Russia and other BRICS member will contribute $18 billion to the reserve fund each, except China and South Africa which will contribute $41 billion and $5 billion respectively
This article originally appeared at The BRICS Post
Russian President Vladimir Putin on Saturday ratified a gas supply agreement with China via the so- called Eastern route and also signed into law the creation of the $100 billion BRICS reserve fund.
“The agreement is aimed at strengthening the Russian-Chinese energy cooperation, and defines the main terms of the natural gas supply from Russia to China through the East-Route, including the cross-border section of the gas pipeline across the Amur River ( the Heilongjiang River in China) near Blagoveshchensk (capital of the Amur region in the Russian Far East) and China’s border city of Heihe,” a Kremlin statement said.
The agreement was passed on April 24 by parliament’s lower house, or the State Duma, and approved by the upper chamber namely the Federation Council five days later.
During Putin’s official visit to China last May, the two sides signed a 30-year gas supply contract that will see the East-Route Pipeline start providing China with 38 billion cubic meters of natural gas annually from 2018.
Chinese President Xi Jinping will reach Moscow on May 8 for the celebrations to mark the 70th anniversary of Russia’s defeat of Nazi Germany and 70 years since the end of World War II.
Putin and Xi will also meet during the 7th BRICS Summit on July 8-9 in the Russian city of Ufa.
Putin also signed on Saturday another agreement into law, approving the establishment of the BRICS currency reserves pool.
Last July, Putin hailed the proposal of the currency reserves pool as one of the practical steps “intended to strengthen international financial architecture and to make it more balanced and just.”
BRICS launched a $100 billion development bank and a currency reserve pool in July this year in their first concrete step toward reshaping the Western-dominated international financial system.
China will also fund $41 billion of the currency reserve agreement, which member countries will be able to tap in case of balance of payment deficits. South Africa will earmark $5 billion of its reserves and the remaining countries will set aside $18 billion each. The $100 billion agreement amounts to 2 per cent of the BRICS’s pooled reserves.
The BRICS Bank will fund infrastructure projects in Brazil, Russia, India, China and South Africa, and challenge the dominance of the Western-led World Bank and the IMF.
South African Trade and Industry Rob Davies said last year that although the capital of the New Development Bank and the Contingency Reserve Arrangement had been set at $100 billion each, this did not mean that this capital would necessarily be held in US dollars.
“We want to move away from the same old, same old way of doing things. What currencies the capital will be held in is something that will be part of the Sherpa process with the pace set by Brazil, but we expect substantive progress by the time of the next BRICS summit in Russia in June 2015,” he said.
The BRICS combined GDP grew 300 per cent in the last decade as opposed to 60 per cent growth registered by the developed world.