The leaders of the world's biggest emerging markets demanded a greater say in the global financial system on Tuesday at their first summit, but steered clear of any assault on the U.S. dollar's dominance.
The summit of Brazil, Russia, India and China (BRIC) ended with a short statement by Russian President Dmitry Medvedev and a communique which demanded more power for developing nations in international financial institutions and the United Nations.
But it did not mention two key Moscow initiatives -- a smaller role for the U.S. dollar and a supranational reserve currency although a Russian delegation source told Reuters that BRIC finance ministries and central banks were tasked to work on reserve currencies proposals.
We are committed to advance the reform of international financial institutions, so as to reflect changes in the world economy, a joint communique issued by the BRIC countries said.
The emerging and developing economies must have a greater voice and representation in international financial institutions, it said. We also believe that there is a strong need for a stable, predictable and more diversified international monetary system.
In the run-up to the summit, the Kremlin said reserve currencies would be discussed and that the world needed more reserve currencies, including widened International Monetary Fund Special Drawing Rights (SDRs).
But China -- which holds nearly $2 trillion in foreign currency reserves -- was silent, indicating little unity on any potential challenge to the greenback.
Analysts say the BRIC four are united by strong economic growth in recent years but not much else. Their political standpoints and global priorities differ widely and diplomats question whether the forum can forge strong, united positions.
The U.S. dollar slid on Tuesday on Russia's comments, which came a day after Finance Minister Alexei Kudrin said the dollar's status as the world's main reserve currency would be unlikely to change in the near term.
The existing set of reserve currencies, including the U.S. dollar, have failed to perform their functions, President Dmitry Medvedev told a news conference in the Russian city of Yekaterinburg, ahead of the BRIC summit.
We will not do without additional reserve currencies, Medvedev said, adding that a new supranational reserve currency was also an option as the IMF's SDRs gained a bigger role.
BUILDING UP BRIC
The BRIC term was coined by Goldman Sachs economist Jim O'Neill in 2001 to describe the growing power of emerging market economies, but Tuesday's summit was an attempt to give the grouping a bigger voice in the world.
We talked about making the decision-making process on the most important international issues -- on the economic agenda, the international political agenda on security -- fairer, said Medvedev in his final statement after the meeting.
The BRIC summit must create the conditions for a fairer world order.
The other presidents sat next to Medvedev as he made the final statement. They then departed without making any comments of their own after the summit.
BRIC countries account for 15 percent of the $60.7 trillion global economy but Goldman Sachs predicts that in 20 years time, the four countries could together dwarf the G7 and China's economy will overtake the United States in total size.
Medvedev's chief economic aide, Arkady Dvorkovich, called on the IMF to expand the basket of SDRs to include the Chinese yuan, commodity currencies such as the rouble, Australian and Canadian dollars and gold.
The SDR is an international reserve asset allocated to member countries with its exchange rate determined by a basket of currencies, at the moment including dollar, euro, yen and sterling. A review of the basket is due in November 2010.
The world economy will grow ... In the future we are sure growth will resume. This growing pie should be divided in a fairer way. We are not talking about excluding the dollar but the share of other currencies should increase, Dvorkovich said before the meeting.
BRIC leaders would discuss investing their reserves in each other's currencies, settling bilateral trade in domestic currencies and striking currency swap agreements, he said.
Chinese President Hu Jintao has remained silent on the Kremlin's currency ideas which could ultimately indicate more about the divisions of the BRIC club rather than its strength.
The lack of mention of the dollar in the final statement appeared to underline again the differing positions among the BRIC nations about how to reform the world currency system.
Russia has tended to be much more outspoken against U.S. dominance of the financial system than other BRIC nations, which favor a more cautious and diplomatic approach.
China also has huge investments in U.S. Treasury bonds and vast reserves of U.S. dollars.
The initial response from the developed world to Russia's initiative came from Japan where Finance Minister Kaoru Yosano reiterated his view that the dollar will remain the world's key reserve currency.
(Additional reporting by Oleg Shchedrov, editing by Stephen Nisbet)