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PaperclipPerfector  23d ago (text post)   1104 thread views

Transnational Thursday for June 19, 2025

Transnational Thursday is a thread for people to discuss international news, foreign policy or international relations history. Feel free as well to drop in with coverage of countries you’re interested in, talk about ongoing dynamics like the wars in Israel or Ukraine, or even just whatever you’re reading.

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Very interesting article: Under shadow of Trump warning, Africa pioneers non-dollar payments systems

Africa's push for local currency payments systems, once little more than an aspiration, is finally making concrete gains, bringing the promise of less costly trade to a continent long hobbled by resource-sapping dollar transactions.

The move by Africa to create payments systems that do not rely on the greenback mirrors a push by China to develop financial systems independent of Western institutions. Countries like Russia, which face economic sanctions, are also keen for an alternative to the dollar.

But while that movement has gained a sense of urgency due to shifting trade patterns and geopolitical realignments following President Trump's return to the White House, African advocates for payment alternatives are making their case based on costs.

"Our goal, contrary to what people might think, is not de-dollarisation," said Mike Ogbalu, chief executive of the Pan-African Payments and Settlements System, which allows parties to transact directly in local currencies, bypassing the dollar.

Africa's commercial banks typically rely on overseas counterparts, through so-called correspondent banking relationships, to facilitate settlements of international payments. That includes payments between African neighbours.

That adds significantly to transaction costs that, along with other factors like poor transport infrastructure, have made trade in Africa 50% more expensive than the global average, according to the UN Trade and Development agency.

It is also among the reasons so much of Africa's trade—84%, according to a report by Mauritius-based MCB Group—is with external partners rather than between African nations.

According to data compiled by PAPSS, under the existing system of correspondent banks, a $200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal.

The shift to homegrown payments systems could cut the cost of that transaction to just 1%.

Using currencies like the Nigerian naira, Ghanaian cedi or South Africa's rand for intra-Africa trade payments could save the continent $5 billion a year in hard currency, Ogbalu told Reuters.

Launched in January 2022 with just 10 participating commercial banks, PAPSS is today operational in 15 countries including Zambia, Malawi, Kenya and Tunisia, and now has 150 commercial banks in its network.

It is understandable that they may have different interests than the US, and thus want a monetary system that can not be controlled by the US. The question is, who will be controlling it then? Somehow I doubt it being controlled by Zambia or South Africa or any other African state would be better for the long-term perspectives of it, and in general African states - especially ones that are located close and thus most in need of common currency system - aren't best known for always valuing cooperation over conflict. Of course, they could elect China or Russia or Iran to be their master - but why exactly would that play better for them than the US?

They could try to implement a truly decentralized zero-trust system, but given as nobody really done it on the national scale, I'm not sure they have the expertise or the guts to try it. Would be an interesting experiment though, but there are so many failure modes there that it could only be of any value if successful.

a $200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal.

That sounds horrendously expensive. I wonder is that because of the risks? Then of course homegrown systems would be cheaper - by just ignoring the risks, until the next rugpull.

It is understandable that they may have different interests than the US, and thus want a monetary system that cannot be controlled by the US.

This is just a payment-processing system, not a whole new currency.

The question is, who will be controlling it, then?

PAPSS's governing council appears to be populated by the top officials of the central banks of its member countries. PAPSS operates under the auspices of the African Export–Import Bank, whose board of directors likewise is composed of various central banks' top officials.

This is just a payment-processing system, not a whole new currency.

Yes, but if the processing system uses dollars and US banks (or banks that eventually connect to US banks) then US can control it. Dealing with a ton of different currency without having an intermediary one where you can align everything to the single common measure could be challenging...

PAPSS's governing council appears to be populated by the top officials of the central banks of its member countries.

Yes, of course, but what happens if there is a conflict between them? Say, one government has a lucrative trade in goods that are frowned upon by other governments, and wants to use this system to facilitate it? What if two members have a fight and try to block (or steal) each other's payments?

Yes, but if the processing system uses dollars and US banks (or banks that eventually connect to US banks) then US can control it. Dealing with a ton of different currency without having an intermediary one where you can align everything to the single common measure could be challenging...

