The decision by Prime Minister Tsipras (e.g. The Guardian) on 26 June 2015 to consult Greek citizens in a referendum on their wish to accept or not the never-ending austerity measures demanded as part of the current bailout was obviously an unexpected move for Greece’s creditors. From the Greek government’s point of view, it was, however, a logical one considering the intransigence of the creditors, refusing to coGrexit, Greece, BRICS banknsider the plight of most of the Greek people, as well as considering the absurdity of measures that only end up ever-reducing the overall Greek national wealth, as again pointed out, for example, by Nobel-Prize economist Paul Krugman (“Greece Over the Brink“, The New York Times, 29 June 2015). It sent shock waves throughout Greece’s “creditors-system”.

Since then, officials compete to make declarations aiming at explaining with great difficulty that a referendum is wrong in a system that is meant to uphold democracy as a fundamental value and at convincing Greek people that the bail out with the famous IMF structural reforms and the austerity measures demanded by Europe are the only way forward, threatening the horrid consequences of default (e.g. President of the European Commission, Jean-Claude Juncker, “press conference on Greece“, 29 June 2015). Negotiations, however, also continue (e.g. BBC News 30 June). Meanwhile, the media try to envision if we shall have a Grexit, i.e. an exit from the Euro zone, what could be the impact for the financial world, also underlining the terrible consequences for people.

There is, however, another potential scenario, which any foresight exercise should consider, and that, publicly at least, is not mentioned: Greece is not isolated, and there are other players, including financially, in the world than the IMF, and the European neo-liberal establishment.

Greece, the first country also bailed out by the new BRICS bank and fund?

Indeed, assuming on 5 July 2015 Greek citizens vote “no” to the austerity reforms as recommended by their Prime Minister, what if Greece were to be bailed out by the “$100 billion BRICS New Development Bank and … currency reserve pool worth another $100 billion” that is expected to be launched – what a synchronous timeline! – during the 8-10 July twin 7th BRICS summit and Shanghai Cooperation Organization (SCO) summit in Ufa, Republic of Bashkortostan, Russia (RT, 26 June 2015)? This scenario obviously assumes that such bailouts will be part of the mission of the bank and potentially associated funds.

Considering the amount and repartition of the Greek debt (see chart Open Europe, “Who does Greece owe?”, BBC News, 30 June 2015), such a new bail out would be unlikely to cover the overall debt. However, we may assume it would to the least cover the IMF share, Greece maybe defaulting on this part of the debt.

Grexit, Greece, BRICS bank, EU
From Alexis Tsipras Flickr photos Taken on23 March 2015 – (CC BY-SA 2.0)

At the European negotiation table to help Greece would now sit not Lagarde and the IMF, but the head of the new BRICS Bank and, through him or her, Rousseff (Brazil), Putin (Russia), Modi (India), Xi Ping (China) and Zuma (South Africa). It would then be highly probable that the new BRICS bank would not ask for austerity measures as they offer a different socio-ideological model from the neo-liberal one.

Indeed, none of the BRICS have an interest in a collapse of the Euro, as their aim is to favour a truly multipolar world (e.g. “‘BRICS key to multipolar world’- Putin“, The BRICS Post, 22 March 2013). Their interest is more likely to put an end of a U.S.-led unipolar world and thus to the supremacy of the U.S. Dollar, upheld by the Washington consensus, as we have followed here (see “Of Saudi Arabia, Turkey and Petrodollars“, 16 April 2015;  “Risks on the USD supremacy“, 27 March 2014, etc.). Thus, the BRICS, assuming such a scenario occur, would probably initially try to negotiate by the side of Greece to see the latter remaining within the eurozone. They would, however, probably also be ready to welcome Greece fully in their fold should no other option be left open. During negotiations under this scenario, those who would be under tremendous pressure would be European leaders as, most probably, the U.S. would then do their utmost not to see Europe siding more with the new BRICS-led pole and less with them.

Is such a scenario plausible?

All the BRICS, promoting a true multipolarity, would also most probably encourage the emergence of a relatively strong Europe and European states, which would fully play an independent role on the world stage. This Europe would neither be subservient to the U.S. nor perpetually under the threat of a default. This Europe and its states are necessary to a multipolar world. The BRICS country, as explained above, would also have an obvious interest in further displacing the IMF.

For all the BRICS countries, and this is probably more particularly important for countries with a long history, i.e. Russia, India and notably China, being the ones to bail out another “old country” with a prestigious past would mean that the time of being despised, patronized and talked down to has ended and that they are not only fully equal partners at the table of nations, but also there with a strong position.

