being seen as somewhat of an economic equal, it fears being taken advantage of. These Asia-directed goals underpinning the EAEU were detailed in the Valdai Club's 2012 report titled "Towards the Great Ocean, or the New Globalisation of Russia". The authors hoped that decision makers would focus more on this trend after reading their work. The report was released while Russia was still creating a customs union with its EAEU partners, so it could have been very influential in hindsight.

The Asia-Pacific countries, or more specifically the countries of Northeast Asia, aren't the only ones that the EAEU aims to compete and cooperate with. Former Secretary of State for European Affairs in Portugal Bruno Maçães wrote in his 2018 article titled "Supercontinent Eurasia " that Russia "now looks in four directions at once, a marked improvement upon the double-headed eagle of its state emblem. Traditionally, Russian elites tended to see their task as that of bringing about a gradual but complete integration with a more advanced Europe. That vision is now being replaced by a new self-image: as the center and core of the Eurasian supercontinent, Russia can reach in all directions and provide a bridge between Europe and China on both ends. In fact, Moscow is also looking south to the Middle East, and to the north, as global warming transforms the Arctic into the main trade route linking Europe and Asia." The Middle East isn't Russia's only southward interest, however, since it can be argued that Pakistan's CPEC is much more important when it comes to non-energy, commercial economic activity. This is yet another point that can be made about the importance of Pakistan in the GEP and why it's so puzzling that practically nothing has been written about its role in Russian grand strategy.

That said, Russia's future integration with Pakistan or any other country outside the former Soviet Union will have difficulty proceeding without the EAEU, ergo this structure's premier importance in serving as the core of Moscow's supercontinental plans. Interestingly, most EAEU member states are also in the SCO, which academic supervisor of the Center for Comprehensive European and International Studies Timofei Bordachev wrote in 2018 is the "foundation of Greater Eurasia". Pakistan and India were invited to join it in 2015, and the organization has since begun to take on more of an economic role atop its original security-related one. Still, the EAEU is much more of an economic actor than the SCO is by its very nature, but the two bodies have a lot in common, not only in membership, but also in overall outlook. According to the opinion of Yaroslav Lissovolik, a member of the Government Expert Council, in his 2015 article titled "Russia's Eurasian Model of Modernization", the EAEU was strongly influenced by Eurasianist theories. He also believes that it can achieve the objectives of "integration into the world economy", "Eurasian integration in the 'near abroad'", "'open regionalism' and prioritizing multilateralism", following an "Asian industrial policy" and implementing "European stabilization instruments/anchors", and more effectively utilizing the "oil and gas sector". In Lissovolik's opinion, Eurasian integration "will dovetail the Chinese efforts to forge ties with Europe via the Silk Road project". It's noteworthy that he expressed this view several years before the Russian government formally did, which shows that his work was truly visionary at the time.

All in all, the cited experts assess Russia's regional integration plans as proceeding along a positive trajectory. This gives hope to the vision that the EAEU will successfully function as the core of the GEP. It is also the Russian-led structure that can benefit the most from this grand strategy too, especially when it comes to prospectively achieving connectivity with CPEC. The Central Asian member states of Kazakhstan and Kyrgyzstan could obtain a new market of over 200 million potential customers for their products, which would assist their economic diversification efforts and enable them to more confidently balance between Russia and China, thus removing any speculation that one or the other might be trying to undermine their sovereignty through economic means. Instead, both Great Powers would be enhancing their partners' sovereignty by freeing up their economies to trade with Pakistan, or even just through it along CPEC en route to the Indian Ocean and the rest of the global marketplace beyond.

On an institutional level, improved Russian-Pakistani connectivity with CPEC as its centerpiece could also bring the EAEU closer to the South Asian Association for Regional Cooperation (SAARC). Even though this group has been more or less moribund for the past few years owing to disagreements between Pakistan and India, it might be revived if Russia more directly began economically cooperating with Pakistan, which could in turn attract India's attention and possibly encourage it to reach a pragmatic compromise with its neighbor for rejuvenating this regional integration bloc. On a grander scale, Pakistan could be the trans-regional gateway state for the EAEU's further bloc-to-bloc integration with not only SAARC, but also the SCO and even the Gulf Cooperation Council (GCC) considering that the Gulf countries are investing in CPEC too and could take advantage of its terminal port of Gwadar for conducting trade back and forth with Central Asia. This is a key point that is sorely lacking in the academic literature on this topic, which is due either to of a lack of knowledge about the trans-regional integration opportunities afforded by CPEC and/or a hyper-sensitivity to India's concerns about its partners participating in that project. Nevertheless, further research should be conducted on this topic.