The other point is that if the actors using the system also want to use dollars and US banks separately, the US can still influence it. This is why the attempted Iran-EU exchange program died after the JCPOA fell apart. The Europeans mooted building what would basically have been shell companies to serve as intermediaries who would never touch dollars for Iran-EU trade, and the US simply moved the threat of secondary sanctions to any European companies that did work with the shell companies doing work with Iran.

This is part of the classic misunderstanding of the influence of the dollar in the international system. It doesn't actually matter if you use dollars in the transaction. Dollars are just a lower transaction cost medium of exchange, but everyone already had the ability to pay a higher transaction cost if they wanted to do currency swaps and such. What matters if you also, elsewhere, want to do business with the dollar system.

What happens if there is a conflict between them?

The linked PAPSS page mentions bylaws, but they do not appear to be posted publicly. Afreximbank's charter (art. 17) states that a dispute between the bank and a member is resolved by a vote of the shareholders (i. e., the members), while a dispute between the bank and a former member is resolved by arbitration.

I mean the big flaw in this seems to be that no one in their right mind actually wants a generic sub-saharan African currency. The CFA franc is still in use for a reason.

This company merely provides a method of sending money in different existing non-dollar currencies between different countries, without having to use overseas banks as expensive intermediaries. It has nothing to do with creating a hypothetical new currency as a competitor to the dollar.

Systems like PAPSS allow a business in one country (for example, Zambia) to pay for goods from another (like Kenya) with both buyer and seller receiving payment in their respective currencies rather than converting them into dollars to complete the transaction.

Yeah, wouldn't the kenyan far rather dollars than shillings?

This system is for transactions, not for savings. Sending money all the way to a European or Asian bank, and converting it to and from US dollars just so that it can cross a single border within Africa, adds a bunch of extra delay and extra fees.

Delay isn't mentioned in the news article, but an FAQ page on PAPSS's website says:

With Instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank—adding days to the transaction time. In addition, compliance, legal and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds.

That adds significantly to transaction costs that, along with other factors like poor transport infrastructure, have made trade in Africa 50% more expensive than the global average

(...)

$200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal. The shift to homegrown payments systems could cut the cost of that transaction to just 1%.

this seems to not match at all

I think the first one is that transaction costs in Africa are 1.5x transaction costs in not-Africa, although it's misleadingly worded.

I will also note that "X costs 1.5x what it should" = "1/3 the cost of X is unnecessary".

Second claims that cost is 10% to 30% of the value of the deal

First claims that "trade in Africa 50% more expensive than the global average" so global standard would be 6% to 20% of value.

But second claims that just homegrown payments systems would reduce costs to 1% value of the deal.

Still seems to be not consistent.

Okay, I'm also confused now.

Probably answer is highly dependent on case.

Selling software? Maybe direct payment can eliminate nearly all overhead.

Selling live chickens? Probably transport eats nearly all trade costs anyway.

Selling missiles? You have so many transaction costs, starting from bribes, that it is not funny.

US/Israel/Iran/Russia.

It seems quite conspicuous how on one hand US engagement with the Israel/Iran war, widely seen as something that is very personal for Trump for whatever reason, coincides with a much-lamented acceleration of the softening of his stance on Russia; and on the other hand Russia is also conspicuously sitting on the fence regarding the conflict, despite their previous military collaboration with Iran and it being ostensibly natural for them to take this opportunity to set another trap for the Western coalition.

Do you figure it could be the case that Trump decided to buy Putin's neutrality on the matter by offering him at least a period of US stonewalling on further pro-Ukraine action? The null hypothesis I can think of is that Putin just independently appreciates that Israel has been reticent to support Ukraine directly so far, while Trump's rapprochement with Russia is just a natural continuation of his preexisting trajectory and not particularly connected to Iran.

buy Putin's neutrality on the matter

I am confused what Putin can even do here. Why he would need to be bought?

(maybe Putin anyway convinced Trump that he needs to be bought, but I doubt that either)

Russia has no way of helping Iran. If this was in 3 years time and the war in Ukraine has ended with massive Russian victory and they couldn't turn off their military industrial complex for fear of the holy mother of depressions then I could see them sending shitload of material for cold hard cash. The only party that could help Iran now is China. But they still test their toys in Ukraine. And shipping now is hard. It is obvious that Iran has zero opsec. So they cannot arrange securely receiving anything even if someone was willing to send it to them.

