JUNE 2014  |  VOL. 28 NO. 6

The return of growth in most of Europe and the renewed leadership of the US in economic advancement should not distract from critical developments in some of the major emerging economies.

Although the focus is often on China—most recently on its increasingly confrontational regional interactions—other BRICS face big changes. The past few weeks brought a major political shift in the largest democracy of the world, India, and a very uncertain economic scenario for Russia in light of its conflict with the Western world over Ukraine. The big victory of Narendra Modi and his BJP party in the Indian elections opens many questions on development, equality and its non-Hindu minorities.

The situation in Russia is even more complex. Energy exports are critical for the Russian economy, and Western sanctions may well be hitting Moscow in its most important sector. The recent gas deal between Russia and China could undermine that impact. Yet some proposed sanctions seem to show a new direction: Overhanging Russia is the threat implicit in the US announcement of a possible 30% tax on all US transactions with banks operating from countries that have not signed the Foreign Account Tax Compliance Act (Fatca) with the United States by July 1.

Before the Ukrainian crisis, Russia seemed to be inclined to allow its financial institutions to share information with the IRS, but now the possibility of a bilateral agreement seems remote. So after July 1, Russian companies face a 30% tax on all US-based transactions, unless individual Russian banks register directly with the US tax authority. Russia-US economic activities could be severely curtailed—with unpredictable consequences.

Finally, a word on the topic of our cover story this month. We have hesitated for some time to focus on digital currencies. We realize, however, that what is true for cryptocurrencies and corporates applies to our magazine as well: We can be skeptical, but we cannot ignore it. We hope the resulting report will help our readers make sense of a trend that could conceivably undermine the role of banks even as it facilitates corporate payments.

Andrea Fiano