Russia's Trans-Regional Integration Strategy

Zachary Paikin, Senior Editor at Global Brief magazine and a Visiting Fellow at the London-based Global Policy Institute, set the backdrop against which Russia's trans-regional integration plans can be analyzed. His April 2019 article "Orders Within Orders: A New Paradigm For Greater Eurasia" begins with him discussing Moscow's dilemma, which he characterizes in this way: "As long as relations with the West remain in the doldrums, Moscow has no choice but to make its strategic partnership with Bejing the lynchpin of its plans to maintain great power status. Russia is but a secondary actor in Asia's regional order, which casts significant doubt on the ability of the EAEU minus Ukraine to become major pole at the global level on its own. But at the same time, failure to mend ties with the West will result in growing dependence on China, thus undermining the very aim that Russia seeks to achieve — preserving its status as an independent great power". The ideal solution, then, is to apply Paikin's "order within orders" paradigm that he describes as "conceptualizing EU-Russia relations as forming a regional international order within the broader Greater Eurasian order, operating according to its own principles and initiating its own separate bilateral dialogue on global ordering practices". This would enable Russia to better balance its relations with China considering President Putin's plans to pair the EAEU with BRI.

Paikin references another expert in his work who he quotes as saying that "the future of global politics will be determined by interactions not between powers but blocs", and the "order within orders" paradigm can be regarded as a "reframing of the Greater Eurasian partnership designed to maximize the number of partners with which Russia can develop constructive relations." This is a very useful concept that doesn't exclusively consider the EU and China as the only "orders" of relevance in principle. Although Pakistan can be described by some as falling within the Chinese order, its massive market size and geostrategic location could change the strategic calculus by making it more of an independent player in the event that Russia is successful with fostering improved economic-connectivity relations with it, which would also bene t all of the EAEU's member states. Pakistan, and by extrapolation the SAARC bloc of which it's a part, is but one example of a so-called third order that could revolutionize the strategic balance and thus give Russia more flexibility for interacting with all other poles of economic significance.

Lissovolik has written extensively about his ideas for how Russia can expand its global economic and institutional reach so it's worthwhile to analyze some of his most pertinent work. The first one that should be covered is his 2017 analysis titled "Re-Thinking the BRICS: On the Concepts of BRICS+ and BRICS++". This article suggests that "Russia in the Eurasian Economic Union, Brazil in MERCOSUR, South Africa in the South African Development Community (SADC), India in the South Asian Association for Regional Cooperation (SAARC) and China in the Shanghai Organization for Cooperation (SOC)" form the constituent entities integrating with one another through BRICS+, while "these countries and/or regional blocks that have concluded agreements with BRICS countries' regional blocks" would constitute BRICS++. Of immediate relevance, Pakistan is a member of both SAARC and the SCO, thus making it doubly important in this context although that's not stated in the article. Still, the takeaway is that the regional integration structures that each BRICS member is in could come together through that platform to form the super-structure of BRICS+, which by implication suggests that Russia should enhance its economic ties with Pakistan in order to take maximum advantage of this idea.

Lissovolik also published an article titled "BRICS Plus: New Technology, New Vision for Economic Integration" later that same year. In it, he wrote that the objective of BRICS+ is "to create a network of alliances that would be comprehensive and representative of all of the major regions/continents across the developing world. In this respect, the BRICS+ paradigm is more about inclusiveness and diversity rather than about selecting the largest heavyweights. By its very nature of being present in all of the key regions and continents of the developing world the BRICS could perform the unique role of a comprehensive platform for economic cooperation across the globe. Accordingly, the BRICS+ concept is first and foremost about a different approach to economic integration and a different technology of how alliances are structured globally". Another important passage from his article proposes that "BRICS+ could perhaps be termed as semi-globalism" because it "would represent an intermediary layer of coordination and integration between the global level institutions (WTO) and the amalgam of countries and regional blocks." This focus on regionalism dovetails with the trend in regional integration processes earlier described by the Russian Foreign Policy Concept of 2016, thus demonstrating strategic continuity with the state's officially promulgated policy and further making the case that it's only natural for Russia to seize the opportunity to improve its economic connectivity with Pakistan because of CPEC's potential to link together the EAEU, SCO, SAARC, and even the GCC.