Grexit, Greece, BRICS bank, China
From Alexis Tsipras Flickr photos, Taken on February 19, 2015 – (CC BY-SA 2.0)

China, notably with its “one belt, one road” strategy certainly has an interest in seeing Greece not falling into chaos but becoming part of the belt, as explained by JM Valantin (“China and the New Silk Road: the Pakistani Strategy“, 18 May 2015; “China, Israel ad the New Silk Road“, 8 June 2015; The Red (Team) Analysis Society). Furthermore, China is already a serious investor in Greece (Silvia Merler, “China seeking to cash in on Europe’s crises“, Bruegel, 16 October 2014).

Grexit, Greece, BRICS bank, Russia
From Alexis Tsipras Flickr photos, Taken on April 8, 2015 – (CC BY-SA 2.0)

Russia has already signed a contract with Greece for its new Turkish Stream pipeline (RT, 19 June 2015), and, considering the continuous aggressive stance of NATO and the U.S. – be it considered as legitimate or not by the American-led side – (e.g. see the host of related articles in 25 June 2015 Weekly), as well as the European sanctions regarding Ukraine, may only have an interest in seeing the overall balance of power change on the European continent. It might also be an opportunity for Russia to show that it did really mean it wanted to build a cooperative world (among many statements, “‘Russia has no aggressive plans, will always prefer political settlement’ – Putin“, RT, 25 June 2015) and promote a peaceful Eurasian strategy (S. Frederick Starr and Svante E. Cornell, ed. Putin’s Grand Strategy:The Eurasian Union and Its Discontents, Central Asia-Caucasus Institute & Silk Road Studies Program, 2014), yet without authorising anyone to directly threatened its essential strategic and national interest, which, from the Russian point of view, led to the necessity to incorporate Crimea within the Russian Federation (e.g. Mearsheimer, “Why the Ukraine Crisis Is the West’s Fault“, Foreign Affairs, Sept-Oct 2014).

The majority of Greek citizens as well as the current Syriza government and its deputies certainly would have interest in such a scenario, as it would potentially mean defaulting only for a small part of their debt and/or only temporarily, then being able to renegotiate a reimbursement of their debt under conditions that would not imply a slow disappearance of the country and the never-ending pauperisation of its population (among others, Krugman, ibid.).

On the contrary, the Greek oligarchs and those they have co-opted have no interest whatsoever in this scenario. Similarly, the Western proponents of the neo-liberal system and oligarchs may only see as a threat even the fact this scenario could be envisioned, as it shows that the hegemony of their ideology is fading.

Assuming world actors have really thought about this scenario, the battle for the heart and mind of the Greek people until Sunday is most likely to spare no means, including further negotiations as is the case on 30 June 2015 (see “Greece debt crisis: ‘Last-minute talks after new offerBBC News).

Why, then, if this scenario is plausible, is no one from the BRICS or from the Tsipras government hinting at this possibility? Why, on the contrary, does Russia seem to insist that it does not intend to lend money to Greece (Associated Press, “The Latest: Russia dismisses talk of lending money to Greece“, 30 June 2015)? As far as Russia is concerned, a bail out by the BRICS bank would not be done by Russia, thus technically they would not be lying. Yet, would they not have interest to give hope to the Greek people? Considering the global high level of tension, and the propensity to accuse Russia of propaganda, if the scenario imagined here were to succeed, then it would be important that the Greek people take their decision alone, without any suspicion of manipulation. Furthermore, from a lender’s point of view, it would also be important for the BRICS bank to be fully certain that the current Greek government has the support of its population. Indeed, even without as stringent austerity measures as those imposed by the current lenders and without the IMF cherished structural reforms, the road ahead would nevertheless most probably be difficult. The choice, thus, must remain with the Greek citizens.

The impact of such as scenario, should it happen, would be tremendous because, beyond the immediate and relatively sudden re-design of the monetary and financial conditions for Greece and the world, beyond a new serious severe blow to the supremacy of the U.S. dollar as upheld by the Washington consensus, it would imply that a socio-ideological model that is not the capitalist neo-liberal one exists, is viable and is chosen by a Western nation. Greece being the cradle of democracy, and the choice having been made through a democratic referendum, would multiply the potential strength and attraction of this new model.

The ongoing transition towards a future that is actively being created accelerates.

Featured image: BRICS heads of state and government hold hands ahead of the 2014 G-20 summit in Brisbane, Australia. 15 November 2014 by Roberto Stuckert Filho [CC BY 3.0 br (http://creativecommons.org/licenses/by/3.0/br/deed.en)], via Wikimedia Commons.

5 thoughts on “Greece and the BRICS Bank, a Forgotten Scenario?”

