Commonwealth Leaders Hold Off Russian Ruble's Collapse
RUSSIAN government leaders over the weekend turned away from ethnic conflicts raging on the federation's southern periphery to face an internal threat to stability - the crumbling economy.
Russia's efforts to revive its shattered infrastructure and deepen market reforms depend greatly on the preservation of the ruble as the currency of the Commonwealth of Independent States, officials say. To this end, acting Russian Prime Minister Yegor Gaidar expressed hope that a preliminary agreement, reached at a meeting Friday of commonwealth leaders in the Belarussian capital Minsk, would help preserve a viable "ruble zone."
"During the meeting of heads of states, there were no issues that sparked serious differences," Mr. Gaidar said at a news conferences following the meeting.
But past experience has shown that the preliminary agreement initialed by leaders of the 11-member commonwealth will not necessarily ensure the adoption of a final ruble-zone document. Commonwealth heads of state, who will meet in Moscow July 6, are expected to hold further discussions to hammer out final details of the document.
If recent cease-fire accords in the South Ossetian enclave of Georgia and the Dniester region of Moldova are any indication, the potential for success of the ruble-zone agreement appears tenuous. The cease-fire agreements - worked out last week by Russia, Georgia, Moldova, and Ukraine - have had virtually no impact on diminishing the fighting.
The cease-fire scheduled to take effect yesterday in South Ossetia, which seeks to secede from Georgia, proved illusory. Three Ossetian civilians were killed and 28 wounded during intense exchanges of mortar and machine gun fire yesterday, the Tass news agency reported.
Meanwhile, a Ukrainian government statement voiced concern at the escalation of the Dniester conflict, in which ethnic Russians living in the area are seeking independence from the Moldovan majority. The Ukrainian statement took special note of artillery attacks on a hydro-electric dam on the Dniester River near Dubossary, saying destruction of the dam could cut electricity supplies to Ukraine and cause an ecological catastrophe.
The ruble-zone draft document stipulates that commonwealth nations intending to issue their own currencies must first notify the other member states, as well as settle all accounts related to the elimination of the ruble beforehand with the Russian Central Bank, the Interfax news agency reported. Also according to the preliminary agreement, the Russian Central Bank would act in the interests of all commonwealth nations remaining in the ruble zone.
Even if a final treaty is worked out, it may prove ineffective in preventing the collapse of the ruble zone. Last week, the Baltic nation of Estonia became the first former Soviet republic to issue its own currency, the kroon, and others say they also are planning to abandon the ruble.
For some, such as Ukraine, a new currency is considered a matter of national pride. But others, such as Azerbaijan and Uzbekistan, say they are being forced to abandon the ruble because of an acute cash shortage in Russia. Uzbek and Azerbaijani officials say there are not enough ruble banknotes available in the republics to pay salaries to workers.
Azerbaijan says its currency, the manat, could be introduced as early as July and would circulate alongside rubles, according to Azerbaijan's Turan news agency. Uzbekistan's monetary plans are less defined.
The Russian mint is working around the clock to print banknotes, but it is having trouble keeping up with inflation. The Russian Central Bank is planning to introduce new 5,000- and 10,000-ruble notes in August, according to Interfax. The bank also is considering a government request to increase the face value of coins by 100 times, Interfax said. If the proposal is adopted, a 1 kopek coin would be worth 1 ruble (about 1 cent).