The next article that Lissovolik wrote about trans-regional integration which will be discussed is "The Mechanics of BRICS+: A Tentative Blueprint". The author makes the point that BRICS+ can play the role of a "sufficiently strong starting engine" for global integration processes by "creating a new platform for forging regional and bilateral alliances across continents". According to him, this could include a "platform for trade and investment integration", "cooperation in international organizations", "cooperation between the respective development banks and other development institutions formed by BRICS+ economies", "use of national currencies/ payment systems", and "cooperation in establishing own reserve currencies/regional and global financial centers". Of pertinence to the research topic is that Pakistan would inevitably participate in these proposed ideas, yet scant research has been carried out about how this would work, which places both countries in a disadvantageous position because they might not be able to fully exploit these opportunities. From the opposite angle, those said opportunities are plenty, so the incentive is certainly there to motivate other researchers once they become more aware of the mutual benefits.

Writing in his report about "BRICS-Plus: Alternative Globalization in the Making?", Lissovolik added another major benefit that could be derived from BRICS+. He said that "the new vision of integration in the form of BRICS+ could drag the world economy out of its misery of persistently low growth rates. It appears that new principles and new approaches in advancing openness and integration are required. We need to think about integration, growth and globalization in new and in hitherto abnormal ways to surmount the 'new normal'. We need to shift gears from the old 'core-periphery' paradigm to veritable sustainable development, which in the integration sphere is to be based on greater diversity, equality of opportunity and due care with regard to spillover and trade diversion effects." Put into topical context, Pakistan is geographically on the periphery of Eurasia, but it's connected to one of the cores of the global economy, China, through CPEC. This has enabled its economy to grow well over the past few years. Its location can serve as a conduit for Siberia and Central Asia to more easily trade with the global economy through the access that CPEC could provide them to the Indian Ocean and partners further afield. If institutionalized through BRICS+, this could prospectively have a multiplying effect for all stakeholders, thus improving global growth rates and therefore benefitting the world economy.

Lissovolik elaborated more on his ideas that BRICS+ is crucially important for the global economy. In his article titled "On the Paradox of Global Economic Integration", he observed that "the economies most in need of economic integration are the ones that are the most left out from regional and global economic alliances and 'clubs'". Generally speaking, Lissovolik believes that a "new paradigm needs to be based on new types of integration arrangements that focus more on issues of connectivity that in turn are paramount for landlocked developing countries." All of this holds particularly true for Pakistan, which while being a formal member of SAARC, never really integrated its economy with India's owing to political reasons on both sides. Its decades of strategic partnership with the US also didn't yield any lasting economic benefits either. Awareness of this might have contributed to China's decision to build CPEC and economically integrate with Pakistan instead. That said integration does indeed "focus more on issues of connectivity that in turn are paramount for landlocked developing countries" such as the Central Asian ones that are part of the EAEU, which could then utilize CPEC's terminal port of Gwadar to more easily access the global economy.

More specifically, Lissovolik signaled that BRI and BRICS+ could fulfill this role because they function as platforms for regional integration, pan-continental integration, and trans-continental integration when taken to their maximum extent with time. Pakistan is part of both, BRI (of which CPEC is one of the flagship projects) and BRICS+ (of which it's included within SAARC and the SCO), so its experience can be extremely useful for helping other countries and is yet another reason why researchers should study it more within this larger context, especially in terms of its relevance to the other countries that are could join the GEP. Bridging BRICS+ and BRICS++, Lissovolik talks about something that he describes as InPEAKS/PEAKS in his article that takes "A Look at BRICS Derivatives and Alter Egos", which he says are the BRICS' countries' "partners in key regional blocks or continental alliances with a substantial size of the financial market/economy and scope for playing catch-up to the BRICS core: Argentina in South America, Kazakhstan in the CIS, Pakistan in South Asia, Egypt in Africa, Indonesia in East Asia. The unifying acronym for this group of countries is InPEAKs — the countries in this group may be viewed as the 'second generation' of BRICS countries coming from the same regions as the BRICS themselves. A moderate variation of the composition of this group would involve the selection of the largest economies by GDP in the respective regions: Egypt in Africa, South Korea in East Asia, as well as Pakistan in South Asia, Argentina in South America, and Kazakhstan in the Eurasian Economic Union. The resulting acronym — PEAKS — is suggestive of a strategy of portfolio allocation in EM and frontier markets that targets an optimal derivative set of countries from the main regions/continents of the developing world. The value of deriving a grouping such as PEAKS/InPEAKs lies in the expansion of the BRICS investment domain to include more markets, resulting in superior optionality, longer investment horizons and risk diversification."