  1. Here’s an article I wrote two days ago:

    Market Shock!! Greece Adopts the Chinese Yuan

    Dr. Gary K. Busch

    In a swift move after announcing the calling of a referendum in Greece for July 5, 2015 the Greek Government also announced that in light of the ECB unwillingness to continue providing liquidity to the Greek banks, the Greek Central Bank has been ordered to change over its currency from the Euro to the Chinese yuan immediately.

    All bank transactions will now be denominated in yuan. The Euros held by the Greek banks will be converted into yuan at the current spot price for the Chinese currency and the costs of the conversion will be added to the notional debt by Greece to its former Euro bank partners. It is envisioned that the physical transfer of Chinese cash to Greek banks and ATM machines will take until 7 July; after the referendum. Until then the Greek banks will be closed to allow the exchange to take place. No Greek saver or current account owner will suffer as the yuan is a freely convertible currency.

    On Tuesday 30 June 2015, when the IMF payment is due, the Greek government will announce that it will not transfer the sums demanded by the IMF and that it is in default. It will then officially announce that it is no longer part of the Eurozone but is now a member of the BRICS New Development Bank (NDB) formed in 2014 by Brazil, Russia, India, China, and South Africa. The NDB is located in Shanghai and Chinese have given strong support to the NDB as the first international organisation headquartered in Shanghai and the first international financial organisation headquartered in China. The NDB is expected to help strengthen efforts to build up Shanghai as an international financial centre.

    This fits in well with the Chinese plan for a new Maritime Silk Road which has its distribution hub at Piraeus. Among the few positive developments in the Greek economy was the major investment from China Ocean Shipping Company, COSCO Pacific, in Piraeus, Greece’s largest port. In China’s quest to improve the efficiency of its supply chains into Europe and expand its presence in the global economy, it has spent the past few years rolling out its “One Belt, One Road” initiative. Piraeus has recently emerged as a focal point of this strategy — and in particular of China’s planned “21st Century Maritime Silk Road,” which aspires to link the country with Europe via the Indian Ocean and the Suez Canal.

    In 2008, COSCO, China’s state-owned shipping giant, reached a €4.3 billion deal with the conservative government of Kostas Karamanlis giving the Chinese the right to operate the second terminal of the Piraeus Port Authority (PPA), as well to rebuild and operate an unused third terminal, for a period of 35 years. Since 2010, when COSCO began operating in Piraeus, it has quadrupled the number of shipping containers passing through Athens every year.

    In addition the entrance by the Greeks into the NDB and the yuan-zone will allow for massive Chinese investment into the well-equipped Greek shipyards, with its skilled workers, which have lain idle for several years. This influx of cash and the strengthening of the Greek economy outside of the straitjacket of its erstwhile European ‘partners’ will rejuvenate the economy and raise the employment level dramatically.

    Equally important to the economic aspects of the Greek-Chinese deal is the opportunity for the Chinese Navy to reconstruct its naval presence on the Adriatic coast. In 1968 the Chinese Navy built and manned a naval base in Albania. Chief of Naval Staff Huang Young-shen and other senior officers of the Chinese Navy travelled to Tirane on December 6, 1968 to sign off on the terms of the Chinese naval and missile base on the Albanian coast. That base, and the submarine base it built, were not closed until twenty-two years later. The Greeks have not yet dealt with the impact of a Chinese naval base on the territory of a NATO member, but the agreement by Cyprus to house a Russian naval base in Cyprus might prove a handy guide.

    Early comments in Greece at this shift from Europe to China have been mixed. The first comments were noted on a local radio show which broadcast the news flash when a listener gave his verdict on the EU and the Eurozone “Όποιος γίνεται πρόβατο τον τρώει ο λύκος” (he who acts like a sheep will be eaten by the wolves”). Another commented “Ekei pou tazoun polla kerasia, pare mikro kalaithi” (where they promise many cherries, take a small basket). A third volunteered “Aftos Pou Pidai Pola Paloukia Tha Tou Hothi Kai Ena Sto Kolo” (The man who jumps many poles will eventually get one up his arse).
    The world awaits the market’s reaction to this dramatic news.

  2. Dear Dr. Gary K. Busch,

    Referring to your article, Market Shock!! Greece Adopts the Chinese Yuan, do you have any sources from which you have obtained the information that the Greek Central Bank has been ordered to change over its currency from the Euro to the Chinese yuan immediately?

    Thank you very much,

    Kind regards

    1. Hello “Random Field”,

      Gary will probably confirm, but his comment to our article is a scenario, i.e. a narrative on the future which he deems as possible. As a result, because it is actually an imagined story, there is no source. The State of the art in terms of scenarios would have demanded he evaluate the plausibility of his scenarios according to real indications. Then, more in-depth scenario analysis, for both our article and Gary’s scenario, would have demanded that indicators, likelihood, impact and timeline be added.

      All the best
      Dr Helene Lavoix

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