Russian and Iranian cooperation seems more just to counter the western empire's expansion collaborate to avoid sanctions and so on. They share some military tech and iirc Russian trade with India is through Iran. Other than that economically they are less interdependent, and if the war went bad and Iran closed the strait of Hormuz and hit Saudi Arabia's oil fields it would put Russia in a spot to make a pretty huge profit and a lot of pressure for the west to back off sanctions to stabilize their economy. This threat is ironically probably a more effective weapon against the west than a nuke.

I think China would be far more likely to come to their aid. They are a huge energy importer and Iran is crucial to their overland trade routes. They recently committed to a half trillion dollar infrastructure project in Iran, etc. Already heard of a couple Chinese warships entering their waters and some cargo planes flying in and out. Guess it will depend on how things escalate.

being ostensibly natural for them to take this opportunity to set another trap for the Western coalition.

What kind of trap could they be setting? They have no military resources deployed there, and whatever they could ship is at complete mercy of Israel air force now that they have full aerial superiority. Nobody is trying to invade Iran on land, so Russia's favorite strategy of sending 10x people in and having 5x killed but still coming ahead on the numbers is pointless there. Not to mention even the most hardened Russian patriot would find confusing why exactly he must go and get killed by Israel in Iran and how it is vital for Mother Russia. Russia would gladly sell Iran any military equipment they could, but the things they are better at than Iran - e.g. air defense systems - are pretty useless by now, as existing ones have been destroyed and new ones are hard to deploy in any useful way in the middle of the war where the enemy owns the air.

On the other hand, they have some very vulnerable projects - like Busher reactor - which are technically not military, but given how Iran already hit many civilian targets in Israel, the case can easily be made for it to be infrastructure and thus fair game. So far, Russia made the opposite deal with Israel - we stay out of it and limit ourselves to blowing hot air, and you don't bomb the shit that makes us money. Since Busher, as far as I know, has little military value, Israel is fine with leaving it alone for now.

On the third hand, is Iran manages to really piss of Israel and it will authorize taking out Iran's oil facilities, guess who would be the only supplier of cheap oil to China. And who would benefit from the oil and gas prices inevitably raising.

So Russia is being very smart right now and doing exactly what is their best interest is - talking big game (in case ayatollahs pull through and there would be business to be done with them in the future) while not doing anything that would cause them to bear any costs. Trump has nothing to do with it - that kind of situation existed long before him, Russia had always been reluctant to mess with Israel directly, and Israel had always been willing to take Russia's interests into account as much as it is possible without hurting the main goals.

so Russia's favorite strategy of sending 10x people in and having 5x killed but still coming ahead on the numbers

what?

Please elaborate a bit when you’re questioning someone.

You should mod him, not me, the quoted line is inflammating claim without evidence, which is against the rules.

I mean, I could do both.

But I still can’t tell what part you find so inflammatory. Is it the assertion of higher Russian casualties? The specific ratios? Use of the word “favorite”?

That’s the kind of thing I’d have liked in your response. What specifically were you hoping to see? It’s very hard to respond to someone who’s just asking “what?”

TPO was modded and there was outrage about his comments "abos like sniffing petrol because they're dumb", this is the same thing. So it's norm here to say racist jokes about Russians

I don’t know who that is, I don’t recall modding him, and I can’t find your quote.

But that is beside the point. Whether or not a comment is inflammatory, when you reply, you have to follow the rules by explaining what you mean. A single word “what?” is insufficient. It strictly drags the conversation down further.

TPO? TrannyPorno was one of most prolific posters, who posted about HBD and often in insensitive manner. Do you want me to find TPO's remarks about Abos? If such thing like JarJarJedis was posted about other groups, the poster would be modded. I guess I have just accept that most people here consider themselves being in war against Russia and it's ok to raise spirit by telling snarky imaginary details about Russia.

Thank you for this thoughtful and well argued observation.

which part you are being confused about? Or disputing?

That seems snarky but reasonable description of Russian approach to warfighting.

Highly unlikely to me there's any relevance from Ukraine to either side's approach. Trump was pro-Israel and anti-Ukraine before any of these conflicts erupted, and Russia's likely just too strained to contribute much, especially with how broadly unpopular Iran is.

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