To the best knowledge of the present article's authors, this is the first time that Lissovolik or any Russian expert for that matter has discussed the role that Pakistan can play in Russia's trans-regional integration strategy. He unfortunately didn't elaborate on it and mostly just mentioned its name and that was it, but it's a starting point from which to justify further research by Russian academics if they were so inclined. Lissovlik, who is well respected in the Russian academic community and whose work can objectively be described as influential, recognizes that Pakistan can be a more active player in trans-regional integration processes than it's oftentimes portrayed as being by his peers, if even talked about at all in this context. It's a member of SAARC, the SCO, BRICS+, and what he calls PEAKS/InPEAKs. It's China's top BRI partner, too. The case can therefore be made that it's much too important of a partner for Russia to pass up, and that it's unfortunate that more research hasn't already been undertaken along this promising vector. Pakistan's over 200 million people represent a promising market for the EAEU's exports, and it would be extremely symbolic for the cause of civilizational cooperation (in contrast with Huntington's fearmongering thesis about a supposedly inevitable "clash of civilizations" [Huntington 1996] if Russia and its economic partners greatly expanded their trade ties with such a massive Muslim country.

Given everything that's been discussed thus far in the present article, the conclusion can be made that the next logical step of Russian foreign policy is to prioritize its connectivity with Pakistan through the GEP. The Russian Foreign Policy Concept of 2016 clearly describes the country's grand strategic goals, of which the strengthening of the EAEU is one of the most important. This regional integration organization is envisaged to function as the core of the GEP and the broader connectivity initiatives proposed by Lissovolik. In pursuit of the latter, it's only natural for Russia to expand its economic influence beyond the borders of its "Near Abroad" with both developed and developing economies alike such as Germany, Turkey, Iran, South Korea, and Japan. Pakistan fits into this strategic paradigm by being a nearby country "beyond the Near Abroad" just like the aforementioned five, among others. Although its economy isn't yet as impressive as them, it has enormous potential because of the $60 billion that China plans to invest into CPEC, which is one of BRI's flagship projects. China is expected to rely more upon this trade route in the future because of its grand geostrategic significance in connecting the People's Republic with the Indian Ocean Region, the Mideast, and Africa. It would therefore be an inexplicable neglect of Russia's foreign policy goals not to explore the potential for strengthening relations with Pakistan, which is why it's hoped that the present article can inspire others to fulfill that role and make up for lost time. Relations between both continues continue to improve, so now is an advantageous moment to do so. With this in mind, several proposals can be made for taking relations to the next step and fully exploring the future role that Pakistan could play in the GEP.

Policy Proposals

Most immediately, Russian experts need to appreciate the significance that Pakistan holds for the GEP, something that is evidently lacking at present and which explains the dearth of research into this topic. That can prospectively be accomplished by more interactions between each country's professional communities, whether academic, diplomatic, business, or otherwise. There are already small-scale engagements between the two, but they must be intensified and expanded as soon as possible. This could be brought about by engaging with one another's existing contacts and expressing a willingness to expand ties. Still, without the proper framing, this might not accomplish much, hence why it's imperative that Russia becomes better acquainted with CPEC, both in general in the sense that it's one of the flagship projects of BRI and more specifically with the many projects that comprise it, both current and planned. One effective proposal would be to request the Pakistani Embassy in Moscow to help arrange CPEC tours, or even better, for that said diplomatic office to proactively suggest as much through its contacts with Russia's leading think tanks. CPEC tours could be separate from, or in parallel with, Russian visits to Pakistani think tanks and government bodies that could directly help take ties to the next level.

Once Russians are more aware of what CPEC is and how it endows Pakistan with an important prospective role in the GEP, the next step is to discuss modalities for tapping into these opportunities. The expert communities of both countries should organize topical conferences on this dealing with the political, economic, and other aspects of bilateral cooperation and the potential for multilateral cooperation. For example, serious discussions could be held about the companies most likely to take advantage of the future establishment of the reliable banking system that the Russian Trade Representative to Pakistan proposed in November 2019 following the settlement of the two sides' Soviet-era debt around the same time that had hitherto been an obstacle to significant economic cooperation between them. Russia's state-owned companies might be interested in participating, though Pakistan also has the responsibility to propose relevant projects that they might be best suited for. These could be determined by their expert communities after holding conferences on this topic. In addition, economic ties must broaden to include small-and medium-sized businesses, to which end it's necessary to figure out the most cost-effective logistical connections between these two connections, which brings to mind the possibility of a trans-Afghan economic corridor in the event that the war in that landlocked country eventually ends. This too could be a subject of intense discussion between both sides.

