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. Last Updated: 07/27/2016

Too Late for 'New' Ruble?

Politicians have been clamoring for a new, Russian ruble, but most bankers agree that the time for such a change has passed. Even with the Ukraine and other republics turning their backs on the ruble, bankers say the ruble will still be the coin of choice for trade between the former Soviet republics.


In an interview with The Moscow Times, Vyacheslav Solovov, deputy chairman of the Central Bank, said it was too late for Russia to switch its currency. Such a move, he felt, could disrupt vital trade links with the neighboring republics.


On the weekend, Viktor Gerashchenko, the bank's chairman, told parliament he did not think a Russian currency was necessary because inflation had reduced the relevance of the ruble supplies in the neighboring republics.


Russia's vice president, Alexander Rutskoi, Civic Union leader Arkady Volsky and influential bankers have all called on the Central Bank to drop the old, Soviet ruble for a new currency exclusive to Russia. Ukraine and the Baltic republics have already switched to their own currencies, and several republics have announced they will do the same. This has caused fears among Russian banks that Russia would be flooded with rubles, which would give another boost to inflation.


Sergei Yegorov, head of the Association of Russian Banks, said he opposed the introduction of a Russian currency when the ruble was still the only currency in the former Soviet Union, but changed his mind when the ruble zone fell apart. "There will be nobody left in the ruble zone now, and no one has taken concrete measures to set up a central bank for the C. I. S". , Yegorov said.


Yegorov acknowledged, however, that the flow of rubles in the neighboring republics had lost importance because of inflation. Cash rubles are only emitted by the Russian Central Bank, and now that Ukraine has switched to another currency, the total volume of rubles in the other republics is relatively small and losing value fast. Before the breakup of the Soviet Union, he said, about 40 percent of the rubles circulated in the other republics, a large proportion in Ukraine.


But republican central banks can emit credits, and have been doing so in very large amounts, mostly to pay off debts to Russia, which has a large trade surplus with most republics. In the process, the republics were boosting Russia's inflation by, in effect, increasing the money supply without printing money.


To make matters worse, Russia itself, after trying to impose tougher credit emission policies on the other republics in July, ended up giving 500 billion rubles in credits to the republics to keep up Russian exports.


However, Solovov said that the continuation of trade relations with the other republics was more important than the threat of inflation. and these deals are still made in rubles. "If there were a new ruble, we would still need to deliver goods to the Ukraine for those rubles", Solovov said. "The introduction of a national currency does not solve the problem by itself".


Given the trade surplus with other republics and the cash shortage among Russian factories, it is vital for Russia to keep trade with republics going, Solovov said, to guarantee both markets and suppliers for Russia's industry.


Solovov said that he and other representatives of the republican central banks were working on setting up a clearing bank for the commonwealth republics, for mutual settlement of ruble debts.


Boris Sergeyev, board member of Tokobank, a Russian commercial bank, agreed that it was too late for a Russian ruble. Other developments, such as excessive credit emission by the Central Bank, had had a bigger impact on inflation than ruble dumping by the other republics, Sergeyev said. He said attention should be paid instead to stabilizing the ruble, reducing credit emissions and cutting the budget deficit.