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Moscow looking for
t(rouble)?
By Sergei Blagov
MOSCOW - Russia is suggesting that its rouble
should dominate transactions among post-Soviet nations,
an idea reminiscent of the Soviet-era "transferrable
rouble". However, it is far from certain whether all
members of the so-called Eurasian Economic Commonwealth,
or EEC, including Russia, Belarus, Kazakhstan,
Kyrgyzstan and Tajikistan, will accept roubles for their
exports.
The Russian rouble is likely to become
the EEC's currency "within the next several months",
Russian Prime Minister Mikhail Kasyanov announced at an
EEC meeting in the Kazakh capital of Astana on September
20. According to RIA news agency, Kasyanov argued that
ongoing economic stabilization allowed the rouble to
become an instrument of international trade. This would
give EEC integration yet another boost, he said. Other
EEC states are yet to approve the idea officially.
The EEC was launched in May 2001 to free mutual
trade. However, the EEC's claims to forge closer
economic ties still largely lack substance. Thus, the
EEC's plans of economic integration are somewhat
reminiscent of the former COMECON, an economic union of
former "socialist nations", including Mongolia and
Vietnam.
Economists argue that COMECON was not a
payment union because national currencies were never a
part of COMECON transactions, which usually relied on
barter or the "transferrable rouble". During the Soviet
era, Moscow insisted that US$1 was an equivalent of
0.6-0.8 of a transferrable rouble, a currency that never
actually existed as cash. However, prices in COMECON
trade were rigged through bilateral governmental
negotiations and differed considerably from one COMECON
member to another.
In the wake of the Soviet
collapse, disagreements over a multi-tiered price system
and the transferrable rouble's exchange rate
overshadowed relations between Russia and its former
"socialist brethren", of whom many owed Moscow billions
of illusory transferrable roubles.
It took
nearly a decade until Russia and Vietnam agreed to cut
the Soviet-era debt, previously estimated at $11
billion, by 85 percent in September 2000. Russia and
Mongolia are yet to agree on how to repay Soviet-era
debt to Moscow, estimated at $11 billion.
These
days, transactions among post-Soviet nations are in US
dollars. However, now Moscow suggests turning its legal
tender, and not a fictitious transferrable rouble, into
a sort of post-Soviet international currency. Within the
past two years, Russia's rouble has experienced a period
of relative stability, now at 31.5 per $1. However,
memories of the rouble's volatility are fresh: within
days of Russia's August 1998 financial crisis, the
rouble had plunged from six to 24 per $1. Against this
backdrop of the rouble's volatile record, some
post-Soviet nations could be wary of accepting it as an
instrument for international transactions.
Apart
from a bold common currency vision, the EEC also aims at
freeing trade. Speaking last week in Astana, Kasyanov
also suggested "to unify import tariffs" of the EEC
states. Some two thirds of Russian and Kazakh import and
export tariffs have been "unified", while between
Russian and Kyrgyzstan the figure is just 14 percent,
Kasyanov complained.
Last May, the EEC summit in
Moscow agreed to refrain from punitive tariffs in
multilateral trade and to coordinate their respective
World Trade Organization (WTO) bids. So far, only one
EEC member state, Kyrgyzstan, has joined the WTO. The
summit approved Moldova's and Ukraine's observer status
within the EEC, which therefore seems inclined to
embrace most of the former Soviet states.
Import
and export tariffs in the EEC in theory are supposed to
be unified, mainly along Russian lines. Last May, EEC
secretary general Grigory Rapota announced that the EEC
aimed at creating unified economic, financial, customs
and energy systems.
As communism fell apart
between 1989 and 1991, its closed trading system,
COMECON, collapsed with spectacular speed. Many
post-communist economies had little choice but to open
themselves to international trade, hence "fraternal
socialist trade" fell apart almost overnight, even
before communist governments fell.
The demise of
the COMECON system was followed by a chaotic period in
which factories were left without markets. Arguably, the
COMECON system presupposed the existence of the Soviet
empire. With that empire collapsed, in many countries
whole cities and industries no longer had reason to be
where they were, or doing what they were doing. However,
some post-Soviet officials still believed they they
could save these industries via managed trade.
Moreover, COMECON adhered to policies of import
substitution rather than foreign products, protection of
domestic industries and artificially high exchange
rates. These days, the EEC's official pronouncements
place stress on self-reliance.
The EEC's
territory is "self-sufficient, historically and
geographically, we have everything" we need, Kasyanov
told the EEC meeting, according to RIA. He also
suggested to create private multinational energy groups
within the EEC.
However, the EEC is yet to prove
its relevance as a trading bloc since trade among some
EEC countries is still conducted on a bilateral basis.
Moreover, many EEC countries have huge foreign trade
bureaucracies with considerable vested interests to
defend, hence the EEC's claims of freeing trade may face
domestic challenges.
No big wonder that Kazakh
Prime Minister Imangali Tasmagambetov voiced concern
over poor enforcement of the EEC joint multilateral
deals. Only nine of the EEC's total 40 international
agreements do work, he was quoted by RIA as saying on
September 20. Tasmagambetov also complained that the EEC
was yet to become a free trade zone as member states
continued slapping anti-dumping tariffs on one another.
On the other hand, the EEC's prospects are not
easy to estimate as official figures often do not add
up. In May, Kazakh President Nursultan Nazarbayev, who
now holds the EEC rotating presidency, stated that in
2001 trade within the bloc was up by 38 percent compared
to 2000. In June, though, the EEC announced that in 2001
trade between EEC states was up by some 8 percent,
reaching $29 billion.
Earlier this year, Russian
Deputy Prime Minister Viktor Khristenko said that in
2001 trade between all post Soviet states reached $30
billion, while the EEC's trade turnover was nearly half
of that.
Whoever is right, EEC trade is yet to
become an economic priority for member states, notably
for Russia, with its some $150 billion annual trade
turnover. Even for Kazakhstan, in 2001 EEC trade
amounted to $4.8 billion, or roughly one third of
overall Kazakh foreign trade turnover.
The heart
of the EEC is, of course, Russia, with its abundant
natural resources. Its trade account is in surplus by
more than $50 billion by Moscow's reckoning.
Subsequently, Russia has a 40 percent vote in the EEC,
Belarus and Kazakhstan have 20 percent each, while both
Kyrgyzstan and Tajikistan have been given 10 percent
each.
However, Russia is responsible for about
85 percent of the EEC's economic potential. By
suggesting that its rouble should dominate the
settlement of international transactions among EEC
states, Moscow is arguably aiming at having more say in
post-Soviet economic policies as it considers itself a
leading power.
In the past, however, Moscow
mistakenly thought that it could afford to subsidize
COMECON via a multi-tiered price system and the
transferrable rouble. Hence, it remains to be seen
whether the introduction of the rouble as an
international currency will prove a viable economic
plan, or a ghost of the communist trading system that
still haunts the post-Soviet economic landscape.
(©2002 Asia Times Online Co, Ltd. All rights
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