Impressive progress was recently made on this front in December 2019. RT reported that a 64-member delegation of Russian businessmen led by Russian Minister of Industry and Trade Denis Manturov traveled to Pakistan for a four-day visit and signed several billion dollars' worth of mostly unspecified agreements. Some of the details that were disclosed revealed that "Russia will provide financial assistance worth $1 billion for the rehabilitation and upgrading of the Pakistan Steel Mills (PSM) project" and "the two sides also discussed investments in the much-delayed North-South gas pipeline." In addition, "Russia's Sukhoi Superjet 100 (SSJ-100) planes will be supplied on both wet and dry lease with an option to purchase, according to Pakistani officials", and "Moscow will also help to construct a railway track from Quetta to Taftan." The report also went on to remind the reader that "earlier this year, Russia promised a $14 billion investment in Pakistan's energy sector, including $2.5 billion for the North-South pipeline project", which is why "a Russian company has developed a project to convert the Muzaffargarh thermal power station to coal and establish a 600-megawatt coal red power plant at Jamshoro." Importantly, RT also shared some hard data about the current state of trade between Russia and Pakistan. According to the outlet, "the two nations aim to increase bilateral trade which last year stood at $700 million. Pakistan's exports to Russia reached $150 million while imports from Russia are worth $250 million." Another RT report released around the same time quoted Alexey Kupriyanov, a research fellow at Moscow's Primakov Institute of World Economy and International Relations (IMEMO), as "suggest[ing] that Russia will not go to extremes even if Pakistan truly wishes this to come true. When engaging Islamabad, Moscow could rely on 'some traditional spheres of cooperation,' namely economy and security, provided that 'it doesn't touch upon Pakistani actions and claims regarding Jammu and Kashmir.'"

With a view towards achieving the aforementioned aim of increasing bilateral trade, a post-war trans-Afghan corridor could conceptually function as the northern branch of CPEC, prospectively called N-CPEC+ (with "N" referring to North and the "+" referring to the expanded framework like it does in BRICS+). Russia, both as a state and also some of its state-owned and even private companies, might be reluctant to participate in any CPEC-branded projects owing to their sensitivities about o ending their Indian partners, so bilateral economic cooperation could proceed according to a different conceptual euphemism even if it's still referred to as N-CPEC+ for simplicity's sake inside of Pakistan. What's most important, however, is to create a frame of conceptual reference within which to view their developing trade and integration ties. That said, it's equally important to be aware of the limitations involved, such as the near-impossibility of formal trade ties between the EAEU and Pakistan owing to Islamabad's refusal to recognize EAEU member Armenia out of solidarity with Azerbaijan. Nevertheless, just like Russia and other EAEU members have strong bilateral trade ties with Azerbaijan in spite of its disagreements with Armenia, so too can they have the same with Pakistan. In other words, while the national interests of Russia's Indian and Armenian partners might pose some political challenges to its closer trade ties with Pakistan, they aren't insurmountable by any means since pragmatic workarounds can easily be devised to overcome them.

If successful, then N-CPEC+ could do more than just improve Pakistan's trade ties with Russia, but also boost its trade with the Central Asian Republics. Pakistani-Kyrgyzstani trade was practically non-existent at only slightly more than $3.5 million in 2016, which is why both sides agreed in May 2019 to try to raise it to $10 million a year. As for Pakistani-Kazakhstani trade, it fell well short of its potential at less than $25 million a year in 2018, but that didn't stop the latter's ambassador in Islamabad from hoping that it could one day grow to $250-500 million as part of his country's his country's "Strategy 2050", to which end he drafted a roadmap for achieving this in early 2019. Pakistani-Turkmenistani trade was slightly better at $29 million in 2016, but has the possibility to greatly increase upon completion of the planned Turkmenistan-Afghanistan-Pakistani-India (TAPI) pipeline sometime later this decade. Pakistan's trade with Tajikistan is more than double that at $62 million a year, though they ambitiously plan to increase it to $500 million a year in the future. Out of all the Central Asian Republics, it's Pakistan's trade with Uzbekistan that's by and far the most impressive, more than doubling from $36 million in 2017 to over $90 million in 2018, with an eye towards tripling its 2019 amount of around $100 million to $300 million "very soon". The successful completion of N-CPEC+ would therefore greatly contribute to the growth of Pakistan's trade ties with the Central Asian Republics, especially since the latter could use CPEC's terminal port of Gwadar to access the vast Indo-Paci c marketplace. Furthermore, Pakistani-Afghanistani trade, which sat at around $1 billion in 2018 (representing a 20% decrease from the year prior after Afghanistan began using India's Iranian port of Chabahar more frequently for political reasons), would also likely increase as well, to say nothing of Afghanistan's trade ties with the Central Asian Republics and Russia further a field as the latter two conduct more trade with Pakistan via its territory.

