Voices from Russia

Wednesday, 25 June 2008

Rouble to Emerge as Regional Reserve Currency

Filed under: business,economy,politics,Russian — 01varvara @ 00.00

President Dmitri Medvedev (1965- )

President Dmitri Medvedev believes that under the present conditions of global financial instability Russia faces the strategic task of making the rouble a regional currency. He said as much during his meeting with Andrei Kostin, the chairman of the board of directors of Vneshtorgbank, Russia’s second largest bank. Most analysts agree that chances for the rouble to become one of the world reserve currencies are higher then ever.

Dmitri Smyslov, a senior expert at the Institute of World Economy and International Relations, took a look at the issue. “The current state of the Russian economy is quite favourable in terms of helping the rouble transform at least into a regional reserve currency in which other CIS countries and neighbouring states would keep their currency reserves. There have been some positive shifts in this direction. Of course, it’s hard to say when exactly the rouble will convert itself into a full-blooded reserve currency because this depends on a varied collection of circumstances. The main prerequisite is the removal of all barriers on capital flows between Russia and neighbouring countries. The second requirement is stable economic growth in neighbouring countries and their capacity to buy Russian goods. Other important circumstances include the opening of an oil exchange in St Petersburg where oil is traded in roubles only. These are the conditions that needed for the rouble’s transformation into a reserve currency, first, for the Commonwealth of Independent States and the Shanghai Cooperation Organisation, and, then, probably, into a world currency”.

Vneshtorgbank President Andrei Kostin said the Russian banking community is already at work on fulfilling the tasks assigned to it. He believes Moscow is a real candidate for becoming a regional reserve financial centre. The rouble as a potential reserve currency is gaining more weight as the dollar continues to fall. The idea of creating regional currencies along with the dollar and euro is becoming increasingly popular with some countries. For example, Brazil’s initiative to build a regional currency union has met with enthusiastic support in Latin America. Similar proposals have been launched by a number of Middle East and Asian countries as they begin to search for an alternative to the weakening dollar.

25 June 2008

Vyacheslav Solovyov

Voice of Russia World Service



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