The ratification of the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement will facilitate the implementation of Russia's strategic aims in monetary and financial cooperation envisaged in the Concept of Russia's participation in the BRICS association, which, in particular, includes developing privileged relations with Russia's BRICS partners.
Reference
The draft federal law On the Ratification of the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement (hereinafter, the Draft Law) has been submitted by the Ministry of Foreign Affairs and the Ministry of Finance.
On the basis of Government Directive No 1239-r of 7 July 2014, the Russian party signed the Treaty on the Establishment of a BRICS Contingent Reserve Arrangement (hereinafter, the Treaty and the Reserve) on 15 July 2014, at the 6th BRICS summit in Fortaleza, Brazil.
The Treaty was developed by central banks and finance ministries of BRICS member states to implement the instruction issued by leaders of BRICS states following their meeting in Los Cabos, Mexico, on 18 June 2012.
Launching the BRICS Contingent Reserve Agreement, along with the New Development Bank, is one of the association's key practical initiatives.
In accordance with the Treaty, in case any issues arise with providing national financial systems with dollar liquidity, BRICS central banks shall support the partner under the Treaty by transferring funds in US dollars on the terms of urgency, agreed serviceability and repayment. The specific parameters of such transactions shall be stipulated by a special agreement between the central banks.
A total of $100 billion shall be committed to the Reserve. China is to provide $41 billion, South Africa $5 billion, and Brazil, India and Russia $18 billion each.
The Reserve shall be managed by the Governing Council, the Standing Committee and the Coordinator, whose functions are to be performed by the country presiding over BRICS.
Each party to the Treaty has the right to request at any time monetary resources subject to the maximum access limits of the Reserve and equal to the value of the individual multiplier for each party. China's multiplier to the committed amount is set at 0.5, South Africa's at 2, and Brazil, Russia and India's multipliers at 1.
The use of most of the resources (70 percent) within the country limit is allowed for a country that has a stabilisation programme coordinated with the International Monetary Fund and that fulfils its obligations under the Treaty. However, up to 30 percent of the country limit can be used without a stabilisation programme approved by the IMF.
The supreme governing body, the Governing Council, is made up of the ministers of finance and/or the presidents of BRICS central banks. The Council makes key and strategic decisions on fulfilling the obligations of the parties arising from the articles of the Treaty. All decisions of the Council shall be taken by consensus.
With the ratification of the Treaty, the Central Bank of Russia shall be vested with authority to enforce the rights and fulfil the obligations of Russia under the Treaty.
Pursuant to Article 15, item 1, sub-item “a” of the Federal Law On the International Treaties of the Russian Federation, the Treaty is subject to ratification, as it sets rules different from those envisaged by Russian legislation.
The ratification of the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement will facilitate the implementation of Russia's strategic aims in monetary and financial cooperation set forth in the Concept of Russia's participation in the BRICS association (approved by the Russian President on 9 February 2013), which, in particular, include making the international monetary and financial system equitable, stable and efficient, and developing privileged bilateral relations with Russia's BRICS partners.
The draft federal law was reviewed and approved at the Government meeting of 9 April 2015.