In conclusion, the research argues that Pakistan could play a somewhat surprising role (relative to the existing opinion of most Russian experts) in the GEP, though this hasn't been widely recognized because of an overall lack of interest in the country and an unawareness about CPEC. This is attributable to the fact that Russia and Pakistan only recently began their rapprochement and still have a long way to go before entering into a meaningful partnership that goes beyond diplomatic coordination in bringing peace to Afghanistan and carrying out yearly anti-terrorist drills, both of which are enormous milestones compared to their previous state of relations but which are still insufficient for inspiring a critical mass of proactive research into the other's long-term potential as a partner. As has been demonstrated through the research, however, Pakistan is poised to play a promising role in the GEP given that it's indispensable to the success of this vision. It is the last remaining piece of the Eurasian connectivity puzzle which Russia has yet to fully appreciate, though it may only be a matter of time before that realization dawns on its decision makers. As BRI becomes a more influential catalyst for international systemic change, it's predicted that Russia will naturally become more aware of its flagship project of CPEC, and with that, a new trend of research into Pakistan might commence shortly thereafter.

First published in the " Polis. Political Studies" Journal.

Korybko A., Morozov V.M. Pakistan's Role In Russia's Greater Eurasian Partnership. — Polis. Political Science. 2020. No. 3. P. 9-22.

Investment and Finance
Investment and finance in BRICS
Inside Russia's stablecoin initiative (О российской идее стейблкоина) / United Kingdom, June, 2020
Keywords: expert_opinion, economic_challenges, digital
United Kingdom

Russian President Vladimir Putin is all for cryptocurrency—the pivotal factor accelerating the country's interest in building a digital economy. Two years ago, something stood out of the ordinary in his address to the Federal Assembly, when he emphasised, "Build your own digital platforms." It pointed to Russia's financial literacy strategy and even the possibility of introducing a stablecoin to evade western economic sanctions.

It was in the same year that Putin held a discussion with ethereum co-founder Vitalik Buterin and miners from fifteen countries, including the US, India, Israel, Armenia and Turkey to seek recommendations and understand their approaches to mining regulations. It was, perhaps, his idea to launch a multinational stablecoin initiative which would typically involve digital currencies backed by commodities. Russia's proposed stablecoin initiative has received full support from the member states of BRICS and the Eurasian Economic Union. The expectation is that stablecoin will reduce corruption, facilitate trade and strengthen the economies of those countries involved in the initiative.

BRICS experiment in multinational stablecoin initiative
BRICS which is a group of five emerging economies—Brazil, Russia, India, China and South Africa are working together to create a single payment system and make settlements in a single cryptocurrency. Last year, they announced the development of BRICS Pay, a cloud platform designed to link the national payment systems of those countries to create a digital wallet. The proposed digital wallet once launched will make it possible for buyers to purchase goods and services in any of those countries irrespective of the currencies held in their accounts.

It is important to Russia and other member states because it could help them achieve mass adoption of cryptocurrencies and peer-to-peer transfers eliminating middlemen and challenges in fighting against money laundering, observed the Financial Action Task Force. Dmitriy Sheludko, member of the commission for blockchain technologies and cryptoeconomics Investment Russia, expert in cryptocurrency trading and CEO of CoinBene, told International Finance, "Cryptocurrency stablecoins have established themselves as a universal and fast means of payments around the world. This has made central banks change their processes and keep up with the times."

A bold attempt at dedollarisation
The stablecoin development is a major step toward something significant—it will result in the integration of BRICS member states as they seek dedollarisation and disassociation from the US-dominated global banking system. That could be a turning point for BRICS member states to further reduce the share of settlements in US dollars. The share of the US dollar in foreign trade settlement has reduced from 92 percent to 50 percent in the last five years. It appears that the creation of cryptocurrency for settlements can be especially convenient for supranational organisations such as BRICS.

Experts believe the main reason for stablecoin development is to reduce dependence on transnational payments amid rising geopolitical tensions. Dmitry Labokho, who has been actively working with China for Russian companies in the field of cryptocurrency, in an interview with International Finance said, "The point of creating a stablecoin is to get away from the diktat of the dollar and get some kind of instrument of netting without complicated external control and to provide through the resources that are stored in the depths that countries have."

Russia, China and India are exploring an alternative to the US dominated Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment mechanism. For that reason, Russia's financial messaging system SPFS will reportedly be linked with China's Cross-Border Interbank Payment System and India plans to link the Central Bank of Russian Federation's platform with a service that is underway. In practice, this new system will act as a 'gateway' while transcoding payments messages in line with a particular financial system.

