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. Last Updated: 07/27/2016

EDITORIAL: Open Dollar Trade Limits Role of State




No one in the government actually mentioned the idea. It was just a suggestion to President Boris Yeltsin by Eduard Rossel, the governor of the Sverdlovsk region.


But even before any official announcement was made, the rumor spread across Russia. It was a terrible nightmare, a return to the Soviet past. The government was going to ban the free purchase of U.S. dollars!


In a country that accepted the invasion of Chechnya with barely a shrug and has more recently accepted the collapse of its entire banking system, this was one threat that could provoke mass unrest.


The government was immediately forced to deny even having countenanced the idea. Prime Minister Yevgeny Primakov and Central Bank chairman Viktor Gerashchenko went on the air to scotch the rumors.


It may not seem patriotic but the right to own dollars is one of the few achievements of the past seven years that almost all Russians treasure.It is a perverse symbol of the right to personal wealth that was denied for 70 years under the Soviet Union.


Under the 88th paragraph of the Soviet criminal code, trading in dollars was a crime comparable to murder. Mikhail Bulgakov devoted chapters of his masterpiece "The Master and Margarita" to the nightmare of Soviet campaigns to flush out hard-currency speculators.


Over the past seven years, Russians have learned to value the fact that they can own one thing that cannot easily be taken away by government incompetence or corruption. By some estimates ordinary Russians have $40 billion stashed under their mattresses.


This is not just a fight over symbols. Some Russians may want to return to the Soviet past, but this week's dollar scandal is a sign that there is a broad political constituency that will oppose any attempts to undo the fundamental steps that Russia has made toward the free market.


The dithering Primakov government has at least been forced to decide that it must allow Russians to buy dollars. This entails a whole range of consequences for all sectors of the economy.


Keeping open trade in dollars for citizens will in turn force the government to maintain a reasonably free hard-currency market. This will place limits on its ability to crack down on other areas or to thumb its nose at the world financial community.


Perhaps, some day, Russians will be ready to accept bans on the circulation of the dollar. But that will only be once they trust the ruble as a currency and once they trust their government. Until then, the dollar must be allowed to trade freely.