Monday, June 21, 2010

Medvedev Promotes Ruble as World Reserve Currency

By Paul Abelsky
Saturday, June 19, 2010

Russia wants the ruble to be one of the world’s reserve currencies as President Dmitry Medvedev renews his push to reduce the dollar’s dominance and make Moscow a global financial hub.

“Only three, five years ago it seemed like a fantasy” to create a new reserve currency, Medvedev said yesterday in a speech in St. Petersburg, Russia. “Now we are seriously discussing it.”

Medvedev, who has repeatedly called for a supranational currency to match the dollar, said discussions with China are continuing on broadening the global options. Russia sold U.S. Treasuries for a fifth consecutive month in April, the U.S. Treasury Department said June 15. The world may need as many as six reserve currencies, Medvedev said.

“It’s something that’s obviously needed,” he said at the St. Petersburg International Economic Forum. “Developing a financial center in Moscow will considerably help to strengthen the ruble’s position as one of the reserve currencies.”

Reasserting Power

Medvedev’s comments underline Russia’s ambition to reassert its global power following the financial crisis. Gross domestic product shrank 7.9 percent last year, the worst contraction since the fall of communism in 1991, after the credit crunch sent commodity prices plunging.

If a country wants to alter the world economic order, including the number of reserve currencies, it must become an international financial center, Bank of Israel Governor Stanley Fischer said in an interview yesterday.

“For a currency to be a reserve currency, you have to have capital markets in which you can sell it and buy it very easily,” Fischer said. “New reserve currencies don’t emerge by fiat. They emerge as countries change.”

The ruble and the yuan may by 2015 be added to the basket of currencies that set the value of International Monetary Fund units called special drawing rights, Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill said. O’Neill coined the BRIC term in 2001 to describe the four nations -- Brazil, Russia, India and China -- that he estimates will collectively equal the U.S. in economic size by 2020.

Free Float

The ruble “has as many reasons to be in it as the pound,” he said today in an interview in St. Petersburg. “If Russia really wants to be in it, it’s got to allow people to use it all over the world.”

Allowing the ruble to trade freely is “very important,” O’Neill said.

“Inflation targeting is key,” he said. Without a shift to an inflation targeting regime, the ruble “isn’t going to be part of the SDR. You can’t have it both ways, really, unless the Chinese change the rules, which they might do by the end of this decade. China is going to be so big.”

Russia may “come very close to floating the ruble” in the course of one year to 18 months, Bank Rossii Chairman Sergei Ignatiev said in April. Even so, the central bank doesn’t need to take on legal obligations to stop intervening in the currency market, he said.

Yuan Flexibility

The People’s Bank of China today said it will allow more yuan exchange rate flexibility and reform of the exchange-rate mechanism as the nation’s economic recovery has “cemented” after the global financial crisis.

Medvedev said he envisages a new economic hierarchy allowing emerging-market giants such as Russia and China to drive the global agenda as the world emerges from the first global recession since the 1930s.

“We really live at a unique time, and we should use it to build a modern, prosperous and strong Russia, a Russia that will be a co-founder of the new world economic order,” he said.

Read the rest of the article.

For further reading:
"Russia Backs Stronger Rivals to Dollar", The Wall Street Journal, June 19, 2010
"Medvedev sees single currency dream in G8 coin gift", Breitbart, July 10, 2009


  1. The issue being discussed in CIS countries at the present time is mutual quotations and convertability of Russian ruble and other CIS national currencies in order to foster the critically declined in the crisis conditions mutual regional trade,capital movements and services. So far, major unofficial currency convertors were working on a simple,but rather sound presumption, that us dollar and euro have almost equal demand and are recently equally looked at in potential liquidity in the post-soviet regional territory. Therefore, their approximate arithmetic average in quotations to CIS national currencies already serves as an instrument defining the correlations between the rates of exchanges,or quotations of russian ruble, ukrainian grhivna,kazakh tenge, belarus ruble and other smaller CIS national currencies.The Central Bank of Russia has established the bi-monetary basket in the proportion of 55 us cents and 45 euro cents for monetary regulating purposes. This existing de-facto conditional non-cash unit of acounts during the last several years already has served in fact the regional objective value and price-formation factor.It is, in accordance with previous long-term projections of IMF and IBRR, proposed to be called Federal ruble with the international abbreviation FRU.This unit of accounts may possibly be introduced officially and legally togather as an infrustructural element of creating the Moscow International Finance Center in order to achieve objective and unified evaluation of bonds, stock and shares and to boost regional capital formation and coomodity movements.Evidently, the sought for mutual quotations of CIS currencies may continue to be provided with a help of inderect implementation of the regional unit of accounts.At a later stage,the monetary unit-FRU- may be, upon agreement, officially quoted by CIS central banks. It may be implemeted to define increased regional currency reserves of the CIS Interstate Bank, including national currencies as a part of its liquidity to secure currency exchanges.Thus the model will remind the monetary integration processes in the European Union with some specifics while official negotiating open processes still unfortunately lag behind the evolutionary de-facto developments.
    For more detail about the history of money in Russia untill the present time, please, adress this author"s Ebook with LuLu (USA)"Modern essays on the history of money in Russia".
    Thank you.
    Dr.Valeriy Popyrin

    Thank you.
    Dr.Popyrin Valeriy

  2. In creating the Moscow International Finance Center it would possibly be fesable to legally introduce the regional non-cash unit of accounts-FRU-federal ruble. For more detail, please, adress this author"s Ebook with LuLu (USA)"Modern essays on the history of money in Russis", Goteborg,Sweden,2010

  3. Has anyone ever seen George Osborne and Medvedev together? They look very similar to me!