Russian companies seek an alternative to US dollar
Building an alternative for the US dollar is perceived to be an integral part of asset-pegged stablecoins. Interestingly, "Russian commodity companies want to use stablecoins instead of the dollar in mutual settlements. In addition, this would help the country to get away from sanctions," Denis Chernookiy, assistant director of Integration Advisory Group in KPMG Russia, told International Finance in an email interview. Last year, a prominent mining company Nornickel which is owned by Russian entrepreneur Vladimir Potanin announced the development of its own stablecoin tied to the company's metals. "It was slated for 2019, but has been postponed due to the current position of the state. The oligarchs are unlikely to become a locomotive for the development of stablecoins in Russia, since their fate depends too much on the central government."

Russia's efforts in developing an oil-backed stablecoin
The Central Bank of Russian Federation has already started testing stablecoins pegged to commodities in a regulatory sandbox. Last year, it was reported that the country was preparing to launch an oil-backed stablecoin.

Having an oil-backed stablecoin is a logical solution to the Russian economy on the back of the current state of the oil market and surging dollar value. Sheludko sees positive signs for Russia in this context, as he points out that "When a stablecoin is created at a national level, trade relations across the country will go to a whole new level in terms of speed and convenience of mutual settlement processes." Arguably, it could even limit the US influence on the Russian economy—and more importantly, help the country to circumvent sanctions and trade restrictions imposed by the Trump administration.

This particular attempt requires dedication and movement in the right direction to optimise the cryptocurrency industry. "For the development of cryptocurrency, it is necessary to build the right bridges between organic, direct investment and the industry. At the same time, the flexibility of attracting resources should be combined with a responsible approach to investment," Chernookiy said. "An approach in which investments are perceived as a tool and not just funds received from the investor is required. The stablecoins for the development of which big businesses advocate it could help this."

Real intent behind testing an oil-backed stablecoin
The push for stablecoin remains debatable in Russia. Despite mixed views, the central bank testing an oil-backed stablecoin does not imply it will function as a means of payment or become a surrogate for money. For now, the idea is to simply understand its potential uses by pegging to another asset. "I don't believe in an early launch of stablecoin as there seemed to be too much controversy even during the discussion phase. If the stablecoin works, it will allow the member countries to work more freely together, without involving the FRS or the Central Bank of Europe," Labokho said.

Is it a far fetched idea?
Indeed, stablecoin talk has received a lot of attention and criticism at the same time. "This initiative does not go beyond the talk, especially if you are talking about the deep involvement of all potentially interested countries," Labokho explained. Pavel Grachev, who is the co-founder of Cyberian Mine GmbH considers stablecoin as a "Trojan horse for truly decentralised technology." Some experts argue that it is not possible for the proposed stablecoin to become an alternative to the US dollar—or at least it is a far fetched idea. In fact, Grachev seconds that thought in an email interview with International Finance, as he explained, "It could turn out to be an alternative for some national states pushed by Russia into the EAEU to adopt eRouble. But even that is an enormous task. As far as international trade is concerned, there is no alternative to the US dollar and it is unlikely that any (stable) coin would have a chance of replacing it in the foreseeable future."

Positives for Russia's business, trade and crypto industry
But when—and if Russia launches an oil-backed stablecoin the implications for businesses and the cryptocurrency industry might be huge. For businesses, it might even lead to the "possibility of achieving a larger investment during an IPO and making it easier to hedge investment risks," Chernookiy said. In the midst of all this, an oil-backed stablecoin could even be an opening for cryptotraders to start participating in oil trading markets.

Another interesting fact is that the proposed stablecoin could result in a "great revival and development of cryptoeconomics in Russia and the world," Sheludko said. In addition, he adds that without this transformation, there is a good chance that "We will live for more than a decade in the current economic situation and all the old problems that have risen already." In short, developing a stablecoin is a boost to the Russian cryptocurrency industry because "there will be a varying number of innovative projects in the pipeline waiting to offer services and products related to the national stablecoin and other crypto assets." The outcome could have a profound effect on trade and corporate relations between the public and the private sectors in Russia.

Overlooked is the fact an asset-backed stablecoin could positively support economies against global crisis. For example, the current pandemic has forced China to freeze its production and the rest of the world is facing the wrath of the situation. In theory, "by making commodity-money settlements faster and more convenient will reduce the effect of such crises as goods will be produced and delivered on time," Sheludko explained.

Again, if Russia strengthens efforts in stablecoin development it will provide "unlimited opportunities for free and transparent trade relations within the state and in the global world," Sheludko emphasised, stating that "the simplicity, speed and transparency of operations to trade with anyone in relation to any product or service" will make the country more sophisticated in trade and technology by "removing various barriers of existing commodity-money relations."

