Russian-cofounded bank unable to fund new projects, highlighting country’s financial isolation.

Russian-cofounded bank unable to fund new projects, highlighting country's financial isolation.

Russia’s Economic and Financial Isolation Deepens as New Development Bank Refrains from Funding Projects

Russia, already facing extensive economic and financial sanctions, finds itself further isolated as the New Development Bank (NDB), which it co-founded, announces that it will not fund any new projects in the country. The NDB, a multilateral lender headquartered in Shanghai, was established in 2015 by the BRICS nations – Brazil, Russia, India, China, and South Africa. This decision by the NDB reflects the bank’s commitment to operate in compliance with international financial and capital restrictions.

The exclusion of Russia from the NDB’s new projects adds to the country’s economic and financial isolation. Following its invasion of Ukraine, certain Russian banks were banned from SWIFT, the Belgium-based messaging service that facilitates global communication between banks for cross-border transactions. This ban, along with the departure of international banks and accounting giants, has severely hindered cross-border transactions for Russia. Consequently, the nation is actively seeking allies to trade with, particularly among the BRICS countries.

Dilma Rousseff, the president of the NDB and former leader of Brazil, attended a two-day summit in St. Petersburg, Russia, where she met with Russian President Vladimir Putin. In discussions between the two leaders, the focus was on “the role of the NDB in the upcoming BRICS Summit,” indicating the ongoing importance of the bank’s involvement within the group. The BRICS countries are set to convene in South Africa next month, where trade and financial cooperation will be key topics of discussion.

While there have been aspirations for the creation of a common currency to rival the US dollar, as hinted by Putin last year, India has denied any such plans within the BRICS group. Instead, it appears that the focus is on increasing the use of local currencies to facilitate trade settlement among member nations. This shift away from the dollar is seen as a way for BRICS countries to reduce their dependence on the US currency and mitigate the potential impact of political tensions.

During Rousseff’s meeting with Putin, he congratulated her on her appointment as the bank’s president and took the opportunity to criticize the dominance of the US dollar. Putin stated, “In the current conditions, it is not easy to do so, given the developments in global finance and the use of the dollar as a political weapon.” This comment underscores the perceived need for alternative financial structures and the desire to reduce reliance on the US dollar within the BRICS nations.

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The NDB’s decision not to fund new projects in Russia highlights the country’s deepening economic and financial isolation. As international barriers increase, Russia continues to search for alternative trading partners and strengthen relationships within the BRICS group. The upcoming BRICS Summit will provide an opportunity for member nations to discuss strategies for increasing trade cooperation and potentially reducing reliance on the US dollar.

• Economy
• Russia
• Ukraine War