Its energy sector necessitates digitisation
Digitisation is imperative to Russia's energy sector because it already ranks fourth in the world for primary electricity production, energy consumption and carbon emissions—and the Russian Natural Resources and Environment Ministry has further acknowledged that the country is heating faster than the rest of the world. Now numbers show that 80 percent of Russia is dependent on exporting oil, natural gas, timber and metals. "The strength of Russia's dependence on hydrocarbons lies in the streamlined process of trade in raw materials and a large lobby to support these processes," Sheludko said.

In 2018, Putin signed a decree establishing a Digital Economy state programme to diversify Russia's hydrocarbon-intensive economy—and digital energy infrastructure is seen as a key component of the programme. Stablecoin can contribute to Putin's ambition in its own way. "When states seriously engage in the establishment of other areas of the economy and the introduction of innovations, including the creation of stable national currencies, this deviation will lead to a change in the structure of state revenue generation and hydrocarbon dependence will be removed," Sheludko explained.

Against this background, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation has developed projects focused on digitalisation, regulation and coordination of Russia's energy sector. For example, Russia's national energy grid operator Rosetti in collaboration with technology startup Waves is testing a blockchain solution for payments in the retail electricity sector in Kaliningrad and Sverdlovsk regions. "The stablecoin could make it so much easier for companies to raise funds on the basis of the ICO for such projects than to receive state funding," as Chernookiy sees this as "the only lever of change so far."

Solarisation of stablecoin is as important as stablecoin itself
Ever since the talk of building a stablecoin started there has been speculation on whether it will help Russia and other countries involved to diversify away from their hydrocarbon energy intensive and dependent economies. The solution to this problem is solarisation of stablecoin. But for Russia, utilisation of solar energy only stands at 0.03 percent.

Solarisation is highly crucial because it is estimated that more than 41 percent of the world will be using electric energy-intensive blockchain and smart contracts. Last year, the UN published the Emissions Gap Report 2019 which found that temperatures are expected to rise 3.2 degrees celsius above pre industrial levels by the end of the century if this technology is fuelled by hydrocarbons highly subsidised by member states. To make matters worse, the BRICS member states are not on track to prevent 1.5 global warming.

A report published by the International Monetary Fund ranks Russia third in subsidies of the hydrocarbon industry valued at $551 billion and it houses the world's largest gas reserves, equivalent to 27 percent of the total. It is worth noting that the country's tax policy is majorly hindering solarisation as it imposes tax on 13 percent of carbon emissions from its energy use. The problem is "the tax will push mass investors away from stablecoin and the mass boom will not happen," Chernookiy explained.

Taxation is hindering solarisation
The path to taxation taken by the Russian government is partially slowing down the country's cryptoeconomics. According to Sheludko, "It is understandable that both stablecoin and cryptocurrencies will be subject to taxation, but the country needs to be aware that making the process complicated will not make crypto-economics more effective than previous monetary relations. Thus, a more simple and flexible approach is needed for such innovations." Currently, Sheludko as part of Investment Russia is working on a cooperation to develop flexible taxation of cryptocurrencies and national stablecoin.

In this context, Chernookiy speaks from an objective standpoint that "For a preferential tax regime to appear, the state must learn to use the benefits of stablecoin for its own purposes. This experience will not come in one or two years and during this period the development will not be very rapid."

Frailty of Russia's approach need to be addressed
But even if Russia makes progress, there are fears associated with the possibility of stablecoin development in the country which further pronounces the "head of central bank Elvira Nabiullina repeatedly stating that the financial regulator will not allow cryptocurrency circulation in Russia," Chernookiy said. "Imagine, if a ruble stablecoin is issued in Russia, the private companies will have an opportunity to organise the circulation of an analogue of the national currency in private blockchains out of the control of the central bank. With that, stablecoins can be exchanged for both rubles and cryptocurrencies. According to Nabiullina, 'if, for instance, individuals are allowed to keep money in accounts with the central bank, it could significantly change the passive base of commercial banks. During uncalm times, the flight of deposits and overflow of funds may begin'. This could eventually lead to the collapse of the banking system'"—a true nightmare to the Russian economy.

These fears will only make the situation bleak and there is no sense to use a new tool if it does not bring obvious advantages. "State policies together with the lack of drivers of growth in interest in cryptocurrency may reduce its investment attractiveness," Chernookiy said. On the downside, it can even cause an "outflow of capital from cryptocurrencies and provoke the beginning of a phase of long-term decline in the value of digital assets, which will only increase as the stablecoins rise in price relative to fiat currencies."

Although many have cast doubts on Russia's stablecoin development, Labokho said that the country has not yet made up its mind about how to treat cryptocurrencies. "Once again, what is planned to be created has nothing to do with the current cryptocurrencies. But its release will really push the government toward stricter regulation of this sphere. Putting this in perspective, Russia revising its approach toward stablecoin will see a new round of development.

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